What Drives Private Equity and Venture Capital in Central and Eastern Europe Countries: Focus on Serbia

Ljumović, Isidora and Lečovski-Milojkić, Ivana and Obradović, Vladimir (2020) What Drives Private Equity and Venture Capital in Central and Eastern Europe Countries: Focus on Serbia. Economic Analysis: Applied Research in Emerging Markets, 53 (1). pp. 133-148. ISSN 1821-2573

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Abstract

The paper examines the main drivers of Private Equity (PE) and Venture Capital (VC) capital into the Central and Eastern European (CEE) market with focus on Serbia. Also, this article analyses the current trends in the industry. Although most of CEE economies remain far behind EU-15 countries in the amounts invested trough PE and VC industry, the region is becoming increasingly attractive. Poland, Hungary, Slovakia, Romania, and the Czech Republic currently attract the majority of PE/VC investors. Investment activities in CEE observed by sector, show that the largest total investments are made in the sector of consumer goods and services, in the sector of Information and communication technology and in life sciences. CEE private equity market remained dominant in buyouts, where VC as a proportion of total investment activity remained relatively low. Main drivers of the region are increased economic activity, favorable tax rates, tax incentives for investors and high quality of labour with low costs. According to SWOT analysis, Serbia has many advantages in terms of attracting PE/VC investments, with the most important factors such as geographical position, well educated and qualified labor with relatively low cost of labour and advantages related to the tax treatment, free trade agreements, but also the efforts made in recent years such as reforms, improvement of fiscal discipline, and introduction of numerous incentives in order to attract investments.

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