ECONOMY

Serbia’s politics keeps out foreign investment

BELGRADE – Serbia’s political instability is holding back foreign investment and could affect the country’s hope of attracting $4 billion in 2008, according to the head of Serbia’s Investment and Export Promotion Agency (SIEPA). «Political stability is key to investors and we still don’t have that here,» Vesna Peric told Reuters. «They’re waiting to see who is going to win the presidential elections.» The February 3 presidential runoff – a tight race between nationalist Tomislav Nikolic and pro-Western liberal Boris Tadic – could have wide implications for Serbia’s domestic stability, economic reforms and its bid to join the European Union. The post is largely ceremonial, but the vote will reveal the national mood as the country awaits the probable, Western-backed independence of breakaway Kosovo province and Serbs are called to decide between closer ties with the EU or defiance. Peric said this lull was part of a recurring pattern whereby aspiring investors held their breath while waiting for Serbian politics to calm down. A political crisis in early 2007 had the same effect. «Last year, we managed to generate more than $3 billion in foreign investment,» said Peric, «and it all came through in the second half of the year, only after the government was formed in May.» Serbia has posted steady growth since the fall of nationalist autocrat Slobodan Milosevic in 2000 ended a decade of war and political isolation. Growth was 5.7 percent in 2006 and is estimated at 7.5 percent for 2007. It has taken some $11 billion in foreign investment since 2000, with $4 billion in 2006 alone. Nearby Croatia has attracted over $13 billion in the same seven-year period. Neighboring EU member Bulgaria took in some $7.5 billion in 2007. Most of Serbia’s inflows came through privatizations but also increasingly through greenfield projects and real estate. «In order to have healthy growth, Serbia needs foreign investment of between $4 billion and $5 billion in the next four years,» Peric said. The main areas of potential were the IT sector, she said. Indian property developer Embassy Group had pledged to build a business park and try to bring in firms such as Hewlett-Packard and Microsoft. In order to overcome the effect of political turbulence in the medium term, the Serbian government was introducing new and improved incentives for investors, she added. «We’re giving financial incentives for employment, with each company qualifying for between -2,000 and -10,000 for each job position created,» Peric said. «We also plan to provide them with infrastructure for free and help them get the land.» But despite the incentives there was no fighting the political backlash for now. «There is only so much we can do,» Peric said. «Investment depends on political stability. If Nikolic wins the election, we have received clear messages that EU members and other countries would not support Serbia and investors always take cues from their governments.»