REGIONAL COOPERATION AND ECONOMIC INTEGRATION

PART V:
Cooperation between the public and private sector (Public Private Partnership) is one of
the forms of joint ventures, while the state authorities, local self-government bodies or
public companies make an agreement on cooperation with the companies from the private
sector to plan formally, carry out and manage a particular activity or goods. The largest
part of FDI inflows in Serbia so far, as well as in other countries in the region, came
through privatization. Most activities related to privatization in other Balkan countries were
implemented in the second half of the nineties of the twentieth century, during the period
of rapid growth of foreign investment in the world. Delayed beginning of privatization in
Serbia was followed by a relatively low general level of foreign capital inflow, which in
the long-term perspective, is not sustainable. In order to attract significant amounts of new
foreign direct investment, it is necessary to improve the cooperation of public and private
sectors, improve infrastructure and strengthen the competition. This is the only way to
overcome the serious lack of investment and underdevelopment of infrastructure. It should
be mentioned that some companies, factories and banks, which now operate in Serbia,
were owned by foreign companies even before selling (such as Mobtel, Delta Bank - Banca
Intesa). During their sales money goes to the accounts of foreign owners and cannot be
considered as the inflow of FDI in Serbia.
Almost the entire inflow of capital from the tender comes from foreign investors, while it is
completely reversed in the case of auctions, where a dominant inflow of capital comes from
domestic investors. Privatization inflows that come through the capital market, are the same
on the origin of capital. Foreign buyers are mostly transnational companies (Philip Morris,
Interbrew, Lukoil, Holcim, U.S. Steel, Alpha Bank, Lafarge, Carlsberg, Titan, Henkel,
BAT, Galaxy Tire & Wheel, etc.).. Many foreign companies have estimated that the general
conditions for investment in Serbia are relatively independent of political uncertainty, and
for that reason they’ve neglected shakes in the Serbian political scene. Issues of unsolved
political status will not slow down the economic development of the country. There are
countries with long-term disputes and unsolved status issues, such as South Korea, Taiwan,
Cyprus and Israel, which have created powerful business environment and are among the
most successful economies in the world in the last decades.
Bearing in mind the number of privatized companies, the investors were most interested
in banking, processing industry and trade. The banking sector, with the sharpening of
competition in a growing number of participants in the market, proved very attractive for
foreign investors. The main reasons of the attraction of the Serbian banking market lies in the
fact that interest rates are on a very high level, in other words the official business perceived
risk is very high, and the actual risk in business is still significantly lower (according to
the central data bank, Serbia is a country with a very high rate of returned loans from
the business with the population). Foreign prominent banks will probably privatize the
remaining banks. This will further increase the competition in the banking market, and
thus lead to reducing the interest rates. Further concentration of banking markets, through
mutual purchases and merger of banks, is expected.
The absence of larger post-privatized investment can be to a certain extent justified by the
fact that the new owners (as well as investors in general) aren’t provided with adequate aftersales
service and support, either from the Agency for Privatization, or any other institutions
such as SIEPA (Serbian Investment and Export Promotion Agency). Looking at the course
of the privatization process, the government, in order to speed up the privatization process
in 2005., proposed, and the National Assembly adopted, amendments to certain laws (on
privatization, Agency for Privatization and the Action Fund). The authorities of the Agency
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