Encouraged by macroeconomic reforms, financial stability and fiscal discipline, the investment climate in Serbia has moderately improved in recent years, and American investors generally have a positive view of doing business in Serbia, according to the US State Department and its 2023 Report on the investment climate in our country.
The State Department goes on to say that “Attracting foreign investment is an important priority for the government. In 2020, Serbia improved four places to number 44 on the World Bank’s Doing Business index. Serbia launched a new 30-month Policy Coordination Instrument (PCI) with the International Monetary Fund (IMF) in June 2021. U.S. investors in Serbia are generally positive due to the country’s strategic location, well-educated and English-speaking labor force, competitive labor costs, generous investment incentives, and free-trade arrangements with the EU and other key markets. U.S. investors generally enjoy a level playing field.”, adding:
Challenges remain, particularly bureaucratic delays and corruption, as well as loss-making state-owned enterprises (SOEs), a large informal economy, and an inefficient judiciary. Political influence on the economy is also a concern; this issue was highlighted in January 2022 when the government abruptly withdrew licenses related to a major proposed lithium-mining project in response to public protests.”
As for the promising economic sectors in Serbia, the State Department notes:” Sectors that stand to benefit include agriculture and agro-processing, solid-waste management, sewage, environmental protection, information and communications technology (ICT), renewable energy, health care, mining, and manufacturing. In April 2021, Serbia adopted its first renewable energy law, which should contribute to scaling up renewable energy capacities. Companies and officials have noted that the adoption of reforms has sometimes outpaced implementation. Digitizing certain government functions (e.g., construction permits, tax administration, and e-signatures) has not yet brought a dramatic improvement in processing times and may not be consistently implemented. The government is slowly making progress on resolving troubled SOEs, through bankruptcy or privatization actions where possible. The government plans to privatize 64 more companies and is also slowly reducing Serbia’s bloated public-sector workforce, mainly through attrition and hiring caps.”
As for Serbia refusing to impose sanctions on Russia and the implications of that decision, the US State Department says the following;” Russia’s attack on Ukraine in February 2022 initially had a limited economic impact on Serbia, and the banking system remains well capitalized and liquid; but inflation, as well as energy and agricultural supply disruptions, are likely if the war continues, despite Serbia’s refusal to join U.S. and EU sanctions on Russian entities. Public fear of price spikes and shortages initially led to sporadic panic buying at supermarkets and gas pumps, but fuel and other consumer goods have remained available. Russia continues to supply natural gas and crude oil to Serbia, but supplies are vulnerable due to heavy Russian influence in the sector and the potential effect of sanctions. Serbia’s trade with Russia is otherwise limited, but agricultural exports could suffer from contraction or loss of the Russian market due to sanctions and resulting financial and logistical barriers.”
The State Department then goes on to mention that Serbia has bilateral investment treaties (BIT) with quite a few countries but not the US, including Albania, Algeria, Austria, Azerbaijan, Belarus, Belgium-Luxembourg Economic Union, Bosnia and Herzegovina, Bulgaria, Canada, China, Croatia, Cyprus, Cuba (not yet ratified by the Serbian Parliament), the Czech Republic, the Democratic People’s Republic of Korea, Denmark, Egypt, Finland, France, Germany, Ghana, Greece, Guinea, Hungary, Indonesia, Iran, Israel, Italy, Kazakhstan, Kuwait, Libya, Lithuania, Macedonia, Malta, Montenegro, Morocco, the Netherlands, Nigeria, Poland, Portugal, Qatar, Romania, Russia, Slovakia, Slovenia, Spain, Switzerland, Turkiye, Ukraine, the United Arab Emirates, the United Kingdom, and Zimbabwe.
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