FDI from US, China, and Russia: Contribution or Distortion of Serbia’s Economic Growth

FDI in Serbia: Growth or Political Leverage?

Foreign Direct Investments (FDI) play a crucial role in driving economic development in emerging economies, primarily by injecting essential capital, enhancing infrastructure, and fostering improvements in human resources. They also contribute by introducing advanced technologies and generating employment opportunities. Serbia has experienced a wave of FDI between 2000 and 2010, which led to substantial transformation in sectors like banking, telecommunications, manufacturing, retail, consumer goods, and energy, with GDP growth fluctuating between 3% and 7%.

The significance of Foreign Direct Investment (FDI) for developing countries is unquestionable. However, a critical question emerges: do major investors such as the United States, China, and Russia genuinely contribute to Serbia’s economic growth, or do they primarily pursue their interests, extracting resources or leveraging their investments for political influence, potentially undermining Serbia’s sovereignty? To explore this complex issue, case studies of these three countries' biggest investments in Serbia will be examined based on six key factors.

Case Studies

Russian Investment in NIS: A Strategic, Political, and Economic Liability for Serbia

In 2008, Serbia sold a 51% stake in its state-owned oil company NIS (National Petroleum Industry) to Russia’s Gazprom Neft for just €400 million, with an additional €500 million promised for modernization. Even at the time, this deal raised serious concerns, as the sale price was significantly below the fair market value of the company. The deal was largely justified by the promise of the South Stream pipeline passing through Serbia, a project that was ultimately cancelled in 2014 due to non-compliance with EU regulations, rendering the initial promise void. Since then, NIS has continued to generate massive profits. In 2022 alone, the company recorded earnings of $836 million, almost double the amount Gazprom Neft paid to gain controlling ownership of the company 14 years earlier. However, instead of reinvesting that capital into Serbia’s economy or energy infrastructure, the profits have been funneled out of the country.

NIS: Profits and Investments

From 2015 to 2024, the Oil Industry of Serbia (NIS), majority-owned by Russia’s Gazprom Neft (56.15%), carried out several large-scale investments in Serbia’s energy sector. While these investments were officially presented as modernization efforts aimed at improving production efficiency and expanding Serbia’s energy infrastructure, a closer analysis raises important concerns about their strategic nature, long-term impact, and real benefit to Serbia’s economy.

Beyond the financial implications, Russian ownership of NIS carries deep strategic consequences. Energy is a critical sector of any economy, and the fact that Serbia’s largest oil and gas company is controlled by a foreign government, particularly one engaged in a major international conflict, poses a serious risk to national sovereignty. This political dimension is made even more evident by Russia’s current refusal to sell its stake in NIS, despite Serbia being at risk of severe economic consequences due to possible international sanctions. These sanctions are a direct result of NIS’s majority Russian ownership, and they threaten to destabilize a key part of Serbia’s economy. Nevertheless, Russian stakeholders remain unwilling to relinquish control, even at the cost of harming Serbia’s national interest.

This situation demonstrates the true nature of the Russian investment in NIS: it is not a partnership based on mutual benefit, but rather a strategic tool used to exert pressure and maintain influence over Serbia.

Chinese Investment in RTB Bor: Economic Boost for Serbia or Exploitation?

In 2018, China’s Zijin Mining Group acquired a 63% stake in Serbia’s largest copper mining complex, RTB Bor, for $1.26 billion. The deal included a capital injection of $350 million and an additional $200 million to cover the company’s long-standing debts. The Serbian government retained a 37% share, and the transaction was portrayed as a lifeline for a failing industry.

However, while Zijin's arrival brought financial stability and modernization, the investment has raised several serious concerns regarding labor practices, environmental degradation, and the true economic value for Serbia. Unlike the Russian investment in NIS, the Chinese stake in RTB Bor may not serve a direct geopolitical function, but its exploitative character presents a valid question in the way operations have been structured and profits managed.

RTB Bor: Estimated Profits

While at first glance, Chinese RTB Bor seems like a profitable company that has saved Serbia’s mining sector from collapse, there are still critical issues for Serbia if further analysis is carried out.

Closed Capital Cycle:

Another pressing concern is the lack of engagement with Serbian subcontractors. Zijin Mining reportedly outsources the majority of its operational contracts to Chinese firms rather than partnering with domestic companies. This creates a closed-loop capital system in which much of the economic benefit of the investment circulates back to China, rather than contributing to broader economic development within Serbia. The absence of local subcontracting partnerships deprives Serbian businesses of growth opportunities and reduces the multiplier effect that such a large investment could otherwise generate.

Environmental Impact:

While the modernization of mining facilities and the upgrade of the copper smelter have led to increased production and improved technical performance, these developments have come at a steep environmental cost. Local communities, such as Krivelj, have reported severe pollution, leading to protests and blockades of mine operations. Residents have specifically cited water contamination and poor air quality as ongoing issues.

Air quality monitoring in Bor between 2019 and 2022 revealed arsenic levels hundreds to over a thousand times higher than permitted by Serbian law, along with frequent spikes in sulfur dioxide concentrations. These environmental hazards have contributed to public health risks and growing distrust toward regulatory institutions, and endangered the lives of around 45,000 residents of Bor.

Despite significant upgrades to the smelter intended to boost Serbia's export competitiveness, environmental oversight remains weak. In 2021, Serbia’s Ministry of Environmental Protection rejected Zijin’s attempt to avoid a full environmental impact assessment, highlighting the company’s reluctance to comply with environmental regulations.

Labor Structure:

A critical issue related to the investment is the employment structure. While the condition to retain 5,000 Serbian workers from before the acquisition was fulfilled, concerns arise with the newly created positions, of which approximately 1000 were added by the end of 2024.

With a lack of reliable and transparent data, which could be considered as an additional, independent problem, suspicion is raised about the labor structure aside from the mandatory keeping of 5000 Serbian workers. In March 2025, the president of the Independent Trade Union at Zijin Copper stated that several thousand workers from China are currently employed at Zijin Mining in Serbia, along with a number of workers from Africa.

Moreover, most Serbian employees at Zijin Copper are engaged in manual labor, technical roles, or mid-level operations, while key managerial and strategic positions are predominantly held by Chinese staff. Despite the availability of qualified local professionals, Zijin frequently imports skilled labor from China, especially for engineering and supervisory roles. This limits opportunities for Serbian workers to participate in decision-making processes.

Zijin's investment in RTB Bor revived a company on the brink of collapse and turned it into a profitable operation. However, this transformation has come at a cost. The economic benefits for Serbia remain limited, as profits are largely repatriated to China, and high-skilled job creation is bypassed through labor import.

Microsoft: Serbia’s Milestone Tech Investment

Microsoft established its presence in Serbia in 2001 by organizing the inaugural "Sinergija" conference, recognizing the immense talent within the Serbian IT community. In 2003, the company officially opened its sales and marketing office in Serbia, followed by the establishment of the Microsoft Development Center Serbia (MDCS) in Belgrade in 2005. The exact data about total investments is not publicly available, but it is known that Microsoft invested around $100 million during the first nine years of its operations in Serbia, with the estimated total investments since 2001 being over $500 million.

MDCS focuses on developing cutting-edge technologies and contributes to some of Microsoft's premier products, including Microsoft Azure and Microsoft Office. The center comprises various teams specializing in areas such as Azure Data, Office, Office Media Group, Web Experiences, Applied Sciences, and Mixed Reality. These teams work on projects ranging from data processing and cloud services to artificial intelligence and mixed reality applications.

The company currently employs over 800 engineers, the majority of whom are Serbian nationals. From its early days, the center has focused on recruiting top local talent, contributing to the development of a strong domestic tech workforce. Serbian professionals occupy both technical and managerial roles, showcasing the depth of expertise available locally. The center is also known for fostering diversity and inclusion, but remains rooted in its commitment to nurturing and retaining homegrown talent. This approach has enabled Microsoft to become one of the most desirable employers in the Serbian tech sector and a major contributor to the professional development of the country’s IT industry.

Microsoft’s commitment to Serbia extends far beyond internal operations. The company has actively supported a wide range of initiatives benefiting local businesses, government institutions, educational systems, startups, and civil society.

One notable success story is Microsoft’s collaboration with Delhaize Serbia, which led to the development of the “My Maxi” mobile app. Built on Microsoft Azure, the app personalizes discounts and shopping experiences for customers. Initially launched in Kragujevac, it quickly gained traction, attracting over 500,000 users across Serbia.

In the public sector, Microsoft has partnered with the Serbian Government and the Ministry of Health to help digitalize healthcare systems. These efforts aim to optimize business processes, enhance preventive healthcare, and improve data-driven decision-making through cloud and AI-powered analytics.

To support education and tech skills development, Microsoft organizes and sponsors numerous initiatives such as Bubble Cup, an international coding competition for students, founded by MDCS, promotes algorithmic thinking and teamwork, Girls in ICT Day and Women Know IT, which are aimed at empowering girls and women in technology and Women in AI Hackathon, designed to increase female participation in artificial intelligence and data science fields.

Microsoft also contributes through ongoing professional development. By providing access to digital tools, training resources, and cloud infrastructure, Microsoft helps local companies modernize their operations. Its regional partner network supports small and medium-sized enterprises (SMEs) and startups by facilitating the adoption of Microsoft solutions.

Beyond technical initiatives, Microsoft Serbia maintains open channels of technical and customer support for local businesses, ensuring they can effectively use Microsoft products and remain competitive.

These actions had a long-lasting impact on Serbia, especially its tech sector, which has become one of the country’s economic pillars, with IT exports being around $4 billion in 2024 and contributing around 10% of the national GDP.

Comparison of the three biggest investments in the Serbian economy from Russia, China, and the US

Based on the comparative analysis of three major foreign investments in Serbia—from Russia (Gazprom/NIS), China (Zijin/RTB Bor), and the United States (Microsoft)—it is evident that the American investment stands out as the only one that has genuinely contributed to the sustainable and healthy development of the Serbian economy.

While Russian and Chinese capital inflows were significantly larger in raw numbers, their impact has been largely extractive. Russian investment in the energy sector has prioritized profit repatriation and political leverage over local innovation or capacity-building. Similarly, the Chinese investment in mining has resulted in environmental degradation, minimal technology transfer, and a labor structure dominated by an imported workforce, offering few long-term benefits for local communities or high-skilled employment.

In contrast, Microsoft's approach reflects a clear growth model. With an estimated investment of over $500 million since 2001, the company has created over 800 high-skilled jobs, primarily filled by Serbian engineers and managers. Beyond direct employment, Microsoft has fostered local innovation, supported education, empowered startups and SMEs, and invested in a diverse, inclusive, and future-oriented tech ecosystem. The reinvestment cycle remains open and active, reinforcing Serbia's digital sovereignty rather than compromising it.

These case studies highlight that it is not the size of the investment that determines its value to the host country, but rather its structure, intent, and impact. Microsoft’s presence in Serbia demonstrates how foreign investment, when focused on partnership and development, can become a powerful engine for long-term national progress.

Date:
April 24th, 2025

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