Are investor incentives, given by the state, cost-effective?

Following the opening of three car parts factories by various foreign investors in the last few months is good news in respect to employment – both the government and experts claim. However, the latter have also pointed out that Serbia stood very little to gain from export-orientated companies.

Does Serbia have a new industrial strategy and is now focusing on having an automotive-orientated economy?

The Chinese-French company Mei Ta, Hutchinson from France, and Teklas Automotive from Turkey have all opened car parts factories in Serbia since the beginning of the year. We are recognized as a country that can offer good terms and conditions – Economy Minister Željko Sertić explains.

– This is because of our Investment Law, the treatment that investors get from local authorities and all the elements required for a company to be satisfied and make long-term plans here. Not a single company has come to be here six months or a year. If you establish a company, you are also entering into a relation with the state and, because we provide incentives, this relation carries a certain weight and you have provide guarantees that your business plan will be implemented – Sertić says.

Some foreign investors have exporting to foreign markets as a part of their business plans – says foreign investment expert Milan Kovačević.

When asked how does the Serbian GDP benefit from this, Kovačević says that the incentives that the state provides can be so large that they are going to return to us only in a distant future.

– If we are talking about export-orientated industries, we are left with very few benefits here. The can always sell their products abroad at any given price and then transfer the entire profit a foreign country while leaving nothing here. The only benefit that we have is the salaries that people here get and the taxes and contributions that such companies have to pay to our state – Milan Kovačević explains.

In many cases, taxes and contributions are much lower than the state subsidies. In order to make subsidies cost-effective, the state, which actually doesn’t have enough capital, goes further into debt or makes the companies that operate successfully pay even more.

(N1, 13.04.2016)

This post is also available in: Italiano

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