Serbia offers numerous opportunities for additional investments, especially in fast-growing sectors like technology, the green economy and infrastructure
The German government last year decided to improve investment guarantee conditions for German businesses for 34 countries, in an effort to support more German investments in countries with special economic potential.
“In short, these guarantees became less expensive for German companies, which makes them more attractive, especially for medium-sized companies investing in the Western Balkans,” says German-Serbian Chamber of Commerce Executive Board Member Alexander Markus.
“On the one hand, this was an important step and I’m sure there are companies that use this support and will use it in the future. However, on the other hand, such measures cannot change these major economic trends that we see worldwide at the moment, and that have a huge impact on the German economy”.
The group of companies in Serbia with German capital is likely one of the largest groups of foreign investors in the country, if not the largest. Does this suggest that the market is already saturated or is there still room for new investors?
— The picture is unfortunately slightly more complicated. When it comes to pure statistics, Germany ranked fifth when it comes to gross inflows of FDI to Serbia in 2023, as reports GTAI, the Germany Trade and Invest office. China was the top foreign investor in Serbia in 2023, with more than 30% of the share of gross FDI inflows.
However, if you look at what companies invest in total, including from revenue generated in Serbia to date and then reinvested in this country, and if you look at how many jobs German companies have created here in Serbia (our estimate is 90,000), you could say that Germany is undeniably among the largest investors in Serbia.
And this doesn’t necessarily indicate market saturation. On the contrary, the fact that Serbia has attracted significant German investments shows a high level of confidence in the business climate and the market’s potential. Serbia offers numerous opportunities for additional investments, especially in fast-growing sectors like technology, the green economy and infrastructure.
Furthermore, the ongoing development of infrastructure, along with favourable conditions for doing business, are helping to create an attractive environment for new investors. Serbia thus remains a highly appealing investment destination, with great growth and innovation potential.
The German projects that contribute to achieving the German government’s climate goals also receive incentives if they invest in green technologies. How many of these German companies are present in Serbia currently and will this decision lead to their number increasing?
— The fact that the German government is supporting companies in becoming greener and developing more sustainable projects is only part of the story. Under the framework of the European Green Deal, the EU has set an ambitious target to reduce greenhouse gas emissions by at least 55% compared to 1990 levels by 2030.
In line with this goal, the Carbon Border Adjustment Mechanism (CBAM) introduces a tax on emissions for products imported into the EU, thus further incentivising decarbonisation.
As a signatory of the Sofia Declaration on the Green Agenda for the Western Balkans, Serbia has committed to reducing GHG emissions by 33.3% compared to 1990 levels by 2030. Many companies in Serbia already recognise the importance of reducing their carbon footprint in order to become more environmentally friendly.
German companies play a crucial role in this context. Their experience and commitment to sustainability serve as a beacon for best practices and innovative solutions. Companies like Siemens, Bosch, Continental, ZF and Procredit are already recognised as leaders in implementing green technologies in Serbia, contributing not only to emissions reductions, but also to improving energy efficiency.
Given the positive trends and growing awareness of the importance of sustainable business practices, Serbia has the opportunity to become an even more attractive destination for German companies that focus on green technologies. We believe this decision will have longterm benefits for both Serbia’s economy and for global climate goals.
How would you assess the overall context for investments in this sector in Serbia? How attractive is it for companies?
— That depends on what you mean by “this sector”, because there is no such economic sector. “Becoming sustainable” means changing the way you do business. It isn’t so much about investing in specific sectors, but rather concerns all kinds of business models, whatever you are earning your money with. It concerns not only the question of whether it makes economic sense to invest in photovoltaic power stations or wind energy parks in Serbia.
Serbia has the opportunity to become an even more attractive destination for German companies that focus on green technologies
However, when it comes to renewable energy and the empowerment of these business projects, it seems to me that Serbia is still at the beginning of its journey. Once carbon emissions become much more expensive due to the aforementioned CBAM mechanism, the demand for green, carbon free energy will become increasingly higher, if not exploding in Serbia.
At this juncture, I have the impression that not many people here in Serbia have grasped that this will happen and what it will mean for the future competitiveness of Serbian businesses on EU markets.
Germany is a key destination for Serbian SMEs. How does the German-Serbian Chamber of Commerce support the development of the Serbian “Mittelstand”?
— Mittelstand is part of Germany’s “DNA”. However, quite frankly, it actually plays a big role all over the European Union and not only in Germany. However, the German Mittelstand is very well known for the hidden champions that emerge from it. This German term cannot be translated to other languages – it can only be described.
Many confuse it with small and medium-sized companies, but that is incorrect. There are Mittelstand companies in Germany that have thousands of employees, yet still see themselves as being part of this group. From my point of view, a Mittelstand company refers to a company that was founded as an SME, is family-owned or usually managed by the owner, and the entire decision-making process remains like that of a small company.
It also means that the company isn’t listed on the stock exchange and doesn’t have a complex ownership structure. If they have, this is more for tax purposes and doesn’t have an impact on decision- making structures.
The hidden champions among the German Mittelstand are those companies that offer very specific solutions or tailor-made products. I will give you an example: when I worked at the Chamber of Commerce of Berlin many years ago, the head of the chamber’s Committee for Foreign Trade was the CEO of a company that produced solutions for vibration control for bridges. He told me that there are very few companies worldwide, and only two in Germany, that produce this kind of solution, which is actually very important for the stability of bridges. Those are the hidden champions of German Mittelstand.
But let’s return to your question. Yes, absolutely! And many Serbian companies that are our members are examples of the Serbian Mittelstand, as they are managed by a single owner or family and are sometimes still SMEs, while sometimes they’re not already.
We support the development of Serbian Mittelstand by bringing them together with German Mittelstand. For example, one of the Chamber’s flagship projects is the “German Supply Chain Initiative in the Western Balkans”, which enables Serbian companies to connect with German partners, explore new business opportunities and expand their market. This project celebrated its 10th anniversary this year in Munich, having facilitated around 5,000 B2B meetings with top companies from the Western Balkans over the past decade. And most of the companies on both sides are Mittelstand companies.
