DR MILAN PARIVODIC CHAIRMAN 7th Vienna Economic Forum Move safely into Serbia

DR MILAN PARIVODIC CHAIRMAN

7th Vienna Economic Forum

Move safely into Serbia

www.investmentserbia.com

A really positive international outlook for Serbia

• A political and national consensus on EU accession (70%)• EU candidacy status - probably in 2011 • Kosovo problem in a calmer stage – dialogue beginning soon• Better regional cooperation• Better political international relations of Serbia • Good Government macroeconomic handling of the world crisis• New free trade agreements (Turkey, Belrus, Ukraine)• Joining WTO next year• Visa free travel for Serbian citizens

Rapid European Integration• EU candidate status expected for 2011• SAA agreement undergoing ratification by EU Member

States• Interim Agreement on Trade with EU in force: full free

trade within 5 years: 47.6% of products (current customs tariff 1.85% on average) liberalized immediately

• Participation in Instrument for Pre-Accession Assistance (IPA) and 7th Framework Programme (FP7) ongoing

CEFTA (South East Europe Free Trade Area) – market of app. 30 million consumersCustoms free exports to Russian Federation and Kazakhstan– market of 156 million consumers

Free Trade – Exports from Serbia!

Complete liberalization with Belarus apart from 3 agricultural products

General System of Preferences for exports to USA

██ EU member states

██ EFTA member states ██ CEFTA member states

Customs free exports to EU – market of 500 million consumers

Key Economic Trends


2005 2006 2007 2008 2009 2010

GDP growth (real, in %)

5.6 5.2 6.9 5.5 -3.1 0.6 (Q1)1.8 (Q2)

GDP per capita in EUR

2,792 3,144 3,899 4,547 4,093 4,138

Inflation (yearly average, in %)

16.2 11.7 7.0 13.5 8.6 4.4

Budget balance (in % of GDP)

0.3 -1.9 -1.7 -1.8 -3.4 -3.1 (Q1)-3.7 (Q1)

Exports (in EUR mn)

3,608 5,102 6,432 7,429 5,961 4,597 (Jan to Aug)

Imports (in EUR mn)

8,439 10,463 13,507 16,478 11,505 8,017 (Jan to Aug)

Current Account (in % of GDP)

-8.8 -10.1 -16.0 -18.2 -5.7 -10.5 (Q1)-7.2 (Q2)

Gross public debt (in % of GDP)

50.6 40.1 31.4 26.3 32.4 33.6 (Q1)35.4 (Q2)

FDI Inflow


Significant foreign enterprise share in Serbian export is a result of privatization, restructuring and Greenfield investments .

Foreign - Owned Enterprises’ Share in

Exports (25 Top Serbian Exporters)


Foreign Investor Legal Treatment

• National treatment of foreign companies• Free transfer of financial and other assets comprising profits and

dividends• Invest freely 100% in all industries except minority stakes

allowed in media and in production and armaments• Corporate profit tax 10%• Income tax 12%

Specific legislation enacted outlining guarantees and safeguards for foreign investors

Company LawsCompany Laws

Improved Business Law Framework

Mortgage LawMortgage Law

Law on Execution ProcedureLaw on Execution Procedure

Foreign Investment LawForeign Investment Law

Foreign Trade LawForeign Trade Law

Bankruptcy LawBankruptcy Law

Law on ArbitrationLaw on Arbitration Law on Special Authorities for Protection of Intellectual Property

Law on Special Authorities for Protection of Intellectual Property

Foreign Exchange Law Foreign Exchange Law

Favourable Tax Regime

• 10-year Corporate Tax holiday for investments over €6 million and 100 employees• 5-year Corporate Tax holiday for investment in underdeveloped regions• Corporate Tax reduction up to 80% of the fixed assets investment• Salary Tax exemptions for employees below 30 and above 45 years of age• Social insurance charges exemptions for employees below 30 and above 45 years of age• Customs-free imports of equipment and certain raw materials• Double taxation treaties in force with 31 countries, another 14 undergoing ratification (in the region: all ex-Yugoslav countries, plus Albania, Bulgaria, Hungary Romania and soon Austria-undergoing ratification).


Double Taxation Avoidance Treaty Swiss Serbian – Dividends and Interest

Dividends (previously 20% tax):• 5% withholding tax if the beneficial owner of dividend is a company (but not a partnership) holding directly at least 25% of the capital of the paying company• 15% withholding tax (in all other cases)

Interest (previously 20%)• Source country has right to tax up to maximum of 10%


Double Taxation Treaty-AustriaRoyalties and Capital Gains

Royalties (previously 20%)• 5% tax on royalties – copyright-protected works• 10% tax on royalties –patents, trademarks, designs, models, plans, secret formulae or processes, use or lease of equipment (industrial, commercial, scientific), information on industrial, commercial or scientific experience.

Capital gains:• May be taxed only in the state of residence of alienator• Except companies that derive more then 50% of its value directly or indirectly from immovable property, where the sale of shares in such company may be taxed also by the country in which such immovable property is situated, while the residence country must provide relief from double taxation (tax credit).


Financial Incentives for Job CreationScale Large-Scale Standard Scale

Project Categories

Manufacturing and Export-Related

Manufacturing Export-Related

Capital and Labour-Intensive

Capital-Intensive

Underdeveloped Regions/Regions of Special Interest

Auto, Electronics, IT and Special Interest Regions

Other Regions

Any Region

Grant 25% of total investment

20% of total investment

€4,000 to €10,000 per new job

€5,000 to €10,000 per new job

€2,000 to €5,000 per new job

€2,000 to €10,000 per new job

Minimum investment

€200 mn €50 mn €0.5mn €0.5 mn €1 mn €0.5mn

Minimum new jobs

1,000 300 50 50 50 10


Distribution of Incentives per Industry

Distribution of Incentives by Nationality of Investor

Recent Major Foreign InvestorsCOMPANY

COUNTRY OF ORIGIN

SECTORTYPE OF

INVESTMENT

app. INVESTMENT AMOUNT (MIL

EUR)

Telenor – Mobi 63 Norway Telecommunications Privatization 1,513

FIAT

Philip Morris – DIN

Italy

USA

Automobiles

Tobacco

Joint venture with State

Privatization

940

518

STADA - Hemofarm Germany Pharmaceuticals Acquisition 475

Intesa – Delta Banka Italy Banking Brownfield 462

InBev – Apatinska pivara Belgium Beer Acquisition 430

Lukoil – Beopetrol Russia Oil Privatization 400

NBG – Vojvodjanska banka Greece Banking Acquisition 385

Merkator Slovenia Retail Greenfield 240

Holcim – Novi Popovac Switzerland Cement Privatization 185

OTP Bank Hungary Banking Acquisition 176

Alpha – Jubanka Greece Banking Brownfield 168

US Steel – SARTID USA Steel Brownfield 150

Metro Cash&Carry Germany Wholesale Greenfield 150

OMV Austria Oil Greenfield 150

Coca-Cola HBC – Vlasinka Greece Beverages Privatization 142

Eurobank EFG – Nacionalna štedionica

Greece Banking Brownfield 130(Source: Ministry of International Economic Relations of the Republic of Serbia – September 2006)

FOREIGN INVESTORS SERVICES (FIS): OUR MISSION

With our unparalleled experience we give focal Strategic Support and secure best in class Professional Support to Foreign Businesses in Serbia and the SEE region developing jointly your full market potential in the shortest possible time


FOCAL STRATEGIC SUPPORT

• An Advisory Board for your business project composed of first-class professionals – leaders in their respective lines of business

• Your Business Strategy for Serbia and the SEE region developed with our assistance

• We find opportunities and reliable business partners for you (land, real estate, suppliers, distributors, etc.)


PARTNERSHIPS AND SOLUTIONS

• Establishing partnerships for your project – Central government partnership– Local government partnership– Timely issuance of all permits

• Finding solutions to problems– Start-up problems – Course-of-business problems


STAR CLUBPartnership assistance rendered by a coordinated group of number 1 professionals:

• Lawyers • Accountants• Market researchers • PR and advertising • Construction companies• Large wholesellers and retailers • Suppliers, etc.

Priority access to owners, general managers or managing partners of best service providing and other companies, saving time and money

FIS IS YOUR RELIABLE PARTNER IN SERBIA


DR. MILAN [email protected]

[email protected] Tel. +381 11 2200590

Address:PC Usce, 15th floor

Bulevar Mihajla Pupina 6, 11070 Beograd

THANK YOU FOR YOUR ATTENTION!


Documents

DR MILAN PARIVODIC CHAIRMAN 7th Vienna Economic Forum Move safely into Serbia