Real Estate Three Time Winner of the Largest Greenfield Investment in South East Europe

Serbia Investment and January Export Promotion Agency 2007

Current Issues

Meet Us

Industry Close Up - Real Estate Three Time Winner of the Largest Greenfield Investment in South East Europe

Investor Personally Mr. Gili Dekel CEO, Airport City Belgrade

Monthly Reporting The Value of Weekly Shopping

Arts & Entertainment

The Other Home Anthony Burnett Plant Manager, Ball Packaging

Hot Spots Magacin

www.siepa.sr.gov.yu SIEPA 2007 NEWSLETTER Current Issues JANUARY

Serbia on CNN

On January 10, the broadcast of Serbia’s promotional video portraying a tourist offer of Serbia on CNN has marked the launch of a four month advertising campaign. During that period, two 40- Non-Refundable Funds Given materials for finishing works in second video clips will be broadcasted to Investors construction and decorative mortars. 507 times in an attempt to make broad Also, a subsidy of €310,000 was audience aware of Serbia and its natu- SIEPA has awarded Subotica-based granted to a Slovenian company ral beauties. This campaign is financed Eminent company with €480,000 Gorenje Tiki for the construction of by the National Investment Plan. from the National Investment Plan for a boiler and radiator factory in Stara a €2.1 million project. Over the next Pazova worth €4 million. Gorenje Tiki three years the company will expand will employ 55 workers and relocate The Comeback of a Furniture both premises and equipment of the entire production of radiator and Producer SIMPO the apparel company Plantex from boilers from Slovenia to this factory. Plandiste, which Eminent has recently Some 65% of the total production will Vranje-based furniture producer Simpo bought and plans to employ 240 be exported to the European Union, inked a €4 million agreement on build- workers. Eminent announced its Russia and other states. ing a factory for manufacturing children intention to continue exporting SIEPA granted €400,000 to Sanch beds. When in full operation, the factory around 30% of its Plandiste branch company from Vranje which is to will be producing some 100,000 beds output into the countries of the region, invest €2 million into the construction annually and employing 150 people, including Russia. Finally, the company of a new plant for the production of while the equipment will be financed aspires to reach a production of footwear and a warehouse in Vranje by Ikea. In addition, Simpo is to build a 100,000 clothing items a month. where this factory is to employ 200 plant for the production of massive fur- Italian company Calzificio Real people. The company is a result of a niture worth €2 million and to increase is another beneficiary of the same joint venture between Swiss company production of furniture by 17%. program SIEPA is implementing. Italian Meise Holding with 70% of share capital Furthermore, Simpo has signed company will receive €800,000 for the and Italian Sant Luis. Sanch exports a €20 million agreement on export construction of a nylon pantyhose and more than 40% of its production to of furniture with Roche-Bobois. The lingerie factory in Backa Palanka, in countries in the region: Macedonia, agreement with the owner of the retail which €10 million will be invested. The Croatia and Bosnia-Herzegovina. chain engaged in sales of exclusive fur- new factory will provide employment Serbian company Foodland has niture was reached at the world largest for 400 people. The construction of signed a contract to receive €200,000 furniture exhibition in Cologne and it the factory should start in May 2007 for a €2 million investment over the will mark the return of Simpo’s furni- and will be completed within 3 years. next three years into the new factory ture on the European market. Simpo The investment program envisages for production of traditional Serbian was the only company from Serbia that two thirds of production inputs foodstuff. The company exports 95% exhibiting at the Cologne fair and has will be sourced locally, while more of its production to markets of EU, US presented 30 new models of furniture than 70% of the production should and Russia. Hundred new jobs will specially designed for German, French, be exported to the EU and Russia. be crated in Brus, where the factory Italian and Scandinavian markets. Company Henkel is to build a €5.2 will be erected. million building adhesives factory €2.6 million investment into in Indjija. The factory will employ 60 recycling facility and 112 new jobs New Investment workers and that has made Henkel over the next three years have entitled in the Banking Sector eligible for receiving financial support Batocina-based company Brzan Plast from SIEPA in the amount of €150,000. to a €280,000 of financial assistance Belgium’s KBC Group and sharehold- The construction of the factory had provided by SIEPA. Brzan Plast was ers of bank A Banka from Belgrade have begun in October 2006 and will be established in 1993 and is engaged reached an agreement on a takeover of operative in the first half of 2007. in the recycling of plastic waste between 70% and 100% of shares of this The factory will be specialized in a and production of PE foil which is Serbian bank. After the agreement is con- production of glue, with an annual almost entirely exported to foreign firmed by the National Bank of Serbia, capacity of 100,000 tons, and powder markets (89%). the third largest financial conglomerate in Belgium can proceed with transaction, which is due in the first quarter of 2007.

www.siepa.sr.gov.yu [email protected] SIEPA 2007 NEWSLETTER Current Issues JANUARY

Serbia Becoming Software Minister Bojan Dimitrijevic have laid a Center of the Region foundation stone of a €1.3 million ski resort at Mt. Rudnik. The ski centre will be The Vice President of the US software launched in the next winter season and company Red Hat Werner Knoblich an- the funds for the first phase of the con- nounced the opening of a representative struction will be provided from the Na- Open Call for Investors office in Belgrade and a regional sup- tional Investment Plan. As being in the port centre in Vrsac. The centre in Vrsac vicinity of Belgrade, this ski resort will SIEPA announced the third appli- will be servicing users in ten countries become a tourist centre of Serbia’s capi- cation round for receiving finan- in the region. Red Hat is a leader in the tal and the surrounding area. To become cial assistance with the application development, distribution and support one, additional investments in road and deadline being March 16, 2007. In of software with an open code, which is hotel infrastructure will be made and addition to the existing benefits based on Linux operative system. that was announced by the ministers. comprising highly qualified labor force at competitive prices, the pos- sibility of duty-free exports to all Car Parts NBS to Retain a Tight the markets in South East Europe from a Brand New Factory Monetary Policy and Russia, strategic geographic position and the lowest corporate Slovenian company Cimos has The Monetary Committee of the Na- profit tax in Europe at 10%, Ser- opened a spare car-part production tional Bank of Serbia has reduced the bia is proud to offer financial as- factory in Secanj in which the com- referential interest rate from 14% to 13% sistance for future investments in pany invested more than €16m. The a year. That is the fifth reduction since the country. The non-refundable factory will produce spare parts for September 2006 when it was intro- funds will be assigned according motor vehicle pumps and is to em- duced as the key monetary instrument. to specified criteria for invest- ploy around 100 workers. The Chair- NBS Governor Radovan Jelasic said ment projects in all areas, except man of the Board of Directors Mr. that the Monetary Committee has as- for trade, tourism, hospitality and Franc Krasovec has announced new sessed a room for certain monetary pol- agriculture. Eligible companies are investments of Cimos in Secanj mu- icy relaxation, since the total inflation in those involved in manufacturing nicipality in the value of €19 million. the fourth quarter of last year was lower activities, internationally market- Slovenian company bought foundry than planned. According to the gover- able services sector and research Livnica Kikinda in 2004 for €100 mil- nor, the announced rise in electric ener- and development sector. For more lion and Forging factory Jasa Tomic gy and household heating prices should information please visit our web- for RSD 112 million at the end of De- not exert a negative influence on the re- site at: www.siepa.sr.gov.yu. cember 2005. alization of the NBS goal of keeping the basic inflation in 2007 between 4% and 8%. Inflation in 2006 was 6.6%. New Employment Booming Real Estate through Effective Cooperation Meet Us MPC Holding will invest €500 million Zastava Elektro company based in Raca into construction of office and -resi Kragujevacka and the multinational February 4 - 6, 2007 dential buildings in Belgrade and Nis company Delphi have signed an agree- over the next three years. The plan for ment on business and technical coop- CPD Düsseldorf, Germany 2007 is to build Usce shopping center, eration. According to the agreement, the second tower of the Belgrade twin Serbian company will produce wire har- February 8 - 10, 2007 towers, office center in Nis, Immo- ness for the top car makers in Europe. In FruitLogistica, Berlin, centar in Belgrade’s suburb Cerak and order to do so, the company will employ Germany several residential complexes in New additional 700 workers by the end of Belgrade. The total area will be 400,000 2007 and additional 3,000 by 2009. February 15 - 18, 2007 square meters. The company ended last year with revenues reaching €100 mil- BioFach, Berlin, Germany lion, which is exactly how much it has The New Ski Resort invested. MPC was found 18 years ago, near Belgrade February 19 - 22, 2007 but started being engaged in real estate GulFood, Dubai, UAE business in 2000. The company now Serbian Minister of Economy Predrag employs 1,200 people. Bubalo and Trade, Tourism and Services

www.siepa.sr.gov.yu [email protected] SIEPA 2007 NEWSLETTER Industry Close Up JANUARY

Three Time Winner of the Largest Greenfield Investment in South East Europe

Three years in a row Serbia was awarded with the Largest Greenfield Investment in In specific, class A office space amounts the SEE region by the Organization for Economic Cooperation and Development to 90.000 sq meters, while the vacancy (OECD). This is just an additional confirmation of the current real estate boom in rate for this kind of office space cur- Serbia primarily concentrating within the capital city of Belgrade. However, with the rently stands at around 15% on aver- intensive FDI inflow and different investment projects happening around the country age, with Class A being 17% and Class investors are beginning to discover other two major cities in Serbia, one in the north of B 12%. Due to a continuous rise in de- the country - Novi Sad and the other in the southern part - Nis. mand, during the last couple of years Looking at the offer of class A and class B office space a significant increase of 18.5% rental prices for Class A went down is recorded starting from the beginning of 2005 and now totals 226.000 sq. meters. and now stand at 18-24 EUR/sq. m, whilst for the Class B one would need to pay 13-18 EUR/sq. m depending

Looking at the offer of class A and class B office space a significant increase of 18.5% is recorded starting from the beginning of 2005 and now totals 226.000 sq. meters.

on the location. Compared to other capitals, rental prices of Class A office space in Belgrade are practically at the level of those in Bucharest, Prague and Warsaw, a bit lower than in Athens and Moscow, but higher than those in Sofia and Budapest.When it comes to residential space, preliminary statisti- cal data show a slight decrease of new residential units in 2005, although the construction works were very intensive in some parts of the city, especially New Belgrade and Cukarica. Prices per square meter in residential buildings range between €1.200 and €2.000 or higher depending on the exclusivity of the location.

Prices per square meter in residential buildings range between €1.200 and €2.000 or higher depending on the exclusivity of the location.

On the rental market, particu- larly in the areas of Vracar and Savski Venac rental levels showed a slight increase due to the limited supply

www.siepa.sr.gov.yu [email protected] SIEPA 2007 NEWSLETTER Industry Close Up JANUARY

and strong demand for quality apart- On the down side, exclusive state Nowadays, predominately in pri- ments. In New Belgrade, escalating ownership over construction land is vate ownership, they are again operat- supply of apartments has slightly de- still the main problem, but the good ing cross-border, on their traditional creased the average rental level. Pres- news is that it will soon be removed. markets of Russia and Middle East. ently, the average prime rental level in Now that the new Serbian constitution One of the latest examples is a €110 Belgrade is €11 per square meter. As is adopted without such constrains, the million deal in Morocco won by the in previous years, high-end tenants basis was set for the series of regula- Serbian construction company, beating are comprised primarily of expatri- tions and laws to be passed and further big companies from four countries. ates, embassy staff and international regulate this field in favor of investors. SIEPA is organizing participa- companies’ personnel. As contractors or sub-constructors tion of domestic companies, with the For foreign companies seeking in- entrusted with construction, Serbian support from the Serbia Investment tensive economic development, unsat- construction companies would be Promotion Programme (SIPP), at the urated market, reliable local construc- the prime beneficiaries from foreign Real Expo 2007 in Munich, MIPIM tion companies and rise in FDI inflow investments into real estate. Investors 2007 in Cannes and Real Vienna 2007 especially in tertiary sector Serbia is are usually contracting local construc- in Vienna. The latest projects in the currently very alluring. In addition to tion companies, thus acknowledging real estate industry will be showcased, that, good geographic position and their quality and expertise. Although such as Airport City Belgrade, Atrium, qualified labor at competitive prices affected by misfortunate nineties, they PC Usce, and Panorama, together with are generally seen as Serbia’s competi- managed to preserve the resources, projects scheduled to be initiated or fi- tive advantages for many industries. skills and business ethics. nalized within the next couple of years.

Sales and rental values by different areas

Rental values (EUR/sqm per month) Sales values (EUR/sqm) New Belgrade 9.5 New Belgrade 1,400 Zvezdara 8 Zvezdara 1,200 Vozdovac 9 Vozdovac 1,300 Savski Venac 13 Savski Venac 1,500 Vracar 11.5 Vracar 1,800 Centar 12.5 Centar 1,650

Source: Colliers International, Serbia

Development of Inventory and Rental Prices for Class A premises per sqm/month

Rents (EUR) A Stock leasable (sqm) 2007 f 17 2007 f 170,000 2006 18 2006 130,000 2005 20 2005 100,000 2004 21 2004 70,000 2003 22 2003 35,000 2002 23 2002 27,000 2001 25 2001 20,000

Source: Colliers International, Serbia

www.siepa.sr.gov.yu [email protected] SIEPA 2007 NEWSLETTER Investor Personally JANUARY

Mr. Gili Dekel CEO, Airport City Belgrade

Why did you decide to invest in the construction industry of the advantages of the Airport City Belgrade development in Serbia? is its largest ratio of parking space in Belgrade. We believe that in the future the Serbian economy will Airport City Belgrade (ACB) is owned by an African-Israeli Cor- experience a steadily growth, and the number of cars per poration and Tidhar, one of Israel’s most successful construction 1,000 people will increase significantly. Our customers companies. I came to Serbia around four years ago to explore will be mostly foreign companies coming to Serbia that real-estate business opportunities, already having in mind the appreciate Class A office space and the right environment introduction of something different than the standard office for their employees, and know the advantages of being lo- building. Developers normally identify a piece of land, acquire cated out of the city center. We are very optimistic about it, build on it and then lease or sell the property. However, our the future growth prospects, otherwise we would not be approach is to build a complete modern business and residen- ready to invest €120 million in Serbia. tial complex beyond the boundaries of the city center. Airport We are very optimistic about the future growth pros- City Belgrade is currently the biggest real estate development in pects, otherwise we would not be ready to invest €120 mil- Belgrade. Altogether, it is a 120,000 m2 plot of land – the largest lion in Serbia. piece of land owned by a private company in Belgrade. Prior to arrival in Serbia, our company had completed de- velopments in Russia, Ukraine, Czech Republic, Poland, and Hungary. We chose Belgrade after a thorough research of all other major sites in the region. Apart from Ljubljana, which is already well developed, our research included cities such as Skopje, Zagreb, and Sarajevo. Among those cities, Belgrade seemed an apparent choice with its 1.5 million population, strong economy growth, rapid internationalization of business activities, and a highly developed construction industry. I would also like to emphasize that Serbia boasts skilled and capable people and we are very satisfied with our Serbian staff performance and cooperation with local construction companies. Due to the lack of parking space and traffic congestion, an increasing number of the local companies are now shifting their headquarters from the old part of the city to New Belgrade.

To what extent have your expectations been met so far and what are your plans for the future?

Our development is situated in the part of the city called Given your experience in Serbia, what would be your New Belgrade, in the close vicinity of the International E-75 message to potential foreign investors? Highway. Due to the lack of parking space and traffic congestion, an increasing number of the local companies are Investors look for performance enhancement possibilities, now shifting their headquarters from the old part of the city and I see Serbia in terms of the future profit. At the moment, to New Belgrade. I am confident that our company will be one can get better deals than those available in Serbia, but strong enough to face the rising competition in New Bel- conditions will certainly get better. Therefore, investors with grade and erect a competitive real-estate development, not long-term orientation could greatly benefit from the growing only in terms of standards, but also in terms of pricing. One opportunities of this market.

www.siepa.sr.gov.yu [email protected] SIEPA 2007 NEWSLETTER Monthly Reporting JANUARY

The Value of Weekly Shopping Source: GfK Omnibus

Purchase through large distributive cash & carry stores. In addition, the re- there is a significant increase of larger channels becoming more attractive search shows that per purchase they tend shopping compared to regular ones. As a to spend more money being also propor- result of a decrease in the amount of free Looking at some macroeconomic data, tional to the quantity of purchased goods. time people turn to this type of shopping, our country is showing stabilization as In only two years there was a 30% in- thus freeing themselves from shopping there was a significant increase in GDP crease of consumers going for large pur- more often than necessary. in 2004 amounting to 7.2% while in 2006 chases (from 2003 until 2005) reflecting Although there is a rapid rise in the it was 5.8%. Also, GDP per capita is con- in an increase of consumer value and usage of credit cards during large pur- stantly increasing, while on the other indirectly of a significant increase in chases there is still a great number of hand unemployment rate has slightly in- capital within the trade sector. those paying in cash. It is quite possible creased. When looking at the category The average amount spent at the that out of habit people stop by the Au- of employed population, the average sal- end of 2005 amounted to €38.2. After tomated Teller Machines (ATMs) and ary in 2006 was around €350 represent- the slight fall in 2004 that followed a then turn to paying in cash at the store. ing a €140 increase compared to 2006. drop in the living standard, 2005 had The Average Spending on How do these macroeconomic data re- brought back the standard of 2003. Large Purchases in Comparisont to flect in the purchase of consumer goods The average amount spent in large Regular Purchases through a so called ‘large purchases’? shopping did not rise significantly in a two year period (if measured in Euros), but as it was mentioned before, the pen- 2005 59% 41% Every other consumer spends €19 etration of large purchases has increased 2003 68% 32% - €50 on big purchases, while every significantly during the above mentioned fourth consumer spends €50 - €75 Large Purchases Regular Purchases period. Thus, it influenced the increase or more. of the total amount of money spent in large purchases in the whole country. Based on the given data it is safe The GfK Shopping Monitor as well There is an additional confirmation of to predict that the future will bring an as GfK Panel of households shows that an increase of large shopping spending. additional rise in spending, thus posi- Serbian consumers are very attracted to Looking at the relationship between the tively influencing merchants to invest shopping in modern distributive channels cost of regular and large purchases within more and further modernize the exist- such as supermarkets, hypermarkets and a monthly spending on consumer goods ing shopping channels.

www.siepa.sr.gov.yu [email protected] SIEPA 2007 NEWSLETTER Arts & Entertainment JANUARY

Belgrade Big Deal – Multimedia Exhibition The Other Home February 1 – March 1, 2007 Patrizio Buanne – Concert Anthony Burnett from UK February 14, 2007 The Museum of Applied Art and Cen- Plant Manager, Ball Packaging tre for Central European Architecture On the Valentine’s Day Mr. Patrizio are inviting you to the multimedia exhi- Buanne will be performing in Sava Cen- bition featuring the most recent Czech How would you describe you ter. His first album called The Italian architectural scene. The three exhibi- experience of living in Serbia? was released in 2005, while the football tions under one umbrella depict differ- On a personal level I’ve found living anthem Stand Up! (Champions Theme) ent objects starting from family houses, in Belgrade, I can’t tell you in Serbia, sang by Buanne was played at the end of through showing different concepts of I can only tell you in Belgrade, prob- every game played at last year’s World space and short films featuring differ- ably one of the most enjoyable parts Championship in Germany. ent architects and their relationship of my life. I have great friends both with contractors, cities, private inves- Serbian and foreign, the life is gener- tors etc. The exhibition will be opened ally very cosmopolitan, it is very easy FEST 07 - Movie Festival by the leader of an architectural studio to integrate and I have a great quality February 23 – March 4, 2007 New York Mr. Svatopluk Sladeček. of life. It’s relatively easy for me to get back in the UK on weekends and my The biggest movie festival in Serbia called children do not live here with me. But FEST will begin with an opening of The St. Petersburg’s Music Hall when they come over to visit my kids Trap by Srdjan Golubovic marking its Dance Performances love it. They stay forever. They won’t 35th anniversary. The festival will feature February 7 - 8, 2007 go back when they come. premieres of the most renowned directors and movies including Volver by Pe- The performance of one of the most dro Almodovar, Babel by Alejandro Gon- famous dance troupes in the world in Novi Sad zalez Inarritu, Apocalypto by Mel Gibson, Sava Center will depict the real merge Flags of Our Fathers by Clint Eastwood, between traditional and modern types You – Emotions in space – Exhibition Little Miss Sunshine by Jonathan Dayton of dancing. All performances show the January 25 – February 8, 2007 and Valerie Faris, Queen by Stephen Fri- Russian history based on Russian folk- ers and many others. This year the honor lore, while some of them are based on The exhibition of an artist Olivera Vu- guest will be the director who brought to- the musical performances from the cinic Leko in the Cultural Center is gether Jessica Lange and Jack Nicholson 30s. Each performance is a colorful depicting immaterial and its value. The in the 1981 film remake called The Post- show using choreography, vocal, origi- red thread cuts and connects the gal- man Always Rings Twice. The FEST will nal numbers of the highest class in a lery space symbolizing connections in be held in three movie facilities namely combination to magnificent paints of a human and among people, thus cre- Sava Centar, Kulurni Centar Beograda costumes, scenery and lighting. ating space that materializes emotions and Dom Sindikata. into real locations. This installation is a continuation of a project started during the artist’s education in France and Hot Spots projects on the topic of immaterial. Magacin Magacin is a mixture of a bar, lounge and a night club and depending of the occasion it can change the at- mosphere starting from an elegant premise for a cocktail, a fashion Serbia Investment and show, or clubbing. It hosts up to 700 Export Promotion Agency visitors that may enjoy the bar that is 15 meters long. The lighting on the Vlajkoviceva St. 3/V walls are made to write the four most 11000 Belgrade, Serbia famous sins: Greed, Envy, Pride and tel: +381 11 3398 550 Lust that may easily replace Ambi- fax: +381 11 3398 814 tion, Admiration, Humility, and Love if one forgets about real values. [email protected] Address: Karadjordjeva 2-4, Belgrade www.siepa.sr.gov.yu