Investing in mature markets such as European countries has become more difficult due to many structural changes. Coincidently, countries such as Serbia, Croatia, Montenegro, Macedonia, Bulgaria and Slovenia have opened their doors wide open for various foreign businesses.
The Balkans are extremely attractive to investors for many reasons. One is the political and economic situation is assessed by the world community as a fairly stable one. Also, let us not forget about general price levels, which are among the lowest levels in Europe. In addition, the Balkans have well-developed banking infrastructure, resulting in after-tax profit to be easily transferred abroad.
For example, Bulgaria guarantees a smooth implementation and the protection of investments without any interference from the state; Montenegrin authorities, for their part, are preparing a draft of so-called economic citizenship for potential investors willing to invest in the country's economy.
But despite common political history and certain cultural and linguistic similarities, each of the Balkan states has a specific character, knowledge about which may be useful for a foreign investor. Where should we invest exactly?
Serbia
Business environment:Ă‚ Serbia's position in the region when it comes to benefits for attracting foreign capital is defined by number of factors, primarily its central geographical position. The state has repeatedly emphasized the need for constant stimulation of investments in the sectors with comparative advantages, i.e. energy, agriculture and information technology.
In this respect, the existing financial incentives and tax breaks for new investments, in particular for large companies and projects, are of key value. It is worth noting, however, that the banking and economic systems are still quite far from perfect, and chances of non-economic methods of influence on investors (particularly applicable to small and medium businesses) are still high.
Experience feedback:Ă‚ Toennies Holding has been one of the largest investors in Serbia so far. The international food group has operations in all of the world's important markets. One of the company's brands, Tillman's, is the German market leader in ready-to-sell, pre-packed fresh meat and also offers a comprehensive range of convenience products such as boiled ham, cured pork products and a selection of sausages. The investor is going to start a total of 20 businesses on the breeding and fattening pigs in Serbia. The whole project is worth 400 million euros.
Tennis Clemens, the owner and director of Toennies Holding, stressed that through this investment, the Serbian farmers will be able to present their products in international markets, which will contribute to the development of agriculture in Serbia. “Such investments would help to increase the resources of livestock, as well as the growth of meat production, exports of meat products, and employment growth on the other hand,” said Prime Minister of Serbia Aleksandar VuÄić.
Bulgaria
Business environment:Ă‚ The country has the most developed tourist infrastructure among the other Slav states in the Balkans. Shaping of the positive business climate in Bulgaria began in the 2000s, as the country's entry into NATO encouraged investment flows. The entry into the European Union cleaned up the situation and spurred foreign investors even more (although at that moment, prices jumped up and inflation exceeded the projected threshold). Considering that the credit rating of Bulgaria had increased, that makes sense. In addition, after joining the EU, Bulgaria opened entry into the European markets to other Balkan countries. The current Bulgarian currency, the lev,Ă‚ has actually been pegged to the euro since 1999. However, the country is firmly in favor of adoption of the euro, even if it will be postponed until after the Eurozone crisis had stabilized, said Simeon Djankov, an economist and former Minister of Finance of Bulgaria.
Experience feedback:Â French Group François-Charles Oberthur (FCO Group), one of the leading private security printers in the world, is one of the most notable investors in the Bulgarian economy. Its subsidiary, Oberthur Fiduciaire, specializes in the design and the production of banknotes. The company, which has long been recognized by central banks and governments of 70 countries, recently signed an agreement with the Printing Works of the Bulgarian National Bank for the production of banknotes through the creation of a joint venture.
In this regard, joint investments in equipment were required -- $10 million investment in equipment from the Bulgarian side and the remaining $22 million from the French. The transaction is part of Oberthur Fiduciaire’s growth strategy on emerging markets, as its CEO Thomas Savare explains “We are now addressing the market from our two plants in France and Bulgaria. We have the exact same standards in terms of quality, security, knowhow and capabilities from those two plants. The clients who choose Oberthur Fiduciaire as a supplier know that they will get the exact same quality whether banknotes are printed in France or in Bulgaria.”
Slovenia
Business environment: Many investors are attracted by the strategic position of Slovenia in the heart of Europe, its excellent transport infrastructure, as well as the information and communication technology environment and its industrial clusters. Skilled labor is available in a variety of industries, making Slovenia attractive for investment. Other advantages include a well-developed business legislation, measures to encourage investment, 17% tax rate on companies’ income and investment tax credits. It is important to note that the major trading partners of Slovenia are European richest economies such as Germany, Austria and Italy. The lack of domestic demand and the total debt of the country abroad can be noted among its shortcomings.
Experience feedback:Ă‚ A major employer and investor in the region is Hofer (the operating name of supermarket chain Aldi in Austria and Slovenia, owned by the German corporation Hofer), established in 2004. The company has built a chain of supermarkets in Slovenia and became a large employer in the region and investor in Slovenia, constantly expanding its sales network, improving competitiveness and increasing the number of Slovenian suppliers in its product range. Hofer has now 74 outlets in Slovenia with almost 1,200 employees and recorded a net profit of 16 million euros last year.
Croatia, Montenegro, Macedonia: Risky businesses?
In July 2013, Croatia joined the European Union, which has allowed the country to move forward in the mutual integration with leading European markets. The country has developed an industrial sector; its share in GDP is 33%, which is even higher than the EU average. Export is streamlined, mainly in the developed Western countries. Montenegro and Macedonia are at the planning stage of joining the EU. Yet, despite the proximity (and, in the case of Croatia, the membership) to the European Union, future investors should think twice before investing money here. GDP growth of the economies does not show promise, and return on investment is still too small to put capital in jeopardy.
Until now, real estate and construction have been the main sector of investment. Vacation properties are enjoying rather high demand, though more from Russia. This is attributable to a significant presence of Russian companies and close economic cooperation between Russia and the three above-mentioned countries. European investors are being more cautious. Most probably, it is associated with greater risk for low return on investment, not comparable to ROI in developed countries.
