Serbia’s investment climate has modestly improved in recent years, driven by macroeconomic reforms, financial stability, and fiscal discipline. Attracting foreign investment is an important priority for the government. In 2020, Serbia improved four places to number 44 on the World Bank’s Doing Business index. Serbia launched a new 30-month Policy Coordination Instrument (PCI) with the International Monetary Fund (IMF) in June 2021. U.S. investors in Serbia are generally positive due to the country’s strategic location, well-educated and English-speaking labor force, competitive labor costs, generous investment incentives, and free-trade arrangements with the EU and other key markets. U.S. investors generally enjoy a level playing field. The U.S. Embassy in Belgrade often assists investors when issues arise, and Serbian leaders are responsive to investment concerns. In 2021, the United States and Serbia signed a new Investment Incentive Agreement that may facilitate opportunities in a variety of sectors. Challenges remain, particularly bureaucratic delays and corruption, as well as loss-making state-owned enterprises (SOEs), a large informal economy, and an inefficient judiciary. Political influence on the economy is also a concern; this issue was highlighted in January 2022 when the government abruptly withdrew licenses related to a major proposed lithium-mining project in response to public protests.
The Serbian government has identified economic growth and job creation as top priorities and has passed significant reforms to labor law, construction permitting, inspections, public procurement, and privatization that have helped improve the business environment. If the government delivers on promised reforms during its EU accession process, business opportunities should continue to grow. Sectors that stand to benefit include agriculture and agro-processing, solid-waste management, sewage, environmental protection, information and communications technology (ICT), renewable energy, health care, mining, and manufacturing. In April 2021, Serbia adopted its first renewable energy law, which should contribute to scaling up renewable energy capacities. Companies and officials have noted that the adoption of reforms has sometimes outpaced implementation. Digitizing certain government functions (e.g., construction permitting, tax administration, and e-signatures) has not yet brought a dramatic improvement in processing times and may not be consistently implemented. The government is slowly making progress on resolving troubled SOEs, through bankruptcy or privatization actions where possible. The government plans to privatize 64 more companies and is also slowly reducing Serbia’s bloated public-sector workforce, mainly through attrition and hiring caps.
Russia’s attack on Ukraine in February 2022 initially had a limited economic impact on Serbia, and the banking system remains well capitalized and liquid; but inflation, as well as energy and agricultural supply disruptions are likely if the war continues, despite Serbia’s refusal to join U.S. and EU sanctions on Russian entities. Public fear of price spikes and shortages initially led to sporadic panic buying at supermarkets and gas pumps, but fuel and other consumer goods have remained available. Russia continues to supply natural gas and crude oil to Serbia, but supplies are vulnerable due to heavy Russian influence in the sector and the potential effect of sanctions. Serbia’s trade with Russia is otherwise limited, but agricultural exports could suffer from contraction or loss of the Russian market due to sanctions and resulting financial and logistical barriers.
|TI Corruption Perceptions Index||2021||96 of 180||https://www.transparency.org/en/cpi/2021/index/srb|
|Global Innovation Index||2021||54 of 132||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M, historical stock positions)||2019||$149 million||https://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita||2020||$7,420||https://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
1. Openness To, and Restrictions Upon, Foreign Investment
3. Legal Regime
4. Industrial Policies
5. Protection of Property Rights
6. Financial Sector
7. State-Owned Enterprises
State-owned enterprises (SOEs) dominate many sectors of the economy, including energy, transportation, utilities, telecommunications, infrastructure, mining, and natural resource extraction. Serbia’s Agency for Business Registers (ABR) maintains a publicly available database of all SOEs on its website at . As of March 2022, according to this database, 266 SOEs are in normal operation, 42 are in bankruptcy, and two are in liquidation. However, the most recently available recorded 545 SOEs employing a total of more than 114,000 people, or approximately 4% of the formal workforce and accounting for 6% of total business sector revenues. (The report for 2021 is expected to be published in June 2022.) At the beginning of 2022, 64 SOEs with a total of nearly 25,000 employees were slated to be resolved through privatization or bankruptcy, down from 90 companies in early 2019. The government has launched a privatization tendering process for two of those companies, and the Ministry of Economy is preparing 10-15 additional companies for divestiture (see Privatization Program, below).
The Law on Public Enterprises, adopted in February 2016, defines a public enterprise as “an enterprise pursuing an activity of common interest, founded by the State or Autonomous Province or a local government unit.” The law also defines “strategically important companies” as those in which the state has at least a 25% ownership share. The law aimed to introduce responsible corporate management in public companies and strengthen supervision over public companies’ management. The law requires that directors of public companies be selected through a public application procedure and that they not hold any political party positions while serving. The law also requires that a portion of public companies’ profits be paid directly to the state, provincial, or local government budget. However, Transparency International Serbia analyzed implementation of the law in an ad hoc report in September 2017 and concluded that almost none of these requirements have been implemented, including the professionalization and transparency of management. The full report can be seen at:
SOEs can purchase goods from the private sector and foreign firms under the Public Procurement Law. For example, foreign companies regularly win public tenders for the construction of roads and other infrastructure projects. Under the Public Procurement Law, a buyer must select a domestic supplier if the domestic supplier’s price is no more than 5% higher than a foreign supplier’s price. The Public Procurement Office, an independent state body, supervises implementation of the Law on Public Procurement. Serbia, not yet a member of the WTO, is not a party to the WTO’s Government Procurement Agreement.
Private enterprises have the same access to financing, land, and raw materials as SOEs, as well as the same tax burden and rebate policies. However, the IMF estimated that in 2014, SOEs enjoyed benefits amounting to approximately 2% of GDP.
The IMF has recommended that the government phase out support for SOEs. In 2016, Serbia committed to significantly reduce the fiscal cost of SOEs by curtailing direct and indirect subsidies, strictly limiting the issuance of new guarantees, and enhancing the accountability, transparency, and monitoring of SOEs. This goal remains a key element of Serbia’s current IMF program. The government decreased the level of quasi-fiscal support (issuing of new guarantees) from $860 million in 2016 to $110 million in 2020. In the latest IMF program, launched in June 2021, the IMF stressed the importance of advancing the SOE reform agenda, including improving corporate governance. Serbia, with EBRD support, adopted an action plan to implement a new ownership and governance strategy for SOEs in June 2021. The Action Plan is posted online at: .
8. Responsible Business Conduct
Responsible Business Conduct (RBC) and Corporate Social Responsibility are relatively new concepts in Serbia, and until recently many Serbian companies viewed them mainly as public-relations tools. The Serbian government has no formal mechanism in place to encourage companies to follow a due-diligence approach to RBC. The Council for Philanthropy held its first session in September 2018. The Council, chaired by the Prime Minister and founded with grant support from USAID, aims to use public policy to create a more encouraging environment for corporate giving in Serbia. Members of the Council include ten government ministers, the Belgrade Mayor, the Director of the Tax Administration, several NGOs, and 29 member companies as of April 2020. Donors have pointed to issues that have a negative impact on philanthropy, including a lack of tax incentives for donors, no available VAT exemptions for in-kind donations, the lack of a system for monitoring donations from companies, and the absence of official data on charities.
The USAID project “Framework for Giving Activity,” which recently ended, strengthened philanthropy and charitable giving in Serbia. The activity focused on improving the legal and policy framework related to charitable giving to make giving easier and more transparent.
According to the 2019 World Giving Index published by the Charities Aid Foundation, Serbia was ranked 123rd out of 126 countries listed in a 10-year aggregate survey of number of people who donate to charity or participate in volunteer work: HYPERLINK “https://www.cafonline.org/docs/default-source/about-us-publications/caf_wgi_10th_edition_report_2712a_web_101019.pdf” https://www.cafonline.org/docs/default-source/about-us-publications/caf_wgi_10th_edition_report_2712a_web_101019.pdf
The Law on Public Procurement allows the government to ask bidders to fulfill additional conditions, especially those related to social and environmental issues, and allows the government to consider criteria such as environmental protection and social impact when evaluating bids.
The UN Development Program’s Global Compact initiative has 118 participants in Serbia and has organized a number of educational events intended to strengthen RBC capacity in Serbia. The list of members is available at: .
Several local organizations, such as the American Chamber of Commerce (AmCham), the Foreign Investors’ Council, and the Serbian Chamber of Commerce (PKS) promote the concept of RBC among the Serbian business community and the public. PKS presents a national award to Socially Responsible Businesses. The Trag Foundation supports the Serbian Philanthropy Forum, a networking body for donors (including numerous corporate actors). The NGO Smart Kolektiv provides consulting services in RBC and established in 2016, with USAID support, an RBC Index which is the first national platform for assessing responsible business conduct in Serbia.
The Responsible Business Forum Serbia is a network of socially responsible companies that contribute to the development of the community, stimulating the development of corporate social responsibility and the establishment of firm and lasting socially responsible practices in the business sector. It was established in 2008 by 14 leading companies in Serbia. More information about the Forum is available at: .
Multinational companies often bring international best practices in RBC, with U.S. companies among the most active. During the COVID-19 pandemic, many large companies donated money and goods to help government combat the crisis; more info is available at: .
Allegations of labor-rights violations are uncommon in Serbia. However, in December 2021, the European Parliament adopted a resolution calling for an investigation into forced labor at the construction site for the Chinese-owned LingLong tire-manufacturing plant in Zrenjanin, in northern Serbia. Media and anti-trafficking NGOs reported that approximately 500 Vietnamese workers were living in poor accommodations and lacked access to sufficient food and water, their passports having been confiscated upon arrival.
According to a 2016 OECD study on small and medium enterprises, Serbia has no national strategy that targets environmental policy toward small and medium-size enterprises. See . Serbia’s 2011 Corporate Law introduced contemporary corporate standards, but business associations indicate that implementation is inconsistent.
The government does not maintain a national point of contact for OECD’s Guidelines for Multinational Enterprises, including OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas. The government does not participate in the Extractive Industries Transparency Initiative or the Voluntary Principles on Security and Human Rights.
Serbia has a private sector security industry but is not a signatory of the Montreux Document on Private Military and Security Companies. Serbia is also not a supporter of the International Code of Conduct for Private Security Service Providers and is not a participant in the International Code of Conduct Association.
Surveys consistently show that corruption remains an issue of concern in many areas. Serbia’s global ranking in Transparency International’s Corruption Perceptions Index declined to 96 in 2021 from 91 in 2020. In Serbia’s EU accession process, the European Commission has repeatedly noted that Serbia must do more to fight corruption. Arrests and investigations on corruption charges generally focus on low or mid-level technocrats, and corruption-related trials are typically drawn out and subject to a lengthy appeal process.
Serbia is a signatory to the Council of Europe’s Civil Law Convention on Corruption, and it has ratified the Council’s Criminal Law Convention on Corruption, the UN Convention against Transnational Organized Crime, and the UN Convention against Corruption. Serbia also is a member of the Group of States against Corruption (GRECO), a peer-monitoring organization that provides peer-based assessments of members’ anti-corruption efforts. Twenty-five local governments in Serbia participated in USAID’s anti-corruption program, which ended in 2022, and introduced and increased transparency measures in their processes.
The government has worked to bring its legal framework for preventing and combating corruption in line with EU norms. A dedicated state body, the Agency for the Prevention of Corruption, plays a preventative role in fighting corruption, while dedicated Anticorruption Police and prosecutors investigate and prosecute cases of corruption. The Criminal Code specifies numerous bases for prosecution of corruption and economic offenses, including but not limited to giving or accepting a bribe, abuse of office, abuse of a monopoly, malfeasance in public procurement, abuse of economic authority, fraud in service, and embezzlement. However, a new National Strategy for Fighting Corruption to replace the expired 2013-2018 version has yet to be drafted – a concern frequently raised by the European Commission and Serbia’s Anti-Corruption Council, an advisory body to the government.
In 2018, Serbia’s Parliament strengthened anti-corruption laws through three pieces of legislation: The Law on Organization and Jurisdiction of State Organs in Suppressing Organized Crime, Terrorism, and Corruption for the first time established specialized anti-corruption prosecution units and police and judicial departments, mandated the use of task forces, and introduced liaison officers and financial forensic experts. The Law on Asset Forfeiture was amended to expand coverage to new criminal offenses, and amendments to the Criminal Code made corruption offenses easier to prosecute. Following these legal changes, specialized anti-corruption departments started operations in March 2018 in Novi Sad, Belgrade, Kraljevo, and Niš to prosecute offenders who have committed crimes of corruption valued at less than RSD 200 million ($2 million). Cases valued above this level are handled by the Organized Crime Prosecutor’s Office.
Serbia’s Law on the Prevention of Corruption, which went into effect in 2020, requires income and asset disclosure by appointed or elected officials, and it regulates conflicts of interest for public officials. Disclosures cover assets of officials, spouses, and dependent children. Declarations should be publicly available on the website of the Agency for the Prevention of Corruption, and failures to file or to fully disclose income and assets are subject to administrative and/or criminal sanctions. Significant changes to assets or income must be reported annually, upon departure from office, and for a period of two years after separation. Independent media reported cases where high-level officials allegedly did not comply with asset disclosure laws by failing to report assets.
The Law on Public Procurement, adopted in 2020, introduced mandatory use of an online public-procurement portal. While the portal noticeably improved transparency and procedures, independent watchdogs reported that more than half of completed public procurement tenders since the implementation of the new law have resulted in only one offer, which indicated continued issues with transparency of public procurement procedures or the establishment of non-competitive procurement processes that favor certain vendors.
Serbian authorities do not require private companies to establish internal codes of conduct related to corruption or other matters, but some professional associations (e.g., for attorneys, engineers, and doctors) enforce codes of conduct for their members. Private companies often have internal controls, ethics codes, or compliance programs designed to detect and prevent bribery of government officials. Large companies often have internal programs, especially in industries such as tobacco, pharmaceuticals, medical devices, and industries regularly involved in public procurement.
In 2020, the Parliament adopted a Parliamentary Code of Conduct, aimed at addressing GRECO recommendations regarding conflict of interest and other issues of ethics among parliamentarians. However, the code lacks meaningful independent enforcement mechanisms.
Serbian law does not provide protection for non-governmental organizations involved in investigating corruption. However, the criminal procedure code provides witness protection measures, and Serbia enacted a Whistleblower Protection Law in June 2015, under which individuals can report corruption in companies and government agencies and receive court protection from retaliation by their employers. Whistleblowers in high profile cases against state-owned enterprises have claimed they do not receive adequate protections under the existing law.
U.S. firms interested in doing business or investing in Serbia are advised to perform due diligence before concluding business deals. Legal audits generally are consistent with international standards, using information gathered from public books, the register of fixed assets, the court register, the statistical register, as well as from the firm itself, chambers, and other sources. The U.S. Commercial Service in Belgrade can provide U.S. companies with background information on companies and individuals via the International Company Profile (ICP) service. An ICP provides information about a local company or entity, its financial standing, and reputation in the business community, and includes a site visit to the local company and a confidential interview with the company management. For more information, contact the local office at and visit . The U.S. Commercial Service also maintains lists of international consulting firms in Belgrade, local consulting firms, experienced professionals, and corporate/commercial law offices, in addition to its export promotion and advocacy services for U.S. business.
Some U.S. firms have identified corruption as an obstacle to foreign direct investment in Serbia. Corruption appears most pervasive in cases involving public procurement, natural resource extraction, government-owned property, and political influence/pressure on the judiciary and prosecutors.
10. Political and Security Environment
Since October 2000, Serbia has had democratically elected governments that have committed publicly to supporting regional stability and security. Governments, however, frequently call early elections at the local and national level, which often leave politicians and elected officials focused on the next campaign. Serbia held parliamentary elections in June 2020. President Aleksandar Vucic’s Serbian Progressive Party (SNS) won an overwhelming majority, with more than 60 percent of the vote and obtained 188 of 250 parliamentary seats. Vucic and his party benefitted from prolific media access unavailable to other parties, the effectively blurred distinction between campaign and official activities, and the inability of other parties to campaign during the COVID-19 state of emergency. The Organization for Security and Cooperation in Europe’s Office for Democratic Institutions and Human Rights (ODIHR) concluded that, aside from state-of-emergency restrictions, candidates were able to campaign, and fundamental freedoms of expression and assembly were respected. However, the advantage enjoyed by the governing party, the decision of some opposition parties to boycott the elections, and limited policy debate narrowed the choice and information available to voters, according to ODIHR.
The government has made EU membership a primary goal. Serbia has opened 22 of 35 chapters in the EU accession acquis and provisionally closed two. After a long delay in Serbia’s accession process the European Commission in 2021 recommended opening a new “cluster” of accession chapters, pointing to some progress in judicial and rule-of-law reform.
Protests are not uncommon, particularly in urban areas, and most protests are peaceful. In late 2021 and in early 2022, environmental activists staged regular nationwide protests that occasionally blocked highways or resulted in a few minor incidents of violence, although police response to these protests was restrained. Past protests, particularly in Belgrade, were at times violent, with protestors attempting to enter the parliament building during protests against COVID lockdown measures in 2020. Press noted that in addition to concerns regarding COVID, many of the demonstrators during these protests were also protesting political corruption.
Although previous years had seen some assaults against participants in LGBTQI events in Serbia, following its seventh successive incident-free Pride Parade, Serbia was selected to host EuroPride in 2022. Although this indicates some confidence that a recurrence of wide-scale violence against Serbia’s LGBTQI community is unlikely, discrimination and physical attacks continue.
Criminal activity linked to transnational organized crime groups is a regular phenomenon in Serbia. Sport hooliganism is often associated with organized crime, and violent hooliganism remains a concern at matches of rival soccer teams within Serbia. A significant police operation in January 2021 against a major organized crime group linked to Belgrade’s Partizan football club resulted in the arrest of the group’s leader, who was suspected of multiple crimes. Several ultra-nationalist organizations in Serbia have harassed Serbian political leaders, local NGOs, minority groups, migrants, and media outlets considered to be pro-Western, but these incidents are infrequent.
11. Labor Policies and Practices
In the last quarter of 2021, according to Serbia’s Statistics Office, the country had a total active labor force of approximately 3.23 million people, of which approximately 2.9 million were employed (55.6% men and 44.4% women) and 316,700 were unemployed. The formal employment rate was 50%, and the informal employment rate was 13.7%, with most of the total informally employed in services and agriculture. Unemployment in the last quarter of 2021 stood at 9.8%. Youth unemployment remained relatively high at 28.7%. Emigration of younger high-skilled working-age citizens is a serious concern, and the share of youth in the total population drops from year to year. The leading sector for employment is manufacturing, followed by government and public administration, agriculture and forestry, fishery, trade, transport, construction, and hospitality services.
The socioeconomic status of women is significantly worse than that of men. The largest number of discrimination complaints relate to disability, age, and gender. According to the Statistics Office, the wage gap between women and men is 8.8% in favor of men. Other reports showed women’s career advancement was slower, and that women were underrepresented in most professions and faced discrimination related to parental leave.
The presence of foreign workers is increasing, especially in construction. After the initial success of the 2018 Law on Simplified Work Engagement on Seasonal Jobs in Selected Areas, in the field of Agriculture, the government is considering expanding the scope of law from agriculture to other areas, including forestry and fisheries, construction, tourism and hospitality, and domestic work. NGOs and the International Labor Organization (ILO) have raised concerns that the proposed amendments could result in stripping migrant and seasonal workers of labor rights, including the right to form unions and mechanisms for redress of abuse.
Demand for IT experts (web developers, programmers, designers) is significantly higher than supply. The National Employment Service (NES) administers various employment support schemes, including new employment, apprenticeship, and re-training programs. For more details see and .
Serbia’s labor costs are relatively low compared to European averages. In December 2021, the average net take-home salary was approximately $693 per month, while the minimum wage was approximately $324 per month. Investors routinely cite low labor costs, as well as a highly educated, multilingual workforce, as advantages to doing business in Serbia, while availability of skilled labor is limited by large-scale emigration. Approximately 57% of the workforce has completed secondary education, while some 26% have completed higher education.
Amendments to the Labor Law in 2014 simplified procedures for hiring and dismissing workers and changed rules for collective bargaining and the extension of collective agreements to non-negotiating parties. The law also changed severance payment requirements, so that the employer pays severance based on the years of service with that specific employer, rather than on the employee’s total years of employment, as was the case previously. Employees may be hired for up to 24 months on a provisional basis before it is required to engage them permanently.
The official mechanism for tripartite labor dialogue is the Social and Economic Council, an independent body with representatives of the government, the Serbian Association of Employers, and trade unions. The Council is authorized to conclude an umbrella collective agreement at the national level covering basic employment conditions for all companies in Serbia. Additional information about the Council is available at .
Serbia has ratified all eight ILO core conventions, including Forced Labor (No. 29), Freedom of Association and Protection of the Right to Organize (No. 87), Right to Organize and Collective Bargaining (No. 98), Equal Remuneration (No. 100), Abolition of Forced Labor (No. 105), Discrimination (No. 111), Minimum Age (No. 138), and Worst Forms of Child Labor (No. 182).
The Staff Leasing Law, which came into force in 2020, regulates leased employees’ status, the staffing agencies, and recipient employers. Under the law, employers may hire up to 10% of their workforce with fixed-term contracts through an agency, with no limit on those with indefinite-term employment contracts.