Serbia and Montenegro

 Table of Contents

Why Serbia and Montenegro? Serbia and Montenegro at a Glance Best Prospects for U.S. Exporters Doing Business in Serbia and Montenegro Success Story Market Research Upcoming Events Contact Us
	Photo: Goverment Building Republic of Serbia

Introduction: Why Serbia and Montenegro?

Expanding Market

With a population of 8.5 million people, Serbia and Montenegro’s internal market is among the largest in South East Europe. In addition to the domestic market, export-oriented companies in Serbia and Montenegro gain access to the South East Europe Free Trade Area market of 55 million people. Furthermore, Serbia is the only country outside of the Commonwealth of Independent States that enjoys a Free Trade Agreement with Russia. This fact, coupled with duty-free exports to the European Union and the United States for most products and services, is one of the key drivers for international investors to relocate their operations to Serbia.

Since 2001, per capita GDP has doubled to almost US $3,000, ahead of most other countries in the region, including Romania, Bulgaria, Macedonia, Albania, and Bosnia and Herzegovina.  In 2004, the economy reached its record growth rate of 9.3 percent and is expected to maintain high growth rates of around 5 percent in the coming years.

The upswing in production has fueled a steady increase in purchasing power, which is apparently seen through the double-digit rise in household consumption and retail trade. Serbia and Montenegro is still one of the few unsaturated markets in Europe. During the nineties, fine quality products coming from the United States and European Union were practically unavailable to local consumers.  Today, Serbia and Montenegro is an importing market and consumer preferences are highly turned towards the products originating from the United States and other developed countries.

Photo: View of Saint Marko Church

Increasing Stability

This year, Serbia and Montenegro’s economic and legislative reforms and the improvement of the business climate have been widely acknowledged. The European Union positively assessed the country’s overall progress and commenced negotiations on reaching the Stabilization and Association Agreement.  According to the World Bank, Serbia was the global top reformer in 2004, leading in reforms aimed at spurring business activities and creating new employment. Standard & Poor's raised Serbia's long-term sovereign credit rating to BB- from B+, saying the country's prospects had improved both financially and politically.

Decreasing Taxes 

Serbia and Montenegro’s tax regime provides various incentives for investors seeking ways to reduce their overhead costs. Set at10 percent, the corporate profit tax rate is the lowest in Europe. In addition to profit tax savings, tax incentives–such as credits for investment in fixed assets of up to 80 percent of the invested amount and a ten-year tax holiday for investment over €7 million–help businesses significantly improve margins.

Serbia and Montenegro at a Glance

Best U.S. Export Prospects

1. Computer Hardware
2. Telecommunications
3. Airport and Ground Equipment
4. Insurance
5. Medical Equipment
6. Energy
7. Agriculture

Click here to learn more about opportunities in Serbia and Montenegro.

Doing Business in Serbia and Montenegro

As one of the largest markets in the region, second only to Romania, Serbia and Montenegro has undertaken aggressive reform programs with the intent to reestablish the country as a regional center and crossroads. All major road, rail, water and even air routes traverse Serbia and Montenegro, connecting Europe with Southeast Europe, Turkey, Greece and the Middle East. Serbia and Montenegro is moving to capture foreign business interest. Total foreign direct investment (FDI) has jumped from virtually zero in 2000 to $4.5 billion in 2005. U.S. companies invested over $1.3 billion in the last five years, making the United States the largest investing nation in the country.

The political risk attached to doing business in Serbia and Montenegro is still high compared to other countries in Central Europe. But the risk is decreasing daily. Paris Club (2001) and London Club (2004) deals have restored relations with both official and commercial banking creditors. The international financial institutions (EBRD, IFC, IMF and World Bank) maintain active programs. There are political issues still to be resolved: future relations between the two republics; the future status of Kosovo; and continued cooperation with The Hague. There is a consensus on the country’s future direction: economic stimulation that will create stability, prosperity and, ultimately, integration with the European Union.

Market Entry Strategy

Considering the complexity of the market, some kind of local representative is a “must”. The use of agents and distributors is an important and commonly used method for foreign firms to enter the Serbian and Montenegran market. Many U.S. companies have found that it is more efficient and cheaper to hire a good local agent or distributor than to conduct direct sales.
International consulting firms present in Belgrade, such as Deloitte Touché Tohmatsu International, PriceWaterhouseCoopers, and KPMG can be helpful in establishing the credibility of a potential local partner. The Commercial Section of the U.S. Embassy can provide International Company Profiles that include background checks on potential clients and representatives. Local organizations may also be useful in verifying the credibility of a potential local partner. Visit the Chamber of Commerce of Serbia at http://www.pks.co.yu/ and the Chamber of Commerce of Montenegro at www.pkcg.org.
It is recommended that U.S. companies pay a visit to the market to introduce themselves to business practices and customs. Good networking and establishing relationships with government officials and business people is very often crucial to achieve goals. The U.S. Commercial Service can provide matchmaking services, business briefings, and facilitate all necessary meetings for a U.S. company interested in this market.

Business Customs

The area of Serbia and Montenegro was never fully integrated into the Eastern Bloc. Enterprises for the most part were "socially owned" and were self-managed by the workers. These enterprises engaged in considerable foreign trade and had substantial contact with western companies. Private entrepreneurship was permitted on a small-scale basis and during the 1990s private business increased substantially. As a result, business managers are quite familiar with western-style market economy philosophy, customs and business practices. Management is typically concentrated at the level of the managing director who is the key decision-maker. Business relationships in Serbia and Montenegro are founded on trust with significant time and energy invested in developing relationships among the parties. On the other hand, Serbia and Montenegro’s business people are also quick to recognize opportunities and can just as suddenly move at an accelerated pace.

Video Market Brief

View this webcast on Serbia and Montenegro to learn more about the market and opportunities present for U.S. exporters!

Success Story

Merit Solutions is a small software company that provides business and technology services. Merit helps mid-market clients to plan their technology investments, design solutions, implement projects that drive competitive advantage, and manage critical applications to improve business performance. Merit recently developed software to meet the compliance needs of midsize companies.  Based in the United States, Merit Solutions has locations in Wheaton, Illinois and Fremont, California. 

In August 2004, Trade Specialists Thomas Panek of Commercial Service (CS) Chicago and Commercial Specialist Merry Cao of CS Beijing counseled Bill Burke, President of Merit Solutions, to discuss CS services. Merit recently identified several European companies that needed compliance software for their U.S. investment. In June 2005, Trade Specialist Dusan Marinkovic of CS Indianapolis arranged the visit of Commercial Specialist Boris Popovski from Belgrade. During his visit, Popovski offered CS staff an extensive overview of the Serbian IT market. Popovski provided market research on Serbia as an emerging market. 

Photo: View of Yugoslavia Drama Theatre

In August 2005, Merit contacted Panek for assistance with Intellectual Property Rights in Serbia. Merit was also looking for a software partner to market and service the European market. Panek provided Popovski's information and market research, to which Burke of Merit Solutions wrote: "Thank you for your help, as well as the expanded country analysis."  Popovski also provided an unqualified contact list of Serbian companies for Merit Solutions. Panek contacted the companies on behalf of Merit and identified a short-list of potential partners based on screening criteria provided by Burke.

In September 2005, Burke notified Panek that Merit had moved forward with their export of software to its European partners.  Following the export success, CS Belgrade performed a Gold Key Matching Service for Merit Solutions, which resulted in establishment of its office in Serbia and expanding its export potential in the region.

Market Research

To view market research reports produced by the U.S. Commercial Service please go to the following website: http://www.export.gov/marketresearch.html and click on Country and Industry Market Reports.

Upcoming Events

2nd Conference on 'Funding Regional Development in the New Europe'
January 26-27, Belgrade
The event presents itself as an informative and networking session intended for all those involved in financing regional development.

Mark Expo
February 4-7, Belgrade Fairground
The third international fair of marketing, advertising, media, equipment and investment projects, the fair is organized by the Belgrade Fair and Perfect Metropolis-Group.

Conference on Socially Responsible Investment

March 2006, Belgrade

This will be the first event of this kind in Serbia, introducing this new subject. The conference will be organized by the Serbian Export and Investment Promotion Agency, Responsible Business Initiative – Serbia and Foreign Investors Council.  In recent years, socially responsible investment (SRI) has experienced a strong surge in popularity among mainstream investors. SRI combines investors’ financial objectives with their concerns about social, environmental and ethical issues.

Conference on Clinical Trials in Serbia: Looking upon GCP, Regulatory Issues and Bio-ethics
March 2006, Belgrade
The conference aims to disseminate awareness of the current practice of clinical trials in Serbia, reflecting on its recent past and anticipating its nearest mid-term future. Insights are to be shared among professionals who take an active role and part in clinical trials within Serbia, as well as from neighboring countries and EU member states.

44th International Motor Show-Commercial Vehicles (OICA)
April 3-8, Belgrade
Commercial vehicles, light commercial vehicles, trailers and semi-trailers, body works, power train, running gear, chassis, equipment, supporting industry, logistics, telemetric, forwarding, insurance, financial institutions, trade organization, media.

1st Southeastern Europe Broadband 2006 (Conference & Expo)
April 10-14, Belgrade
The Conference will address the rapidly growing market of 12 countries located in Southeastern Europe with total population exceeding 150 million. This First Broadband Conference and Exposition event in Southeastern Europe presents a unique opportunity to present the technology solutions and products of ICT companies to the government officials, service provider representatives, potential channel partners, and major enterprise customers.

28th Tourism Fair
April 19-22, Belgrade
Travel agencies, associations and organizations, hotels, tourist centers, hunting tourism, airway companies, international tour operators, and hotels.

Vienna Economic Forum
Summer 2006, Belgrade
Leading investor group in CEE, connecting 10 countries and gathering over 1000 businessmen, investors, and representatives of international financial institutions.

First Investment Fair
November 2006, Novi Sad

Contact Us

The U.S. Commercial Service in Serbia and Montenegro provides assistance to U.S. firms interested in doing business in this market. Our Commercial Service professionals help U.S. companies export successfully by providing professional trade promotion, consultation, market research, and customized contact services.

U.S. Commercial Service Belgrade