REGIONAL COOPERATION AND ECONOMIC INTEGRATION

PART V:
needs of Serbia and in that sense, unsatisfactory. Since the domestic capacity of investment
is small and the privatization inflows after the restructuring and sale of the following
tour of large companies will decrease, it is clear that the low level of foreign greenfield
investment must be increased. Because of modernization and development, increase of
employment and export, the country is obviously referred to a significant increase of the
inflow of new foreign direct investment and the creation of the environment in which the
existing companies are encouraged and supported to re-invest in activities with higher
added value.
Private investors who bought companies from the state in the last few years in a lot of
cases do not respect their contractual obligations related to the social and investment
programs (as the media widely report). When the investors estimate that further investment
is justified, they implement it, otherwise, they cannot be obliged to invest. The state then
has two options: either to react and cancel the previous privatization, thus sending a bad
message to other potential and existing investors, or to ignore the occured situation. The
first possibility would discourage already low level of investment, and the other one would
undermine the credibility of the state. Social programs and investment commitments should
therefore be removed from the Law on Privatization and leave the sales price as the only
criterion. So, what is really necessary here is to establish a real, and not promised state of
affairs which refers to the foreign direct investment. It is important to discover the precise
amount of new foreign direct investment, because it is the best indicator of the quality of
business environment. Serbia as a country will not increase FDI if the domestic investment
does not rise significantly, since they are usually the basis for greater foreign investment.
2. Analysis of advantages and disadvantages in attracting foreign direct
investment
In the beginning, the period of a significant increase in FDI was caused by the increased
need for integration and quick progress within the privatization program in all the
countries of Eastern Europe. The largest part of the new investment flew into the countries
that developed economy and succeeded in facing the great challenges of technological
development, global restructuring and improvement of logistics and information flow. In
this respect, Serbia has had a minimal success so far in comparison with other countries
of Central and Eastern Europe, but has made a significant progress in the development
of relations with the European Union and the International Community and it is moving
forward in the reform process in order to raise its legislative and administrative capacities
to the European level. Serbia has the potential to regain a prominent place in the region and
affect the development of international trade and seek ways of creating new employment
opportunities by improving investment in the private sector. Despite the limitations, there
is a clear intention to speed up the legislative reform and to initiate additional activities to
strengthen institutional capacities, to solve the problem of competitiveness and improve
understanding of the importance of foreign investment in the country and marketing
abroad, in order to provide relief and support to investors in the implementation of their
investment plans.
The biggest obstacles to foreign direct investment in Serbia are:
- Legislative problems of the ownership of land, especially the reform of the rules that
regulate the area of construction
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