Serbia is a developing country in the final transitioning stage towards liberal market economy. The membership in the European Union is not yet certain but the country has already harmonized its legislation with the EU acquis to a significant extent. The EU commission has recently stated that Serbia has to continue with political and economic reforms with a possibility to join the EU in 2025. However, before becoming an EU state Serbia will have to make some hard political decisions, including the resolution of political and border disputes with the neighboring countries.
Since 2009 when it recorded negative GDP growth rate, Serbia has been experiencing moderate growth. In 2017, its GDP increased by 1.9%. This is still modest compared to most of the neighbors, but it encouraged foreign investors to increase their activities in the country. Serbia is the regional leader by the value of foreign direct investments, which amounted to EUR 2.4 billion in 2017. One of the main reasons for the low growth is low share of investments in the country’s GDP. In 2016, investments made only 17% of Serbia’s GDP while valid economic studies suggest that greater economic progress is possible only if investment share is above 20% or even 25%.
According to the International Monetary Fund, the country made respectable progress in reforming its fiscal policy and consolidating public finance. Public debt went down from 74.7% (2015) to 64.9% (2017) of the national GDP.
One of the greatest burdens for Serbian economy and its fiscal stability are large state owed companies. These include Elektroprivreda Srbije, Telekom Srbija, Pošta, Srbija Gas, RTB Bor. The strategy of the state is to keep majority stake in companies which hold market monopoly and do not generate enormous financial losses, such as Eleketroprivreda or Pošta (Serbian post), while bringing in professional management. On the contrary, state owed companies which have been generating financial losses will be privatized, if there is a buyer, or put in insolvency . Following this agenda, the Government of Serbia recently sold Smederevo steel company to Chinese Hesteel and Galenika pharmaceuticals to Elius. Azotara, Petrohemiija and RTB Bor, to name a few out of 120 companies, are next in line for privatization.
In 2017/2018, first two public private partnerships have been signed: concession agreement for Belgrade Airport Nikola Tesla and public-private partnership contract for Vinča landfill.
In January 2018 the Team of experts for the concession chose the offer of Vinci Airports for concession of Belgrade Nikola Tesla Airport. Following the outcome of the selection process, representatives of the Serbian Government and Vinci Airports signed the concession agreement in March 2018. According to the agreement, Vinci Airports will manage the airport for the period of 25 years and during this period it will invest in the airport infrastructure and expand the pool of airlines landing at the Belgrade Airport. Vinci Airports is obliged to pay EUR 501 for the concession to the Serbian state with the annual fee of EUR 5 to 16 million per year and to invest EUR 732 million in the airport infrastructure during the concession period. Vinci Airports is daughter company of Vinci one of the global leaders in the construction business.
In September 2017 Belgrade city Government and Beočista Energija company signed the private public partnership agreement with the consortium comprising SUEZ Groupe and I-Environment Investments limited. According to the agreement the consortium is to invest EUR 300 million in the construction of a modern waste management facility in Vinča landfill and to manage the facility for the period of 25 years. SUEZ Groupe is a global company providing water and waste management solutions while I – Environment Investments Limited is an investment company in water and environment industries and a member of Japanese Itochu Corporation.
The investments in the road infrastructure are underway as well with the part of international Corridor 10 to be finalized soon, making highway connections to both Macedonia and Bulgaria. Construction of a highway to Montenegro, as part of Corridor 11 in western Serbia, is also underway. Serbian Government recently announced that the development of new high-speed railway between Belgrade and Budapest will finally begin.
BDK Advokati in Serbia
BDK Advokati started its operations in Serbia in 2004, when the country was starting to experience political and economic liberalization after almost 15 years of illiberal, autocratic rule of Slobodan Milošević. We started as a full-service corporate law firm and have remained true to that concept. As the transactional, contentious, advisory and regulatory work was piling up, we were constantly expanding practice areas and industry sectors in our focuses. Today our team in Serbia numbers more than 30 fee earners who cover XX practice areas and serve clients from virtually every industry sector. We have been involved in major transactions in the country, such as the acquisition by CVC of Apatinska pivara and subsequent exit, acquisitions of Smederevo steel plant by Chinese Hesteel Group, PPP for the Belgrade Airport, municipal PPP for the development of a waste-to-energy plant in Vinča and the first successfully closed wind power project in Serbia, Kovačica. We represented Greek Mytilineos in a landmark investment arbitration against Serbia in which the client secured a USD 40 million award, and Coca Cola in the abuse of dominance investigation which was terminated without a finding of infringement. Our compliance team is assisting companies operating in Serbia to prepare themselves for GDPR. We are also actively involved in the shaping of national legislation to create friendly business environment and legal certainty.