Explore the investment opportunities and risks associated with investing in Serbia. Discover the factors that make Serbia attractive for foreign investors, including its favorable geographical position, low cost of labor and operational costs, and government support.
Located in the Southeast of Europe, Serbia is an attractive place for foreign investors seeking access to developing markets. Since Yugoslavia disintegrated, Serbia has gone through dramatic political and economic changes.
These changes have contributed to the development of a highly favorable business climate in the country. However, not all problems inherited by Serbia from the past have been solved so far. Below we discuss the investment opportunities available in Serbia as well as the risks associated with putting money into the country.
Attractiveness of Serbia for foreign investors
The factors listed below make Serbia worth considering if you are considering making some investments abroad. The country is at the stage of development when it combines reputability with business opportunities unavailable in European countries with long-established advanced economies.
Favorable geographical position of Serbia
Serbia is located at the crossroads of important transportation routes that connect Europe and Eastern Asia. Thanks to the country’s geographical location, investments into logistics and transport may be especially promising. Besides, Serbia is a member of the European Free Trade Association, which gives Serbian-based companies direct duty-free access to huge markets.
Essentially, Serbia is a country at the crossroads of East and West. So you can comfortably trade with Turkey and Middle East countries from there. Speaking about European countries, Serbia is linked by the Danube River with 10 large EU countries and several international seaports.
Moreover, there are preferential trade agreements not only with the EU but also with the USA and – since recently – with China. Thus, you can conduct duty-free trade with the Chinese, among many other nationalities if you have a company registered in Serbia.
Low cost of labor in Serbia
The average salary is lower in Serbia in comparison to many other European countries. The low cost of labor attracts foreign companies looking to reduce their operational costs. Such sectors as IT, car manufacturing, and large-scale production look especially promising from this point of view.
Let us give you an example of salaries in Serbia. An IT specialist can make between 25 and 35 euros per hour in the country. The wages are approximately the same in the IT sector of Armenia and Turkey. In Germany, the wage starts at 50 euros. In the USA, IT specialists make around 80 dollars per hour.
Low operational costs in Serbia
Because the salaries are not very high in Serbia, the prices for various items are also lower than they are in some neighboring countries. The electricity is less expensive, the rent is less expensive, and the water supply and other utilities are less expensive in Serbia too. For example, renting an office in Belgrade will cost you between 300 and 800 euros per month. Renting an office in a smaller city can cost even less. Operational costs certainly play an important role for any business venture.
Government support
The Serbian Government is eager to attract foreign investments and it offers various bonuses and incentives to foreign business people. Serious administrative reforms have been underway and much less bureaucracy is involved in creating a business venture now than it used to be. The business administration procedures have also become much less demanding. In addition to that, Serbia has several Free Trade Zones and industrial parks where resident companies enjoy considerable tax reductions. Even when the corporate profit tax is not reduced, its rate is only 15% in Serbia. If you would like to learn more about the taxation system in Serbia, you can log onto the Serbian Wealth website and find a lot of information about taxes in Serbia as well as investment and business opportunities in the country.
Risks associated with investing into Serbia
With all the advantages that Serbia offers, certain risks are also involved in carrying out business operations in the country. The main risks are listed below.
Political instability
The political situation can be unstable in Serbia at times. A change of policies or a change of Government strategies can affect your business operations in the country and put you in a state of uncertainty. Therefore, you have to pay serious attention to the current political situation in Serbia and analyze the recent trends if you are considering setting up a business company in the country.
Inadequate infrastructure
Serbia has been improving its infrastructure actively over the recent years and many things have become much better. At the same time, some remote regions of Serbia still lack good roads, energy supply infrastructure, and logistic centers. This may hamper business development in the country. If you are not planning to leave the premises of Belgrade or Novy Sad, however, all the infrastructural objects are readily available in these large Serbian cities.
Regional tensions
Serbia is still involved in some regional conflicts. Its relations with some neighbors are tense. This situation can also entail certain risks for your company especially if you carry out business operations in the areas where civil unrest or military fights are probable.
Other disadvantages of Serbia
In addition to the risks mentioned above, you should take into consideration a few more factors that may make Serbia not quite suitable for your business company.
Small size of the country
You will find only a limited market if you conduct business operations only inside Serbia: no large crowds of people to sell your products or services to, no long distances to travel. For this reason, most foreign companies registered in Serbia are focused on export/ import operations and on foreign markets.
Lack of technological advancement
Even though the IT sector is rapidly developing in Serbia, the country cannot be rightfully referred to as a technologically advanced one. Online shopping is still rather unpopular in Serbia. Online Government services are also largely unavailable. You have to visit a Government agency in person if you need to obtain a certain document. Sometimes, it can take a month to register a company in Serbia. Banks can also be slow in providing services to the clients because many of them use outdated service technologies.
The language barrier
When you visit a bank in Serbia, you will always find a bank officer who speaks English there. When you visit a Government agency in the country, you will often find such a person especially if the agency is large enough and more than just a few people work there. If you need to ask for directions in Belgrade, the second or the third passerby that you ask will be able to show the way in English. However, if you go outside Belgrade, you will find that very few Serbians in rural areas speak English. On the other hand, you will run into this problem only if you do business in the countryside Serbia and the probability of that is not very high, we believe.
Invest in real estate in Serbia
Of all business areas where you could invest in Serbia, the real estate market is probably the most promising one. In spite of all the downsides that we have mentioned above, the popularity of Serbia in the international community has been growing. The explanation for this is simple: things have been improving in Serbia.
The economy of the country has been on the rise for a long time already and a growing number of foreigners have been relocating to Serbia and settling down there. This fact makes the demand for housing higher, which, in its turn, drives the property prices up.
The rental prices have also been steadily growing. If you purchase a small apartment in Belgrade, you will be able to rent it out in a heartbeat thus acquiring a stable passive income. If you purchase several small apartments in Belgrade, you won’t have to work anymore at all. Serbia is a stable European country and it is still relatively inexpensive. The time to invest in Serbia is now!
