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JUNE, 2010 Country Profile

BOSNIA AND HERZEGOVINA √ CEFTA Capital WTO Population 3.8 million EFTA √ IMF Area 51,129 km² NATO GDP per capita (US$): 4,235 √ EBRD (2009 estimate) √ SAA Double Tax Treaties: 36

CROATIA √ CEFTA Capital √ WTO Population 4.5 million √ EFTA Area 56,594 km² √ IMF NATO GDP per capita (US$): 10,682 √ (2008) √ EBRD √ SAA Double Tax Treaties: 48 Country Profile

MACEDONIA √ CEFTA Capital √ WTO Population 2.1 million √ EFTA Area 25,713 km² √ IMF NATO GDP per capita (US$): 4,495 (2009 estimate) √ EBRD √ SAA Double Tax Treaties: 32

SERBIA CEFTA Capital √ WTO Population 7.3 million √ EFTA IMF Area 77,474 km² √ NATO GDP per capita (US$): 5,809 √ EBRD (2009) SAA Double Tax Treaties: 42 Access to Markets

CEFTA Countries EFTA Countries EU Countries FREE TRADE AGREEMENT WITH EU (market size: 500m)

EFTA COUNTRIES (market size: 13m)

1. 2. 3. 4. LICHTENSTEIN

CEFTA COUNTRIES (market size: 31m)

1. BOSNIA & HERZEGOVINA 2. 3. SERBIA 4. CROATIA 5. MACEDONIA 6. 7. 8. Distance to Markets

Distance by Road (Km)

SKOPJE 1350 Prague 1300 Turin 1550 Istanbul 800 230

Distance by Road (Km)

BELGRADE Munich 950 Prague 900

Turin 1150 Istanbul 1200 Thessaloniki 630

Distance by Road (Km)

ZAGREB Munich 550 Prague 700 Turin 750 Istanbul 1600

Thessaloniki 1030

Distance by Road (Km)

SARAJEVO Munich 1000 Prague 1100 Turin 1230 Istanbul 1170 Thessaloniki 730 Distance to Markets

VW, Poznan HMC-Kia, Zilina (2006) EST HMC-Hyundai, Novosice (2008) GM, Zeran (Warsaw) GM, Gliwice VW-Skoda, Mlada Boleslav LVA , Tychy Toyota/PSA, Kolin Daewoo, Uzhgorod PSA, (2006) LTU ZAZ, Zaporozhje VW-Skoda, AutoVAZ, Kherson LIAZ, Velki Krtis BLR Renault-Nissan, Pitesti VW-Audi, Györ, (Engines) Ford, Opel/GM POL BRD Ford, Otosan, Gölcük Suzuki, Estergom Toyota, Sakarya Renault-N, Novo Mesto CZE Oyak-Renault , Beykoz Ford, SVK UKR Fiat – Tofas, Bursa

AUS HUN MDA

SLO ROM HRV SER BIH

BGR

MKD

ALB

GRC Economic Indicators

BOSNIA AND HERZEGOVINA

REAL GDP GROWTH RATE (%) FDI BY YEAR (million US$)

3,150 6.3 6.1 6.2 5.7 3.8 3.9 1,097 1,091 1,356 654 925

2003 2004 2005 2006 2007 2008 2003 2004 2005 2006 2007 2008

CROATIA

REAL GDP GROWTH RATE (%) FDI BY YEAR (million US$)

5.5 5.0 4.7 5,007 4.2 4.2 3,755 4,034 2.4

2003 2004 2005 2006 2007 2008 2006 2007 2008 Economic Indicators

MACEDONIA

REAL GDP GROWTH RATE (%) FDI BY YEAR (million US$)

699 5.9 587 5.0 424 4.1 4.1 4.0 323 2.8 118 97

2003 2004 2005 2006 2007 2008 2003 2004 2005 2006 2007 2008

SERBIA

REAL GDP GROWTH RATE (%) FDI BY YEAR (million US$)

5,474 8.4 7.5 6.2 5.7 5.4 3,569 3,363 1,616 2.5 1,389 987

2003 2004 2005 2006 2007 2008 2003 2004 2005 2006 2007 2008 Taxes and Benefits

SOCIAL CONTRIBUTIONS - 2010 SOCIAL SECURITY SOCIAL SECURITY EMPLOYER EMPLOYEE Macedonia 27.0% Macedonia - 27.0%

Serbia* 35.0% Serbia 17.9% 17.9%

Croatia 37.2% Croatia 17.2% 20.0%

Bosnia and Herzegovina 41.5% Bosnia and Her. 10.5% - 30.6% 31.0%

* The minimum social security base is 35% of average monthly salary while the maximum contribution base is capped at five times average salary.

Corporate Income Tax Personal Income Tax General VAT Rates

BOSNIA 17% BOSNIA 10% BOSNIA* 8% 10%

SERBIA 10% MACEDONIA 10% SERBIA 18%

MACEDONIA 10% SERBIA 12% MACEDONIA 18%

CROATIA CROATIA 20% CROATIA 12% 25% 40% 23%

* 8% in the of Srpska, 10% in the Federation Average Monthly Gross Salary

AVERAGE GROSS MONTHLY SALARIES IN € (2009)

1051

615 468 488

SERBIA MACEDONIA BOSNA I CROATIA HERZEGOVINA AVERAGE GROSS MONTHLY SALARIES IN € (2009) – COMPARISON OF SEE COUNTRIES

1,439

1,051 893 781 713 717 745 594 615 643 653 445 469 488

Source: The Institute for International Economic Studies (wiiw) Education

NUMBER OF ENROLLED STUDENTS NUMBER OF GRADUATES IN COLLEGES AND UNIVERSITIES IN COLLEGES AND UNIVERSITIES

BOSNIA AND HERZEGOVINA

TOTAL TOTAL

2008/2009 105,488 2008/2009 15,246

CROATIA

TOTAL TOTAL

2007/2008 143,410 2007/2008 20,969

MACEDONIA

TOTAL TOTAL

2008/2009 63,437 2008/2009 10,839

SERBIA

TOTAL TOTAL

2007/2008 237,598 2007/2008 34,671 Utility Prices

BOSNIA AND HERZEGOVINA CROATIA

UTILITY PRICES - INDUSTRY UTILITY PRICES - INDUSTRY

Electricity: €3.60 - 13.20/100 kWh Electricity: €9.04/100 kWh 3 Natural gas: €0.45 - 0.46/Sm3 Natural gas: €0.21/m 3 Water: €1.53 – 1.66/m3 Water: €1.07/m

MACEDONIA SERBIA

UTILITY PRICES - INDUSTRY UTILITY PRICES - INDUSTRY

Electricity: €3.85/100 kWh Electricity: €4.76/100 kWh

Natural gas: €0.45/Sm3 Natural gas: €0.35 – 0.42/m3 Water: €0.20 - 1.07/m3 Water: €0.20 – 0.75/m3 Fiscal/Non fiscal benefits

BOSNIA AND HERZEGOVINA

Investment incentives in Bosnia and Herzegovina

FOREIGN INVESTORS SUPPORTS FUND

• Budget: €1m • No import and custom duties on • Non-refundable funds supporting foreign imported equipment (except passenger investment projects cars, slot and gambling machines). • Criteria for project evaluation: • Tax exemptions: • Number of employees • if 30% of total revenue is from • Investment location exports to be exempted from the • Value of investment tax payment for that year. • Export of products • Investments > 20m KM are • Environment protection exempted from corporate income

• Max amount of money that can be tax for five years beginning from approved per project is €150,000 the first investment year in which min. 4m KM must be invested.

Fiscal/Non fiscal benefits

CROATIA

Investment incentives in Croatia

Amount No. of people Investment Corporate tax invested (m €) employed duration (years) • Establishment of Technological 0.3 – 1.5 10 10 10% and Innovation centres: Tax Incentives 1.5 - 4 30 10 7% • 5% of the value (max. 4 - 8 50 10 3% €0.5m) > 8 75 10 0% • Big investments ( > €15m and Increase for 100 employees) Increase for County Investment Strategic technological unemploy- amount activities of • cash support of 5% of and innovation ment rate subsidised business centres investment (max. €1m) in support Employment 10% (Up to counties with Incentives < 10% +50% (€750) +25% (€375) €1.500) unemployment > 20% 15% (Up to 10 - 20% +50% (€1.000) +25% (€500) €2.000) 20% (Up to > 20% +50% (€1.500) +25% (€750) €3.000)

Education Incentives Expert education General education

Big companies Up to 35% Up to 60% Small and medium Up to 45% Up to 80% companies Fiscal/Non fiscal benefits

MACEDONIA

Investment incentives in Macedonia • Free connection to utilities TAX RATES TAX TIDZs Outside TIDZs • Subsidy of up to €500,000 towards

Corporate tax 0% - for the first 10 years 10% building costs

Personal income tax 0% - for the first 10 years 10% • Green Customs Channel available at border for rapid export from Value added tax 0% 18% Zone to EU countries Property tax 0.1%- 0.2% 0.1%- 0.2% • Land in a TIDZ in Macedonia is Excise taxes 0% 5% - 62% available under long-term lease for a period of up to 99 years

CUSTOMS DUTY • Training Grants PRODUCT TIDZs Outside TIDZs • Fully harmonized with EU state Raw materials 0% Up to 15% aid and competition rules Equipment 0% 5% - 20% • Max. amount of aid capped at 50% of initial investment Fiscal/Non fiscal benefits

SERBIA

Investment incentives in Serbia

FINANCIAL GRANTS

Large-Scale Projects Standard-Scale Projects Manufacturing and Export-Related Export-Related Manufacturing Services Services Projects in Eligible Projects Projects in Capital and Automotive, Capital-Intensive Devastated Regions Projects in Other Projects in Any Labor-Intensive Electronics, IT Projects and Regions of Regions Region Projects Industries in Interest Regions of Interest 25% of the total 20% of the total €4,000 - 10,000 per €5,000 - 10,000 per €2,000 - 5,000 per €2,000 - 10,000 per Grant Amount investment investment new job created new job created new job created new job created Minimum €200m €50m €0.5m €0.5m €1m €0.5m Investment Amount Minimum Number of 1,000 300 50 50 50 10 New Jobs Created

10-year Corporate Income Tax holiday for large investments Corporate Income Tax credits up to 80% of the investment in fixed assets 5-year Corporate Income Tax holiday for concessions Carrying forward of losses over a period up to 5 years Tax Incentives Avoiding double taxation Salary Tax and social insurance charges exemptions Annual Income Tax deductions up to 50% of the taxable income Value Added Tax exemption in Free Zones Customs-free import Other Incentives Local incentives Foreign Investors in the Region Success Stories…

Success Story - Macedonia Johnson Controls PROJECT SCOPE • $40m automotive components plant • 150 employees initially – increasing to 500 • First phase production – mainly integrated circuits for and French markets CONSIDERED COUNTRIES • Macedonia, , and WHY MACEDONIA • The availability of skilled engineers; • “The increase in costs over the next couple of years will be significantly lower in Macedonia than in other CEE countries.” • Macedonia offers the company just-in-time delivery and minimal freight costs Success Story

Success Story – Serbia Fiat Automobiles

• Joint Venture between Fiat Group Automobile and the Republic of Serbia Government • Total investment at around 700 million EUR • Starting from 2011, FAS will set-up the production of at least 200,000 units per year • The new factory should export 1.5 billion EUR/year of cars • 2,400 jobs will be created by Fiat, while 10,000 more by suppliers and sub-suppliers • We expect knowledge transfer to our workers Thank You

Foreign Investment Promotion Croatia Trade and Investment Agency Promotion Agency

e-mail: [email protected] e-mail: [email protected] web: www.fipa.gov.ba web: www.apiu.hr

Invest Macedonia Serbia Investment and Export Promotion Agency

e-mail: [email protected] web: www.investinmacedonia.com e-mail: [email protected] web: www.siepa.gov.rs