Serbia A high potential country
in Blog

Corona highlights the weaknesses of global supply chains. Large economies like Germany have had to recognize their great dependence on complex supply links with non-European countries like China. Entire industries have had supply and production problems due to their great dependence on China. Especially for industrialized nations like Germany, these experiences have led them to increasingly look to other regions and countries.

Alternative suppliers are being sought outside of China that are also geographically closer and can guarantee stable supply chains.  Many large and small and medium-sized companies in major European industrialized nations that are pursuing an internationalization policy are rethinking their old location concepts and looking for new locations.

In the process, location factors, factors that decisively determine a location decision, are being re-examined. The focus is on cost advantages in quantifiable input factors such as tax, capital, human capital with suitable know-how, infrastructure, raw materials or energy costs. Market potential, market volume, purchasing power development, market growth and market trends are primarily strategic location factors. Political and legal stability, administrative issues, environmental regulations or innovative capacity are also increasingly coming into focus.

In terms of these location factors, Serbia plays a central role in the Western Balkans as a development and manufacturing location. Competitive labour costs, available labour and a good know-how base for various industries can be found in Serbia. Business-friendly policies encourage domestic and foreign investment projects.

The Balkans are the bridge between Europe and Asia and Serbia has a central position in this. Since 2000, the country in the Western Balkans has been undergoing a transformation process from a socialist state to a market-oriented democracy.

The Serbian government faces extensive political, social and economic challenges. These include deficits in the rule of law, high unemployment and underemployment, high levels of poverty, exacerbated among disadvantaged groups, and brain drain.

The government's pro-European line, its interest in expanding regional cooperation and its success in stabilizing state finances open up new scope for state investment and increase security for private investors. The country is increasingly becoming an interesting investment location:

Foreign direct investment (FDIs) amounted to EUR 1.9 billion in the first nine months of 2020. Thus, 60 % of all investments in the Western Balkans flowed to Serbia, especially from countries of the European Union.

An important location factor is corporate tax, which is low compared to European corporate tax. An important selection criterion for Serbia as an investment location is the stable exchange rate of the Serbian dinar, which is pegged to the euro. Another key location factor will be above all the availability of well-trained human capital. German companies in particular, which now have great problems finding well-trained staff, should be happy to turn their attention to Serbia. The country has decided to introduce dual vocational training based on the German, Austrian and Swiss model. Serbia stands for high innovation capacity. Many tech entrepreneurs founded companies in Serbia in the last ten years. Serbia's economy is increasingly developing into a development and production location in other areas as well, such as mobility. Innovative settlements and company start-ups are changing the image of the extended workbench and allow for a positive outlook.  There is no doubt that economic development remains dependent on international developments. It also depends on the further development of legal certainty and a constitutional administration in the country. The accession process to the European Union, the realization of the "mini-Schengen area" for alignment with EU standards, are important steps in this regard.