A. Greenfield investment

        B. Concessions

10.    What is a concession?
11.    Can a concession be granted to a foreign person?
12.    Is there a list of sectors concerned with concession provisions?
13.    What is a maximum concession length?
14.    How is the best concessionaire selected?

       C. Privatization

15.    Who is concerned with privatization?
16.    Who are the entities responsible for privatization implementation?
17.    What are the enterprises in privatization?
18.    What are the privatization models?
19.    What are the privatization methods?
20.    Who is responsible for launching the privatization?

Foreign investment legislation

Legal basis:

Law on Foreign Investment (FRY Official Gazette, 79/94, 15/96, 29/96, 3/2002);  
Law about the basis of ownership relations (FRY Official Gazette, 29/96);
Serbian and Montenegrian concession laws (Official Journal of Serbia, 20/97, 22/97,25/9; Official Journal of Montenegro, 13/91, 10/96);
Privatization Law (Official Journal of Serbia 38/01);
Law on the Privatization Agency (Official Journal of Serbia 38/01);
Share Fund Law (Official Journal of Serbia 38/01);

For more information see:

Ministry of Economy and Privatization: http://www.mpriv.sr.gov.yu

Yugoslav Chamber of Commerce and Industry: http://www.pkj.co.yu

 Serbian Chamber of Commerce: http://www.pks.co.yu

The new Foreign Investment law

Creation of a friendly legal, political and economic climate, and encouragement of foreign investors were the main goals of the new Act. One of the long-term goals was to create a legal system that is compatible with the EU legislation. The legislators general principle was to equalize the rights and responsibilities of domestic and foreign investors and provide them with friendly and attractive environment for doing business.

According to Article 1, FIA regulates foreign investments in enterprises and other forms of establishment engaged in profit generating activities in the FRY.  Foreign investments in insurance companies, banks, other financial institutions and free trade zones are regulated in conformity with federal law governing their founding and legal status.

 

           A.Greenfield investment  

1.   Who is a foreign investor?

  According to the Foreign Investment Law, a foreign investor is

Foreign legal entity having its seat abroad;
Foreign natural person;
Yugoslav national having his domicile or residence abroad for a period exceeding one year.

According to Art. 3 of FIA, a foreign investment is:
Investment in a Yugoslav enterprise granting the foreign investor stakes or shares in the initial capital of that enterprise;
Acquisition of any other property right through which the business interest in the FRY is being    realized

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2.   What are foreign investment statistics?

According to the data from the Federal Ministry of Foreign Economic Affairs, for the year 2001, there were 1.319 foreign contracts registered, which is three and a half times more, compared to the previous year (373).  Of that number, 639 firms were registered as companies with 100% of foreign capital, whereas 680 firms were established with mixed capital, of both foreign and domestic origin.

Structure of companies with foreign capital

  Structure of FDI inflow (In Euro)

Year	1998	1999	2000	2001
Total amount	148 mil.	232 mil.	64 mil.	160 mil.
In cash	61 886 254	111 293 934	23 845 592	53 480 171
In kind	83 186 067	120 978 192	38 221 510	4 360 466
In right	3 400 269	-	923 033	4 360 466
Other	-	-	-	307 154

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3.       What are the major investments?

Country of origin of foreign capital    

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4.    Which institutions regulate foreign investment?

   Federal institutions

   Federal Ministry for Foreign Economic Relations

   Yugoslav Chamber of Commerce and Industry
 (For more information see: http://www.pkj.co.yu)

   Serbian institutions

   Ministry of International Economic Relations
 (For more information see: http://www.mier.sr.gov.yu)

   Investment and Exports Promotion Agency
 (For more information see: http://www.siepa.sr.gov.yu)

   Ministry of Economy and Privatization
 (For more information see: http://www.mpriv.sr.gov.yu)

   Serbian Chamber of Commerce
  (For more information see: http://www.pks.co.yu)

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5.   What are the forms of foreign investments?

  Foreign persons may:

establish a company or subsidiary;

invest in a company;

buy a company (entirely or partially).

A foreign investor may freely found or invest into an enterprise engaging in all kinds of profit generating economic activities.

However, under Art. 19 of FIA, a foreign natural person or legal entity may not, by itself or with other foreign investor, establish an enterprise in the field of production and trade in armaments, or in areas defined as restricted zones by law. 

A foreign investment may consist of foreign convertible currency, goods, intellectual property rights, securities and Yugoslav Dinars, which are transferable abroad under the foreign exchange regulations. A foreign investor may convert its established claim into a business share or stock of the debtor company.

A foreign natural person or legal entity may found an insurance company only as a joint venture with a local natural person or legal entity. Exceptionally, a foreign legal entity may found a wholly owned captive insurance company for offshore activities only.

An insurance company with foreign capital is not allowed to carry out re-insurance activities abroad.

A foreign investor may, in the respect of any payment related to the foreign investment, freely convert domestic currency into foreign convertible currency.

A foreign investor may, once commitments are met in accordance with domestic law, freely and without delay transfer abroad in a convertible currency all financial and other assets related to the foreign investment (profits, dividends, additional payments, property upon dissolution of the enterprise etc.).

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6.    What rights does  foreign investor have?  

   A foreign investor in FRY has the right to:

Control or take part in management of the enterprise he has founded or in which he has invested his capital;
Transfer the rights and obligations (set out in the investment contract or the founding act) to other foreign or domestic persons;
Share and freely dispose the profit accruing from its investment;
Inspect the books and business operations of the enterprise in which he has invested;
Audit the interim and annual financial statements either himself or through an authorised representative;

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7.    With which countries has the FRY concluded Agreements on Foreign Investment Protection and Stimulation?

   FRY has concluded Agreements on Foreign Investment Protection and Stimulation with 22 foreign countries:
Russian Federation, Romania, Peoples Republic of China, Slovakia, Korea, Bulgaria, Byelorussia, Macedonia, Guinea, Greece, Czech Republic, Croatia, Italy, Ukraine, Turkey, Hungary, Austria, USA, Ghana, Zimbabwe, Cuba and Spain.

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8.    Are there any restrictions concerning ownership rights for foreigners?

  Foreign investor is also allowed to buy real estate business premises and apartments, provided the reciprocity condition is met. Urban construction land is still state-owned, implying that a foreign investor (as well as a domestic investor) may be given only the right to use it, for which a charge is to be paid.

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9.    What are the free zones?

Legal basis:

  Law on Free Zones (FRY Official Gazette No. 81/94).

   Companies which operate in the free trade zones are entitled to import and re-export products from these zones without restrictions and without paying the customs duties, charges or the Sales Tax. A permit for opening a tax free zone is issued by the Federal Government.

Activities directly related to citizens health, environment, creation of material goods and the national defense are not allowed. 

There are currently 12 free trade zones in Serbia with more than 170.000 square meters of production and storage space and related infrastructure. The free trade zones are located in Belgrade (with sub zones in Pancevo, Smederevo and Kovin), Sabac, Novi Sad, Sombor, Prahovo, Pirot, Lapovo, Sremska Mitrovica, Senta, Nis, Vladicin Han and Backa Palanka.

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B. Concessions

10.   What is a concession?

  The utilization of natural resources or goods in general use is subject to concession provisions.

The issuing of authorizations for the performance of activities in general use is also subject to concession provisions.

The new Law on Concessions entered the adoption procedure and is expected to be enacted in the Serbian Parliament during 2002. The new law will create even more favorable conditions for obtaining and utilizing the concession licenses.

The existing Law regulates the conditions and procedures for obtaining the concession (license) for exploitation of natural resources, property in public domain and for conducting activities in general interest. Special form of conc