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Greek firms losing interest in investing in Serbia, Montenegro
By Athena Kalaitzoglou   Kathimerini
Aug 17, 2003

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Serbia and Montenegro have not quite convinced foreign investors that they are a safe destination for their capital. The action plan for the creation of an internal market between the two countries, an essential prerequisite before signing a Stability and Association Agreement with the European Union, is still pending, as there are differences over crucial technical matters. The recent replacement of the head of Serbia’s central bank, Mladan Dinkic, has reinforced the image of a fragile political system, unable to function because of the tangled economic and political interests.

In this environment, interest from Greek companies in Serbia and Montenegro is seen as low, even if there are occasional efforts to buy out local companies. The most recent one, an attempt by the Hellenic Sugar Industry to acquire a third sugar company, collapsed, proving that even declared intentions in privatization can be far from actual action. Another indication of declining Greek interest in investment in Serbia is the fact that there was only one application for financing a private investment in the framework of Greece’s Balkan Reconstruction Plan.

In an effort to change the prevailing attitude among Greek business people on investments in Serbia and Montenegro, Deputy Foreign Minister Andreas Loverdos plans to organize a tripartite business council, including chambers of commerce and industry, other business bodies and individual business people from the United States, Greece and Serbia and Montenegro. The council could meet on October 14-15, during the official visit of President Costis Stephanopoulos to Belgrade.

Greece’s trade volume with Serbia and Montenegro continues to be low. According to data provided to Kathimerini by the Economic and Commercial Affairs Bureau of the Greek Embassy in Belgrade, during the first four months of 2003, Greece was in fifth place among exporters to the two states, with exports worth $72 million. It was also the ninth biggest importer, with total imports worth $23 million.

The purchasing power of Serbian and Montenegrin consumers remains at very low levels, while industrial production continued to shrink in the first half of the year. Indicatively, consumers shopping at C-Market, Serbia’s largest supermarket chain, only spend about three euros per outing, while the average expenditure when shopping at all chains is between two and three euros. Industrial production in Serbia declined 3.1 percent in the first half of the year, while in Montenegro, it dropped 10.7 percent. Overall, in both states, industrial production is only 42 percent of its 2001 level. Unemployment is very high; in the first five months, the jobless rate was 32 percent, up from 28 percent in the same period in 2002. In Serbia, employment in the private sector increased 10.6 percent, while in the public sector, it declined 7.2 percent.

Corruption at the highest levels of government is among the problems holding back Serbia and Montenegro’s economy and it seems to be endemic. Former Bank of Serbia Governor Mladan Dinkic was ousted from his post because he published a report by the Hungarian police which implicated two advisers to the Prime Minister and members of the government in a money-laundering scheme.

In this environment, it is not surprising that there is no progress on the plan for the creation of an integrated internal market between Serbia and Montenegro. The plan will describe the necessary harmonization policies and will include a timetable for their implementation. Serbia and Montenegro had hoped the plan would be ready to be presented at the EU Summit in Greece, last June. Nonetheless, the fact that Italy succeeded Greece in the presidency of the EU is considered a positive development, as Italy, like Greece, is especially interested in the region’s economic development and political stability.

The privatization program underway in Serbia and Montenegro has not progressed as fast as expected but is of great interest to Greece. So far, Greek glassmaker Youla is the only bidder for the acquisition of Paracin, the largest glass company in the Balkans, which employs 2,000. Youla is offering 35 million euros to buy Paracin and another 20 million to modernize it. Hellenic Petroleum is interested in acquiring Beopetrol; bids for the company will be opened next month. Many more privatizations, including those of three banks, are in the pipeline.

According to the Greek Embassy in Belgrade, direct Greek investment in Serbia is estimated at $640 million, not including trade agreements. There are about 230 Greek companies active in Serbia and Montenegro.


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