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Leading Sectors for U.S. Export and Investments

(Airport and Ground Equipment - AGP)
Pharmaceutical - DRG
Telecommunications Equipment and Services - TEL
Franchising - FRA
Agricultural Sectors
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(Airport and Ground Equipment - AGP)

Overview

The aviation industry in Serbia comes under the principal jurisdiction and management of the Civil Aviation Directorate of Serbia (CAD). The major air transport carrier in Serbia is Yugoslav Airlines (JAT), accounting for 98% of passenger traffic.

According to CAD, in 2008 the total airport throughput reached 2.8 million and is expected to increase to over 3.1 million by 2010. The total throughput air cargo is estimated to rise around 15% each year, achieving approximately 60,000 tons in 2010.

Currently there are 15 international air routes operating in Serbia. The country currently operates two major civil airports, the primary airport is located in Belgrade and the secondary airport is located in Nis. Belgrade Airport “Nikola Tesla” is the largest airport and air-traffic center in the former Yugoslavia. It handles almost 75% of the country’s international passenger traffic.

Serbian aviation experts and government authorities are aiming to transform the country into a regional hub. Currently, the upgrade of the transport infrastructure (road, rail, water, air) is a priority, though redevelopment of the civil aviation sector is a high priority.

There is significant foreign investment and export opportunities in this sector. While the majority of investment involves local construction materials and services, the United States is an important player in exporting products ranging from ground support to security equipment.

The primary source for financing this development will come from the national budget, foreign official development assistance loans, and export credits. Procurement in the aviation sector is mainly carried out through open local or international competitive biddings.

Competitive Situation

The major competitive factors for securing contracts in the aviation sector in Serbia include a good reputation, competitive pricing, and a willingness to build long-term strategic partnership.

Domestic Production

Airport runway systems and air traffic control equipment manufactured in Serbia accounted for only 8% of the total market in 2008. Serbian companies or foreign subsidiaries could meet about 6% to 8% of total demand by manufacturing and/or assembling airport and air traffic equipment locally and by outsourcing some of the related services to small local private companies. None of the Serbian companies are presently serious competitors to U.S. firms, but they could be considered viable partners in providing the accompanying after sale services, as well as designing, manufacturing and assembling subcomponents.

U.S. Market Position

From 2002 through 2008, the United States accounted for approximately 30% of Serbia’s imports of airport equipment and air traffic control equipment. U.S. firms are expected to increase their exports over the next two to five years. U.S. exports have been primarily radar and navigational equipment, supplied by such firms as Hughes/Raytheon (civil aviation).

Third Country Imports

Over 60% of the airport runway systems and air traffic control equipment imported into Serbia from 2002 to 2008 were imported from third countries. Third country imports are expected to grow over the next two years at an average rate between 20% to 25%.

The largest source of Serbia's imports of airport equipment traditionally comes from Germany, followed by France, the United States, and Italy.

Major foreign suppliers include the firms Siemens-Cardion and Thales, which supplies lightning systems and radio-navigation and communication systems, and Mannesman, which is supplying the passenger and cargo ground transportation equipment. The French company Telefles is supplying the flex bands for transportation of passenger and luggage and cargo.

Best Products/Services

Over the short and medium term, demand is estimated to be highest for airport and air traffic control equipment and related services; services related to concession of airport activities; cargo handling outsourcing and management; runway systems improvement; and safety and security equipment.

The following products represent the best prospects for U.S. firms exporting to Serbia: passenger bridges, firefighting trucks, metal detectors, electronic sniffers, baggage X-ray inspectors, etc.

U.S. airport equipment firms primarily compete with companies from Israel, Denmark and Italy. Due to the competitive nature of the market and the high cost of capital in Serbia, firms providing the most attractive financing arrangements will generally be the most competitive. Because most of Serbia’s formal bidding procedures are related to tenders, U.S. suppliers should contact the U.S. Commercial Service early to find out about timing, strategy, and the levels of available assistance.

Foreign companies winning bids are typically associated with local firms. In the case of international bids, supplying goods and services for specific government projects, successful bidders are required to have local representation. Since the open period for bidding is often as short as one month; a partner resident in Serbia, able to act on tenders as soon as they are announced, is critical.

Opportunities

The international airports are the most important users of airport and air traffic control equipment and related services. Procurements by the newly spun off airport service providers are expected to increase in number as airport services are increasingly being outsourced. The biggest customer will be Belgrade Airport. The second most important users of airport equipment will be major international air carriers such as DHL, FEDEX, Lufthansa, Austrian, Air France, British Air, Swissair, Alitalia. Foreign and Serbian air carriers use equipment and services provided by the airports. The airlines’ greatest needs are for better and faster passenger and luggage check-in handling, transportation to and from the airport, professional catering services, and safer and faster fuel supply. To meet these needs new and modern equipment, technology, and know-how are required.

Resources

Airport “Nikola tesla” Belgrade

Dr. Velimir Radosavljevic, Deputy Director

Director General – Currently Vacant,

Fax: (+381 11) 209 4802
e-mail: kabinetl@N0SPAM.N0SPAM.beg.aero

www.airport-belgrade.rs

Mr. Goran Jovicic , Security Department Director

Tel: (+381 11) 209-4821
Fax: (+381 11) 209-7755
e-mail: security@N0SPAM.N0SPAM.beg.aero

Government contacts:

Ministry of Infrastructure

Of the Republic of Serbia

Mr. Milutin Mrkonjic, Minister

Mr. Radoslav Tomasevic, Assistant Minister

Belgrade, 22-26 Nemanjina St.
Tel: 3616-426; 3616-431
Fax: 3617- 486
E-mail : cabinet@N0SPAM.N0SPAM.mi.gov.rs

www.mi.gov.rs

(Medical Equipment - MED)

Overview

The continually growing demand for medical equipment in Serbia, as well as in many developing Balkan states, indicates a strong prospect for companies in this field to conduct beneficial business operations in the broader Balkan region.

According to Episcom sources, the Serbian market for medical equipment was estimated at $162 million in 2007. Imports account for approximately 90% of the Serbian medical market. The primary suppliers of such equipment are manufacturers from the EU with a lesser share from the United States. The vast majority of the market is supplied by imports from Germany and Italy. U.S. suppliers account for almost 15% of Serbia’s imports in this sector. The actual share of U.S. imports is much higher than what is indicated in official statistics, because a large percentage of imported medical equipment is produced by European subsidiaries of U.S. firms and thus registered as originating in the EU.

The Serbian import market for medical equipment is growing at a rate of 12% annually. This development is largely a result of the Serbian public sector, which is characterized by constant restructuring in order to become more effective and productive in service of the Serbian citizenry. Therefore, the ability of the public sector to become more flexible in adopting systems, practices, and policies that have been applied successfully in Serbia and many foreign countries, is a fundamental condition for achieving the desired growth through the implementation of Public Private Partnerships (PPP).

Public expenditure for healthcare is low, amounting to 3.2% of GDP in 2007. The Serbian government has committed to improving and modernizing their nationalized healthcare system, which everyone agrees is in desperate need of reform. Equipment upgrades are part of the goal. According to the National Investment Plan adopted in June 2006, around $300 million was spent in this sector in 2007 and another $200 was expected to be spent in 2008.

The Ministry of Health in Serbia is the major player in the Serbian medical equipment market. The Ministry develops health policies establishing fundamental objectives for health care, proposes the health care budget and the investment program for the sector, and monitors the work of state-owned health institutions. Equipment purchases and other major investments are financed from the government’s budget. The Act on Public Procurement requires open tenders for all purchases of goods and services exceeding a certain amount. Currently most purchases are made by publicly owned institutions, but private practices in medical sector have created some space for sale of equipment for e.g. dialysis, diagnostic imaging, etc.

The Institute of Health Insurance in Serbia administers healthcare systems which are based on compulsory payroll contributions from both employers and employees. Serbia has opted to retain a predominantly publicly-funded health system, with an increasing degree of private services.

The Health Ministry in Serbia has embarked on a program of reform in the health care system in an attempt to modernize it and bring it closer to Western standards. These ongoing and future reforms offer U.S. medical manufacturers opportunities to increase their market share in Serbia.

Best Prospects/Services

U.S.-manufactured medical equipment enjoys an excellent reputation in Serbia for its state-of-the-art technology, quality, and reliability. However, medical equipment importers and specialists emphasize the real and perceived lack of technical assistance and service support as one of the main obstacles to further growth of US imports on the market. One should also take into account that the Serbian market for medical equipment is still very price-sensitive because of limited resources.

Best sales prospects for U.S. medical equipment are expected to be cardiovascular diagnostic equipment, non-invasive surgical devices, anesthesia and intensive care equipment, diagnostic imaging (CTs, MEIs) and radiation therapy equipment, as well as for ultrasound equipment, urology equipment, laboratory and testing equipment, tissue and blood bank related equipment. Also, there are good prospects for products such as: ultra-violet of infra-red apparatus used in medical, surgical, dental, or veterinary sciences, as well as apparatus based on the use of X-rays of alpha, beta or gamma radiations, whether or not of medical, surgical, dental or veterinary uses, needles, catheters, cannulae and the like, used in medical and surgical procedures, medical lasers, endoscopes and laser instruments.

GE Healthcare products are well known in Serbia. In addition, U.S. companies Medtronic and Boston Scientific have established strong positions in the sale of cardiovascular diagnostic equipment, pacemakers, and stents. U.S. Alcon is well represented in the area of ophthalmology.

Local distributors of medical products and equipment claim that there is a large demand for diagnostic tests for drugs, pregnancy, and various illnesses. Local distributors also expressed willingness to import what they refer to as “hit” products (i.e., new U.S. products for which equivalents do not exist in Europe). It is critical to note that the Serbian market that is very price-sensitive. However, if the main competitors do not have such products, local distributors are willing to accept the relatively higher prices of American products.

Opportunities

There are good opportunities in the Serbian market for US manufacturers of sophisticated diagnostic equipment such as electrocardiographs, endoscopes, scanners, computer tomograph imaging equipment, pace makers, digitalized x-ray equipment, nuclear medical instruments and clinical laboratory equipment.

The Ministry of Health is also looking for innovative ways to work with medical equipment suppliers. They are considering the option of public-private partnerships in which a company would equip and administer a certain medical center or hospital unit. At this early phase of this project the Ministry is willing to listen to different proposals.

Having in mind the current state of medical equipment in Serbia, hospitals suggest that several sub-sectors will be especially prominent in the near future. Therefore, the biggest opportunities for the coming years are expected to be in the following medical equipment sectors: health informatics equipment, home health care and rehabilitation equipment, pathology equipment and services, diagnostic imaging equipment, especially ultrasonic diagnostic equipment, patient monitoring systems including intensive care units, dialysis equipment, day hospital and day surgery concepts.

Medium and long-term procurements will be made for information systems developed for the National Health Insurance Fund, as well as training, public information and technical assistance, and support for outpatient and inpatient care. Hospitals perform regular procurements of diagnostic equipment, modern patient monitoring systems, and hospital management systems.

The proposed donor program for Serbia represents a best market opportunity for U.S. companies. In total, donations/grants/loans are expected to be around $145 million and will focus on: pharmaceutical support, health IT systems, medical equipment and civil works, policy development and capacity building, as well as health information system design.

Resources

Other resources can be found at the following websites:

Ministry of Health and Social Welfare of Serbia: www.zdravlje.gov.rs

Health Fund of the Republic of Serbia: rswww.rzzo.gov.rs

Velefarm: www.velefarm.co.yu

Association of Medical Devices Distributors in Serbia www.pks.rs

Pharmaceutical - DRG

Overview

The total market size for pharmaceutical products in Serbia is estimated at $730 million annually. The market is dominated by local producers for generic products: Hemofarm, Actavis (owns Zdravlje-Leskovac) and Galenika, who account for more than 60% of the market. Despite active local manufacturing, foreign producers account for more than 90% of the market for innovative medicines. Imports are highly concentrated, the majority of which come from these top four groups: Roche (Swiss), Pfizer (USA), Novartis (Danmark), and GSK (UK). According to the local statistics, the United States exported $29 million worth of pharmaceutical preparations to Serbia in 2008, versus $10 million in 2003. U.S. firms also imported products from manufacturing facilities located in other countries.

Generics play a significant role in the market, owing largely to the low spending power of both the government and consumers. Domestic production of generics has increased steadily in recent years, accounting for about 45% of total output, although, overall, imports are making significant inroads.

Growth in pharmaceuticals should reach at least six to eight percent a year for the next five years. Several foreign companies, like Actavis and Stada, made local acquisitions, providing further opportunities for foreign stakeholders. Privatization of state enterprises will continue, and the sector will attract a considerable amount of foreign investment.

Serbia operates a nationalized healthcare system, in which the government sets prices and subsidies prescription medicines.

Best Prospects/Services

Among European countries, Serbia has one of the highest rates of cardiovascular disease, cancer, liver disease and cirrhosis. Poor diet, smoking, and other unhealthy habits are often cited as causes. Pharmaceuticals that address these conditions, as well as their precursors e.g., hypertension, high cholesterol, etc., are in demand. With the market for pharmaceuticals, especially vitamins and minerals, growing steadily, (almost doubling in the last four years) local distributors are in constant search of new U.S. suppliers.

Opportunities

The market for natural medicines expanded significantly in recent years. While a U.S. supplier should be able to offer a full range of food supplements, there are a couple of products that are especially in demand (Calcium citrate/acetate/lactate, Iron sulfate, glucosamine sulfate). There is a significant demand for oncology products, vitamins/minerals and natural medicines aimed at prevention of diseases, as well as for drug/alcohol tests.

Computer Hardware and Peripherals - CPT

Overview

In 2008, the IT market, including services, in Serbia reached a value of around $400 million. Hardware comprised 70% of the total market, while software constituted 16.5% and IT services the remaining 13.5% share. Independent experts expect IT spending in Serbia to rise 17.2% year-on-year in 2008, and at a compound annual growth rate (CAGR) of 11.6% over the next five-year period. In 2010, the value of the IT market is estimated to rise to $703 million. However, due to the current economic crisis, this estimate was reduced to $620 million.

The current IT consumption per capita of $50 in Serbia is much lower than in neighboring countries in the region and the IT market in Serbia is still in the process of reconstructing itself along with the entire economy. Major attention is still focused on the development of basic infrastructure with hardware purchases at the core. Once these infrastructure improvements are in place and have a chance to function for some time, attention will begin to shift to IT services and software solutions aimed at maximizing initial investment. As most companies do not have defined IT budgets, cash flow problems and a sluggish economy make IT one of the first areas cut from investment plans.

The emerging and but still immature (in terms of market penetration) PC market of Serbia offers great growth potential in the long term. Businesses and the public administration will continue to improve their basic infrastructure as their IT requirements increase. Moreover, households will seek greater internet access. In 2001, the value of the hardware market in Serbia was $120 million and has grown to $296 million (estimated) in 2008.

The top 10 suppliers dominate a market of about 200 companies. Competition is intense. During the previous decade, computer hardware was imported from Asia. Some of that hardware was of poor quality, and many users desired better quality, even at a higher price. In 2004, the government fostered the computer market by abolishing the 20% sales tax. Despite introduction of VAT of 18% on January 1, 2005, growth of around 20% was achieved in this sector in 2006 and continued in 2007 and 2008 at an average rate of 13%.

Statistical data are not yet reliable for analysis, but experts estimate that U.S. companies had a significant percentage of the total market in 2008 (rough estimate up to 34%). Hewlett-Packard, IBM, Compaq, Dell, Gateway, Xerox, and Cisco continue to be among the market leaders in Serbia. Toshiba, Siemens and Acer are the main competitors to U.S. equipment suppliers on the SAM computer market, while the main competitors to U.S. companies for peripherals sales are Canon, Epson, Minolta and Brother.

The government, state enterprises, large and small commercial enterprises, and commercial banks are highly receptive to U.S. computer technology. The total number of computers in Serbia is estimated to be 300,000, representing a remarkably low 3.75% penetration rate. A conservative 10% annual growth is expected over the next couple of years. Growth is expected to come from new market segments like small- and medium-sized enterprises, home users, as well as from continuing needs for computers and peripherals for commercial banks, big infrastructure projects, and further information technology needs of the Government administration.

The three most important competitive factors in the Serbia’s computer hardware and peripherals market are price, quality, and after sales support.

Best Prospects/Services

Best prospects include data communications and network equipment. Best prospect sub-sectors for U.S. suppliers include personal computers, servers, laptops, modems, printers and scanners.

Opportunities

The government and many domestic companies are in the process of introducing computer technology in their operations. Significant funds will be invested in equipment by such firms.

Serbia has free trade agreements with most of neighboring countries in the Balkans (CEFTA) and with Russia (the only country in the Balkans to have a free trade agreement with Russia).

Some local experts predict strong spending in the IT security and data protection segments. Spending on IT security is expected to double in the coming three years.

Note- Impact of the crisis:

Software and hardware sales in Serbia have dropped amid the world economic crisis, but just as the global IT industry was the first victim of the liquidity crunch, it is expected to be the first to recover from the slump. IT investments have been stalled worldwide, as well as in Serbia. Indian property developer Embassy Group has postponed the start of construction on an IT park in Indjija (North-Central Serbia), earlier planned for the fall of 2008. Embassy Group, however, is still interested in the IT Park and has already secured land for the project.

Resources

Chamber of Commerce and Industry of Serbia

Association of ICT

Terazije 23, 11000 Belgrade

Phone: (381 11) 3304 558; Fax: (381 11) 3304 556

Ministry of Telecommunications and Information Society

Ms. Jasna Matic, Minister

Mr. Nebojsa Vasiljevic, Deputy Minister for IT

Address: Marsala Birjuzova 3-5
11000 Belgrade
Tel: +381 11 2020 057

Fax: +381 11 2020-059
E-mail: nebojsa@mtid.gov.rs

Web site: http://www.mtid.gov.rs

Serbian Agency for Telecommunications RATEL

Mr. Jovan Radunovic, President of Managing Board

Address: Visnjiceva 8
11000 Belgrade
Tel: +381 11 3242 673
Fax: +381 11 3232 537
E-mail: ratel@N0SPAM.N0SPAM.ratel.rs

Web site: www.ratel.rs

Association of ICT -- JISA

11000 Belgrade, Zmaj Jovina 4/VI

Tel:+381 11 3281 727

E-mail: jisa@N0SPAM.jisa.rs

Web: www.jisa.rs

Information Society of Serbia

11000 Belgrade, Kneza Milosa 9

Mr. Nikola Markovic, President

E-mail: nimar@N0SPAM.afrodita.rcub.bg.ac.rs

For more information on market entry strategies contact:

E-mail: zorica.mihajlovic@N0SPAM.N0SPAM.mail.doc.gov

Telecommunications Equipment and Services - TEL

Overview

Note: Data regarding the imports from the United States relates to the equipment shipped from the United States. Many U.S. companies are distributing equipment from their “outsourcing” countries, which are not treated as U.S. exports by official statistics.

The telecommunications sector is probably the most dynamic component of Serbia’s economy, and definitely one that is receiving priority attention from the government. The telecom sector already contributes around 2% to Serbian Gross Domestic Product (GDP) and is growing fast. Over the last five years, it has experienced impressive growth, offering Serbia the latest technologies in most branches of telecommunications. Although the telecom sector has a high annual growth rate of 18.3% and projected 5-year compounded annual growth rate of 16.8%, its further development to reach the level of developed economies requires urgent improvement of regulatory environment. Expected changes in the regulatory and business environment in the next two years will bring greater than average value growth

The dominant telecom company in Serbia is Telekom Srbija. The most current statistics (mid 2008) indicate that Telekom Serbia has 2,850,000 fixed line subscribers. Around 95% of the fixed line telephone networks have been digitalized. In Serbia, telephone penetration has reached an average 85.0 lines per 100 inhabitants.

During the last five years, mobile telephone services have developed rapidly in Serbia. The average annual increase in mobile subscribers is 30%. At the end of 2008, the country’s total number of subscribers exceeded 8.5 million subscribers.

Serbia’s mobile penetration is estimated at 115%. Telenor (acquired domestic operator Mobtel in 2006), Mobile Telephony of Serbia (MTS), the mobile phone arm of state telecom provider Telekom Srbija, and Mobilkom Austria share the mobile market in Serbia. They strongly compete in the introduction of new technology and new high-profit value added services. Significant opportunities for U.S. companies in this sector will be influenced by privatization of the telecom sector and need to modernize existing, and in some areas obsolete, equipment.

State telecom provider Telekom Srbija, which currently has 4.9 million subscribers, plans to increase the figure to over 5 million in 2009. Telekom has more than 700,000 post-paid customers but its goal is to double the number because post-paid users are a more reliable source of revenue. The company launched Serbia’s first 3G network and already has 20,000 users, approximately 2,000 video calls are made each day.

Telekom Srbija has invested heavily in modern data networks, and its mobile operations unit is gaining market share. The company returned to profitability in 2005 and 2006. Tariff rebalancing, which started late 2008 will provide a substantive boost, as 80% of traffic is domestic. Reduction in tariffs on international calls will not negatively impact profitability as most international calls have been switched over to VoIP over the past year. Transmission facilities are comprised of a national and international backbone consisting of about 3,000 km of optical cables for digital transmission systems with 2,5 Gbit/s and 622 Mbit/s capacities.

The rapidly growing cable television sector also provides opportunities for investment. There are telecommunications equipment manufacturers with innovative solutions for the particular problems of undeveloped countries: low-cost solution for line doubles (party lines); low cost small scale digital exchanges; home grown ADSL solutions, etc. Mostly European companies are present in this sector (Siemens, Alcatel, Ericson), while there is enough space for the presence of U.S. products.

U.S. telecommunications equipment is very well received in the Serbian market. U.S. telecommunication equipment manufacturers represented in Serbia include Hewlett Packard, Cisco, Juniper, 3Com, and Bay Networks. However, European producers such as Siemens, Ericsson, Nokia and Alcatel heavily dominate the Serbian market.

Switching from analogue to digital TV will be a great opportunity for the American companies. The Serbian Government needs to meet digitalization requirements by mid 2015.

Best Prospects/Services

The best market prospects are for Internet-related equipment such as routers, switches, access servers, equipment for mobile telephony, cable operators’ equipment for transmission and fixed wireless equipment. There are also lucrative business opportunities for U.S. companies with technical skill and expertise in Internet applications. In particular, as GPRS usage becomes widespread and UMTS cellular telephony is introduced, there will be good prospects for the business-to-consumer market for publishing via Internet

Opportunities

Significant opportunities for U.S. companies in this sector are related to the modernization of equipment, but competition is fierce, mostly from European companies, as stated above.

Three other major factors contributing to market growth are the continued increase in Internet users, the substantial increase in mobile phone use, and the increase of services offered by the cable TV operators, private radio stations, and TV broadcasting operators. These factors should help create expanded demand for U.S. providers of advanced telephone service solutions, as well as value-added telecommunications services. Other best prospect sub-sectors include Internet services, wireless and broadband Internet access technologies, cable television, and voice-over-Internet.

In January 2009, the Government of Serbia adopted a plan on replacing analogue broadcasting by digital television, that should be completed by June 2015. The project which follows this plan will cost some $60 million. US companies, one of the leader in producing equipment for such a project, are seen as one of the potential supplier.

Resources

Ministry of Telecommunications and Information Society

Ms. Jasna Matic, Minister

Mr. Nebojsa Vasiljevic, Deputy Minister for IT

Address: Marsala Birjuzova 3-5
11000 Belgrade
Tel: +381 11 2020 057

Fax: +381 11 2020-059

E-mail: nebojsa@mtid.gov.rs

Web site: http://www.mtid.gov.rs

Telekom Srbija
Mr. Branko Radujko, General Manager

Address: Takovska 2
11000 Belgrade
Tel: +381 11 3616 273
Fax: +381 11 3616 273
E-mail: kabinet@N0SPAM.N0SPAM.telekomtelekomtelekom.rs

Web site: www.telekomsrbija.com

Serbian Agency for Telecommunications RATEL

Mr. Jovan Radunovic, President of Managing Board

Address: Visnjiceva 8
11000 Belgrade
Tel: +381 11 241 786
Fax: +381 11 241 805
E-mail: ratel@N0SPAM.N0SPAM.ratel.rs

Web site: www.ratel.rs

For more information on market entry strategies contact:

E-mail: zorica.mihajlovic@N0SPAM.N0SPAM.mail.doc.gov

Franchising - FRA

Overview

Consumer and economic conditions in Serbia are developing quite favorably for the entry of international franchising. The U.S. Commercial Service has been very proactive in developing this market segment in Serbia in that we helped create a Center for Franchising in 2008 with the Serbian Chamber of Commerce. In addition, we embarked on a 13-city tour around Serbia to educate local entrepreneurs and small and medium sized enterprises (SMEs) on the benefits of importing U.S. franchise concepts. Moreover, in conjunction with the Serbian Chamber of Commerce, the Belgrade Fair, and the newly established Serbian Franchising Association, we plan to host the first ever Franchise Trade Show in Belgrade in May 2009.

Business and government experts generally agree that the foreign franchising industry will be the pioneer of further economic growth and technical development.

Serbian customers are intrigued by a variety of new products as both quality merchandise and quality services are still lacking in the market. Therefore, new marketing ideas, promoted through franchised systems, are welcome. Awareness of how successful franchising is in the United States is very strong and many Serbian businesses are interested in acquiring the rights to operate American franchises, especially in the services sectors.

Today, there are approximately 270,000 entrepreneurs, including 90,000 SMEs, operating in Serbia. Experts expect this number to increase to over 400,000 in the next 5 years, which provides promising opportunities for U.S. franchisors. Serbia has a large number of companies and private entrepreneurs in Serbia with sufficient funds to commence small size franchising operations without having to borrow money. As a result, the current economic crisis may not have as big an impact on this segment as one might expect. On the other hand, obtaining financing for more expensive concepts is also possible, but in light of the current global financial crisis could become more difficult.

Best Products/Services

There is a strong potential market for franchises in services, food, and apparel sectors. Serbians spend a disproportionate amount of their income on eating out. Typical Serbian restaurants are heavy on meat. Italian and French cuisines are very popular, but few Asian or Mexican restaurants exist in Serbia. Currently, there are three U.S. fast food chains: McDonalds, with several restaurants throughout Serbia; Pizza Hut, with one restaurant in Belgrade; and Kentucky Fried Chicken, also with one restaurant in Belgrade. The number of foreigners living in Serbia is increasing, which is another target market for franchisers. The U.S. Commercial Service in Belgrade has been approached by several Serbian businessmen inquiring about possibilities of obtaining a U.S. franchise in these sectors. One of the primary success factors is location. Real estate owners are well aware of this fact and are pricing their property accordingly. Our office has not seen any drop of prices caused by the current crisis.

The apparel sector is another good prospect for U.S. franchisers. Other than the establishment of retail outlets, production franchises would support the government strategy and revive the deeply troubled textile sector.

Franchising concepts such as dry cleaning, fitness facilities, pet grooming, etc., that have lower buy-in costs than restaurants; probably have the strongest potential in Serbia. There is a general lack of consistency across local service providers, making franchised concepts potentially popular.

Opportunities

Generally speaking, the business community in Serbia is relatively familiar with the concept of franchising, as it is understood in developed markets in Europe. Awareness of franchise businesses in the United States is very strong among local consumers who traditionally associate such U.S. brands with superior quality, excellent customer service, and a western lifestyle.

Though Serbia has no specific franchise laws (it is regulated by the Law on Contracts and Torts), both government officials and business circles agree that the foreign franchising industry could be the pioneer of new investment as interest in franchising is growing daily. Given the importance of trade secrets and trademark protection, substantial work has also been done on IPR protection, both in legislative and enforcement aspects. Careful choice of local partners, protection of IPR and a smart pricing policy remain critical to success.

For more information on franchising opportunities please read the separate market research report: “Franchising Market in Serbia” in the market research library database.

Resources

Serbian Chamber of Commerce - Franchising Center

Ms. Marica Vidanovic, Head of Center

Phone: +381 11 3304 518

E-mail: marica.vidanovic@pks.co.yu

Center for Franchising website: pks.komora.net/fransizing

For more information on market entry strategies contact:

E-mail: boris.popovski@N0SPAM.N0SPAM.mail.doc.gov

Agricultural Sectors

Serbia’s agricultural sector, including hunting and forestry, contributed about 11.3 percent to gross domestic product (GDP) in 2008. Total agricultural production rose 9%, compared to 2007, mostly due to favorable weather conditions during the growing season and unexpectedly good harvest of wheat and maize. Agricultural exports continued to grow and contributed about 17.8% of total Serbian exports, reaching surplus of 563.7 million USD in 2008.

As per current statistical data, 529,326 citizens or 26% of Serbia’s labor force are actively employed in agriculture. Serbia has 4.2 mil ha of arable land (0.56 ha per citizen); 90% is privately owned and 10% belongs to the government and companies; about 450,000 registered households of which about 120,000 are retired farmer’s households.

Despite the obvious potential, this sector bears a huge burden of economic, social and political nature. In order to turn domestic agriculture into a modern, state of state of the art and market oriented sector, the Ministry of Agriculture started to implement a new policy with three basic frameworks reflected in: legal framework, institutional changes, and creation and implementation of adequate agrarian policy.

In 2008, the Serbian government provided several policy measures to support agriculture production that included subsidized short and long-term loans for registered farmers. The assistance measures also included: direct payment to registered farmers totaling 10,000 din per ha (USD 165) for grain and other field crops; funds for development and improvement of stock-farming (breeding efficiency, preserve genetic resources of domestic animals, increase milk production); subsidized export of certain agriculture and food commodities; premium for tobacco production, stimulus for development and improvement of production of wine, brandies and food with geographic origin; subsidies for organic food production as well. The signing of Stabilization and Association Agreement in April 2008 enhances trade and political links and clears the way for Serbia to eventually be considered for membership in the European Union. This was immediately frozen pending Serbia's cooperation with the war crimes tribunal at The Hague. The negotiations of Serbia's accession to the World Trade Organization (WTO) also continued in 2008. The Serbian government is hopeful that the accession process to this important international body will be successfully completed by the end of 2009.

Serbia's total agricultural exports reached about 2 billion USD, an increase of 16% over the previous year. Serbia's agricultural exports consisted mostly of grains, fruits and vegetables (fresh and frozen), sugar and beverages. The biggest surplus in foreign trade of agriculture product came from grain and grain products (USD 269.6 mil), fruit and vegetables (USD 147.3 mil.). The majority of Serbia's agricultural and food exports went to the CEFTA countries, including Montenegro, Macedonia, and Bosnia-Herzegovina, as well as to the EU. The biggest production and export potential of Serbia agriculture are fruits and vegetable, non-alcoholic beverages, water, and confectionary industry.

Serbian food imports are also rising. Agricultural imports are mostly high-value food items; with European products dominating the import market. Total imports were estimated at 1.5 billion USD, an increase of 30.8%. Import growth is expected to slow down but will continue to grow faster than exports, which will cause a widening of the trade deficit. Overall demand for high quality consumer oriented products are expected to slightly decrease due to the current world financial crises and will lead to substantial weakening of demand.

U.S. agricultural and food exports to Serbia increased by almost 23.4% in 2008 vs. 2007. Total agriculture imports from the U.S. were estimated at about 28.6 million USD, or about 2% of Serbia's agricultural import market. U.S. agricultural exports consisted mainly of almonds, tobacco, dietetic foods and concentrated proteins without dairy fats, alcoholic drinks, hake, frozen fish and seafood, dried fruit, pistachios, and planting seeds. U.S. exports of these products to Serbia are expected to continue to grow in the short term. In the medium term, Serbia is likely to increase imports of fish and fishery products, poultry meat for processing and high value consumer products and beverages. U.S. soybean meal exports to Serbia declined in 2008 due to price disadvantage to Argentinean and Brazilian supplies. Possibilities also exist for expansion of U.S. exports of high value products, such as tree-nuts, raisins, snacks, beverage basis, bovine semen and embryos, flavor and fragrances and plant seeds.

The following table represents the most important items of U.S. agricultural and food products exported to Serbia in 2008: