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Make some cash in crisis times…. DR. MILAN PARIVODIĆ PARTNER WOLF THEISS Invest in Serbia!

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Presentation on theme: "Make some cash in crisis times…. DR. MILAN PARIVODIĆ PARTNER WOLF THEISS Invest in Serbia!"— Presentation transcript:

1 Make some cash in crisis times…. DR. MILAN PARIVODIĆ PARTNER WOLF THEISS Invest in Serbia!

2 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


4 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

5 A sampling of our clients in Serbia

6 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.

7 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) Location v v

8 Serbian GDP per capita and GDP Growth Rate All-time record foreign currency reserves amounting to $14 billion Decreasing public debt standing at less than 30% of GDP GDP per capitaGDP growth rate

9 GDP Growth Rate in the Region (in %) Country2005200620072008 * Bosnia and Herzegovina Bulgaria6.26.16.0 Croatia4. FYR Macedonia4. Montenegro4.16.56.0 Romania4. Serbia6.** *GDP growth forecasts (Source: EBRD) **GDP growth forecast (Source: Statistical Office of the Republic of Serbia)

10 Indicators of Goods Exchange and Balance of Payments of Serbia 200520062007 2005-2007 AVERAGE Export of goods, growth rate in %21.628.525.425.2 Import of goods, growth rate in %-2.922.829.316.4 Foreign trade deficit, in % of GDP-20.8-21.1-23.0-21.6 Current acount deficit (without grants), in % of GDP -10.1-14.2-14.813.03 Foreign direct investments, net infow, in millions EUR1,244.63,394.61,601.62,080.3 Net inflow of foreign credits, in millions EUR1,765.12,280.03,074.12,373.1 Foreign reserves of NBS, in millions EUR, end of period 4,935.19,024.89,640.77,866.9

11 Export per capita in Transitional Economies in 2007

12  CEFTA (South East Europe Free Trade Area) – market of app. 30 million consumers  Customs free exports to Russian Federation – market of 150 million consumers Free Trade – Exports from Serbia!  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  Customs free exports to EU – market of 490 million consumers  WTO accession in 2009

13 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%

14 SAA Agreement SAA and the Interim Trade Agreement signed in April 2008, ratified in September 2008. Serbia will start implementing the SAA from January 1 st, 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

15 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

16 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

17 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

18 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

19 Geographical Distribution of Serbian Trade in 2007 Source: Statistical Office of the Republic of Serbia

20 Major trading partners in 2007 Source: Statistical Office of the Republic of Serbia

21 The Leading Serbian Exporters in 2007 EXPORTEREXPORTS IN EURSHARE IN TOTAL EXPORTS IN % 1.U.S. STEEL SERBIA D.O.O. SMEDEREVO743,598,841.2311.56 2.AD HIP PETROHEMIJA PANCEVO216,519,477.363.36 3.METANOLSKO-SIRĆETNI KOMPLEKS AD KIKINDA79,634,920.151.23 4.HEMOFARM AD VRSAC76,032,457.361.18 5.NIS AD NOVI SAD NIS PETROL BEOGRAD NIS JUGOPETROL BEOGRAD 63,345,062.150.98 6.SUNOKO D.O.O. NOVI SAD59,749,119.730.92 7.IMPOL SEVAL A.D. SEVOJNO48,576,313.510.75 8.JP ELEKTROPRIVREDA SRBIJE BEOGRAD44,171,988.630.68 9.HENKEL MERIMA DOO KRUŠEVAC35,044,365.690.54 10.FABRIKA BAKARNIH CEVI AD MAJDANPEK31,090,973.200.48 11.TARKETT D.O.O. BAČKA PALANKA29,129,549.240.45 12.HIP AZOTARA DOO PANČEVO28,951,939.180.45 13.RUMA GUMA RUMA27,738,006.730.43 Source: SIEPA

22 Foreign - Owned Enterprises’ Share in Exports of 25 Top Serbian Exporters  Significant foreign enterprise share in Serbian export is a result of privatization process, restructuring and greenfield investments

23 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 Export Strategy of the Serbian Government

24 FDI NET Inflow in Cash and in Kind in Serbia in mn USD  Over $ 13bn of FDI since 2002  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

25 Foreign Investments Forecast (in million EUR) Source: Memorandum on Budget and Economic and Fiscal Policy for 2009 with the Projections for 2010 and 2011 – Ministry of Finance, May 2008

26 Leading Foreign Investors COMPANY COUNTRY OF ORIGIN SECTOR TYPE OF INVESTMENT app. INVESTMENT AMOUNT (MN EUR) 1Telenor – Mobi 63NorwayTelecommunicationsPrivatization1,602 2Fiat-ZastavaItalyCar industryJoint venture700 3Philip Morris – DINUSATobaccoPrivatization611 4Austrian TelekomAustriaTelecommunicationsGreenfield570 5Intesa – Delta BankaItalyBankingBrownfield508 6STADA - HemofarmGermanyPharmaceuticalsAcquisition475 7Embassy GroupIsraelIT parkGreenfield446 8InBev – Apatinska pivaraBelgiumBeerAcquisition430 9NBG – Vojvodjanska bankaGreeceBankingAcquisition385 1010MerkatorSloveniaRetailGreenfield240 1Fondiaria-SAI – DDOR Novi SadItalyInsurancePrivatization220

27 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

28 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

29 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)

30 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

31 International Recognition…  The World Bank 2005: Serbia 1 st 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!

32 International Recognition  The World Bank 2006: Serbia 2 nd 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 3 rd most attractive investment destination among developing countries  The WEF’s global competitiveness report 2008-2009: Serbia ranks 84 th among 134 countries which is improvement vs. 91 st place it took among 131 countries in the 2007-2008 edition

33 Contact us: tel. +381 11 330 2900 Address: PC Ušće, 18 floor Bulevar Mihajla pupina 6, 11070 Beograd THANK YOU FOR YOUR ATTENTION!

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