Investment guarantees are central to German foreign trade policy. If a German company invests in a developing country or a so-called rapidly developing country, it can apply for insurance with the federal government.
In the event that the company has to write off the investment due to expropriation, war, or violations of the law by the government of the foreign country concerned, the German government will compensate most of the loss. For example: in the first half of 2023, the German government guaranteed about 30 billion euros of investments with its insurance.
However, that insurance is tied to certain, often millions of costs for the company itself that wants to invest – both in the form of fees, bureaucracy, and in the event that a case of damage actually occurs.
Part of the diversification strategy
That is why the important news is that the German government decided at the beginning of the week to improve the terms of investment guarantees for the German economy in selected countries and halve the guarantee costs. We are talking about 34 countries on all continents. When it comes to Europe, Turkey and the countries of the Western Balkans are listed: Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia.
The decision is part of the German government’s diversification strategy that aims to reduce heavy dependence on some markets and critical nodes in supply chains. The improved conditions are intended to encourage companies to make new investments in markets where they are currently little active. “With new positive incentives, we are strongly supporting the German economy in the important diversification for greater resilience to crises,” State Secretary for the Economy Franziska Brantner said.
“We chose countries that are reliable foreign trade partners and politically stable.”
Economic factors are important
Are there any companies that have been waiting for these new, more favorable conditions and will now invest in Serbia?
“All factors play a role when choosing an investment location. However, as a rule, economic factors play a greater role. The Government of Serbia provides very attractive investment incentives to investors, whether domestic or foreign. They certainly play a bigger role in individual cases due to the scope and very easy application process. According to the German government’s annual report on investment guarantees, Serbia, with four projects in 2022, was among the first 5 countries for which such guarantees were requested.
The combination of the now improved conditions on the German side, with the support offered by the Serbian side, will enable more German companies to consider Serbia as an attractive location for investment”.
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