The significant potential for Foreign Direct Investment (“FDI”) in Serbia’s Free Zones, coupled with Serbia existing free trade agreements with Russia, offer an unmatched opportunity for companies targeting the sanctioned Russian market and vice versa. However, these opportunities are tempered by the context of the current political climate, making it essential for investors to identify and maintain relationships with key decision makers in the country in order to ensure a smooth investment process. It is necessary to understand the cultural nuances to further help investors navigate the bureaucratic maze successfully, ensuring that risks of any potential red flags are minimized.
As the Serbian Progressive Party (“SPP”) currently holds the reins of government, it is crucial for any potential investor to secure key facilitators and decision makers with strong ties to SPP decision makers. These facilitators are responsible for development in each municipality, as the decision-making authority for each Free Zone is controlled at this level. This is also important as SPP strategies support the development of each district and municipality through FDI that is heavily government subsidized. Therefore, with the right facilitator directly cooperating with all leading politicians in Serbia, potential investors can significantly reduce investment risk.
On the other hand, Serbia’s refusal to impose sanctions on their long-standing ally, Russia, has created an ideal opportunity for foreign investors targeting the Russian market, as they can easily capitalize by using Serbia’s free zones as a gateway. Moreover, the Russian producers gain access to the European market. Prospective investors require necessary on-the-ground intelligence in order to minimize the risk profile of their investment, while, in the case of the sanctioned Russian market, reducing obstacles.
Serbia’s free zones are even more attractive considering the country’s prime placement as a trading hub connecting Western countries to Russia, CIS, and beyond. Moreover, infrastructure is already extant within the free zones, meaning that investors can set up machinery and offices and commence operations straightaway. With 14 free zones, warehousing and accessibility to land for FDI investments can be prepared in advance. Rapid facilitation of FDI and immediate access to Western and Eastern markets through bilateral agreements create a unique opportunity for foreign companies.
Among the more attractive Free Zones for investors can be found in Zrenjanin as it offers significant incentives and covers a variety of industries. Some key features of the Zrenjanin Free Zone are as follows:
- imports and exports are free;
- raw materials imported for producing finished goods to be exported are duty-free;
- foreign currency earned through operations within the zone can be used freely;
- capital movement from the production zone to a potential market is free;
- zone users can lease, buy, or build manufacturing facilities, warehouses or commercial buildings, which makes this zone very flexible for entry and departure.
The ability to export goods to Russia without any fiscal or legal restraints presents a strong strategy that many companies are currently exploring, including the fast moving consumer goods (FMCG) producers who were most affected by the imposition of sanctions. As noted, an array of investment opportunities as well as significant incentives are already extant in Serbia; however, these must be viewed within the current political context, and relevant risk mitigation strategies must be implemented in order to minimize investors' exposure and maximize their knowledge. In short, access to well-placed sources as well as strong knowledge of this political environment and key decision makers within SPP, can help mitigate risks in order to help investors make the right choices and the right contacts.
by Jovan Radakovic