Invest in Serbia!
Make some cash in crisis times….
DR. MILAN PARIVODIĆ
PARTNER
WOLF THEISS
WOLF THEISS LAW FIRM
Established in Vienna, Austria in 1957
• Albania • Austria • Bosnia and Herzegovina • Bulgaria • Croatia • Czech Republic • Hungary • Romania
• Serbia
• Slovak Republic • Slovenia
PHILOSOPHY
• • • • • • • • PROFESSIONALISM & QUALITY SPEED (REACT “IMMEDIATELY”) HIGHLY QUALIFIED LAWYERS INTERNATIONAL EXPERIENCE CONFIDENTIALITY PRECISION TEAM WORK CLIENT CARE
WHAT THE INDUSTRY SAYS ABOUT US
- Eastern European Law Firm of the Year 2006 Austrian Law Firm of the Year 2008
- Czech Law Firm of the Year 2007 - Austrian Law Firm of the Year 2007 - Austrian Law Firm of the Year 2006
- Austrian Tax Law Firm of the Year 2007 - Austrian Tax Law Firm of the Year 2006 - FT Innovative Lawyers Report 2008: one of the TOP 50 European law firms and one of the strongest performing European continental law firms
A sampling of our clients in Serbia
Some of our recent work in Serbia
• Advising IKEA on all legal aspects of their operations in Serbia (real property acquisition and leasing issues, commercial and corporate matters, employment). • Regional legal advisor to Kraft Foods International, advising on all legal aspects of their operations in Serbia. • Advised Deutsche Bank with respect to the financing of the Horgosh-Pozega highway concession; includes preparation of all loan documentation, general structuring matters, review of all related regulatory issues and lender side due diligence (deal value approx. € 1 billion). • Advised Stada Arzneimittel AG in the acquisition of Hemofarm AD, Serbia's leading pharmaceutical company (Deal value: approx. €500 million). • Advised Nordzucker AG on the acquisition of a majority stake in the sugar business of MK Commerce, the largest sugar producer in Serbia (Deal value: approx. €500 million). • Advised the Russian air carrier Aeroflot in the proposed privatisation of the Serbian flagship air carrier JAT Airways.
• Advised the EBRD on its acquisition of significant stake in Komercijalna Banka, Serbia's largest majority state-owned bank and the country's third largest bank by assets.
• Advised UniCredit Markets & Investment Banking (of Bank Austria Creditanstalt AG) with respect to syndicated secured facilities of € 83,000,000 for the acquisition of Serbia Broadband (SBB), a major Serbian cable television operator, by Mid Europe Partners.
Location
Crossroads of 2 Pan-European transportation axes: VII (Danube) and X (high-ways) Vicinity of other European capitals (1-2 hours by plane) Vicinity of regional capitals (1-2 hours by car)
v v
Serbian GDP per capita and GDP Growth Rate
GDP per capita
8.000 7.000 6.000 5.000 4.000 3.258 3.000 2.000 1.000 0 2.112 2.720 4,207 3,526 5.641 7.400
GDP growth rate
9%
8% 7% 8.4% 5.7%
7.5%
6% 5%
4% 3%
7.2%
4.8%
6.2%
4.2%
2% 1%
0% 2001 2002
2.5%
2002
2003
2004
2005
2006
2007
2008
2003
2004
2005
2006
2007
2008 Es t.
All-time record foreign currency reserves amounting to $14 billion
Decreasing public debt standing at less than 30% of GDP
GDP Growth Rate in the Region (in %)
Country
Bosnia and Herzegovina Bulgaria Croatia FYR Macedonia Montenegro Romania Serbia 6.2 4.3 4.1 4.1 4.1 6.2 6.1 4.8 4.3 6.5 7.7 5.7 6.0 5.6 5.1 6.0 6.0 7.5 6.0 5.2 4.5 6.0 6.5 7.2**
2005
5.5
2006
5.3
2007
5.0
2008*
5.0
*GDP growth forecasts (Source: EBRD) **GDP growth forecast (Source: Statistical Office of the Republic of Serbia)
Indicators of Goods Exchange and Balance of Payments of Serbia
2005-2007 2005 2006 2007 AVERAGE
Export of goods, growth rate in %
21.6
28.5
25.4
25.2
Import of goods, growth rate in %
-2.9
22.8
29.3
16.4
Foreign trade deficit, in % of GDP
-20.8
-21.1
-23.0
-21.6
Current acount deficit (without grants), in % of GDP -10.1 -14.2 -14.8 13.03
Foreign direct investments, net infow, in millions EUR
1,244.6
3,394.6
1,601.6
2,080.3
Net inflow of foreign credits, in millions EUR
1,765.1
2,280.0
3,074.1
2,373.1
Foreign reserves of NBS, in millions EUR, end of 4,935.1 period 9,024.8 9,640.7 7,866.9
Export per capita in Transitional Economies in 2007
12.000
30%
26,1%
10.000
9.616,5 8.628,7
25%
8.000
20%
17,5%
6.000
15,5% 9,1% 11,7%
15%
13,7%
10%
4.000
2.002,6
2.000
1.746,5
1.314,3 869,5
5%
0
0%
Slovenia
Czech Rep.
Croatia Export (EUR)
Bulgaria Growth (%)
Romania
Serbia
Free Trade – Exports from Serbia!
Customs free exports to EU – market of 490 million consumers WTO accession in 2009 CEFTA (South East Europe Free Trade Area) – market of app. 30 million consumers Customs free exports to Russian Federation – market of 150 million consumers 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
██ ██ ██
Trade between Serbia and the EU
• The major Serbian trading partner is the EU (in 2007 the share of total trade with the EU accounted for 55.4%) • In 2007 exports increased by 23% and imports increased by 29% compared to the previous year • Trade deficit amounted to EUR 3.8 billion in 2007, which is 57% higher in comparison to 2006 • Ratio of coverage of imports by exports decreased in 2007 and accounted for 49%
SAA Agreement
• SAA and the Interim Trade Agreement signed in April 2008, ratified in September 2008. • Serbia will start implementing the SAA from January 1st, 2009 • Gradual reduction of tariffs during the next 6 years (depending on the sensitivity of products) and the establishment of full free trade area • Faster reduction of tariffs on industrial products • Meanwhile, all legislation shall be harmonized with EU standards
CEFTA - Central European Free Trade Agreement…
• CEFTA Parties: Albania, Croatia, Macedonia, Bosnia and Herzegovina, Moldova, Montenegro and Serbia and UNMIK/Kosovo • After the EU, CEFTA is Serbia's second major trade partner • Average share of trade with CEFTA Parties represents 16% of Serbia's total trade with the world • Serbia has net surplus in total trade exchange • In trade with CEFTA Parties Serbia's export was two times higher then the import from CEFTA Parties • Growth was recorded in both export and import • Trade is fully liberalized with UMNIK/Kosovo and with countries: Macedonia and Bosnia and Herzegovina • With Moldova 97% liberalized and with Croatia and Albania - partial liberalization
CEFTA - Central European Free Trade Agreement
Structure of Serbia's exports to CEFTA • 50% of Serbia's total agricultural export is focused on CEFTA countries: beer, corn, biscuits, meat products, water, flour, edible oil, milk • Petrol oil, electrical energy, stripes, medicines, furniture
• Average share of export to CEFTA Parties is 32% of Serbia's total export
Structure of Serbia's imports from CEFTA
• Petrol oil, coke and coal, articles of wood, electrical energy, wires, tubes
and metal constructions, medicines, glass container • Agricultural products – wine, cigarettes, tomato • Average share of import from CEFTA Parties is 8% of Serbia's total import
FTA with the Russian Federation
• FTA with the Russian Federation has been applied since August 2000 • Serbia is the only country outside the CIS that has FTA with RF (market of 147 mill. consumers) • FTA enables over 95% duty free trade - 50% rule of national origin • Estimated mutual trade level by the end of 2008 is 4 billion USD • Energy sector is the key in trade, investments and JV (gas and oil account for 80% of imports from RF) • Serbian exports to RF diversified (450 million USD in 2007) • Further trade liberalization is recently negotiated: entry into force upon signing – expected by the end of 2008 • FTA envisages duty free export to RF for all products within Headings 1- 97 of HS, except for short list of exemptions • Exemptions include poultry, sugar, alcohol, tobacco, some wool/cotton fabrics, TV/video equipment, tractors, passenger cars, some wooden furniture
FTA with Belarus
• Serbia has finished FTA negotiations with Belarus (market of 11 million consumers) • Signing expected by the end of 2008 • Around 99% of mutual trade will be duty free • Free trade exemptions:
• white sugar
• alcohols • cigarettes • used vehicles: tractors, cars, buses, trucks and (protected) tiers
Geographical Distribution of Serbian Trade in 2007
14% 1% 14% 55% 16%
1. EU 2. CEFTA 3. CIS 4. EFTA Other
Source: Statistical Office of the Republic of Serbia
Major trading partners in 2007
Import in 2007
Export in 2007
15%
7%
1. EU
8%
5%
2. Russia 3. CEFTA
55%
1. EU 2. CEFTA
32% 56%
8%
4. China Other
3. Russia Other
14%
Source: Statistical Office of the Republic of Serbia
The Leading Serbian Exporters in 2007
EXPORTER EXPORTS IN EUR SHARE IN TOTAL EXPORTS IN % 1. 2. 3. 4. 5. U.S. STEEL SERBIA D.O.O. SMEDEREVO AD HIP PETROHEMIJA PANCEVO METANOLSKO-SIRĆETNI KOMPLEKS AD KIKINDA HEMOFARM AD VRSAC NIS AD NOVI SAD NIS PETROL BEOGRAD NIS JUGOPETROL BEOGRAD 6. 7. 8. 9. 10. 11. 12. 13. SUNOKO D.O.O. NOVI SAD IMPOL SEVAL A.D. SEVOJNO JP ELEKTROPRIVREDA SRBIJE BEOGRAD HENKEL MERIMA DOO KRUŠEVAC FABRIKA BAKARNIH CEVI AD MAJDANPEK TARKETT D.O.O. BAĈKA PALANKA HIP AZOTARA DOO PANĈEVO RUMA GUMA RUMA 59,749,119.73 48,576,313.51 44,171,988.63 35,044,365.69 31,090,973.20 29,129,549.24 28,951,939.18 27,738,006.73 0.92 0.75 0.68 0.54 0.48 0.45 0.45 0.43 743,598,841.23 216,519,477.36 79,634,920.15 76,032,457.36 63,345,062.15 11.56 3.36 1.23 1.18 0.98
Source: SIEPA
Foreign - Owned Enterprises’ Share in Exports of 25 Top Serbian Exporters
28%
72%
Foreign investors
Dom estic investors
Significant foreign enterprise share in Serbian export is a result of privatization process, restructuring and greenfield investments
Export Strategy of the Serbian Government
• Cooperation of the state and business community resulted with clearly defined competencies, tasks and responsibilities aimed to create and implement export strategy • Creation of export support system in accordance with pace of accession to WTO (expected in 2009) and EU (expected in 2014) • Export strategy relies on two basic principles: 1. Export capacity strengthening of small and medium enterprises 2. Establishing support system for inflow of export oriented FDI
FDI NET Inflow in Cash and in Kind in Serbia in mn USD
4.500 4.000 3.500 3.000 2.500 2.000 1.500 1.000 500 509 1.402 966 1.550 2,195 2,190 4.387
Over $ 13bn of FDI since 2002
2002
2003
2004
2005
2006
2007
Aug.08
EU member states accounted for about 70% of FDI infow Best SEE regional track record of greenfield project realization, by OECD The largest greenfield investments in SEE awards by OECD went to Serbia three years in a row: Ball Packaging – 2004, Metro Cash and Carry – 2005 and Airport City Belgrade – 2006
Foreign Investments Forecast
(in million EUR)
3.500
3.200
3.000
3.300
3.300
2.500
2.200
2.000
1.500
1.000
500
0
2008
2009
2010
2011
Source: Memorandum on Budget and Economic and Fiscal Policy for 2009 with the Projections for 2010 and 2011 – Ministry of Finance, May 2008
Leading Foreign Investors
COUNTRY OF COMPANY ORIGIN Telenor – Mobi 63 SECTOR INVESTMENT AMOUNT (MN EUR) TYPE OF app. INVESTMENT
1
Norway
Telecommunications
Privatization
1,602
2
Fiat-Zastava
Italy
Car industry
Joint venture
700
3
Philip Morris – DIN
USA
Tobacco
Privatization
611
4
Austrian Telekom Intesa – Delta Banka
Austria
Telecommunications
Greenfield
570
5
Italy
Banking
Brownfield
508
6
STADA - Hemofarm
Germany
Pharmaceuticals
Acquisition
475
7
Embassy Group InBev – Apatinska pivara NBG – Vojvodjanska banka
Israel
IT park
Greenfield
446
8
Belgium
Beer
Acquisition
430
9
Greece
Banking
Acquisition
385
10
Merkator Fondiaria-SAI – DDOR Novi Sad
Slovenia
Retail
Greenfield
240
11
Italy
Insurance
Privatization
220
Foreign Investor’s Status
• National treatment of foreign companies • Free transfer of financial and other assets comprising profits and dividends • Generally no restrictions on investment
• Minority stakes allowed in media and in the field of production and trade in
armaments
Attractive Investment Incentives
Financial incentives: • Production: from €2,000 up to €5,000 per new job created minimum investment amount 1-3mn € and 50 employees • Services: from €2,000 up to €10,000 per new job created minimum investment amount 0.5mn € and 10 employees • R & D: from €5,000 up to €10,000 per new job created minimum investment amount 0.25mn € and 10 employees
Incentives for Investments of Special Importance
• In 3 key industries - automotive, electronics and information and telecommunications technology • The investor has to: - invest at least 200 million EUR - create at least 1,000 new jobs - be a renowned company or to meet high standards • Opportunities for investors: - joint venture with the Republic of Serbia - getting up to 25% refund of the invested assets - state financing of the infrastructure and other preconditions for the realisation of the investment (especially - procurement of land and other real-estate, infrastructural facilitation of land and
sanitation of possible environmental damages in the pre-investment period on the location where the
investment is planned)
Free Zones in Serbia
• Currently 3 Free Zones: Pirot, Subotica, Zrenjanin (New Law on Free Zones adopted in 2006) • Kragujevac is expected to become a new free zone • Imports of goods and services are exempt from VAT and custom obligations • Equipment and raw material are also VAT and custom duty free • No customs limitation regarding duration of the storage of goods • Reduced customs procedure • Goods can temporarily be taken out of the free zone to the Serbian market for the purpose of finalization, repair, refinement and commercial presentation
International Recognition…
The World Bank 2005: Serbia 1st in speed of reform out of 155 countries!
The EBRD 2005: Serbia fastest reformer among 27 countries in transition! US Trade Department awarded Serbia “Market of the Month” title in January 2006! Financial Times 2006/07: Belgrade – City of the Future in Southern Europe!
International Recognition
The World Bank 2006: Serbia 2nd in relative progress out of 175 countries - climbed up the list for 24 places! The EBRD Transition Report: Serbia-regional leader, strongest growth in 2006! PWC 2008: Serbia is 3rd most attractive investment destination among developing countries The WEF’s global competitiveness report 2008-2009: Serbia ranks 84th among 134 countries which is improvement vs. 91st place it took among 131 countries in the 2007-2008 edition
Contact us:
milan.parivodic@wolftheiss.com beograd@wolftheiss.com
tel. +381 11 330 2900
Address:
PC Ušće, 18 floor Bulevar Mihajla pupina 6, 11070 Beograd
THANK YOU FOR YOUR ATTENTION!