Development Agency of Serbia

Development Agency of Serbia www.ras.gov.rs Industry Serbia Subotica

Sombor

88,499 km2 Novi sad

Belgrade  7.19 million Šabac Data does not include Kosovo and Metohia For over half a century, Fiat and Zastava have played” an important CURRENCY Serbian Dinar role in developing the Serbian €1=123 RSD $1=117 RSD Kragujevac automotive industry. Moreover, Čačak

our commitment demonstrates Kraljevo Kruševac Niš  our confidence and trust in Pirot 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 CEO at FIAT Chrysler Automobiles membership: negotiation 10th Pan-European Corridor process has officially 7th Pan-European Corridor started, ready for accession by 2020.

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 Sremska Mitrovica, Accounting for 10% of the years Zastava would go on to produce more batteries from Sombor. 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 Kikinda was exporting castings to Opel in 70 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 40,000 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 hatchback Serbia today. range of cooperation, so suppliers started to called Yugo 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 back to 1939, when assembly of military trucks these companies found that they could expand of Yugoslavia in the 90s, combined with started in the City of Kragujevac, today the heart beyond what was the market of Zastava and economic sanctions on Serbia severely of Serbian automotive industry. started to export parts and systems, mostly to reduced the market grinding the sector Ever since then, by acquiring the license Western Europe. Castings came from Kikinda to complete hold. In the next ten years of The Automotive from FIAT, the small Kragujevac plant was and Mladenovac, complete engines from economic isolation the automotive industry transformed into the Serbian car producing Belgrade, tires and rubber parts from Pirot in Serbia would 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 like plastic and rubber producers found they had a improve and grow. Johnson Controls, Magneti Marelli, Gruppo new market on their doorstep. Proma and Sigit, that built their factories in Besides vehicles produced by Fiat, Serbian Most significantly the year 2008 specially 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, turbocharger and parts in Serbia using the cost effectiveness, housings, 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, Delphi, relentlessly year by year forwarding Serbia into overhauled with new machinery Lear, Hutchinson 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) Companies SUBOTICA

KIKINDA • Mecafor Products (Machining) • Le Belier (Aluminium castings) • FAS (Batteries) SOMBOR

• Magna (Seat covers) BEÈEJ • Knott Autoflex Yug (Trailers)

ODŽACI TEMERIN • FKL (Bearings) • Dräxlmaier (Wiring harness) • Mecaplast (Plastic patrs) ZRENJANIN • Lear Corporation (Wiring harness) • Delphi (Wiring harness) • Agena Technology (Connecting rods) • Hutchinson (Rubber hoses) NOVI SAD • Coficab (Wire) • Konkab (Wiring harness) • Cooper Standard (Rubber hoses) RUMA SREMSKA KOVAÈICA • Eurozait (Wiring harness) • Lames (Window lift mechanism) MITROVICA INĐIJA • IGB Automotive (Seat heaters) PEĆINCI • Ikarbus (Buses) • IPM (Fuel supply) STARA PAZOVA • Streit Group (Turbocharger housings) • Robert Bosch (Whiper system) • Srboauto (Transmission parts) BEOGRAD • Carbotech (Graphite brushes) • Yazaki (Wiring harness) ŠABAC OBRENOVAC SMEDEREVO • PKC Wiring Systems (Wiring harness) • Mei Ta (Castings) MLADENOVAC • AD Plastic (Insulation) • GredaMetal (Pressed parts) VALJEVO • Yura Corporation (Wiring harness) • FAD (Suspension parts) RAÈA • KM Manufactur (Interior parts) LJUBOVIJA BATOÈINA • Grah Automotive (LED Systems) GORNJI • Inmold (Plastic parts) MILANOVAC JAGODINA • Aunde (Seat covers) KNIÆ KRAGUJEVAC • Autoventil (Valves) UŽICE POŽEGA ARILJE • Proleter (Forgings) TRSTENIK • Kromberg & Schubert (Wiring harness) • FAP (Trucks) PRIBOJ KRUŠEVAC • Cooper Tires (Tires) • Trayal (Tires and rubber parts) • Sloga (Hidraulics) ALEKSINAC • LEONI (Wiring harness) NOVA VAROŠ • Johnson Electic (Electric motors) • Shinwon (Wire) NIŠ • Ming (Forgings) • Yura Corporation (Wiring harness) • EMA (Superstructures) PROKUPLJE PIROT • Tigar Tyres (Tires) • Fiat Chrysler Automobiles (Passenger cars) • SCGM (Plastic patrs) DOLJEVAC • Bacchis Osiride (Insulation) • Gomma Line (Rubber hoses) • Johnson Controls (Car seats) • Magneti Marelli (Plastic parts) VLASOTINCE • Elrad WS (Electronics) • Gruner (Electronics) • Tekina (Pressed parts) • TPV Šumadija (Pressed parts) • Zastava Inpro (Trailers) • Yura Corporation (Wiring harness) • Zastava Tapacirnica (Seat covers) • Sigit (Rubber parts) • PMC Automotive (Body parts) LESKOVAC • Teklas (Rubber hoses) • PPT (Hydraulics) VLADIÈIN HAN

• 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 of automotive industry Mr. Jongwoo Nam, Value of production 2015 (€mill) in Serbia by years (in EUR) Deputy Director Yura Corporation d.o.o. Source: Serbian Business Registers Agency and Source: Serbian Business Registers Agency and Serbian Development Agency Development Agency of Serbia 3,000,000,000 Passenger cars 1,156.1 2,500,000,000

Tires 341,8 2,000,000,000 1,500,000,000 Wiring harness 292.0 SERBIA HAS REGAINED ITS 1,000,000,000 ND 500,000,000 POSITION HOLDING 2 PLACE Casted & Machined parts 165.3 AS THE TOP INVESTMENT 0 DESTINATION COUNTRY Plastic parts 112.3 2006 2009 2012 2015 IN THE WORLD* * MEASURED RELATIVE TO POPULATION SIZE, e&y, 2016. Number of workers in automotive industry Wiper system 83.5 in Serbia by years Source: Serbian Business Registers Agency and Rubber hoses 82.7 Development Agency of Serbia 40,000 Car seats 75.4 35,000 30,000 Seat covers 73.6 25,000 20,000 Body parts 51.0 15,000 10,000 Economic Other 226.6 5,000 0 Indicators 2006 2009 2012 2015 15 SUBOTICA

Ownership structure in the Serbian automotive industry 2015

(by number of workers employed) ODŽACI Source: Serbian Business Registers Agency and RAS ZRENJANIN

NOVI SAD 0 4,000 8,000 12,000

STARA PAZOVA SREMSKA Germany PEĆINCI MITROVICA  BEOGRAD Serbia

ŠABAC OBRENOVAC SMEDEREVO South Korea

RAÈA Italy

over €26 billion of inward JAGODINA France KRAGUJEVAC foreign direct investment since 2000. Slovenia

KRUŠEVAC ALEKSINAC Automotive industry Canada  NIŠ accounting for more than PROKUPLJE 14% of the total Fdi stock. Finland PIROT

United States

Hong Kong VLADIÈIN HAN Other

 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 70 factories were built intensive projects possible along with a balance practice, often even exceeding the most by international investors with total capital of low operating costs, developed infrastructure, optimistic expectations. More than 2.1 billion euros value over 2.1 billion euros, creating more free trade possibilities, financial and fiscal This is the reason why Michelin, IGB, Grammer, of foreign investments than 40,000 jobs. The Flagship is FIAT´s €940 incentives, traditional university technical Draexlmaier, Leoni, Yura, Continental or Johnson 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 will 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

310 296.5 293.4 294.4 TECHNICAL FACULTY „MIHAJLO PUPIN” (ME, IT) 290 306.6 270 282.4 273.8 Our decision (to invest in Serbia) FACULTY OF 250 I-V FACULTY OF TECHNOLOGY AND METALLURGY (MT) was based on a high confidence 2011 2012 2013 2014 2015 TECHNICAL SCIENCE (ME, EE, IT) ZRENJANIN FACULTY OF TRANSPORTATION and TRAFFIC ENGINEERING (LE) ” 2016 NOVI SAD Faculty of Organizational Sciences Belgrade (IT) to find a very motivated and FACULTY OF MECHANICAL ENGINEERING (ME) FACULTY OF ELECTRICAL ENGINEERING (EE, IT) skilled workforce, to have optimal BEOGRAD logistics conditions from and to 16% 43% Technical Faculty (MT) the other European countries, to Unemployment Rate* Unemployment Rate** Faculty of BOR Faculty of Engineering Sciences (ME, IT) develop an intense cooperation (under 30 years old) Technical Sciences (ME, EE, IT) KRAGUJEVAC Source: *Statistical Office of the Republic of Serbia, Labor Force ČAČAK Faculty of Mechanical and Civil Engineering (ME) KRALJEVO with technical high schools and Survey, I-IX 2016; **National Employment Agency universities and to build a strong 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 31.4 General Manager Operations Europe, High School 54.3 ME – Mechanical Engineering Johnson Electric University/College 14.4 EE – Electronics Engineering Source: National Employment Service, Republic of Serbia IT – Information Technologies LE – Logistics Engineering MT – Metallurgy Engineering

Old Build New Build 0.067 €/kWh Commited to 1-2.5€/m2 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 Serbia is the only country Due to a number of free trade agreements, Europe, the European Free Trade Agreement outside of the Commonwealth Average Road Transportation Costs Serbia can serve as a manufacturing hub for members, and Belarus. of Independent States that (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 has a Free Trade Agreement Union, the United States of America, the Russian exceptions and annual quotas for a limited Moscow €2,250 Federation, Kazakhstan, Turkey, South East number of goods. with Russian Federation. Copenhagen €1,700 London €2,050 Total: 1.1bn 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 171.1mn Consumers 5.9% of Total Exports

The existing infrastructure, CEFTA TURKEY 20.1mn Consumers 76.7mn Consumers speed of issuance” of building 18.6% of Total Exports 1.9% of Total Exports permits, administrative procedures and existing transport corridors and logistics,provide solid and EU 506.8mn Consumers stable business environment, 66% of Total Exports similar to the business environment in the EU. US EFTA 321.4mn Consumers 13.6mn Consumers Mr. Zivko Topalovic, 1.9% of Total Exports 0.9% of Total Exports Source: Statistical Office of the Republic of Serbia, 2015. CEO, ContiTech Fluid Serbia, (Continental AG) 21 Financial Incentives

Serbia places high priority on the five categories. The subsidies are calculated as development of automotive industry. A lavish percentage of the two year salary expenses or system of incentives is offered to all investors percentage of investment. So far, more than fifty in the sector in order to further boost its foreign investment projects have successfully development. The incentives are set up to participated in the incentives program, with offer the highest grants to most undeveloped names that include: Michelin, Bosch, Delphi, municipalities, which are in Serbia divided into 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) offers a wide range III 30% + UP TO 20% of services on behalf of the Government of the Republic of IV 35% + UP TO 25% Serbia, including support of direct investments and export V 40% + UP TO 30% promotion, and leads the implementation of projects with the aim of improving Serbia’s competitiveness and BONUS FOR LABOR INTENSIVE PROJECT reputation in order to support the economic and regional For more than For more than For more than development. 200 employees 500 employees 1,000 employees As a newly established agency, RAS builds upon the +10% of the sum of 2-year +15% of the sum of 2-year +20% of the sum of 2-year knowledge of the former Serbia Investment and Export gross salaries gross salaries gross salaries Promotion Agency (SIEPA) and National Agency for Regional Development (NARD) and brings improvements requried to meet the needs of a modern economy.

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

Development Agency of Serbia (RAS) Resavska 13-15, 11000 Belgrade, Serbia Payroll Tax Incentives Phone: 011 3398 900, Fax: 011 3398 550 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, 2017: • 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

March, 2017