From 2001 to 2011, foreign direct investments (FDI) in Serbia totalled EUR 17 billion (or 15 billion net), 40% of which was accounted for by privatisation of industries and finance sector. The mentioned amount was far from being sufficient for the recovery of the national economy in general and industry in particular, because around 35% of such investments were directed to the sectors of non-exchangeable goods and services and only about 15% was accounted for by the so-called greenfield investments.
Following the changes made in 2000 and a decade of isolation, hyperinflation and sanctions, Serbia oriented itself to European integrations in political and economic terms. At the beginning of the period under observation, the banking system was paralysed because of losses and debts based on citizen foreign exchange accounts, while the industry was outdated and excessively indebted. In such a state of the economy and finance, very much was expected in that initial period from EU economic aid and foreign capital, particularly in the form of foreign direct investments coming from Western countries, which have been Serbia's important economic partners for a long time.
Mostly because of internal factors and erratic development concept, the expected FDI impact was achieved only partly. The economic recovery model was based on attracting foreign direct investments with the means of privatisation, which produced no expected results. As of the year 2010, FDIs were being given strong support by non-repayable budgetary incentives, as well as many facilities and incentives provided by local governments. Even so, foreign investors are making remarks about the insufficiently clear regulations, corruption, problems to do with the unclear property status of real estate and the business environment as a whole as determining factors influencing FDI-related decisions. However, several credible and successful foreign investors invested in Serbia, which had a positive impact on the overall business climate and stimulated new investment.
Compared with other countries in transition (including also some other former Yugoslav republics), Serbia has a longer experience with foreign investments, particularly those in the form of contractual joint ventures in the enterprise sector, which were allowed for the first time under the 1967 Foreign Investment Law. In the late 1980s, the standing legislation made provisions also for direct investments (not only the contractual ones), as well as for investments in banks, which led to the establishment of the first banks with foreign majority shares. All these advantages disappeared during the last decade of the last century.
Key words: direct investment, scope and sectoral structure, investment into industry sectors, banking, insurance, legal framework
* Information about the authors and reviewers of this text are available at the end of the text.
ILE KOVAČEVIĆ, Editor-in-Chief
Reviewed by: Dr Radovan Kovačević, professor at the Faculty of Economics in Belgrade and Dr Marijana Vidas - Bubanja, professor at the Belgrade School of Business
Translated by: Milutin Dovijanić