Presentation by:Presentation by:

Milivoje MandicMilivoje MandicHead of FDI DepartmentHead of FDI Department

SIEPASIEPA

SERBIA

Your Partner for Success

Why invest in Serbia?Why invest in Serbia?

Strategic positionStrategic position

Partnership culturePartnership culture

Low taxesLow taxes

Free Trade AgreementsFree Trade Agreements

Market of 10 million people (8 Serbia, 2 Kosovo)Market of 10 million people (8 Serbia, 2 Kosovo)

Intellectual capital and skilled labor Intellectual capital and skilled labor

Linguistic skillsLinguistic skills

Strategic PositionStrategic Position

Intersection of Pan European Corridors No.10 and No.7

Gateway to Middle East and South- East Europe

Proximity of the Adriatic sea

TTrade rade LiberalizationLiberalization

DecreasedCustoms

EliminatedRestrictions

Customs Rate ReductionClearance Rate: 0.5%

Tariff Rate ReductionAverage Rate: 7.2%

Minimal export quotas

No import quotas

Free Trade Free Trade Agreement with RussiaAgreement with Russia

FTA with SEEFTA with SEE

Free ZonesFree Zones

14 Free Zones

FYROM

Bosnia

Hungary

Croatia

Albania

Bulgaria

Romania

Greece

StrongStrong commitment to FDIcommitment to FDI

Stabilized macroeconomic situationStabilized macroeconomic situation Legal ReformLegal Reform More than 1,000 foreign companies operating in SerbiaMore than 1,000 foreign companies operating in Serbia More than $2.1 billion in revenues through privatizationMore than $2.1 billion in revenues through privatization

120

120

30

155

550

1200

0 300 600 900 1200 1500

1998

1999

2000

2001

2002

2003

FDI in millions $

Decreasing InflationDecreasing Inflation

159

39

112

0

20

40

60

80

100

120

2000 2001 2002 2003

Source: National Bank of Serbia

Annual Inflation in %

Sound Financial SectorSound Financial Sectorto Support Your Business!to Support Your Business!

HVBHVB Raiffeissen Bank Raiffeissen Bank Societe Generale Societe Generale National Bank of Greece National Bank of Greece Pro Credit BankPro Credit Bank Hypo-Alpe-Adria BankHypo-Alpe-Adria Bank FolksbankFolksbank

Steps takenSteps taken Paris club of creditors wrote of 2/3 of Serbia’s debtParis club of creditors wrote of 2/3 of Serbia’s debt London club negotiations soon to be finished London club negotiations soon to be finished 23 insolvent banks closed23 insolvent banks closed 9 socially owned banks to be privatized in 20049 socially owned banks to be privatized in 2004 Securities market active since 1989Securities market active since 1989

Banks with foreign capital:Banks with foreign capital:

Corporate Profit TaxCorporate Profit Tax

23.525

18

2831

14

0

5

10

15

20

25

30

35

Bulgaria Romania Hungary Poland CzechRepublic

Serbia

in %

Source: SIEPA

Electricity Cost Electricity Cost for Industrial Consumersfor Industrial Consumers

00.01

0.020.03

0.040.05

0.060.07

0.080.09

0.1

Croatia Slovenia Poland Romania Serbia

Source: Electric Power Industry of Serbia

$ / KWH

Business Environment Business Environment Scores and Ranks Scores and Ranks

Regional rank 2003-Regional rank 2003-20072007

(out of 27)(out of 27)

Regional rank Regional rank

1998-20021998-2002

(out of 27)(out of 27)

EstoniaEstonia 11 11

Czech RepublicCzech Republic 22 33

PolandPoland 55 44

BulgariaBulgaria 1010 99

Serbia and Serbia and MontenegroMontenegro

1414 2525

MacedoniaMacedonia 1616 1313

UkraineUkraine 1717 1818

Bosnia & Bosnia & HerzegovinaHerzegovina

2222 2020

Source: Economist Intelligence Unit

Incentives for Your BusinessIncentives for Your Business

Investment Investment

IncentivesIncentives

Tax IncentivesTax Incentives

Import of goods and equipment Import of goods and equipment on the basis on foreign on the basis on foreign investment is freeinvestment is free

Accelerated depreciationAccelerated depreciation

Investment in fixed assetsInvestment in fixed assets New employmentNew employment Tax holidaysTax holidays Carrying forward of losses for Carrying forward of losses for

10 years10 years Tax exemptionsTax exemptions

Skilled WorkforceSkilled Workforce

Long history of cooperation with foreign Long history of cooperation with foreign

companiescompanies

High availability of skilled workforceHigh availability of skilled workforce

Diversified sector experienceDiversified sector experience

Good Command Good Command of Foreign Languagesof Foreign Languages

Percentage of Population Speaking Foreign Languages

0

10

20

30

40

50

English French German

Czech Republic Poland Hungary Romania Bulgaria Serbia

Textile IndustryTextile Industry

Long tradition Currently mainly import dependent on yarns

and fabrics Export mainly to EU countries (75%) CMT High domestic demand Well developed retail network

Compelling Cost SavingsCompelling Cost Savings((Textile Industry)Textile Industry)

SerbiaSerbia Czech Czech RepublicRepublic

RomaniaRomania

Gross wageGross wage

159159 494494 170170

CorporateCorporate

Profit Profit

Tax RateTax Rate

14%14% 31%31% 25%25%

In Euros

In %

Foreign TradeForeign Trade((Textile Industry)Textile Industry)

0

50

100

150

200

250

mil USD

2001 2002

Exports by Subsectors

Finished products

Yarn and fabrics

0

200

400

600

mil USD

2001 2002

Imports by Subsectors

Finished products

Yarn and fabrics

Sub sectorsSub sectors((Textile Industry)Textile Industry)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Number of companies

Number of employees

Fixed assets

Profit

Revenue

Yarn and fabrics

Finished products

Timber & FurnitureTimber & Furniture

Excellent raw base (27% of the Serbian

territory)

Successful history - major partners: US, Russia

and EU

Highly skilled workforce

Active wood and furniture cluster

Average gross salary 136 EUR (Sept. 2003)

Foreign Trade Foreign Trade ((Timber & FurnitureTimber & Furniture ) )

MOST SIGNIFICANT CATEGORIES IN TOTAL FURNITURE EXPORT IN 2002

50.0%

7.0%

26.0%11.0%

3.0%

3.0%

Leisure furniture

Dining room furniture

Kitchen furniture

Chairs (bent wood)

Bedroom furniture

Other wooden furniture

Trade with ItalyTrade with Italy((Timber & FurnitureTimber & Furniture ) )

TRADE OF WOOD PRODUCTS BETWEEN SERBIA AND ITALY in 000 USD

0 5,000

10,000 15,000 20,000 25,000 30,000 35,000 40,000

1995 1996 1997 1998 1999 2000 2001 2002

Export Import

Agribusiness

Total area of agricultural land exceeds 5 million ha with 85% of land ownership under private farms;

Fertile soils, restricted use of chemical fertilisers and perfect climatic conditions;

Favourable ‘brand’ image Average gross salary 270 EUR (Sept. 2003)

Foreign TradeForeign Trade((Agribusiness)

Agribusiness 000 USD % of total

agro industry

exports

Raspberries 64,847 24

Refined sugar 38,769 14

Biscuits, waffles 9,279 3

Products made of cocoa 8,633 3

Sour cherries 8,400 3

Total top 5 products 129,928 52

Top 5 Exporting Products in 2001

Serbia is the regional and global leading producer of raspberries.

SIEPASIEPA

Established in February 2001 by the Established in February 2001 by the Government’s DecreeGovernment’s Decree

Mission: To attract, facilitate and support Mission: To attract, facilitate and support FDI and promote Serbian exportsFDI and promote Serbian exports

SIEPA has three departments:SIEPA has three departments:

1.1. Marketing and ResearchMarketing and Research

2.2. FDI / Investor ServicesFDI / Investor Services

3.3. Export Promotion Export Promotion

Foreign Direct Investment Foreign Direct Investment Support Support

SIEPAICE

Foreign Investors Council(Investors association)

Italian EmbassyMinistry for International

Economic Relations

SSerbian erbian IInvestment and nvestment and EExport xport PPromotion romotion AAgencygency

23 Terazije St., Belgrade 23 Terazije St., Belgrade

Serbia and MontenegroSerbia and Montenegro

Tel: +381 11 3248 040Tel: +381 11 3248 040

Fax: +381 11 3248 227Fax: +381 11 3248 227

www.siepa.sr.gov.yuwww.siepa.sr.gov.yu invest@siepa.sr.gov.yuinvest@siepa.sr.gov.yu

Thank You!