Development Agency of

Industry Serbia

Sombor 2 88,499 KM

Belgrade  Pančevo 7 MILLION Šabac Data does not include and Metohia

For over half a century, Fiat and Zastava have played” an important Požega CURRENCY SERBIAN DINAR role in developing the Serbian Bor €1=118.3 RSD $1=100.3 RSD . Moreover, Čačak  our commitment demonstrates Kruševac Niš  our confidence and trust in Existing highways Serbia, its industry, management Highways under construction Planned highways expansion competence and Major railways SERBIA HAS CONTINUED the skill of its workers.  Airport ITS PATH TOWARDS EU Mr. Sergio Marchionne, River port Former CEO at FIAT Chrysler Automobiles MEMBERSHIP: NEGOTIATION 10th Pan-European Corridor PROCESS HAS OFFICIALLY 7th Pan-European Corridor STARTED, READY FOR ACCESSION BY 2025.

The attractiveness of the location, logistics advantages,” availability of skilled workforce, and a very good support of the Government of the Republic of Serbia and the local community are the main reasons why the Bosch Group decided to invest in the Republic of Serbia. Mrs. Jovanka Jovanovic, General Manager of Robert Bosch Serbia

Welcome to Serbia! 3 giant called Zastava (The Flag). In the next 55 and Kruševac, valves from , Accounting for 10% of the years Zastava would go on to produce more batteries from . The automotive sector Serbian export, around 14% of than 4.5 million vehicles, 650,000 of them being expanded to a degree where the foundry MORE THAN designated for export. in was exporting castings to Opel in 80 YEARS OF TRADITION IN value of foreign investments Over time the model of production in Zastava exchange for disassembled cars, which started and employing more than would shift from simple car assembly to being assembled in new plant called IDA. This AUTOMOTIVE INDUSTY production of almost all the components, plant in Kikinda would go on to assemble some 60,000 workers, automotive design modifications and then finally to the 50,000 Opel models such as Kadett, Corsa, MORE THAN 5,000,000 industry is certainly the most independent design and development of the Vectra and Omega. PASSENGER CARS PRODUCED complete vehicles. Back in Kragujevac, in the late 80s, Zastava important industrial sector in Naturally, this massive industry needed a wide launched a modern segment B Serbia today. range of cooperation, so suppliers started to called Florida designated to lead the The development of this sector in Serbia goes boom all over former Yugoslavia. Very soon factory into the new age. The break-up of back to 1939, when assembly of military trucks these companies found that they could expand Yugoslavia in the 90s, combined with economic started in the City of Kragujevac, today the heart beyond what was the market of Zastava and sanctions on Serbia severely reduced the of Serbian automotive industry. started to export parts and systems, mostly to market grinding the sector to complete hold. Ever since then, by acquiring the license Western Europe. Castings came from Kikinda In the next ten years of economic isolation The Automotive from FIAT, the small Kragujevac plant was and , complete engines from the old automotive industry in Serbia would transformed into the Serbian car producing , tires and rubber parts from Pirot slowly fade away. Story 5 In recent years the automotive industry started its rebirth, this time based more on foreign being introduced for the building their factories triggering the influx of 300,000 ANNUAL CAR investments and entrepreneurship in sector of production of the brand new FIAT much needed capital and know-how into an industry with long tradition. At the same time, PRODUCTION CAPACITY SME´s. 500L mini MPV. Tradition and know how in the industry attracted Serbian capital oriented itself to more flexible a significant number of foreign investors to the Together with FIAT also came Tier 1 suppliers SME sector while Serbian forgers, toolmakers, sector which in turn stimulated local suppliers to for the new passenger car and companies plastic and rubber producers found they had a improve and grow. like Adient, Magneti Marelli, Gruppo Proma new market on their doorstep. and Sigit, that built their factories in specially Besides vehicles produced by Fiat, Serbian Most significantly the year 2008 designated supplier park in Kragujevac. automotive sector shows a diversified portfolio saw the takeover of lumbering Moreover, other OEMs found different of component producers. Zastava factory by FIAT with advantages of producing automotive systems Whether it is passenger cars, tires, turbochargers, and parts in Serbia using the cost effectiveness, electric drives, wiring harness, electric motors, an unprecedented investment logistic position and government support for bearings, seat covers and heaters, fuel or coolant project worth €940 million. investments in the industry. hoses or various plastic, rubber or metal parts, The factory was completely Very soon it was brands like Bosch, Michelin, the automotive industry in Serbia is growing Industry Continental, Magna, Johnson Electric, Aptiv, relentlessly year by year forwarding Serbia into overhauled with new machinery Lear, Hutchinson, ZF and many more that were the new industrial age. Today 7 Components and Systems INSULATION

RUBBER HOSES AND PARTS

ELECTRONICS

R

SUSPENSION PARTS

TYRES

BODY PARTS

SEATS AND SEATS PARTS

WIRING HARNESS ENGINE PARTS PLASTIC PARTS

produced in Serbia Largest • Norma (Rubber hoses) • Continental (Rubber hoses) • Boysen (Exhaust System) Companies SUBOTICA • Mecafor Products (Machining) • Le Belier (Aluminium castings) KIKINDA • BATAGON ENERGY (Batteries) SOMBOR • Knott Autoflex Yug (Trailers) • Magna (Seat covers) BEČEJ • FKL (Bearings) • Dräxlmaier (Wiring harness) • Mecaplast (Plastic patrs) ODŽACI • Lear Corporation (Wiring harness) • Aptiv (Wiring harness) • Linglong (Tires) ZRENJANIN • Continental (Interior Electronics R&D) • BMTS (Turbochargers) • Agena Technology (Connecting rods) • Hutchinson (Rubber hoses) NOVI SAD • Coficab (Wire) • Cooper Standard (Rubber hoses) • Konkab (Wiring harness) SREMSKA KOVAČICA • Eurozait (Wiring harness) • Lames (Window lift mechanism) MITROVICA INĐIJA • IGB Automotive (Seat heaters) • (Tires) PEĆINCI PANČEVO • Ikarbus (Buses) • IPM (Fuel supply) • ZF (Electric drives) • Brose (electic motors) • Robert Bosch (Whiper system) • Srboauto (Transmission parts) BEOGRAD • Streit Group (Turbocharger housings) • (Wiring harness) ŠABAC SMEDEREVO • Carbotech (Graphite brushes) • PKC Wiring Systems (Wiring harness) • Adient (Seat covers) • Minth (Body parts) LOZNICA • AD Plastic (Insulation) • Mei Ta (Castings) MLADENOVAC • GredaMetal (Pressed parts) RAČA • Yura Corporation (Wiring harness)

• KM Manufactur (Interior parts) BATOČINA • Grah Automotive (LED Systems) GORNJI • Inmold (Plastic parts) MILANOVAC KNIĆ • Aunde (Seat covers) • Autoventil (Valves) KRAGUJEVAC UŽICE ČAČAK KRALJEVO • Proleter (Forgings) POŽEGA TRSTENIK • Kromberg & Schubert (Wiring harness) • FAP (Trucks) PRIBOJ KRUŠEVAC • Cooper Tires (Tires) • Trayal (Tires and rubber parts) • Sloga (Hidraulics) • LEONI (Wiring harness) NOVA VAROŠ • Johnson Electic (Electric motors) • Shinwon (Wire) NIŠ • Ming (Forgings) • Yura Corporation (Wiring harness) • Vorwerk (Suspension parts) PIROT • Tigar Tyres (Tires) • FAD (Suspension parts) • EMA (Superstructures) • LEONI (Wiring harness) • Elrad WS (Electronics) • Gruner (Electronics)

• Fiat Chrysler Automobiles (Passenger cars) • SCGM (Plastic patrs) LESKOVAC • Yura Corporation (Wiring harness) • Aptiv (Wiring Harness) • Bacchis Osiride (Insulation) • Gomma Line (Rubber hoses) • Adient (Car seats) • Magneti Marelli (Plastic parts) • Tekina (Pressed parts) • Yanfeng (Interior Trims) • Teklas (Rubber hoses) • TPV Šumadija (Pressed parts) • Zastava Inpro (Trailers) • Sigit (Rubber parts) VLADIČIN • Zastava Tapacirnica (Seat covers) • PMC Automotive (Body parts) HAN • PPT (Hydraulics) • FRAD (Filters) • Grammer (Headrest) • Leoni (Wiring harness) • Leoni (Wiring harness) in Automotive Industry Trucks and Buses

The production of motor vehicles in Serbia license. The Mercedes components and started with the assembly of trucks. As the standards of quality are their greatest advantage. passenger cars industry flourished in the Like the passenger cars, Zastava Truck factory also 50´s and the 60´s, so did the production of developed in cooperation with FIAT producing commercial vehicles. trucks in segment up to 8 tons. At the peak of Production of buses started in Belgrade in 1954. its production in the 90´s, factory was turning are still based on the old Mercedes-Benz range. under the license of Sauer. This factory called up more than 10,000 vehicles per year and has FAP’s core activity today is the production of Ikarbus was formerly a light aircraft factory become a joint-venture company with Iveco. heavy-duty vehicles with gross weight capacities called Ikarus which traced its origins to 1923. The state still owns a majority share in the factory ranging from 10 to 32 tones. FAP’s annual The company has cooperated with brands such which is now in the process of privatization. capacity is 5,000 trucks. However, the company as MAN, Mercedes and DAF. Today, Ikarbus Larger trucks up to 32 tons were the responsibility has only used up to 5 % of the capacity over the production range consists of: city buses, intercity of FAP from Priboj. FAP started production last few years. With a strategic partner among buses, tourist buses and medical vehicles. The of trucks in 1953. A year later, FAP introduced the reputable companies from the industry that majority of Ikarbus vehicles are sold on the their first heavy-duty vehicles upon acquiring a could bring the much needed know-how to domestic market, while the rest is exported license to manufacture under the Saurer-Werke cooperation production with FAP, the company mostly to Russia. Contemporary models under brand. In 1970, FAP signed a license agreement could once again be an important player on the Ikarbus brand are still produced under Mercedes with Mercedes-Benz and the current FAP trucks market. 13 We were delighted to find such abundance ”of highly qualified workforce at such proximity to the European Union market. Serbia has invested a lot of attention to the road and industrial infrastructure as well as the customs system making it possible to establish manufacturing operations and OEM supply at a very fast rate. Major Products Groups Turnover in Automotive Industry in Serbia 2018 Value of production 2018 (in €mill) 10.63% Mr. Jongwoo Nam, 11.21% 7.33% Deputy Director Yura Corporation d.o.o. Source: Serbian Business Registers Agency and Development Agency of Serbia 4,000,000,000 3.48%

Tires 783.2 3,000,000,000 2,000,000,000 Passinger cars 746.8 2,000,000,000 Wiring harness 666.7 SERBIA HAS REGAINED ITS 1,000,000,000 POSITION HOLDING 1ST PLACE AS THE TOP INVESTMENT Wiper system 246.8 0 DESTINATION COUNTRY 2015 2015 2016 2017 2018 IN THE WORLD* Rubber hoses 213.8 * MEASURED RELATIVE TO POPULATION SIZE; Employment in Automotive Industry in Serbia 2018 IBM’S GLOBAL LOCATION TRENDS REPORT 2019, FINANCIAL TIMES (FDI PERFORMANCE INDEX 2019) Casted & Machined parts 201.3 19.27% 80,000 Seat covers 143.9 13.50% 14.37% 14.10% 60,000 Electric motors 106.7 40,000 Plastic parts 102.3 20,000 Economic Other 374.1 0 Source: Serbian Business Registers Agency and Development Agency of Serbia Agency and Development Agency Serbian Business Registers Source: Indicators 2015 2015 2016 2017 2018 Rate Growth 15 SUBOTICA Employment in Automotive Industry in Serbia 2018 (by company ownership) Source: Serbian Business Registers Agency and ODŽACI Development Agency of Serbia ZRENJANIN 0 10,000 20,000 5,000 NOVI SAD

Germany STARA PAZOVA PANČEVO SREMSKA PEĆINCI MITROVICA USA  BEOGRAD

South Korea ŠABAC OBRENOVAC SMEDEREVO LOZNICA

France RAČA VALJEVO OVER €30 BILLION OF INWARD Serbia JAGODINA FOREIGN DIRECT INVESTMENT KRAGUJEVAC SINCE 2007. China ČAČAK  KRALJEVO Italy AUTOMOTIVE INDUSTRY KRUŠEVAC ALEKSINAC ACCOUNTING FOR MORE THAN  Slovenia NIŠ 14% OF THE TOTAL FDI STOCK. PROKUPLJE PIROT Hungary

Canada

VLADIČIN Others HAN

 Airport ExistingRiver port Motorway Planned Motorway Motorway Under Construction In recent years the automotive sector in Serbia significant role in creating jobs. Relatively high companies. The examples of these are plentiful was especially vibrant in attracting foreign unemployment rate in Serbia has made labor in Serbia, making it almost a universal business investments. More than 110 factories were intensive projects possible along with a balance practice, often even exceeding the most built by international investors with total of low operating costs, developed infrastructure, optimistic expectations. More than 2.1 billion euros capital value over 4 billion euros, creating free trade possibilities, financial and fiscal This is the reason why Michelin, IGB, Grammer, of foreign investments more than 55,000 jobs. The Flagship is FIAT´s incentives, traditional university technical Draexlmaier, Leoni, Yura, Continental or Johnson €940 million investment into the factory with the education and lowest tax rates in Europe. Electric expanded their initial projects several Foreign capacity of over 200,000 cars per year, but parts One of the greatest proofs of an investment times, and continue to do so in the country and systems suppliers have played an even more friendly climate comes from the reinvestment of that is Automotive. Investments 17 In order to keep competitive in the automotive The long tradition of automotive industry is according to the needs of the industry. Practical industry it is recommended to ride the “economy best revealed by its mark on Serbia’s educational work in the factories is obligatory for all the class”. Serbia definitely boosts such an environment system. Study of engineering is popular in students but some institutions are beginning with its labor cost, low taxes and low cost utilities. Serbia and Serbian technicians pride themselves to pioneer the dual educational system with On top of their skill, education and affordable with good factory work. In total Serbia has their students spending time on practical work cost, workers in Serbia are readily available. Due 14 technical faculties, 18 technical colleges throughout whole year. The Government of to high unemployment rates still existing in many and 132 secondary technical schools. These Serbia is placing high priority on the development areas in Serbia, labor intensive projects can enjoy institutions today are working closely with the of educational system and collaboration of unprecedentedly quick ramp-up. industry and investors to adjust their curriculums education and industry.

Average Net Salary (EUR) Major Technical Faculties in Serbia

385.2 € TECHNICAL FACULTY „MIHAJLO PUPIN” (ME, IT) Average Net Salary Our decision (to invest in Serbia) Automotive Sector Serbia 2018 FACULTY OF FACULTY OF TECHNOLOGY AND METALLURGY (MT) was based on a high confidence TECHNICAL SCIENCE (ME, EE, IT) ZRENJANIN FACULTY OF TRANSPORTATION AND TRAFFIC ENGINEERING (LE) ” NOVI SAD FACULTY OF ORGANIZATIONAL SCIENCES BELGRADE (IT) to find a very motivated and 233 € FACULTY OF MECHANICAL ENGINEERING (ME) Minimal Net Salary FACULTY OF ELECTRICAL ENGINEERING (EE, IT) skilled workforce, to have optimal Serbia 2018 BEOGRAD logistics conditions from and to TECHNICAL FACULTY (MT) the other European countries, to Unemployment Rate FACULTY OF BOR FACULTY OF ENGINEERING SCIENCES (ME, IT) develop an intense cooperation TECHNICAL SCIENCES (ME, EE, IT) KRAGUJEVAC ČAČAK FACULTY OF MECHANICAL AND CIVIL ENGINEERING (ME) with technical high schools and KRALJEVO universities and to build a strong 10.3% FACULTY OF MECHANICAL ENGINEERING (ME) FACULTY OF ELECTRICAL ENGINEERING (EE, IT) NIŠ partnership with the national and DEPARTMENT OF TECHNICAL SCIENCES (IT) local authorities. Level of Education % of of Unemployed NOVI PAZAR Mr. Laurent Cardon, Elementary School 15.3 General Manager Operations Europe, High School 63.3 ME – Mechanical Engineering Johnson Electric University/College 21.4 EE – Electronics Engineering Source: Statistical Office of the Republic of Serbia, Q2 2019 IT – Information Technologies LE – Logistics Engineering MT – Metallurgy Engineering

OLD BUILD NEW BUILD 0.067 €/kWh Commited to 1-2.5€/ 3-5€/m2 0.6-1.3 €/m3 Technical AVERAGE BUILDING COST 2 Education 200-400€/m 0.38-0.42 €/m3 ... and Available 19 Trade Unlimited

Due to a number of free trade agreements, Europe, the European Free Trade Agreement Serbia is the only country Average Road Transportation Costs Serbia can serve as a manufacturing hub for members, Belarus, Australia and . outside of the Commonwealth (1€ per km) duty-free exports to a market of more than These customs-free regimes cover most 1 billion people that includes the European key industrial products, with only a few of Independent States that Union, the United States of America, the Russian exceptions and annual quotas for a limited has a Free Trade Agreement Moscow €2,250 Federation, Kazakhstan, Turkey, South East number of goods. with Russian Federation. Copenhagen €1,700 London €2,050 TOTAL: 1.3bn Consumers Warsaw €1,098 Stuttgart €1,176 Prague €900 Paris €1,700 Vienna €620 Zurich €1,200 Munich €944

Milano €1,050

Madrid €2,570

Istanbul €962

24h RUSSIA DELIVERY KAZAKHSTAN BELARUS* 172.2mn Consumers 5.7% of Total Exports

TURKEY* JAPAN** 82.3mn Consumers 126.5mn Consumers The existing infrastructure, CEFTA* 1.5% of Total Exports 0.4% of Total Exports 12.4mn Consumers speed of issuance” of building 17.4% of Total Exports permits, administrative procedures and existing transport corridors and logistics,provide solid and US** EU* 327.2mn Consumers 513.2mn Consumers stable business environment, 1.4% of Total Exports 67.0% of Total Exports similar to the business

*FTA - Free Trade Agreements environment in the EU. EFTA* AUSTRALIA** **GSP - Generalized System of Preferences Mr. Zivko Topalovic, Source: Statistical Office of the Republic of Serbia, 2018 14.2mn Consumers 25mn Consumers World Bank, 2018 1.0% of Total Exports 0.1% of Total Exports CEO, ContiTech Fluid Serbia, (Continental AG) 21 Financial Incentives

Serbia places high priority on the into five categories. The subsidies are development of automotive industry. A lavish calculated as percentage of the two year salary system of incentives is offered to all investors expenses or percentage of investment. So far, in the sector in order to further boost its more than fifty foreign investment projects development. The incentives are set up to have successfully participated in the incentives offer the highest grants to most undeveloped program, with names that include: Michelin, municipalities, which are in Serbia divided Bosch, Aptiv, Continental, Lear and many more.

PERCENTAGE OF LEVEL OF DEVELOPMENT OF PERCENTAGE OF 2-YEAR INVESTMENT IN FIXED THE LOCAL MUNICIPALITY TOTAL SALARIES COST ASSETS (OPTIONAL) I 20% + UP TO 10% II 25% + UP TO 15% Development Agency of Serbia (RAS) is a government III 30% + UP TO 20% organization offering a wide range of services including IV 35% + UP TO 25% support to direct investments, competitiveness and V 40% + UP TO 30% export promotion, leading the implementation of projects aiming to improve Serbia’s attractiveness and reputation BONUS FOR LABOR INTENSIVE PROJECT and increase economic and regional development. For more than For more than For more than 200 employees 500 employees 1,000 employees With a unique set of support programs tailored for micro, small and medium enterprises and entrepreneurs, as +10% of the sum of 2-year +15% of the sum of 2-year +20% of the sum of 2-year well as domestic and foreign investors seeking to set up gross salaries gross salaries gross salaries or expand their business in Serbia, RAS strives to raise Serbia`s position in the region and globally.

Created as a one-stop-shop, RAS acts as a reliable CORPORATE INCOME TAX RELIEF partner for both domestic and international companies with a single goal of building a strong and sustainable A 10-year Corporate Profit Tax Holiday is available for investors who hire more than 100 employees economy, and increasing the quality of life for the and invest more than 8.5 million euros (1 billion RSD). Tax holiday begins once the company starts people in Serbia. making a profit.

Development Agency of Serbia (RAS) Kneza Milosa 12, 11000 Belgrade, Serbia PAYROLL TAX INCENTIVES Phone: +381 11 3398 510, +381 11 3398 900 Employment of people who were registered with the National Unemployment Agency for more [email protected] than 6 months entitles employers to a sizable relief of taxes paid on net salary from the moment www.ras.gov.rs of employment until December 31, 2019: • 1-9 new jobs: 65% reduction • 10-99 new jobs: 70% reduction • 100+ new jobs: 75% reduction (payroll tax incentives can’t be combined with Financial Incentives) RAS Development Agency of Serbia www.ras.gov.rs

November, 2019