Once upon a time in Kragujevac, the fourth largest city in Serbia, there was the Zastava factory, a symbol of the Yugoslav and socialist car industry (a bit like the Lada in Russia or the Trabant in East Germany). In a few months, tens of thousands of specimens of the new Fiat 500L will begin to leave the same factory. Perhaps it would be enough to compare these two images to describe the radical economic change that is taking place in Serbia: sand until twenty years ago Belgrade was the symbol of socialism and the planned economy (albeit in the "titina" version, slightly sweetened and in contrast to the Soviet one), today it is instead the destination of important investments and relocations, mainly arriving from Italy.
Serbia is therefore proving to be a successful country on the road to political and economic development. Almost thirteen years after the NATO intervention in Kosovo, which had led to the dismissal of Slobodan Milosevic, the last dictator in the area of ex-Yugoslavia, the Balkan nation has obtained the official status of candidate for entry into the European Union. The decision, taken by the EU Council a month ago, has an even more important significance if one considers the fact that the enlargement of the membership is not exactly a priority in Brussels, where the urgencies are very different these days.
Yet President Boris Tadic, a member of the Democratic Party, has shown that Belgrade is serious about taking this further step towards political and economic integration. Tadic resigned on April 4 to go to early elections (scheduled for May 6) and thus take advantage of the moment of great popularity he enjoys: in fact, he expects to be reconfirmed by the polls and to continue along the path implemented in recent years towards integration with the EU. This path undoubtedly had some virtuous aspects. They not only prove it developments in terms of enforcement of democratic institutions, but also the economic growth of recent years, which has known how to base itself on solid roots.
However, Serbia cannot consider itself immune from the effects of the European economic crisis: in 2011 the GDP grew by 2% and forecasts for 2012 are just over 1%. according to the European Bank for Reconstruction and Development. These are fairly low growth rates, even more so when considered in relation to inflation, which according to the Serbian Central Bank was 10,7% in 2011. The vulnerability of the Balkan country therefore seems to lie mainly in its dependence on capital foreigners, especially from Western European countries, which have had to reduce their investments due to the crisis in the Eurozone.
Another problem that Belgrade has to face is high unemployment, which in 2011, again according to the Central Bank, amounted to 23,7%. Looking at the macroeconomic fundamentals, therefore, Serbia seems to be a step behind the Eastern European nations which, having already joined the EU, have taken further steps towards the evolution of their systems. Why, then, do companies choose to invest here? The answers seem to be essentially two: the low cost of labor and the availability of skilled labour. Suffice it to say that the average salary is 345,4 euros per month (the data, from the Central Bank, refer to the latest survey of January 2012): about a quarter of the Italian one and half of the Polish one, to make a comparison with a "competing" country in terms of attracting investments.
These favorable conditions, together with the advantage represented by a geographical proximity with respect to the EU area which is much higher than with other popular destinations for relocations (see China and South-East Asia), contribute to explainwhy Italy is the sixth country in the ranking of foreign investors in Serbia. It is no coincidence that Prime Minister Mario Monti went to Serbia a few weeks ago and our government played an active role in supporting Belgrade's candidacy for EU membership. The stock of invested Italian capital amounts, according to data processed by ICE, to around one billion euros, for a total of almost four hundred companies which have tripled in the space of a few years.
As stated above, it is Fiat is the national company that has made the most important investment in the Balkan country. In 2009, in fact, Lingotto created Fiat Automobili Serbia in a joint venture with the Serbian state, which holds 33% of it, and has taken an active part in the agreement by committing itself to the modernization of the Kragujevac plant. The investment of the Turin house, which amounts to 700 million euros, saw the assembly of the new Punto in the first phase; production of the new 500L is about to begin, with the aim of selling 160 units as early as 2013 and also exporting the model to the US market.
Sergio Marchionne, CEO of Fiat, will be in Serbia on April 16 to inaugurate the new plant and officially launch the new production line. There is no doubt that the competitive advantage in terms of cost had an important component in Fiat's decision: an advantage that is not only reflected in the lower wages of the workers, but also in the active commitment of the Government which, through incentive measures, the creation of infrastructural connections and tax breaks for the newly established company was able to increase the attractiveness of Belgrade.
Furthermore, Confindustria announced a few days ago that it was opening its own office in Serbia. This choice was born out of the experience of “Sistema”, a structure that has been present in the Balkan country for three years and which has the purpose of promoting the development of bilateral economic relations. But there are not only large industrial companies in Serbia: Italy also plays a leading role in the banking sector, managing assets that amount to 25% of the national total. It is UniCredit (which holds the lead in Eastern Europe, but is also significantly present in the Balkans) and Intesa Sanpaolo which hold a very significant share in the local credit sector. Intesa was named "Bank of the Year" by the London-based financial monthly "The Banker" not only in Italy, but also in Serbia, due to its solid performance in terms of economic results, capital and liquidity.
Serbia therefore represents an attractive destination for Italian investments due to the possibility of reducing costs without however having to give up the quality of the workforce. Also yesi is an expanding internal market, with a certain potential in terms of growth in spending power and the savings rate. Belgrade's road towards "mature" economic development is still long, and some structural problems will have to be addressed in the coming years leading up to its entry into the European Union.
However, this entry will also entail the obligation to comply with the "dictates" of Brussels in terms of competition and state aid: it is therefore possible that the statist component, still strong in the Serbian economic system, which is helping to support the localization of investments foreigners, will have to be scaled down. The dependence on capital arriving from the EU is also a fundamental factor for the economic growth of the Balkan country. In the next few years Serbia is therefore awaited by important challenges, made more uncertain by the current negative situation.
