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Italian Investment in the Balkans: High-Profile Deals in the Financial, Automotive, Distribution and Energy Sectors

By Matteo Albertini editor’s note: while it tends to be perceived as a Western power with business interests strictly on the Balkan Adriatic coast, Italy is increasingly seeking to look further within the peninsula for opportunities, as this fact-rich new overview documents.

Italy today is, together with Germany, the main commercial partner of the Western Balkan countries, with more than 30,000 Italian firms operating and investing in the former Yugoslav countries and Albania.

These investments, even if stemming from an historical and well-established economic presence, show the growing interest of Italian companies towards this region, still undergoing the lengthy processes of institutional stabilization, European integration and transition to market economy.

Italy’s main sectors of FDI (foreign direct investments) in the Balkans are examined in the following summary, utilizing recent data, such as reports from the Italian Ministry of Foreign Affairs, the Italian Ministry of Economic Development and the National Institute for Foreign Trade. All data can be found (in Italian) here.

Market Attraction

First, we must underline that the economic crisis which began in 2008 put a stop to the then-increasing export of Italian products to the Balkans: while in 2008 the total export amounted to 15 billion euros, in 2009 this figure shrank by around 25 percent, to around 8.4 billion euros, but came close to 10 billion euros in 2010, according to ISTAT/ Italian Institute of Statistics.

For the end of 2011, new growth is expected, however; in fact, investments in the Western Balkans remain a favorable opportunity for Italian firms due to four main reasons: the potential dimension of new markets (at least 25 million customers and growing), the cheap labor costs (30-70% lower than in Italy), the profitable tax regime, and a young, well-educated and specialized local population.

To give some examples, in Bosnia and Herzegovina the value-added tax (porez na dodanu vrijednost, PDV) is 17% and wages in 2008 were still lower than 400 euros monthly on average. In Croatia, where the VAT is 23%, the law guarantees 0% tax for companies investing more than 8 million euros, and the government can subsidize up to 20% of the costs in those counties with unemployment higher than 20%. In Kosovo, where 70% of the population is aged 40 or younger, and unemployment typically at 34-45%, the monthly average wage is 230 euros. Macedonia also offers skilled workers for relatively low wages and the government there has attempted to make attractive tax and other incentives to bring in foreign investment in the last five years.

Italy’s Balkan Investments: the Four Major Sectors

Many Italian corporations have recently taken advantage of this state of affairs, moving part (or all) of their production into Yugoslav successor states (Serbia, Montenegro, Kosovo), all of which have very sound relations with Rome. Market penetration in Croatia, Bosnia-Herzegovina and Slovenia is more difficult because of German and Austrian prominence, though some economic hubs are emerging around Italian companies or merchant banks.

Generally speaking, Italian investments in the Balkans have been made in four principal areass, in which operate major investors: finance, the automotive industry, general distribution and the energy sector.

The financial one is understandably the leading area of Italian investments in any Balkan country; in particular, the major Italian banks Unicredit and Intesa-San Paolo have opened since the 1990s bases and affiliates in new capitols and major towns.


In Croatia, Unicredit controls the Zagrebačka Banka with 4 branches and 119 counters, while Intesa-San Paolo holds the Privredna Banka Zagreb (8 branches and 230 counters). These are the main Croatian banks and represent 45% of the entire credit market, according  a report from the Italian Institute for Foreign Trade (ICE) in 2011. This centrality is quite evident also in Serbia, where these two groups control around 25% of credit and bank business, and in Bosnia-Herzegovina, where they reach 30% of the market.

The insurance sector represents the second pivotal area in Italian financial investments in the Balkans, lead by Assicurazioni Generali which holds the subsidiary Generali Osiguranje, with a life and non-life insurance turnover of around 30 million euros. In 2006, Generali arrived in Serbia, acquiring 50% of Delta Osiguranje, based in Belgrade: together with Fondiaria-SAI, a second insurance group from Italy, they control a share of 44% in the Serbian market.

Automotive and Industrial Production

Outside of the financial sector, the Italian business presence in Balkan states tends to vary in relation to the disposal of raw materials, energetic sources and level of government commitment in attracting foreign capitals and companies.

Broader investment has been allocated in Serbia by FIAT, Italy’s biggest automotive firm, bent on delocalizing in the former Zastava industries of Kragujevac, by means of a joint-venture (two-thirds, one-third) with the Serbian state.

The total amount of the investments exceeds 700 million euros, and will grow in the next years with the launch of the new minivan L0, entirely produced in Serbia. According to the official project, the production will start at the end of this year and – according to FIAT manager Marchionne’s declarations –  will in 2012 have resulted in 200,000 finished cars.

However, the FIAT-Zastava operation is not the only field of Italian investments in Kragujevac. Magneti Marelli – an automotive components industry controlled by FIAT – signed in May 2010 a new agreement with the Serbian government for the construction of a factory, with a capital expenditure of 60 million euros and the likelihood of granting 400 new jobs. Also, in July 2010 the Italian company Dytech (a producer of fluid-conducting tubes) started the construction of a new factory in Niš, with an overall investment of about 13.3 million euros.

In the field of industrial production, greenfield investments have been made by two Italian medium-sized companies, located in Vukovar and Sremska Mitrovica. In the Danubian town Adriatic Dunav, mostly financed by the company Adriatica S.p.a. from Rovigo, is active in the market of fertilizers: the total amount reached 18 million euros, with more than 200 employers working in an ultra-modern factory with a low impact on the environment; in Vojvodina, the STG group last year opened a foundry in Sremska Mitrovica to produce iron bars for building trade, with an investment of near 35 million euros.

Clothing and Trade

A more active Italian sector in general distribution is clothing production and trade, with some well-known international brands moving factories and productions into Serbia and Croatia: above all, Calzedonia, whose investments in Croatia (Čakovec and Varaždin) amount to about 100 million euros, and directly employing 1,300 workers and boosting a growing satellite industry. This company also owns a 700-employee factory in Sombor in Serbia’s Bačka region (about 16 million euros invested).

Benetton also has a long history of investments in Croatia: since 2001, when the first manufacturing plant was established in Osijek, Benetton Croatia has evolved to become one of the biggest local industries, with 500 internal workers and more than 3,000 in cooperating firms. The total amount of the investments has been approximately 16 million euros (5.2 in 2000, 7.7 in 2001 and 3.1 million in 2006). In September 2010, Benetton inaugurated its Serbian branch: current projects define a future investment of 50 million euros for a new factory in Niš, which will employ about 2,700 people.

Two more important investors in the clothing production industry are Pompea, with some 300 employees in Zrenjanin and Brus, and Geox (third-largest footwear producer in the world) which is investing 8 million euros in a new manufacturing plant in Pirot, southeastern Serbia.


The fourth area of Italian investments in the Balkans is energy production and supply, in particular in Croatia, Serbia and Montenegro.

Concerning the first country, ENI (Ente nazionale idrocarburi, the largest Italian state-controlled industry) has worked with the Croatian government since 1996 for the modernization of infrastructures and for the construction of a pipeline between the Adriatic gas rig Ivana and the town of Pola, in Istria. This experience led ENI to create a joint-venture with local oil company INA, named INAgip; current production exceeds 5 million cubic meters.

In a joint venture with INA, Edison (the fifth-largest energy company in Italy, active in electricity and natural gas) created ED-INA for research and production of hydro-carbons in the Adriatic. In 2010 Edison funded an exploratory investment of 25 million euros and spent about 110 million euros for developing infrastructures on the new “Isabella” oil field. The rig started production in 2010 and will furnish an estimated total production for 2011 of 200 million euros.

In Serbia, as well, SECI Energie SPA signed an agreement with Elektroprivreda Srbije to create a joint company named Ibarske Hidroelektrane, with a 51%share for the Italian company. This investment (about 285 million euros) provides for the construction of hydro-electric power plants on the River Ibar.

Energy production represents the main sector of Italian investments in Montenegro, as a consequence of the wide operation of recapitalization and partial privatization of the EPCG (Elektoprivreda Crne Gore) led by the government. In this scenario, the Italian Group A2A from Brescia became a pivotal strategic partner of the Dinaric Republic, buying 43.7% of the capital, for a total amount of 436 million euros. This agreement, thoroughly supported by the Italian government, led Italy to became the principal foreign investor in Montenegro in 2010.

A second Italian energy company, Terna rete elettrica s.p.a. (controlled by the Ministry of Economy through the state bank Cassa Depositi e Prestiti) acquired a 22.09% minority stake of CGES (Montenegrin energy distribution society) on November 23, 2010. The entrance of Terna into the state-controlled company is the first step in the project for the laying of a power line between Italy and Montenegro, which will run for 415 km, 390km of this total being under the Adriatic Sea. The total investment by Terna will amount to 720 million euros.

Besides these high-profile investments made in recent years. many smaller Italian companies have opened subsidiary bases or factories in Balkan states, favored by the development of deeper economic relations between these countries and national or international institution and organization. This tendency is likely to continue in the coming years- unless, of course, the entire Italian economic system is not jeopardized by the Eurozone financial crisis first.

Italian Investors in the Balkans: a table
Company/ controlled societies Country Sector Investments
Unicredit Banca→  Zagrebačka Banka Croatia, Serbia, Bosnia – Herzegovina, Montenegro Banking and finance
Intesa-San Paolo→  Privredna Banka Zagreb Croatia, Serbia, Bosnia – Herzegovina, Montenegro Banking and finance
Generali Assicurazioni Croatia, Serbia Insurance
Fondiaria-Sai Mostly Serbia Insurance
FIAT→ Magneti Marelli Serbia (Kragujevac)Serbia (Kragujevac) AutomotiveAutomotive components > €700 million  €60 million
Dytech Serbia (Niš) Automotive (fluid conductors)  €13.3 million
Adriatic Spa→ Adriatic Dunav Croatia (Vukovar) Fertilizers ~ €18 million
STG Serbia (Sremska Mitrovica) Furnitures for building trade ~ €35 million
Calzedonia Croatia ( Čakovec and Varaždin)Serbia (Sombor) Clothing trade  €100 million
€16  million
Benetton→ Benetton Croatia→ Benetton Serbia Croatia (Osijek)Serbia (Niš) Clothing trade  €16 million
~ €40 million
Pompea Serbia (Zrenjanin and Brus) Clothing trade  €1.5 million
Geox Serbia (Pirot) Clothing trade  €8 million
ENI→ INAgip Croatia (sea, Pola) Gas production and supply
A2A Montenegro Energy production and supply > €436 million (initial investment)
Terna Montenegro Energy production and supply  €720 million
SECI Energie→  Ibarske Hidroelektrane Serbia (river Ibar) Hydro-electric energy production  €285 million
Edison Croatia (sea) Gas production and supply  €135 million

Data source: ICE (Italian Institute for Foreign Trade) survey 2011

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