Foreign Investors Flee Unstable Serbia

5 April 2008 Even before the elections have occurred, many foreign investors are packing their bags – worried by Serbia’s possible drift into isolationism.

By Jelena Marinkovic in Pirot

Serbia is in danger of losing substantial amounts of foreign investments, owing to fears about the country’s long-term political stability, economists are warning.

According to some estimates, since the beginning of this year, Serbia has lost around 750 million euros as a result of a silent “freeze” in foreign investments.

The town of Pirot, in south-east Serbia, for example, is in danger of losing out on 8 million euros of investment if footwear company Geox abandons plans open a factory there.

Representatives of the world’s third-largest shoe manufacturers say they are awaiting the outcome of May 11 parliamentary elections in Serbia before making a final decision on whether to open a factory in Pirot.

The elections in Serbia are being followed with great interest at home and abroad and are widely seen as a potentially crucial contest between embattled pro-European centrists and resurgent nationalists – the latter capitalising on national resentment over the loss of the former province of Kosovo and the perceived failure of economic reforms to lift living standards.

Some companies have abandoned major investments in Serbia without even waiting for the election results – rattled in some cases by the anti-Western riots that briefly gripped Belgrade following Kosovo’s February 17 declaration of independence.

The Austrian company Atek has now abandoned earlier plans to purchase the large but run-down copper mining and smelting complex in Bor, south-east Serbia – a major blow to an impoverished region with high unemployment.

The explanation was that due to an unstable political situation in Serbia they could not close their financial plan.

The Slovene company Tus has also postponed scheduled construction of a large shopping mall in Vranje, in southern Serbia.

General Motors representatives have cited similar concerns over stability as a reason for postponing their announced visit to the Zastava car manufacturer in Kragujevac, central Serbia, local media reported.

Portfolio investors began withdrawing back in January, and judging by the decreased involvement of foreign investors in the purchase of stocks and stock index movements, the trend will only increase at least until the elections.

BELEX15, the index of most liquid shares at the Belgrade Stock Exchange, dropped around 30 per cent since the beginning of the year.

Economists predict that even if the withdrawal of capital ceases, and its flow into Serbia merely slows down, Serbia will still face a financial crisis.

Serious damage to the economy, primarily through the worsening of expectations by investors and potential investors, has already been done.

Economists say political instability has a clear knock-on impact on the economic realm and any further deterioration in the country’s political troubles could have additional serious consequences to the flow of foreign investments, leading to a rise in prices among other things.

The question marks over Geox are seen as particularly worrying. After talks with Serbian President Boris Tadic in January, the Italian-based business announced it would invest around 8 million euros in building and opening a factory in Pirot.

In the first phase, the firm planned to employ around 1,000 workers, which would have reduced unemployment in the town by a significant 15 per cent.

In Vranje, meanwhile, around 100 local people were expecting to find jobs in the Tus shopping mall.

Last year, the Slovene company paid around 1.5 million euros to the municipality of Vranje for the use of construction land and agreed to pay 2,000 euros monthly to rent the land. The construction of the shopping mall was planned for March, occupying more than 3,000 square metres.

Ivana Jovanovic, representative of Tus in Belgrade, said the company was abandoning all its activities in Serbia as a whole, not only in Vranje.

Goran Nikolic, from the Belgrade based Centre of Scientific and Research Work and Economic Analyses, said reductions in investments affected imports, exports and industrial production, leading first to a slowing-down and then to an absolute drop in GNP.

This was primarily because growth in Gross National Product is mostly induced by local demand, which in Serbia’s case would stagnate without strong loan activity.

Dragan Kostic, director of the Pirot Free Zone, where the Geox factory was supposed to be opened, confirmed that the heads of Geox had decided to postpone any final decision about the factory until the results of the elections.

He said the latest jitters were damaging the Free Zone’s prospects in Pirot, which was hoping to attract more foreign investors in future.

If, after the elections, a nationalist coalition was to be formed, presumably under the auspices of the Serbian Radical Party, the flow of foreign capital would become minimal, Nikolic warned, and the country would be increasingly isolated internationally.

He predicted that the Belgrade stock market would continue operations but without serious movements and with a lower value of stocks. The Serbian currency, the dinar, would come under pressure, and foreign reserves diminish.


Jelena Marinkovic is a journalist with Pirot TV. Balkan Insight is BIRN`s online publication.

This article was produced as part of OSCE `s Mission in Serbia Economic Journalism training project in cooperation with BIRN.

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Jesus beat the devil with two sticks. Colossian 2:13,15

Proud American!

And still, Serbia is USA in comparison with Kosovo, in terms of economy.

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Albanians are Islamo-fascists supported by Bin Laden and trained in Al-Qaeda terrorist camps.
Albanians were (chronologically): Turkish horse breeders, Hitler's little pawns, Stalin's servants and today they are Uncle Sam's "allies".
Albanians from Kosovo ethnically cleansed more than 250,000 non-Albanians: Serbs, Jews, Gypsies and others; desecrated more than 150 Christian churches and monasteries and killed thousands in cold blood.

hahahahahahahaha...i am still laughing........dumbest quote..hahahaahahahaah

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Jesus beat the devil with two sticks. Colossian 2:13,15

Proud American!

You may consider it dumb as much as you want, but this is the fact you will unwillingly have to face and eventually shut up because of its correctness.

__________________
Albanians are Islamo-fascists supported by Bin Laden and trained in Al-Qaeda terrorist camps.
Albanians were (chronologically): Turkish horse breeders, Hitler's little pawns, Stalin's servants and today they are Uncle Sam's "allies".
Albanians from Kosovo ethnically cleansed more than 250,000 non-Albanians: Serbs, Jews, Gypsies and others; desecrated more than 150 Christian churches and monasteries and killed thousands in cold blood.

hahahaahahahahahahahahahahaaha

__________________
Jesus beat the devil with two sticks. Colossian 2:13,15

Proud American!

If I was the president of Serbia all of the international investors would not be able to buy a cow in Serbia. All the Croatian, Slovenian, German, Austrian investors would be offered once in a lifetime chance to take their bussines and money out of Serbia for free. Then, I would bring in people with real money and resources. Yes, you know who I am talking about. Most milionaires and billionaires of the world live, believe it or not, in Moscow.

????????????????????????
You must change your nick to funnyBoy.

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White man came across the sea,He brought us pain and misery,He killed our tribes killed our creed,He took our game for his own need,We fought him hard we fought him well,Out on the plains we gave him hell,But many came too much for Cree,Oh will we ever be set free?

IRON MAIDEN

hahahaha...i am just reading news.....the worst thing you could do to yourself and it seems as you are doing, it is self-deception! A guess lying traits run deep as for your former serbian president, Covic said.


not moscow but not even cuba would want to invest in a troubled country, serbia! hahaahahahahaahahah

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Jesus beat the devil with two sticks. Colossian 2:13,15

Proud American!

Beautiful!

First, Covic was never president of Serbia. He was mayor of Belgrade in the mid 1990's.

Second, check this out:

Source: US Embassy in Belgrade
Source: http://www.buyusa.gov/serbia/en/71.html

__________________
Albanians are Islamo-fascists supported by Bin Laden and trained in Al-Qaeda terrorist camps.
Albanians were (chronologically): Turkish horse breeders, Hitler's little pawns, Stalin's servants and today they are Uncle Sam's "allies".
Albanians from Kosovo ethnically cleansed more than 250,000 non-Albanians: Serbs, Jews, Gypsies and others; desecrated more than 150 Christian churches and monasteries and killed thousands in cold blood.