Building Bridges Between Serbia and the US Through Investments

Importance of Attracting FDI’s & Serbia’s Case

The role of FDIs as one of the key factors in driving economic growth in developing countries is underscored for a reason: they provide much-needed capital inflow in the country, and upgrade infrastructure and human capital, while also bringing new technologies and jobs. Some of the most notable examples of developing countries similar to Serbia in size and population that experienced rapid growth after attracting FDI include Hungary and Slovakia, both achieving 3.5% to 6% annual GDP growth since the early 2000s.

Between 2000 and 2010, Serbia attracted significant FDI, transforming key sectors such as finance, telecommunications, manufacturing, retail, consumer goods, and energy. From the period of 2000-2023 in Serbia, the correlation coefficient between GDP growth and FDI inflows is approximately 0.96, indicating a very strong positive relationship. The growth itself varied from 3-7%, with a recession in 2009, caused by the World economic crisis.

Doing Business In Post-Milošević Years

After the fall of Milošević in 2000, Serbia began restoring and renewing its bilateral ties with the United States. The first major American investment in the country was the 2003 privatization of the country’s largest steel producer, Sartid, acquired by the US Steel Corporation for $23 million. US Steel later sold the company, and it is currently owned by the Chinese HBIS Group. Despite that, later projects such as Philip Morris acquiring the Niš Tobacco Factory (2003), Microsoft Development Center (2005), and NCR Voyix in Belgrade (2011), were all regarded as successful.

Impact of American FDI on Serbia

In 2024, the United States was Serbia's third largest investor, after Germany and Italy, and accounted for 11% of total FDI in Serbia. In the last two decades, American companies invested over $14 billion in the country and employed around 30,000 people.

In the geopolitical context, Serbia's energy and infrastructure sectors have historically been dominated by Russian and Chinese investments. Russia has maintained a strong presence in the energy sector, and Chinese companies have played a key role in infrastructure projects. However, recent years have seen increased American involvement, signaling a diversification of partnerships. A notable example is the Morava Corridor project, a strategic highway funded and built in partnership with Bechtel, which strengthens regional connectivity. Additionally, in September 2024, Serbia and the United States signed a landmark Energy Cooperation Agreement, focusing on improving energy security and diversifying energy sources. This marks an important step in broadening Serbia’s strategic alliances while reducing overreliance on traditional partners.

Also, US investments have largely contributed to regional stability, and positioned Serbia as a reliable partner, with international recognition of its economic potential and steady growth of nearly 4% at the end of 2024. Better living standards, cross-border energy and transport infrastructure had a part in bolstering regional ties and decreasing tensions in the process. The United States has strongly supported the Open Balkan initiative, aimed at promoting regional integration and cooperation in the Western Balkans. Unfortunately, the initiative is currently stalled due to a lack of support from Germany.

The US investment boom had a skyrocketing effect on Serbia’s startup culture and venture capital market, with the ecosystem growing by nearly 30% annually. Over the past decade, American capital has fueled startup growth and international funding access proving Serbia’s global tech potential. Standout examples of Serbian companies thriving with US backing include Tenderly (backed by Accel), Nordeus (acquired by Take-Two Interactive for $378M), and 3Lateral (now part of Epic Games). This investment surge helped Serbia become a regional innovation hub, particularly in AI, fintech, biotech, and gaming. Anari AI is pioneering cloud-based AI chips, while Seven Bridges Genomics leverages machine learning for medical breakthroughs. The fintech sector is thriving with Tenderly’s blockchain solutions and Payoneer’s cross-border payment services. Meanwhile, the gaming industry has seen unprecedented growth, with Nordeus, 3Lateral, and Ubisoft cementing Serbia’s reputation as a European game development hub. Additionally, the State Data Center in Kragujevac, one of the most advanced in the region, with a Tier 4 reliability rating, provides top-tier services for public and commercial data storage. The facility supports Serbia’s e-government infrastructure and attracts global companies seeking a secure environment for their data.

Beyond capital, US mentorship, accelerator programs, and government incentives have helped transform Serbia’s risk-averse business environment into a high-growth, innovative economy with significant potential for future growth. With more US investors, successful exits, and deep tech advancements, Serbia is rapidly advancing its tech landscape, poised for further expansion.

Leading American companies like NCR, Rivian, Oracle, IBM, Databricks, and Microsoft have played a vital role in strengthening Serbia’s tech talent pool. With extensive R&D centers, Databricks and Microsoft, in particular, have driven the transfer of advanced knowledge and the adoption of the latest technologies.

Why is Serbia a good place to invest?

First, it’s important to highlight Serbia’s strategic geographic location. Historically, the country was always located at the crossroads of trade routes connecting Europe and Asia, different civilizations, and great powers. Its transit position should continue to be the best in the region. Secondly, the EU market, with a population of 449 million people, is easily accessible, despite Serbia not being a member state, and represents the country's biggest trade partner with 60% of total exports. Also, Serbia has preferential trade agreements with the regional CEFTA countries, Russia, and China, allowing businesses to tap into a wide range of markets.

Serbia’s time zone is another strategic advantage, located perfectly between the US and Asia. This enables companies to maintain smooth communication with global partners and run operations efficiently across multiple continents within the same business day.

Besides its geographical environment, the investment also has a lot of benefits. With the regulatory procedure of entering the market being simple, Serbia also has a corporate tax of 15%, positioning it among the lower rates in Europe. Moreover, the government frequently provides subsidies for foreign investors, and even provides tax reliefs and cash grants, if the investor meets certain conditions about his workforce.

Finally, Serbia is home to a highly skilled and competitive workforce, particularly in sectors such as IT, the automotive industry, mining, and agriculture. Serbian professionals stand out for their excellent command of the English language, adaptability, and strong work ethic. The growing focus on technology and innovation, supported by the presence of global companies with large R&D centers, has significantly contributed to the expansion of Serbia’s tech ecosystem. This has driven technological advancement and knowledge transfer, further strengthening the local talent pool and positioning Serbia as a regional tech hub for high-quality expertise rather than low-cost labor.

What Serbia Offers

Information and Communications Technology: Serbia generates around 10% of its GDP in this sector at this moment, placing it among the top 4 export sectors. Specifically with the US, Serbia has a total export value of around $4 billion. There are over 3000 thousand ICT companies that employ around 110,000 people. The startup ecosystem is steadily growing around 30%, given the low government regulation and initiatives support, such as the establishment of the first AI Research Institute in Southeast Europe and the development of a National AI strategy.

Infrastructure: Being at the crossroads of three key corridors (VII, X, and XI), Serbia is often regarded as the connector between Western Europe and the Middle East. However, the country's infrastructure suffers from a major lack of investment over the years, but the government saw this problem and initiated major investments in the last decade. Even so, there is still a lot of work to do, but the initiative has taken place. There is a government plan to allocate $14 billion to fund infrastructure projects in 2025.

The most important future projects include roads, air, and river transport. The total amount of upcoming projects for building highways and high-speed ways is currently 345km and 579km. The US has also already recognized the sector's potential, investing $2 billion in the Morava Corridor (112km), which finished construction at the end of 2024.

Air and river transport also has potential for future investments, given the fact that the country aims to modernize airports in Novi Sad, Kraljevo, Užice, and Kruševac for hosting commercial flights. In the river traffic, the key announced project is the new location for the Belgrade port. Given Belgrade’s strategic location on the Danube River and yearly revenue of more than $10 million, it should not be underestimated. Moreover, a similar project is announced with the Smederevo port, also on the Danube River.

Automotive Industry: Serbia's automotive industry is a significant contributor to its economy, accounting for approximately 15% of the country's industrial output and 18% of total exports. The sector has attracted substantial foreign investments, particularly in electric vehicle (EV) production and related components, such as automobile parts and tires.

Key developments in its aim to position itself as a key regional actor in EV production include Stellantis' investment of $210 million in Fiat’s Kragujevac plant to produce electric vehicles, as part of its strategy to compete with Chinese automakers in the European market. Also, Japanese company Nidec opened two factories in Novi Sad in 2023, boosting EV motor production, while Serbian-based ElevenEs launched a $1.1 billion LFP battery facility in Subotica, aiming for 48 GWh capacity by 2027. These ambitious investments mark Serbia’s concrete steps toward becoming a major hub for EV production and supply chain development in Europe.

Energy: Serbia’s energy sector offers strong investment potential, particularly in renewables, energy infrastructure, and nuclear energy. The country generates around one-third of its energy from renewables and has accelerated diversification since the Ukraine war in 2022. The government has announced a $15.6 billion investment in renewable energy projects. A major milestone is the October 2024 agreement between UGT Renewables, Hyundai Engineering, and the Serbian government to build six solar power plants totaling 1.2 GW, along with battery energy storage systems (BESS). With a $1.8 billion investment, this is Serbia’s largest solar project to date.

Beyond renewables, energy infrastructure expansion is a key priority. Serbia has strengthened its role as a Balkan gas hub through major projects like the Serbia-Bulgaria gas interconnector and the Serbia-Hungary oil pipeline. Serbia is also working on reintroducing nuclear energy, with a focus on Small Modular Reactors (SMRs). The government is in active discussions with France’s EDF to develop nuclear capacity, aiming for the first deployment by 2035. This shift further strengthens Serbia’s energy independence and long-term sustainability.

Healthcare: The country has relatively high expenditure for health (10% GDP), but has an overloaded public sector, which struggles with long waiting lines, lower quality, and corruption. On the other hand, the private health sector is steadily growing, quickly accessible and efficient. Nevertheless, both private and public sectors have space for future investment, given that the state’s National Health Fund is the top customer.

Imports account for approximately 88 percent of the market, in part because of health system reforms which increased demand for new equipment. US imports account for 15 percent of medical equipment imports, although the actual share is higher as some American products are shipped from their European subsidiaries. The leading opportunities for products and services needed are information systems, technical assistance, and technology for outpatient and inpatient care.

Date: February 14th 2025

Аuthors:
Vuk Velebit, Pupin Initiative
Petar Ivić, Pupin Initiative