IFLR 1000
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"Why are people not coming to Serbia? Why are they going to other countries in the region? Serbia has extremely attractive tax rates, 10% income tax, 10% company tax incentives x1000 Euros per new employee. So why don't people come?" one partner says, adding: "My personal view is it's still a perception to the outside world that when you say Serbia, people might think Kosovo, they might think war crimes, they might think it's not a friendly place and they will look elsewhere....

"Why are people not coming to Serbia? Why are they going to other countries in the region? Serbia has extremely attractive tax rates, 10% income tax, 10% company tax incentives x1000 Euros per new employee. So why don't people come?" one partner says, adding: "My personal view is it's still a perception to the outside world that when you say Serbia, people might think Kosovo, they might think war crimes, they might think it's not a friendly place and they will look elsewhere. If you looked at the benefits of investing here and one of the main things about Serbia is of all the countries in Central and Eastern Europe (CEE) it has the highest percentage of people who are literate in English probably the best educated work force you can find, yet people are still not investing here and that's a big question."

Greenfield and brownfield investment in Serbia is scarce, and it is apparent that the country suffers from branding concerns. Unfortunately, most of the aforesaid anxieties phase into the political arena as the recent arrest and extradition of Ratko Mladic to the Hague showed. Once again, to the dismay of the business community, the past percolates into the present. Nevertheless, as one partner notes, Serbia's resistance to this negative imagery needs to gain traction: "A lot of people, they look at Serbia and they look at, for example, Novak Djokovic [and] Jelena Jankovic, the tennis players. The happy smiling face of Serbia, that's what they see, a joker let's say, and they're very friendly people. If you go out here, they forget that whoever you are English, USA whatever and the amazing thing is that 95% of the people I bring here completely go away with a different perception of what Serbia's all about. You've got to get them here in the first place that's the issue, they need to do something about selling Serbia more as a business destination".

Serbia is in transition, the country officially applied for accession to the European Union on December 22 2009 and the incumbent government's strong desire for the impending candidacy translates into its stated aim to accede by 2014. Naturally, it is anticipated that such realisation will bring fresh waves of investment into the country. In fact, this process of transition has been a dominant theme for quite some time as the country straddles the lines between perceptions of old and new. This year has seen the country in the dwindling stages of privatisation. Serbia's programme to liberalise its economy is presently engaged in its third (and main) wave of privatisations, which started in 2001 and bar a few cash cows, it is all but over. "To be honest, we think privatisation is substantially completed except for large state owned entities, where telecoms clearly has been in the news over the past year," one partner said. Certainly, Telekom Austria's looming €1.4 billion acquisition of a controlling stake in the state-owned Telekom Srbija from the Serbian government continues to be one of the market's talking points. However, the deal has reached a point of attrition, with the sole Austrian bidder's offer of €950 million pitted against the government's resolute public declaration that it will not go below its minimum price tag of €1.4 billion. "I'm not a religious man, but I'm going to church twice a day to light candles [for the government] to sell it," one partner says.

Another deal that has been generating excitement on the market is that of the €933 million sale of 100% of the Delta Maxi Group, Serbia's largest food retailer, to Delhaize Group Belgium. This complex cross-border deal represented the largest private transaction ever in Serbia. This was a unique transaction, and while one cannot say that it signifies any real trend in M&A, one cannot rule out its worth in spreading awareness of potential business prospects in Serbia. "This is also very important for Serbia in the sense that this is a clear sign to other potential investors that Serbia is still attractive to some extent. I would say we will have other M&A deals in this area supporting this business like food production. There are signs that Nestle is now looking for some opportunities [and] Danone is also looking for some opportunities; very good international players in this area [it is a] positive sign for the whole economy," one partner says.

To expand on a theme mentioned above, Serbia is straddling the line between perceptions of the old and the new. From individual practitioners to local "Western" styled law firms, through to international firm's representation (or lack thereof), there is no better example of the manifestation of such ideation at play (and the anxieties it holds) than in the bar dispute (between the Serbian and Belgrade bar associations) that currently grips the legal market. No doubt, this dispute is highly politicised and it would not be prudent to attempt to unpack its multifaceted aspects in this space. "These are parallel conflicts but also two different conflicts; one conflict is between old fashioned domestic lawyers and new fashioned domestic lawyers. The second conflict is between domestic and international law firms. There is no permission for international law firms to operate here. It's tricky because Serbian law firms who want changes also want to protect themselves. End of story," one partner says.

In future editions, it will be interesting to see how Serbia decides to fashion itself. The incumbent government is very much driven towards the EU and has a vested interest in renewable energy. "Renewable energy will just have to happen, it will be a given, first of all Serbia will run out of coal at some point, but also it will pay a penalty for not participating in the renewable energy programs and everyone is aware of that," one partner says.

Additionally, Serbia has a free trade agreement with Russia and in traditional energy, the two countries signed an agreement in 2008 to route a northern pipe of South Stream through Serbia and to create a joint company to build the Serbian section of the pipeline and a large gas storage facility near Banatski Dvor. This will be a huge investment for the country and promises to develop the industry. "There will be gas through Serbia and it will definitely stay in the country depending on the needs, and there will be of course the commission for the transit, it will create lots of jobs, and it's a huge infrastructure project and I hear already lots of companies being interested," one partner says. When faced with the question on whether Serbia is being pulled in different directions, one partner said: "This has been the case since forever, this is nothing new, I mean if you look at old Yugoslavia, the entire success of old Yugoslavia was based on the fact that the dictator at that time, called Tito, was managing to play with both east and west and trying to cash in on both directions. It's like having two divorced parents; you always get what you want."

In the legal market, Gide Loyrette Nouel decided to reorganise its activities with the aim of forming an integrated regional approach. On January 1 2011, the Belgrade office has been restructured and its activity was integrated with the Budapest office. The Budapest office now serves as a hub for Serbia and the other Balkan countries.