BELGRADE (Reuters) – A recent visit by billionaire Formula One car racing supremo Bernie Ecclestone and reports that Swedish home products company IKEA is looking for its first site in Serbia are fueling a buzz that more foreign capital may be on the way. Serbia’s economic progress helped it bring in a record $4 billion in privatizations and foreign direct investment last year alone, but whether the cash will keep flowing largely hinges on the outcome of Sunday’s general election. The election pits a pro-Western bloc promising to fast-forward Serbia into the European Union against nationalists who refuse to give up the breakaway Kosovo province and say Serbia should only join the EU on its own terms. «It would be an exaggeration to say foreign investors are holding their breath ahead of the elections. But they are certainly waiting for the situation to stabilize,» said Jasna Matic of Serbia’s Investment and Export Promotion Agency. Speaking at an investor forum in Belgrade this week, Matic said foreign investors had various irons in the fire. «Investments in the energy sector will be hit this year. Investors are looking at various projects, both traditional thermal and hydro energy and alternative biofuels,» she told Reuters. Since 2001, Serbia’s economy has grown by 5.5 percent per year on average, official forex reserves have doubled to $12 billion, the dinar currency has firmed and inflation has returned to single digits. Break with nationalism Five years of privatization and efforts to curb runaway inflation have changed the face of a $30 billion economy still reeling from a decade of war and sanctions and investors want to see reforms continue. «The market hopes that the elections see the continuation of the economic reform policies pursued over the past five or six years,» Bear Stearns’ emerging market analyst Tim Ash told Reuters. «The market would like a stable reform coalition formed after the elections. It also wants Serbia to move away from its more nationalist past and continue to reintegrate with Europe and global markets,» he said. Foreign firms doing business in Serbia believe it will need at least $3 billion a year in foreign investments to keep on growing and create jobs for the almost 1 million people – a third of the work force – who are out of work. Harvard University Professor Louis Wells said Serbia should take advantage of its cheap and skilled labor, proximity to wealthy markets and an attractive capital city to woo investors. «Oil firms go where oil is and they have no choice, whether it’s attractive or not. Manufacturing firms go where certain conditions are right and they also go where managers like to live,» he told students at the private FEFA University. «But there is an image problem that’s not going to be resolved until Kosovo is resolved,» Wells said. Kosovo is seeking independence from Serbia. It has been administered by the UN since the bloody 1999 conflict between Serbs and its majority ethnic Albanian population. Serbia is the only country in the region without an association agreement with the EU, a pre-membership pact that can set the agenda for membership and open access to aid from Brussels. Once dependent on heavy industries and agriculture, the country’s economy shifted to financial services, trade and transport. The change has thrown the spotlight on the Belgrade bourse. Its main index hit an all-time-high of 2,000 points this week and trading volume doubled last year to -1 billion, half of it generated by foreign investors. Svetlana Cerovic, the bourse’s spokeswoman, said the market appeared calm ahead of the election. »There seems to be no anticipation of a dramatic election outcome,» she said. But Richard Segal of the Argonaftis Capital investment fund said the authorities could do more to woo capital. Serb stocks remain off-limits for some investors as foreigners can do business only through local brokers and the repatriation of profits is hard.