The news that several Serbian cities and municipalities were at the top of the list of “European cities and regions of the future” by fDi magazine, a publication of the Financial Times, was a surprise for many, but not for experts who believe that state subsidies are one of the reasons for their high ranking. but not only that, but also other benefits that are good bait for the recognizable investment climate in Serbia.
What is the advantage of “locals”?
This climate was recognized by big and well-known players on the world market, but also by small and unknown ones, and in addition to Belgrade, Leskovac, the champion in the category of small cities, as well as Kragujevac, Zrenjanin, Subotica and Šimanovci, which are in the list of cities of the future in 2024, are the top. Each of them had specific characteristics that lifted them to the top, but what they all have in common is that they also gained this prestigious status with state subsidies for the creation of new jobs.
In addition to them, the “locals” had additional benefits such as free land, construction or at least participation in the communal infrastructure. Admittedly, there are other local communities that have all that and are not on this prestigious list. That is why it is difficult to create a picture of the average foreign investor, as well as whether their overriding motives for investing in Serbia are primarily related to the amount of subsidies. They were introduced in 2006 and were patented by the then Minister of Economy, Mlađan Dinkić, based on the Irish and Slovenian models.
At that time, they ranged on average from 2,000 to 4,000 euros per job, but from then until May of last year, when the criteria for awarding incentives were changed in order to attract direct investments, the subsidies increased significantly and were colorful.
For example, in 2020, the average subsidy to investors per employee reached around 30,000 euros. Admittedly, this average also includes a record state aid of 144,000 per employee, which probably increased this amount. Admittedly, these are extremes, so it is estimated that, since 2006, the average cost of working for foreigners is about 8,000 euros for Serbian taxpayers. That money mostly ended up in the processing industry, and estimates are that from 2006 to 2022, the state allocated slightly more than one billion euros in subsidies.
What foreign investors say
However, foreign investors say that subsidies are not the only reason they invested money in Serbia. In addition to them, for them our country is attractive because of lower business costs, mainly in terms of labor costs, proximity to raw materials needed for production, avoidance of customs and other export costs to target markets, as well as reduction of transport costs of delivering products to target markets.
All of this caused that from 2012 to 2023, around 35 billion euros of foreign investments were recorded. That money created the conditions for every fourth employee in Serbia to work for a foreign employer, or about 350,000. Their incomes are diverse and range from 500 to several thousand euros.
These lowest wages are characteristic mainly for the textile industry and other branches of the processing industry. The reason for this lies in the fact that the state, when awarding a subsidy for the workplace, gave them the opportunity to earn 20 percent more than the Serbian minimum wage. Workers with secondary and lower education were primarily employed, and the most subsidies were given to industry and the least to high-tech companies that create great added value, employ highly educated and well-paid staff who drive the economy forward with innovations and creations – say union representatives.
The salaries of these well-paid personnel range from 1,000 to several thousand euros and are mostly linked to large international corporations operating in the field of information technology, communications and sales. Because of them, the average salary in foreign companies rises significantly, which is around 850-900 euros. It is important to say that a significant number of these large international corporations are reinvesting in Serbia. Some of them employ several thousand workers, while when it comes to smaller companies, primarily in the production of textiles and food, the number of employees ranges from 100 to several hundred workers.
Foreign companies invested 4.4 billion euros
According to NBS data, foreign companies invested 4.4 billion euros in 2022, which is estimated to be in 2023 as well. If we look at the geographical origin, the largest influx was recorded in 2022 from European (65.8 percent) and Asian countries (32.3 percent). Individually, China is the record holder with 1.1 billion euros, followed by Great Britain with something around 270 million, and the third is Germany with close to 260 million euros.
As for 2023, at the time this text was being written, there were no data on the website for the entire year, but it was pointed out that 4.2 billion euros had entered Serbia as of November.
The highest influx from European countries
According to the latest publicly available data, which refer to inflows during the first two quarters of 2023, the largest inflow was recorded from European countries, around 66 percent and 32 percent from Asian countries. Observed by country, China is still the record holder with 592.6 million euros, while the places of other countries have changed compared to 2022. The Netherlands is second with 414.7 million euros, followed by Romania with 124.5, Great Britain with 122.5 and Germany with 117.1 million euros.
Mihailo Vesović, Director of the Sector for Strategic Analysis, Services and Internationalization of PKS for “Blic Biznis” says that it is evident that Serbia is attractive for foreign investors and that it is no wonder that several Serbian cities and municipalities were at the top of the “European Cities and Regions of the Future” list ”, Financial Times.
– This is a great success because as many as 350 European cities were monitored, from Glasgow and London to Barcelona, and it is not accidental, but the result of a long-term investment policy aimed at providing incentives to foreign investors to achieve desirable effects in the short term. For example, Leskovac succeeded because it had a fully equipped industrial zone. In a very short period of time, it enabled investors to have not only all connections for electricity, gas, water and other communal needs, but also good roads for transport and logistics. On the other hand, Belgrade is recognized for the sector of IT services, tourism, but also for the lifestyle, which is especially important for large multinational companies, says Vesović.
