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Gorenje, maker of home appliances, has had its products available in Serbia since the fifties and since 2006 it has opened in Valjevo a factory for the production of refrigerators and freezers. This was the company's first Greenfield investment abroad. The following year it has opened a production plant for water heaters in Stara Pazova that has become the company's only location for the production of water heaters since the closure of the factory in Slovenia. The company is also planning a third production plant in Serbia in Zaječar. The plant will be assembling washing machines and dryers, as well as manufacture plastic wash basins.

Profitability matters

There are several reasons behind the decision to establish partial production in Serbia, the company says.
"Production in Serbia with the various aspects of production is cheaper than in Slovenia (such as labor costs and energy costs). In addition, the Republic of Serbia - in accordance with the job creation program offers investors grants for new employment and education of employees - has set up a favorable tax treatment.
"A very important argument for us is the customs agreement that Serbia has with Russia and some other Eastern European countries that are very important for Gorenje in terms of profitability.
"It should be mentioned that since the establishment of production in Serbia, the company has acquired a status of local manufacturer, which certainly affects the perception of consumers in Serbia towards us and our devices and also the sales (in the country), which have greatly increased in recent years."

Good long term prospects

Like Gorenje, logistics group Intereuropa has been present in the Serbian market since the fifties, when a branch office was established in Belgrade as one of the first branches in the former Yugoslavia. Being a logistics group, Intereuropa invested in the Serbian market in order to round off its range of logistics services in the Balkans, the company says, "and so followed the vision of strengthening the position of the leading logistics provider in southeast Europe."
"Serbian market represents one of the key markets for the group and Serbia has great market potential within the future economic developments in this area of Europe."
The company cites as one of the major obstacles for the overall business environment, the instability of the local currency - dinar. As other drawbacks, the company cites the country's bad shape economically as well as imbedded grey economy, especially in the southern parts of the country. Though the workforce is cheaper than in Western Europe, the productivity still lags behind the western European standards, however, the education and training of personnel is increasing, the company adds.
The biggest advantage of Serbia as an investment destination lies in the "the possibility of long-term development of the market and developing industry, since it is a market of several million people with relatively good labor force, which will undoubtedly grow, and this will be even more reflected with the possible entry of Serbia into the European Union."

Great potential

Nova KBM bank is one of the more recent investors in the Serbian market - it has entered the market in 2010 with EUR 10m recapitalisation of Serbian Credy bank, a move "which has realised the strategic development goal of expansion to the markets of southeast Europe, which was set by the bank and the group strategy for 2008-2013".
The bank has also completed the second recapitalisation of the Credy bank in June this year, amounting to EUR 5m. The bank sees huge potential in Serbian financial market.
"The Serbian market is considered one of the most promising financial markets in southeast Europe", says Peter Kuplje, executive director of the management board for the field of accompaniment and control operations.
"The Serbian banking system is less developed and has great potential organic growth. This means huge opportunities for development in the area of business volumes, as well as the introduction of new financial products. "
Although Serbia might have some way to go before meeting the business standards of the western world, Slovenian investors are seeing its huge potential and are capitalising on all the advantages the country currently offers.