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Serbia, It should not be surprising when a political issue becomes an economic one - Serbia Business

Serbia, It should not be surprising when a political issue becomes an economic one

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It should not be surprising when a political issue becomes an economic one – and vice versa, because politics and economics are closely related in many segments. The recent statement by the President of Serbia, Aleksandar Vučić, that the representatives of the European Union, the United States of America, Germany, France and Italy told him that if he rejects the EU’s plan for Kosovo, investments from Serbia will be stopped and then withdrawn, is causing a lot of attention, but also the fear of a part of the public.

However, would foreign investors really just pack their bags, leave their factories and leave Serbia?

Professor of the Faculty of Economics in Belgrade Ljubodrag Savić believes that this would not happen and tells that he listened carefully to the president, and that Vučić put the claim that foreign direct investors will leave in the first place as far as the economy is concerned.

“I have to admit that I do not share that impression because I think that the majority of foreign investors in Serbia, at least as far as I know the German economy and the situation in the European Union, did not come because some president said so.” I have little faith in the story that a company in the conditions of a free market economy would go where the German chancellor tells it to. Rather, President Vučić wanted to make the situation a little more serious and prepare the public for what will happen in the political sense”, explains Savić and states that the question that arises is – where would the investors go?

On the other hand, the president of the Serbian business club “Privrednik”, Zoran Drakulić, said that the pressure of world politicians on their big investors in Serbia, due to the situation in which the country is in, could lead to them leaving, and that it is necessary to adopt a proper the decision of how the country will survive.

“This is a turning point. I have always criticized, but now is a difficult time and the right decisions need to be made. “I don’t get involved in politics, but now we need to think about where we will go next and how this country will survive, especially at a time when we have expensive loans and we will also have a debt crisis,” Drakulić said.

Professor Savić says that Serbia gives investors subsidies for employment and investments, they have established contact with local suppliers. At the same time, they have more benefits given to them by the state – lower prices of electricity, gas…

“We also have industrial zones. Is it like that, for example, in Germany? The rights of workers are different in foreign companies here and in the same companies in the country they come from. I had the opportunity to see for myself that this is so, and I don’t believe that a Jura could happen in Germany like it did here,” says Ljubodrag Savić.

The professor adds that even if someone leaves, it will be because they do not see their own economic interest. As he says, Serbia has a lot of countries it cooperates with on the trade plan – there are Russia, China, CEFTA countries, and that is our advantage.

“It sounds unrealistic to me that someone from the German or any other top government would punish Serbia by telling its investors to leave.” Especially since no one would compensate them for a potential departure. From a political point of view, everything is possible, but from an economic point of view, I am convinced that the economy will come before politics here,” Savić points out.

He says that it is unlikely that a scenario would occur in which investors would leave the country in which they operate even if they have positive results. The problem could arise only if foreigners pass some administrative regulation that says that it will no longer be possible to invest in Serbia, but the professor believes that no one will do that.

The EU invested 19.8 billion euros in Serbia in 12 years

Data from the National Bank of Serbia are the only official data on foreign direct investments in Serbia, with the NBS publishing aggregated data on these investments by countries of payment and branches of activity, while official data on investments by individual companies is not available, told from Razvojna agencies of Serbia.

Due to the change in the calculation methodology of foreign direct investments, data are currently available only for the period from the beginning of 2010.

“According to the available NBS data for the period from 2010 to September 2022, inflows based on investments by residents of EU countries in the Republic of Serbia were recorded in the amount of about 19.8 billion euros, which represents about 60 percent of the total investments in the said period “.

According to RAS data, if we look at the number of projects whose implementation began in the period from 2012 to 2022, almost 60 percent are projects whose parent companies originate from EU countries.

Most of them are from Germany, Italy, Slovenia, Austria, France.

“Looked at according to the criterion of the value of the projects for the mentioned period, investments from EU countries account for about 50 percent, mostly from Germany, France, Italy, Austria, and the Czech Republic. It is similar when we look at the criterion of the number of planned new jobs, where EU countries participate with about 45 percent, and within which Germany, Austria and France are leading. According to each of the mentioned criteria, a part of the EU countries is in the top 10, and they often occupy leading positions”, they state from RAS.

The Netherlands is first on the list of investments in Serbia

Great Britain has not been a member of the EU since the end of January 2020, so investments from this country were not included in the final total. For the period 2010-2019. investments from this country in Serbia were worth 407.6 million euros.

“A significant number of companies, both European and from other continents, register companies in the Netherlands (and Luxembourg) due to favorable tax conditions and make further investments from there. In this regard, according to the NBS, the Netherlands is at the top of the list of countries that invest the most in Serbia,” the Development Agency of Serbia points out.

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