Serbia Investment and April Export Promotion Agency 2007

Current Issues

Meet Us

Industry Close Up Automotive Components Industry

Investor Personally Mr. Damir Firšt Chairman of the Board of Directors, METRO Cash & Carry

Monthly Reporting Types of Buyers in Central and Eastern Europe

Arts & Entertainment

The Other Home Mirko Bernuzzi Director of Pompea Serbia

Hot Spots Relax Plato

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

Inflation Lower Than Projected

The Governor of the National Bank of Serbia, Mr. Radovan Jelasic, estimated that the total inflation in Serbia in the first €600,000 Project of SIEPA and MIGA quarter of 2007 will be lower than 5%, while the basic inflation will be less than Serbia Investment and Export Promotion Agency (SIEPA) and an EU funded 4%. He reminded that the projected basic project delivered by the Multilateral Investment Guarantee Agency (MIGA), un- inflation was between 4 and 8%. Jelasic also der the name of Serbia Investment Promotion Program (SIPP), are implement- said that the inflation would be somewhat ing a project - Serbian Supplier Development Program (SSDP) worth €600,000. bigger in April due to seasonal increase in The aim of the project is developing competitive local suppliers able to meet prices of early fruit and vegetables, as well the supply requirements of multinational corporations (MNCs) in the region. increase in prices of oil derivatives. By enhancing their management and production skills, the program will help local companies to obtain more and higher value-added contracts from mul- tinationals and become part of global value chains. The new world-class local First Come – First Served supplier base would also help to retain existing inward investors as well as attract new ones. Increased local sourcing by foreign-owned corporations is, together Construction of a Mercator hyper- with job creation, one of the most tangible effects of Foreign Direct Investment market in Kragujevac on the surface (FDI). It is also a major channel for the transfer of knowledge, technology and of 20,000 square meters, should com- skills that FDI brings into the host economy. These positive effects are particu- mence in August and is due to be fin- larly important for countries in transition like Serbia, which is still defining the pri- ished in March next year. ority of FDI promotion amongst the other development policies it is pursuing. Although the original plan was to open The pilot version of the SSDP should be designed to provide targeted the hypermarket in 2009, the manage- technical assistance to approximately 30 selected local enterprises and the ment of this Slovenian retail chain es- completion is expected in June 2008. timated that the construction should be accelerated because the designated offer its services of GSM and UMTS created and that the investments in that parcel has become interesting to other network to the citizens of Montenegro, sector and solidarity will be stimulated. investors in the meantime. as well as services of landline telephony According to the Declaration adopted by Internet, based on WiMax technology. the presidents of Serbia, Montenegro, Al- bania, Croatia, Macedonia, Bulgaria and Ikarbus Exports to Russia Bosnia and Herzegovina, the constant The Largest Privatization and diverse energy supply is necessary Belgrade-based bus factory Ikarbus has Deal in CEE for economy development and social sta- started assembling 50 mini-buses to be bility of the countries in this region. exported to the Russian market. The to- PricewatherhouseCoopers announced tal value of the job for Russian partner that the acquisition of the Serbian Rusicar amounts to about €3 mil. company Mobi 63 by Norwegian Tele- Happy Anniversary to HP Company Ikarbus was founded in nor for about $1.9 billion is the largest 1923 as the first airplane factory in the privatization transaction in Central Hewlett-Packard celebrated the fifth year Balkans. The first bus in this factory was and East Europe in 2006. In addition, of operating in Serbia. Slobodan Radic, produced in 1954. It employs about 720 out of 490 privatization transactions in General Manager of HP, pointed out that workers and its annual production ca- Central and East Europe, 210 transac- the turnover in that period has been in- pacity is 1,000 vehicles. tions took place in Serbia. creased 2.5 times and that it reached the amount of $60 million in 2006. The growth has been registered in all Telekom Srbija Set Declaration on Long-term segments of business, mostly in the field for Launch in Montenegro Energy Stability of services (by 550%), while the rise by 500% has been registered in the segment Consortium of Telekom Srbija and Dutch The heads of the countries of South East of personal computers. The turnover in company Ogular has settled all obliga- Europe have signed the Declaration on the group for graphics and printing in- tions for the license of the third mobile long-term energy stability at the summit creased by 70% - Radic emphasizes and telephony operator on the territory of in Ohrid. It has been pointed out in the adds that the significant growth in the Montenegro. The consortium will oper- final Declaration on long-term energy field of services is a result of the develop- ate in Montenegro as a telecommunica- stability that the functional and com- ment of domestic IT market and the fact tion company MTEL, which will soon petitive regional energy market will be that 80% of companies depend on that.

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

Future Biotec To Build others are single and double rooms. Starting from 2011, the Pan-Euro- a Factory in Zrenjanin, The sizes of the rooms will range pean oil pipeline will be used to trans- Another One Possibly in Sabac between 26 and 80 square meters. port oil from the Caspian and Uralian The hotel will follow Holiday Inn area to European market. One of the Representatives of the city authorities standards that will be fully effective signers, the Minister of Mining and of Zrenjanin and company Future Bio- starting from year 2010. The hotel is Energy of Serbia, Radomir Naumov, tec have signed a contract on building a intended for businessmen and it will stated at the press conference that factory for production of synthetic die- have contents suitable for such cli- the signing of that document was not sel in industrial zone Ecka near Zren- ents. New hotel will have seven con- only important segment for final re- janin. The factory will be built under a ferences and banquet halls, which will alization of the project, but also the €50 million investment and should be be named after Serbian monasteries. new stimulant to the process of inte- completed in seven months time. gration of the entire region into the Another similar factory is possible European Union. to be opened in Sabac. Representatives Somboled Has a New Owner of the Texas company Pax have contact- ed the representatives of Municipality Company Lactalis from France, one of The First International of Sabac, announcing possible invest- the largest dairy groups in the world, Conference: Business ment into bio-diesel production, with has become the owner of more than Powered by Women total of 100-120,000 tons as a planned 91% of stocks of Croatian company volume of the production. It has been Dukat and also became the owner of The first international conference: estimated that the factory would be Sombor-based Somboled. Business powered by Woman will be profitable if oilseed rape was planted The agreement implies obligation organized in Master Center, Novi Sad, on at least 30,000 ha in the region. of the French company to keep the on June 7-9, 2007. Women from Ser- current number of employees in Du- bia, Croatia, Bosnia & Herzegovina, kat and related companies, as well as a Albania, Bulgaria, Romania, Mace- Memorandum on Construction further development of operations and donia, Montenegro and Germany of the Black Sea Highway primary milk production. This transac- have been invited to the conference tion is worth €279 million. to talk about their successful lives and Ministers of country members of the businesses, thus motivating and em- Black Sea Economic Collaboration Meet Us powering competent women in an (BSEC) have signed the Memorandum ever-changing business environment, on joining the construction of the Black May 22 - 25, 2007 to enhance and develop their existing Sea highway on April 19 in Belgrade. Expo Italia Real Estate, businesses and start up new ones. The highway should connect all Milan, Italy By holding workshops and lectures countries in the region and be a cor- and giving participants the opportuni- ridor connecting North, West, East May 23 - 25, 2007 ty to share their experiences and ideas, and Southeast of Europe. Serbia and Real Vienna, the conference aims to create inter- the members of BSEC should sign a national networks of women from memorandum on transportation ben- Vienna, Austria different countries working in similar efits, development of the Black Sea business environments and to transfer navigable ways and collaboration of May 29, 2007 knowledge about specific issues that diplomatic academies. Investment Forum in Korea, are characteristic of the region. Addi- Seoul, Korea tional quality of the Conference is the presence of a number of international Holiday Inn in New Belgrade experts, prominent persons from eco- Green Light for Oil Pipeline nomic, political and cultural life, but The four star hotel Holiday Inn Beograd Konstanza-Pancevo-Trieste above all participation of almost 300 will be opened on September 1st. The female entrepreneurs. value of the investment is estimated at The ministerial Declaration on Con- The conference is being organised €25 million. The investors and Holiday struction of Pan-European Oil Pipeline by GTZ on behalf of the German Fed- Inn hotel group plan to have several Konstanza-Pancevo-Trieste worth about eral Ministry for Economic Coopera- hotels built in the capital and around $2 billion was signed on April 3 in Za- tion and Development (BMZ), which Serbia within the next few years. greb. The Declaration was signed by the will endeavour to transfer its positive The hotel will have six floors and Ministers of Energy of Serbia, Romania, international experiences from work- 140 rooms, two of which will be in- Croatia, Slovenia and Italy and European ing with female entrepreneurs. tended for disabled persons, while Commissar for Energy Andris Piebalgs. Prepared in cooperation with E kapija.

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

Automotive Components Industry

There are about one hundred companies directly involved in production of au- tomotive components and many of them are exporters to markets in Europe and wider. Employing 36,000 people and with total exports of about €100 mil- lion, this sector proves its international competitiveness in several key fields. Having FTAs with all countries in the region and Russia – fast growing automo- tive markets are at the doorstep of potential investors and trade partners. The most distinctive feature of Serbia’s automotive industry is that it was rather strong for a number of years having a peak production of as much as 250,000 cars in 1989, whilst exporting to the USA. These facts separate Serbia from all other countries in the region. The accumulated knowledge and experi- ence is easy to build on and Serbia has all the potential to once again become the automotive center of the Balkans.

Employing 36,000 people and with total exports of about €100 million, this sector proves its international competitiveness in several key fields.

The location of Serbia allows for the establishment of just–in–time supply mech- anisms with partners in Western and Central Europe. Given the eastward shifts of production and assembly of passenger vehicles, it is certain that domestic companies will increase their visibility as suppliers and partners to the foreign OEMs and Tiers. Apart from location, Serbia’s great advantage lies in qualified and competitive- ly priced labor. With age structure closely following trends of those in Western Eu- rope, labor force can be considered sufficiently experienced with enough young graduates to sustain a steady flow of qualified labor. In Serbia, around one third of Zastava Kovacnica all University students receive a diploma from technical faculties. This fact alone Producer of forgings for Zastava Cars, proves that technical sciences are still popular among young people in Serbia. privatized in 2005 has been a fine ex- ample of innovation in automotive The location of Serbia allows for the establishment of just–in–time supply industry. One of the most distinctive mechanisms with partners in Western and Central Europe. products of the company is forged housings for automatic gearboxes. The great potential of this sector lies in its current under–capacity opera- Company has developed and engi- tions, combined with competitive and experienced labor. This attracted many neered this product and achieved foreign companies to establish cooperation with domestic companies and there higher durability which was perceived are number of major players in both exports and investments. Serbia can be as very valuable by its customers. Za- seen as an open door to many neighboring markets in which the automotive stava Kovacnica successfully cooper- industry is either developing or will develop in the following five to ten years. ates as supplier to GM and there is no doubt that other OEMs will recognize FAS Sombor Jucit Invest this as opportunity for improvements Battery manufacturer from Sombor Company closely specializing in produc- of their own products. has proved once again that innovations tion of car jack leavers has been established bring about great results when it comes in 2001 and is already Tier 1 supplier for Unior to sales. In 2003 the company has in- major French OEMs. Company is rather Formerly Zastava Toolshop, this com- vested in latest state-of-the-art machin- ambitious, planning to play an important pany has been privatized by Slovenian ery for production of car batteries and role in the world car jack leaver market. It Unior. Company specializes in devel- two years later new hybrid battery has has brought about innovation to its prod- opment and production of tools and been produced. This new type of battery ucts and patented a part of its products. is excelling in production of stamp- has been awarded by SIEPA as the Best Company has gradually expanded its pro- ing tools. Company has received very New Export Product. The batteries have duction to plastic housings for the jacks positive opinions about the quality of proved excellent in extreme conditions and developed set of solutions to reduce the tools and this is one of the good and the reliability of the batteries has noise in the toolboxes provided with the car. examples of successful privatization. earned the trust of customers world- All in all, this company has proven its keen Modernized machine park, highly wide. From blazing hot Middle Eastern ability to produce and develop competitive skilled labor and outstanding pro- climate to freezing Siberia – FAS batter- products,which will surely let them become duction quality is what separates this ies have not let down their buyers. significant players on the global market. company from other companies.

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

previous experience, I would like to main growth market in the next pe- say that Serbia has a large number of riod and therefore, we expect that the qualified, highly educated people with trend of investment in this area will great potential for further improve- be continued with more intensity. ment. METRO has employed over 1,000 people and until now interest to join the METRO team was enormous. Given your large experience in Ser- During each job opening we have re- bia what would be your message to ceived several times bigger number of potential foreign investors? applications than requested. In addition, during 2005, we have In 2005, Organization for Economic Co- developed collaboration with around operation and Development (OECD), as a thousand domestic producers and part of the fourth annual SEE Ministerial suppliers. For this year, we are plan- Conference on Investment and Trade, ning production of the first Serbian has awarded METRO Cash & Carry product under METRO’s own brand Serbia as the Largest Regional Green- and that will probably be a product field Investment. This award speaks Mr. Damir Firšt from the food assortment. It will be a much about our approach to the Serbi- Chairman of Board of Directors, great satisfaction for us to see Serbian an market and its economy which grows METRO Cash & Carry products on the METRO’s shelves in fast. This information will be significant the countries such as Netherlands, for the potential foreign investors, since England or Japan. in the world trade circles, METRO has a Why did you choose to invest in the Serbia has significant tendency reputation of a pioneer in entering new retail industry in Serbia? for progress and adoption of world’s markets. Furthermore, the company in- standards and creation of modern vests only in countries where all finan- METRO Cash & Carry is the world regulations. As the final result of such cial and trade regulations necessary for wholesale market leader operating creation of positive business atmo- doing legal business exist. To conclude, with 544 distribution centers in 28 sphere, new investments will follow in Serbia conditions for serious investors countries. After the government an- and METRO Cash & Carry will real- exist and they are constantly improving. nouncement of the introduction of ize them by opening its outlets in the METRO Cash & Carry Serbia has VAT law which was vital for starting cities where the administrative and opened its first distribution centre at the the operations of METRO Cash & legal conditions will be solved in the beginning of 2005. Openings of other Carry business in Serbia, we could go fastest way. The only right way for de- two centers in Zemun (Belgrade) and ahead with plans to invest and open veloping the Serbian economy at this Kragujevac are proofs of great potential first cash & carry distribution center moment is to be open to the novelties of this country which is very attractive to in Serbia. Although the final version with the total respect for the local investors. Our investments from the last of Trade law is not yet completed, specificities. Serbia, together with the year are only the beginning of further we hope that the new law will define region of South East Europe, is the actions which will follow soon. wholesale and cash & carry concept in line with the definition of the World Trade Organization ( WTO). Also, we expect that Serbia, as a future member, will completely follow all the terms set with this organization.

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

We are satisfied with the work of our distribution centers in Belgrade and Kragujevac, in which company has invested €60 million during the last year. We are especially pleased with our employees and, based on our

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

Types of Buyers in Central and Eastern Europe There is an important affinity in the distribution of types of buyers between the four countries of Central Europe Countries within South East Europe (SEE) are character- and among countries of ex-Yugoslavia. ized by 8 types of shoppers and the common one, when looking at 10 markets, is the Saver although having differ- ent concentration over the region. The region itself is not The buyer typology research is suggesting a different unique but subdivided into 4 sub regions, according to the SEE regional segmentation. There is an important affin- differences and affinities within the buyer typology. ity in the distribution of types of buyers between the four The SEE region is characterized by a growing competi- countries of Central Europe (Czech Republic, Hungary, tion when it comes to trade development and this process Poland and Slovakia) and among countries of ex-Yugosla- goes hand in hand with buyer sophistication and demands via (Serbia, Montenegro and Croatia). However, there are resulting in different shopping styles. some other similarities, for example, in Czech Republic The number of households using their own cars when and Croatia there is a very low presence of Communicative shopping for food and basic non food products is still grow- Housewives, whilst that is much more frequent in Serbia, as ing in Central and Eastern Europe (Czech Republic, Slo- well as Slovakia, Hungary and Russia. vakia, Poland, Hungary, Romania, Bulgaria, Serbia, Mon- The results of this research show there are connections tenegro, Croatia, Ukraine represented by Kiev, and Russia between eastern Balkan countries (Bulgaria and Romania) being represented by Moscow and St. Petersburg). Recent and certain cities of the former Soviet Union (Moscow, St. research of the SEE buyer typology conducted by INCO- Petersburg and Kiev) having a high percentage of buyer types MA Research and Gfk suggests that more than 21 million not using cars when shopping for groceries (65-75%), as well households are mobile, i.e. using cars when going shopping as and important segment of consumers that are not as de- for food and basic non food products. manding when it comes to the store environment (55-65%). This figure represents more than 40% of the observed population. This fact has wider consequences: mobility gives Comparison of the Savings Segment consumers the power to be more selective when choosing According to Buyers Typology (in SEE countries) the main shopping venue, producing greater sensitivity to price levels in different shop types. Bulgaria 23% Among most mobile and, at the same time, most price Croatia 8% sensitive SEE countries are: Czech Republic, Hungary, Poland Czech Rep. 11% and Slovakia where 60% of all households are very choosy due Hungary 9% to prices when deciding on a shopping venue. On the other Poland 18% hand, Romania and Bulgaria have less than 25% of households Romania 29% (around 3 million households in both countries in total) that use their own cars when shopping for groceries. Russia 10% SCG 16% The most common buyer in the SEE region is the so Slovakia 16% called Saver. Ukraine 16%

This correlates with the fact that almost 70% of Bulgar- Total 17% ian and Romanian households do not prioritize based on the quality of the selling point, like cleanness and arrangements. Proportion of one of the purchasing styles There are major differences between SEE countries in -re lation to representation proportion of certain types of buyers. According to the buyer typology, the most common buyer in Proportion of Types of Buyers in the 10 Observed SEE Countries the SEE region, one of the basic 8 types defined in the buyer ty- Region 1: Czech Republic, Hungary, Poland, Slovakia pology research, is the so called Saver. He represents more than 50% 50% 8.5 million households, i.e. 17% of the observed population. Region 2: Croatia, SCG This type of spending behavior is characterized by price 54% 46% deals available at different offers and deals. Region 3: Bulgaria, Romania Representation of the Saver is different when looking 26% 74% through the SEE region. This is the most frequent buyer Region 4: Moscow, St. Petersburg, Kiev type in Romania with 29%, Bulgaria with 23%, while it is 38% 62% much less present in other parts of the region. This type of Consumers using cars Consumers not using cars a buyer is least present in Croatia and Hungary, 8% and 9% respectively, and Czech Republic with 11%. Serbia has mod- erate participation amounting to 16%. Source:

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

Belgrade Boris Tadic. The elite of world branding for classical, jazz and world music. Up will try to explain why is the world chang- to now he published numerous albums May 7 – 12, 2007 ing and how to be ready for it. of traditional and modern flamenco Belgrade Design Week music, working with names such as Al Di Meola and John McLaughlin. Branding, design, architecture, publishing, May 8 – 13, 2007 business, more than 50 exhibitions, hap- Antique Fest The Other Home penings, and presentations will be held Mirko Bernuzzi in different venues around Belgrade. The The Museum of Applied Arts together Director Pompea Serbia central manifestation, world business and with the Association of Professional th educational conference called Change 2 Antiquaries is organizing the 5 antique Do you enjoy your life in Serbia? will be held from May 10-12 under the fair. The exhibits will be presented by 12 In a city such as Belgrade energy and patronage of the President of Serbia Mr. antiquaries of this association and one vivacity of Serbian people can be felt. It restoration professional. Visitors will be can be felt in everything, culture, sports, Hot Spots in a position to enjoy really fascinating I would say in everything. The vigor is display of applied art, decorative objects very important for us, the people that Relax Plato made of porcelain, glass, silver, carpets, are coming to Serbia. It is very unpleas- watches, jewelry and paintings. ant to be working and living in a coun- When you step into the Spa Zone try whose people are inert, however it of Relax Plato you have entered into is certain that Serbia is not and that is your own empire of enjoyment and May 11, 2007 why it is our pleasure to be coming and harmony. This type of premises is – Concert working here. When it comes to hos- unique in Belgrade and it is envisaged pitality, there are no words to describe as a peace oasis for business people Sava Center will host this world fa- it, how can I describe that generosity, and families. Guests are offered to mous guitarist performing songs actually we feel like at home. have a drink or lunch throughout their from the Close as you get album, out newspaper reading session or some of on May 23. He started his career dur- Novi Sad the numerous books published by the ing 1960,s and has played on more than Plato bookstore. The restaurant has 30 albums, while he became world fa- May 4 – 7, 2007 self service option together with a la mous after issuing in The Days for Movies from Holland card featuring a great variety of dishes. 1990. His major hits include Parisienne Film Festival The recommendation is the All Natu- Walkways, Out in the Fields, Friday on ral menu made of 9 meals such as tofu My Mind, Still Got the Blues (For You). Right after the presentation of mov- or tuna steak with avocado salad. In ies from Denmark, the Cultural Center addition, the Spa Zone offers massag- of Novi Sad is presenting movies from es, sauna, and steam room. You may May 20, 2007 Holland. Animated movies, Simon – di- have your personal trainer assist you Swan Lake – Ballet rected by Eddy Terstall, then Me and getting into shape according to your My Parents, My Parents and I – directed special needs, while Ella Bache treat- In cooperation with the French Cultural by Gerrit van Elst, and The Last Victory ments will enrich your face and body. Center and Belgrade National Theater, – directed by John Appel are those that Address: Masarikova 5, Belgrade, Sava Center will be the venue for the ballet will be shown to the local movie lovers. Tel: (011) 30 61 765, (063) 106 44 75, www.relaxplato.com written by Pyotr Ilyich Tchaikovsky. Mem- bers of the orchestra and the ensemble of National Theater will host Emille Cozette and Christophe Duquenne, from a ballet group of the Paris National Theater, in the roles of Odette and Prince Siegfried. Serbia Investment and Export Promotion Agency Vlajkoviceva St. 3/V May 23, 2007 11000 Belgrade, Serbia Paco De Lucia Concert tel: +381 11 3398 550 One of the most appreciated flamenco fax: +381 11 3398 814 guitarist will be having a concert in Sava [email protected] In cooperation with Center. This artist famous for the new www.siepa.sr.gov.yu Caffe&Bar magazine by Frame Media. flamenco movement is equally talented

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