Pharmaceutical
Industry in
Serbia
Serbia Investment and
Export Promotion Agency
Contents
General Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Why Serbia? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Pharmaceutical Industry in Serbia
Serbian Drug Market . . . . . . . . . . . . . . . . . . . . . . . .6
Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Legal Framework for Pharmaceuticial Manufacturing . .7
People . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Foreign Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Investment Possibilities in the Pharmaceutical Sector
R&D in Serbian Pharmaceuticial Industry . . . . . . . . .10
Environmental Medical Waste Treatment . . . . . . . . .11
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Privatization . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Contract Manufacturing . . . . . . . . . . . . . . . . . . . . .13
Doing Business in Free Zones . . . . . . . . . . . . . . . . .14
Investment Incentives . . . . . . . . . . . . . . . . . . . . . . .15
Financing Options . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Success Stories
Zdravlje Actavis . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Hemofarm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Galenika . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
West Pharmaceutical . . . . . . . . . . . . . . . . . . . . . . .22
Useful Contacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
About SIEPA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Official Name Republic of Serbia
Form of State Republic, member State
of the State Union of Serbia and Montenegro
Legal System Based on the Serbian Constitution of 1989
Political Structure President, Unicameral Assembly
with 250 seats
Area 88,361 sq km
Population (in million) 7,498
Geographic Position South East Europe, central part of Balkan
Peninsula; borders Hungary, Bulgaria,
Romania, FYR Macedonia, Albania,
Bosnia and Herzegovina and Croatia
Official Language Serbian
Main Religion Christian Orthodox
Largest Cities Belgrade (capital): 1.5 million;
Novi Sad: 300,000; Niš: 250,000
Currency Dinar (CSD)
Exchange Rate 1 USD = 68.8867 CSD
1 EUR = 84.3242 CSD
(as of 24th of August 2005)
GDP (2004) 21.377 billion USD
GDP per Capita (2004) 2,813 USD
Time Zone Central European time zone (GMT + 01:00)
Internet Domain .yu
2
Preface
The $500 billion global pharmaceutical industry is one of
the fastest growing and most profitable sectors in the
world. It continues to experience tremendous growth
fueled by innovation and advances in R&D. Competition
to create new drugs and therapies has intensified as companies continue to strive for the next “blockbuster” drug.
In order to facilitate growth, many international pharmaceutical firms are looking to expand through mergers and
acquisitions or joint partnerships with smaller,
more dynamic companies.
More recently, generic
drugs started taking on a
much greater role in the
industry as more and
more patents on “blockbuster” drugs are expiring.
The growing pressure to
provide low–cost drugs to
Third World countries is
also putting generic drug
manufacturing in the
headlines. The trend
towards generics has created a tremendous business opportunity for pharmaceutical companies who serve the “the bottom of the
pyramid.”
The cost of healthcare is a major concern all over the
world. When coupled with the effects of an aging population, healthcare costs are creating a strain on national
economies–particularly in Europe. Governments are put-
ting pressure on pharmaceutical companies to provide
affordable drugs. As a result, industry leaders continue to
explore ways to reduce manufacturing costs in order to
stem the tide of rising healthcare expenses.
Serbian pharmaceutical companies have strategically
positioned themselves to take advantage of global trends
in the sector. Companies like Hemofarm and Galenika,
who have invested substantial capital into development,
are expanding the frontiers of
medicine in the region. Other
companies
like
Zdravlje
Actavis–the Icelandic–owned
Actavis company who is one
of the leading manufacturers
of generics in Serbia–provides access to low–cost
drugs to those who might
otherwise not be able to
afford them. Furthermore,
Serbia’s business incentives,
such as tax breaks, cost–efficient labor, and skilled
workforce, can help companies reign in costs.
Investment in the burgeoning Serbian pharmaceutical
sector is still in its infancy. Recently, pharmaceutical
giant GlaxoSmithKline made a substantial investment in
Serbian pharmaceutical company Hemofarm. Many
investment opportunities exist for companies looking to
grow their product portfolios, expand into new markets or
simply reduce manufacturing costs.
3
Why Serbia?
TO MAKE YOUR BUSINESS GROW
Southeast Europe is the region with the highest growth
in Europe. For companies that seek to start or expand
their businesses in this region, Serbia is the place to be –
for a number of reasons. Serbia and Montenegro is the
only country outside of the Commonwealth of Independent States (CIS) that enjoys a Free Trade Agreement
with the Russian Federation, offering customs–free
access to its market of 150 million people!
Furthermore, Serbia is in the middle of the South East
Europe Free Trade Area that provides duty–free access to
a potential market of 55 million people. The local Serbian
market itself is among the largest in the region (7.5 million people). The Serbian economy grew by 7.6% in
2004, and is expected to sustain high growth rates,
leading to a significant increase in purchasing power
and expansion of the domestic market.
TO EASILY SERVE YOUR EU CUSTOMERS
By operating in Serbia, a company can enjoy easy access
to the EU market, while benefiting from lower production costs. Bordering Hungary, Serbia is at the doorstep
of the EU. It is also a gateway between South East
Europe, Western and Central Europe, and an intersection
of the two most important transportation corridors
connecting Western Europe and the Middle East
(Pan–European corridors No. 10 and No. 7).
By investing in Serbia a business could effectively serve
its European and Middle–eastern customers thus
enhancing its profitability.
TO BENEFIT FROM EXCEPTIONAL HUMAN
CAPITAL AT COMPETITIVE COSTS
Every year thousands of young graduates leave universities and colleges in
Serbia. Highly educated people who
are receptive to new technologies,
familiar with IT, and well–versed in
foreign languages, represent Serbia’s
true capital.
Furthemore, Serbia possesses a
skilled and productive workforce
with a wealth of experience, both in
management and manufacturing. A
tradition of cooperation with foreign
companies and decades of openness
towards Western culture and values
have left a mark on their skill–set.
This exceptional human capital is
available at very competitive prices.
Labor costs in Serbia are among the
lowest in the region, and are significantly lower than those in the EU
member countries.
TO BOOST YOUR COST EFFECTIVENESS
The tax regime in Serbia is the most
favorable in the region. Some of its
features include:
• the lowest corporate profit tax
rate in Europe, set at 10%,
• tax credits for investing in fixed
assets up to 80% of the invested
amount,
• a 10–year tax holiday for investments
over €7.5 million,
• subsidies for new employment,
tax exemptions, and a variety of
other incentives.
GDP growth rates
2005e
2004
2003
2002
2001
4.6%
7.5%
3.1%
4.0%
5.5%
Source: Statistical Office of the Republic of Serbia
Corporate profit tax rates, 2004
Serbia
Hungary
Bulgaria
Croatia
Romania
Czech R.
10.0%
16.0%
19.5%
20.0%
25.0%
28.0%
Source: IDA, Ireland
Familiarity with English language
Serbia
Poland
Czech R
Romania
Hungary
Bulgaria
42%
22%
22%
20%
25%
28%
Source: Gallup International
Labor costs in October 2004, in Euro
Serbia
Romania
Czech R.
Slovakia
Croatia
Hungary
Gross
Salary
180
196
656
657
785
832
Employers
Contributions
34
64
230
232
135
295
Source: SIEPA, National IPAs
5
Pharmaceutical Industry in Serbia
Sector ID, 2004
Share in total Serbian industry
3.24%
Annual industrial production
€308 mill.
Annual growth rate
SERBIAN DRUG MARKET
The Serbian drug market in 2004
was dominated by the three largest
drug manufacturers: Hemofarm
Concern, Galenika and Zdravlje
Actavis. After acquiring several
pharmaceutical companies (Panfarma,
Zorka Pharma, and Hemomont)
Hemofarm Concern became the
market leader accounting for around
45% of total sales of pharmaceuticals
on the Serbian market in 2004.
Leskovac–based Zdravlje was
acquired by Iceland’s Actavis in
2002, and its market share has been
increasing ever since. Galenika used
15%
to be the leader in the Serbian pharmaceutical industry but unresolved
ownership relations and a few years
of stagnation resulted in the loss of
its market position. Overall, smaller
players in the sector have made their
presence felt by targeting specific
areas of pharmaceutical production.
Serbia’s pharmaceutical industry is
characterized by its efficient utilization
of available resources and high levels
of production. It has achieved relative
success but requires additional
capital and investment to compete
globally–presenting an excellent
investment opportunity for a joint
business venture.
Market share by selected pharmacological groups in percentage of total sales, 2004
Zdravlje
Actavis
Zorka
Pharma
Srbolek
Hemomont
9
6
5
1
–
15
1
6
–
–
2
12
1
–
–
–
1
9
–
–
–
6
–
4
30
–
–
34
13
3
2
46
–
–
15
20
15
9
16
11
3
1
9
14
25
4
19
13
15
–
11
7
13
2
58
1
–
–
Drugs for treatment of skin and subcutaneous tissue diseases
5
49
6
15
4
20
–
–
Blood substitutes and parenteral nutrition
66
2
–
1
15
–
–
16
Group
Hemofarm
Galenika
Drugs for treatment of infective and parasitic diseases
12
34
29
Drugs for treatment of endocrine diseases
50
26
–
Drugs for treatment metabolism and nutrition disorders
23
54
6
Drugs for treatment of blood diseases and blood forming organs
–
70
Drugs for treatment of mental disorders (psycho–pharmacy)
9
45
Drugs for treatment of nervous system
2
Drugs for treatment of cardiovascular system
Drugs for treatment of respiratory tract
Drugs for treating diseases of digestive tract
Source: Serbian Pharmaceutical Manufacturers Association
6
Panfama Jugoremedija
COMPANIES
Structure of companies
The pharmaceutical industry
in Serbia is dominated by
small, privately owned companies; however, industry
leaders are large companies
capable of deploying sufficient
means for cross – border
expansion. Serbia’s pharmaceutical industry is eager to
join the frontier of medical
research.
LEGAL FRAMEWORK
FOR
Production of pharmaceuti- Production of pharmaceuti- Production of pharmaceutical
cal ingredients
cal preparations
products (industry total)
Number of companies
Number of employees
Number of small companies
Number of medium sized companies
Number of large companies
Number of private companies
Number of socially owned companies
Total sector revenues
Net profit
Fixed assets
4
16
4
–
–
4
–
€328,500
€1,304
€275,902
45
7,585
33
4
8
30
4
€363.6 mill
€41.6 mill
€172 mill
49
7,601
37
4
8
34
4
€364 mill
€41.6 mill
€172 mill
Source: National Bank of Serbia, Solvency Bureau
PHARMACEUTICAL MANUFACTURING
Manufacturing and trade of medicines and other pharmaceutical products is regulated by the Law on Drugs and Medical
Devices (in effect as of August 1, 2004). This Law established
the Medicines and Medical Devices Agency of Serbia, which
works to align domestic regulations with EU standards. Based
on its mandate, the Agency would be your counterpart in
doing business in Serbia in many ways. The following list
shows some of the activities the Agency is in charge of:
• issuing licenses for trade of medicines and medical
devices,
• conducting laboratory control and quality inspection of
medicines and medical devices,
• issuing licenses for clinical research of medicines and
medical devices and controlling execution of clinical
research,
• monitoring side effects of medicines and medical
devices,
• issuing credentials for implementation of Good
Medical Practice (GMP) policies in clinical research of
medicines and medical devices,
• issuing credentials needed for exports of medicines and
medical devices in accordance with recommendations
of WHO,
• approving imports of unregistered medicines and
medical devices intended for treatment of a specific
patient or group of patients, as well as imports of
medicines and medical devices for scientific research,
• classifying of medicines and medical devices,
• collecting and processing information about sales and
use of medicines and medical devices.
7
PEOPLE
Employees in Serbia’s pharmaceutical
sector are highly qualified, holding
specialised high school and university
degrees.
In addition to the high educational profile of the workforce in the pharmaceutical sector, the annual number of new
university graduates in the field of pharmaceutical sciences in Belgrade safeguards the quality of your potential production in Serbia or possible partnership
with a Serbian company. In addition to
pharmacists, you can easily recruit
labour from other related branches of the
medical sciences. Medical universities in
Serbia produced 977 graduates in 2004,
while 376 students graduated from the
School of Dental Medicine in the same
year. As for postgraduate students, all
medical universities in Serbia produced
185 specialists, 195 Masters of Science
graduates, and 83 new PhDs in 2003.
This human capital is available at
very competitive prices as the wages
in Serbia are significantly lower than
those in the EU: the average monthly
gross salary in the sector in 2004 was
€472 (€326 net) insuring high quality,
low–cost production.
Current educational structure in the Serbian pharmaceutical sector (number of employees)
Total
2002
2003
2005
5550
5673
5901
University
degree
955
929
995
Source: Statistical Office of the Republic of Serbia
8
Higher degree
271
300
347
High–school
degree
2225
2242
2601
Elementary
school
706
380
274
Highly skilled
Skilled
Semi skilled
Unskiled
349
379
423
716
983
808
236
262
199
187
198
254
FOREIGN TRADE
Top 10 Export Products in 000 USD
The Serbian pharmaceutical industry exports around
20% of its annual production and meets around 60% of
the local market demand. The rest of the demand is
being met by imported pharmaceuticals, mainly
originating from EU countries.
Decades of presence in the Russian market has
built trust and loyalty toward Serbian drugs and
pharmaceuticals. This loyalty on the part of Russian
consumers is due to high quality products and
duty–free exports to Russia. Both factors have led
to Russia remaining Serbia's main importer of
pharmaceuticals.
Serbia enjoys a Free Trade Agreement with the Russian
Federation, which encompasses a long list of drugs and
medical devices that are exempt from customs duties
when exported to Russia: various types of infusion
solutions, penicillines, vitamin preparations, diuretics,
analgesics, antibiotics, antihistaminic preparations,
antiseptics, along with many others (the complete list
can be obtained at SIEPA).
Furthermore, based on the free trade agreements Serbia
has with other countries, Serbia is entitled to free exports
of pharmaceutical products to Albania, Bulgaria, Romania,
Former Yugoslav Republic of Macedonia, and
Bosnia and Herzegovina.
Finished medicaments for sale
91,804
Medicaments containing insulin
11,092
Medicaments with dissipated dosage
10,685
Medicaments containing antibiotics
10,339
Medicaments containing hormones
9,855
Medicaments mixed with other antibiotics
4,722
Medicaments containing vitamins
3,990
Medicaments containing alkaloids
3,352
Substances and adhesives, sterilized devices
3,051
Haemoglobin, blood and globulin serums
2,994
Source: Statistical Office of the Republic of Serbia
Top 10 Import Products in 000 USD
Finished medicaments
38,286
Medicaments containing antibiotics
7,486
Medicaments containing adreno–kort. hormones
3,329
Medicaments containing penicillin
3,169
Medicaments containing vitamines
2,707
Vaccines for human medicine
1,110
Medicaments containing hormones
336
Antiserums
281
Medicaments with dissipated dosage
259
Medicaments dosed with other antibiotics
179
Source: Statistical Office of the Republic of Serbia
Top 5 Export Destinations in 000 USD
Top 5 Import Partners in 000 USD
Russian Federation
31,311
Switzerland
40,577
Bosnia and Herzegovina
17,270
Germany
31,495
FRY Macedonia
5,752
Denmark
19,132
Romania
4,005
France
18,423
Slovenia
3,848
Austria
15,039
Source: Statistical Office of the Republic of Serbia
Source: Statistical Office of the Republic of Serbia
9
Investment Possibilities in the Pharmaceutical Sector
R&D IN SERBIAN PHARMACEUTICAL
INDUSTRY
Research and development in Serbia’s
pharmaceutical industry is mostly
concentrated and conducted under the
auspices of the leaders of the industry:
Galenika, Hemofarm and Zdravlje.
The Galenika a.d. R&D Institute
was founded over 30 years ago. Today,
Galenika is the only pharmaceutical
company in Serbia and Montenegro
with an Institute registered with the
Ministry of Science and Environmental
Protection. The Institute is a centre
of knowledge and experience, with
135 employees (61 with university
degrees, including 7 PhDs, 15 MSc,
and 4 specialists). The Institute
employees are experts in various
fields: pharmacy, chemistry, medicine,
chemical engineering, biology,
veterinary medicine, dental medicine,
physical chemistry, languages, and
organizational sciences.
Key Institute activities include: synthesis/biosynthesis of new pharmaceutical active substances and generics;
biomedical screening (in vitro and in
vivo); preclinical trials (including
pharmacology and toxicology studies);
formulation development of dosage
forms (solid, liquid, semi–solid, and
modified release forms); development,
implementation and validation of
analytical methods; stability studies
(active substances and dosage forms);
scale–up and optimization of tech-
nological procedures for synthesis /
biosynthesis of substances and
dosage forms; organizing and monitoring clinical trials (Phases I – III)
and pharmacokinetic studies; preparation of registration dossiers, as well
as IND and NDA documentation.
Special attention is devoted to intellectual property protection. Today
the company has numerous valuable
patents and trademarks: domestic
trademarks – 396; WIPO trademarks
– 37; trademarks registered abroad
(Bosnia/Macedonia/Russia) – 96/30/20;
patents – 20; patent applications – 26.
The Research and Development Centre of Hemofarm Group is engaged in
developing new products, performing
research and providing registrations
in the country and abroad. The work
of the Research and Development
Centre is based on its own potentials,
but the experience of renowned
experts and researchers from numerous
scientific institutes in the country
and abroad is involved.
The process of transforming ideas
into a finished products consists of
several stages and requires a diverse
pool of talent and expertise. Therefore,
experts from different fields including
medicine, technology, biology,
chemistry, along with many others,
are working in the Research and
Development Centre. About 100
employees are involved in mastering
and exploring new technologies.
As Zdravlje Actavis manufactures generic medicines, the
research and development process within the company is
significantly lower than that of Hemofarm and Galenika.
It mostly pertains to marginal development of already
existing generic medicines in terms of dosage and forms,
and mostly relies on the R&D capacities in its parent
company Actavis.
Along with research and development capacities within
the pharmaceutical companies, there is an array of
research institutions – think tanks that can easily be
deployed in order to achieve the best results. Namely,
research laboratories within the mentioned companies
have an ongoing relationship with the following institutes:
Institute for Chemistry, Technology and Metallurgy,
Scientific Institute Vinča, Institute for Medical Research
of the Military Medical Academy, Institute of Pharmacology,
faculties (Medical, Pharmaceutical, Dental, etc.), and
clinics (Clinical Center of Serbia).
The level of R&D activity in the Serbian pharmaceutical
industry is evident in the number of newly registered drugs
and forms of drugs. In just the last three years, Hemofarm
registered the following number of pharmaceutical products and proved its position as a market leader:
Year
Number of products
2002
2003
2004
23
6
23
Zdravlje Actavis has approximatly 180 registered pharmaceutical preparations in more than 200 forms. In
2004 alone, it registered nine new pharmaceutical forms.
Galenika, the company with the longest history of R&D,
registered the following number of new medical products
in the last three years:
Year
Number of products
2002
2003
2004
7
21
26
ENVIRONMENTAL PROTECTION – MEDICAL WASTE TREATMENT
Medical waste treatment in Serbia is regulated by the
Law on Environmental Protection and Law on Integral
Prevention and Control of Pollution (in effect as of
December 2004). The mentioned laws are in full compliance with the EU regulations on this matter. Unfortunately,
at the present time, there is no adequate facility for proper medical waste treatment in Serbia; therefore, leading
companies in the sector export waste to certified institutions in Switzerland and Austria in order to keep their
production and the surrounding environment clean.
Zdravlje Actavis has one of the best storage facilities for
medical waste in the country and plans to introduce an
ISO 14001 quality system. Hemofarm acquired the ISO
14001 certificate in 2004 and treats its medical waste in
Austria. Galenika partially uses its own facilities for
destroying waste, but also outsources waste treatment
services abroad.
According to some estimates, Serbian pharmaceutical
companies create some 15 to 18 tons of medical waste
annually. Zdravlje Actavis exported almost 100 tons of
medical waste in 2004 and plans to destroy almost 200
tons of waste deposited over the course of last three
decades by mid 2005. Hemofarm exported some 18 tons
of waste in 2004 resulting from its production process,
research, quality control and storages, while Galenika
has an additional 50 tons to waste.
Some estimates say that there is additional 120 tons of
medical waste deposited with wholesalers of drugs, pharmacies and medical centres, waiting to be destroyed. The
lack of adequate facilities for medical waste treatment by
all means implies there is a great niche for investment in
such facilities in Serbia. In addition, such investment
would be highly beneficial for environmental protection
and, therefore, would draw interest of both the financial
institutions and donor community.
11
MANUFACTURING
PRIVATISATION
If you are considering manufacturing in Serbia, below is a
snapshot of production inputs you can source locally and
those you must import.
Although private companies dominate the ownership
structure, there are companies within the sector that are
still awaiting privatisation. The following table shows a
list of companies awaiting privatisation.
Since there is no production of Active Pharmaceutical
Ingredients (API) in the country, except for Galenika
which produces certain pharmaceutical raw materials
based on synthesis and biotechnology, these ingredients
must be imported. Additional pharmaceutical ingredients
such as vitamins, alcohol and corn starch can be sourced
locally, but the rest must be also imported. In addition to
customs duties levied on import of such items at the rate
of 1%, they are subject to an 18% VAT. Packaging materials such as cardboard, foil for blisters, plastic and rubber
packaging materials can be obtained from local suppliers.
Glass packaging, bottles and ampoules, which meet EU
standards, need to be imported.
Company
Base
Activity
Method of
Privatisation
Medifarm
Belgrade
Wholesale of
pharmaceutical
products
Auction
Bureau for Disinfections and Deratisation
Belgrade
Production of
pharmaceutical
products
TBD
Galenika
Belgrade
Production of
pharmaceutical
products
TBD
Jugoremedija
Zrenjanin
Production of
pharmaceutical
products
Stock Exchange
Vetprom
Novi Sad
Wholesale of
pharmaceutical
products
Stock Exchange
Srbolek
Belgrade
Wholesale of
pharmaceutical
products
Stock Exchange
Production within Free Zones is free from customs and VAT.
In brief, there are three methods of privatisation in Serbia:
tender privatisation (used for large enterprises), auction
privatisation (for small companies) and acquisition
through stock exchange (for joint stock companies). The
entire process of privatization in Serbia is handled by the
Serbian Agency for Privatization (www.priv.yu).
CONTRACT MANUFACTURING
If you are short of in–house manufacturing capacities,
want to outsource small–batch production, reduce
manufacturing costs, or delay/avoid capital investments
in manufacturing, you should consider contract
manufacturing in Serbia.
Leading companies in the Serbian pharmaceutical industry
have modern technological solutions that enable them to
produce over 95% of current galenical forms.
Production in a large number of companies is in compliance with modern standards and specific requirements of
the pharmaceutical industry. In Serbia you can find
facilities for production of: penicillines, cephalosporins,
hormones, sterile block products, cytostatics, mix–o–vials,
drugs in various dosage forms (coated, slow release, effervescent tablets, pellets, powder sachets, hard capsules,
oral liquid syrups, ear/eye drops, injectable solutions –
LVPs and SVPs, powder for injections, lyophilisates for
injection, cream, gel, suppositories, solutions for
inhalers), and antibiotic sterile gauze.
Commitment to quality
Production in Hemofarm is conducted in compliance
with MHRA–UK, PIC GMP, ANM–Romania, NAFDAC–Nigeria, CE, ISO 9001:2000, ISO 13485:2000.
Preparation for acquisition of EU GMP is well underway.
A system of quality assurance in Galenika a.d. is accomplished at the level of management, processes and products. The concept of quality assurance is based on valid
world requirements and national legal regulations:
• good manufacturing practice (GMP),
• good laboratory practice (GLP),
• good clinical practice (GCP),
• ISO 9000 series standards (Introduction of environmental
protection system according to ISO 14000 series standards
is in the process).
Zdravlje–Actavis has introduced ISO 14001, while most
of other Serbian drug manufactures comply with the ISO
9000 quality system.
DOING BUSINESS
IN
FREE ZONES
There are 12 free zones in Serbia evenly distributed on
the territory of the Republic, mostly located in the near
vicinity of transportation corridors, providing excellent
logistic opportunities. The following table shows key
benefits of having production within the free zone as
opposed to having it outside this designated area.
Within a Free Zone
Outside a Free Zone
Importers who are users of a free trade zone aren't liable for VAT on imported
goods.
VAT is assessed on all imported goods at the rate of 18%, except for certain
goods identified by VAT law, which are taxed at 8%.
Imports and exports of goods and services into and out of a zone are unlimited.
Imports and exports of goods and services are unlimited outside of the free trade
zones; however, the government is legally authorized to impose quotas and other
restrictions on certain types of goods in order to protect the domestic market.
Raw materials used for finished goods that are meant for export can be imported All goods (except for humanitarian supplies) imported outside of the free trade
duty–free.
zones are liable for payment of duties at tariff rates currently in force.
Fixed assets, machines, and construction materials can be imported duty–free.
Fixed assets, machines, and construction materials are liable for payment of
duties. If they are part of a foreign investment, they are only liable for a nominal
customs fee of 0.5%.
Zone users can freely make use of foreign currency earned through operations
within the zones.
According to the Foreign Investment Law, foreign investors have total control
over profits they earn.
Imports of all types of goods into the zones are duty–free. Goods from the zones All goods (except for humanitarian supplies) imported outside of the free trade
can be distributed on the domestic market after customs duties have been paid. zones are liable for payment of duties at tariff rates currently in force.
If goods distributed on the Serbian market are produced in a free trade zone
from domestic and imported components, customs duties are only paid on the
imported components.
Imports into the zones and exports from the zones are unlimited. They aren't
subject to quotas, permits, licenses, or other foreign trade restrictions. Goods
that are imported from the zones into the domestic market are subject to standard customs procedures, however, if the goods are produced out of at least
50% domestic components, they are considered to be domestic goods.
Imports and exports of goods and services are unlimited outside of the free trade
zones; however, the government is legally authorized to impose quotas and other restrictions on certain types of goods in order to protect the domestic market.
Goods can be temporarily transferred from the zones to the domestic market
and vice versa in order to add value through activities such as processing,
installation, repairs, quality control, and marketing activities, among others.
This creates many opportunities for cooperation with domestic industries.
According to the current Foreign Trade Law, the Ministry of International
Economic Relations determines which types of goods may be temporarily
imported or exported.
Zone users can lease, buy, or build manufacturing facilities, warehouses, or
commercial buildings.
Outside of the free trade zones, it is also possible to lease, buy, or build buildings,
but the process is more complicated.
14
INVESTMENT INCENTIVES
If you invest in fixed assets
• Taxpayers investing in fixed assets are entitled to a tax
credit of up to 20% of the value of the investment made
in that year. The tax credit is limited to 50% of assessed
tax in the year of the investment. The unused portion of
the tax credit can be carried forward for up to 10 years.
• Taxpayers classified as small companies are entitled
to a tax credit of up to 40% of the value of their investments in fixed assets in the year of investment. In this
case, the credit is limited to 70% of assessed tax in the
year of the investment. The unused portion of any
such credit can be carried forward for up to 10 years.
• Certain industries including production of medical
instruments are entitled to receive a tax credit of up to
80% of investments made in purchasing fixed assets
with their own financing. The unused portion of any
such credit can be carried forward for up to 10 years.
If you employ new workers
Taxpayers who employ new workers are entitled to a tax
credit equal to their new employees' gross salaries plus
related social security contributions paid by the employer.
For your large investments
Taxpayers who invest over CSD 600 million (around
€7.4 mill) in fixed assets and employ at least 100 new
workers are not liable for corporate income tax for up to
ten years, provided that those assets are used for the
activities for which the taxpayer is registered.
Other incentives
• Import of equipment and other assets as well as
construction materials representing a foreign entity's
investment are exempt from customs duties.
• Import of raw materials, semi–finished and component
parts carried out for the purpose of realization of a
long–term production contract in cooperation with a foreign
producer are exempt from customs and other import duties.
15
Financing Options
European Bank for Reconstruction and Development
EBRD was formed in 1991 to foster the shift to a market
economy in transition countries. EBRD operates in 28
countries and is the single biggest investor in the region with
commitments of over €24 billion in over 1,000 projects.
What has been done in Serbia so far?
Since the Bank started its operations in Serbia and
Montenegro in 2001, it has committed €644 million, of
which €425 million for public sector projects and €219
million for private sector projects (excluding the trade
facilitation program). The Bank's clients in the corporate
sector include Ball Packaging Europe, Fresh&Co, Frikom,
Grand Prom, GTC, Hemofarm, Lura, Marbo, Progas and SBB.
What's in it for you?
EBRD develops tailor made products that are designed to
satisfy the needs of the client and the project. The product range includes long–term loans, working capital,
equity, quasi–equity instruments, and guarantees. Typically the Bank directly finances long–term loans between
€5–250 million and equity investments of €2–100 million (with exit usually within 4–8 years).
The Bank finances a portion of the project costs (usually
up to 35% of the total project costs), with the remainder to
be provided by the client, sponsor or other financiers. The
EBRD's clients are required to comply with high standards on
integrity, transparency and fairness, as well as the local and
international environmental, health and safety regulations.
16
The Internationa Finance Corporation
IFC is the largest multilateral source of loan and equity financing
for private sector projects in the developing world. As a member
of the World Bank Group, IFC shares the primary objective
of World Bank Group institutions: to improve the quality
of the lives of people in its developing member countries.
How to Apply for IFC Financing
IFC provides a range of products and services for clients,
including loans, equity, quasi–equity, structured finance,
and risk management products that are funded through
IFC's own financial resources. In order to be eligible for
IFC funding, a project must meet a number of IFC criteria. It must: be located in Serbia and Montenegro, be in
the private sector, be technically sound, have good
prospects of being profitable, benefit the local economy
and be environmentally and socially sound.
The Local Banking Sector
Extensive reforms in the financial sector, widely praised as
the leading process in the Serbian transition, have produced
a sound and efficient banking system. The results are best
seen in the rapid growth of total domestic and foreign currency savings, currently standing at €1.6 billion, almost 50
times the amount in 2000. Significant foreign investment
has been made resulting in the improved quality of goods
and services offered. In March 2005 there were 10 foreign
banks, most of which started operations in Serbia over the
past four years, which set high–quality standards for banking
services: Raiffeisenbank, Hypo–Alpe–Adria Bank, Societe
Generale, HVB, ProCredit, National Bank of Greece, LHB,
Volksbank, EFG Eurobank, and Alpha Bank. Since then,
another five banks have come to Serbia: French Credit Agricole
– the largest European bank, Austrian Erste bank – the leading private bank, Slovenian Nova ljubljanska banka, as well
as Italian Banca Intesa and Findomestic. With further
privatization of the domestic banking sector, the number of
foreign banks is expected to increase in the coming months.
Success Stories
Zdravlje will be a fully EU–compliant solid dosage and
packaging facility by January 2007.
Background
Zdravlje is a leading manufacturer of drugs for gastroenterology and cardiology and one of the largest drug manufacturers in Serbia. It was established some five decades
ago and, after being acquired by Actavis Group in 2002,
became part of this Iceland based pharmaceutical
multinational company.
People
The company is based in Leskovac in Southern Serbia, and
currently employs around 1,300 highly educated personnel.
Manufacturing
In addition to manufacturing products for various
well–known European pharmaceutical companies, Zdravlje
produces more than 100 registered drugs and preparations
in the form of tablets, capsules and ampoules. As a result
of the recently embarked upon expansion programme,
Manufacturing in Zdravlje complies with environmental
standards for medical waste treatment. Medical waste is
placed in suitable packages for transportation and is destroyed
in authorized institutions in Switzerland and Austria. The
introduction of ISO 14001 and training of employees in
this regard started last year and is continuing in 2005.
Plans for the Future
After taking over Zdravlje, Actavis has invested some
€6.9 million in 2004 and plans to invest another €5.7
million in 2005, mostly in reconstruction of the pharmaceutical sector, GMP standards, logistics and education of
its workforce. By the year 2007, Actavis will invest a total
of €20 million in Zdravlje.
While holding a strong position on the Serbian market,
the company continues to develop its sales presence in a
number of neighbouring countries. In 2005 it has planned
to considerably increase exports to over €5 million.
17
Background
Hemofarm is a company with four decades of experience in
drug production. Over the course of the last decade, Hemofarm
experienced large levels of expansion. Today, it is a Group
made up of the parent company and 21 subsidiaries, of which
12 are in Serbia and Montenegro, and the others are abroad.
The parent company is organized according to the division
principle. The seat of the parent company is in Vršac. In the
last four years, Hemofarm invested €92.5 million in new
production capacities. An infusion solution plant was reconstructed and a freeze–dried forms (injectables) and ampoules
factory was constructed and equipped. These investments
amounted to €25 million, of which €18 million were secured
through a loan arrangement made with the European Bank for
Reconstruction and Development. Investing in state–of–the–art
technology has made Hemofarm the only pharmaceutical
company in this part of Europe that currently manufactures the three most sophisticated drug forms – effervescences, Mix–O–Vial freeze–dried injections and pellets.
Manufacturing
Existing manufacturing plants, as well as those under construction, are in compliance with the GMP regulations. Hemofarm
is also the only company in the country that has been granted
MCA approval, which secures export of our products to the
European Union. Preparation of the Validation Master Plan, in
compliance with the American Food and Drug Administration
guidelines is in process and will be applied in the new sterile
forms plant and then transferred to other plants.
People
Over 3,000 people are employed in the Group, with periodical
fluctuations of part–time workers. The average age of employees is forty and each fifth person holds a university degree.
International
The strategy of the Group is directed towards a powerful penetration into foreign markets. Apart from classical export,
Hemofarm realizes different types of cooperation and investment in establishing local production in other countries.
18
Below is a brief overview of Hemofarm’s international operations.
Hemofarm’s first enterprise abroad
was founded in mid–1991 in Frankfurt. Hemofarm GmbH deals in
export–import operations and has
specialized in the trade of pharmaceutical raw materials. It has built a
strong financial and marketing
operation. Its subsidiary company
Hemopharm USA, Corp. was officially established on June 23, 2003.
A Yugoslav–Chinese mixed enterprise
was established between Hemofarm,
as the majority owner, and the local
pharmaceutical company Jinan Yongning
Pharmaceutical. As of May 2000,
infusion solutions in glass and plastic
bottles are being produced in China.
Partnerships
Zannini
Zannini Hemofarm is a mixed
enterprise comprising Hemofarm
from Vršac and Grafica Zannini
from Pisa, which invested €3.1 million in its construction.
GSK
A cooperation agreement with GlaxoSmithKline has been signed with
the aim of increasing Hemofarm's
capacity to win over foreign markets. The cooperation pertains to 13
exclusive products in 15 forms for
hospital usage, belonging to the
group of anesthetics, cytostatics,
antivirals and immunosuppressants.
19
Background
Galenika a.d. has been producing drugs, other pharmaceutical products and raw materials for 60 years. Established
in 1945, Galenika became the fourth company in the world
to produce penicillin. In 1991, after a joint venture was
formed with the US company SPI Pharmaceuticals, the
company was named ICN Galenika, and later ICN Jugoslavija.
Since March 1999, the company once again operates under
its traditional and renowned name – Galenika a.d.
Currently, Galenika has a 30% share of the domestic
pharmaceutical market, and a well–trained marketing
department. The company also has the necessary expertise, R&D and technologies to take advantage of both
domestic and foreign markets. This includes licensing
agreements and technology transfer based on long–term
cooperation with international companies.
In terms of exports, the most interesting export markets
for the company are the former USSR, Baltic States and
ex–Yugoslav republics. Also, Africa and the Middle East
present opportunities for a large transfer of knowledge.
People
Today, Galenika a.d. has 2816 employees, 1108 men and
1708 women.
Employee qualification structure (as of April 30, 2005)
University graduates
PhDs
MSc
Specialists
Two year post secondary education
Secondary school
Elementary school
Highly skilled
Skilled
Semi skilled
TOTAL
557
8
28
26
94
999
223
192
574
177
2,816
Over the years, Galenika has developed products based on license
cooperation with world renowned companies, and also on their
own expertise, inovations, and discoveries from its own Institute.
Manufacturing
Modern technological solutions enable Galenika a.d. to
produce over 95% of current galenical forms. Manufacturing is
organized according to modern standards and specific requirements of the industry. There are four programs: Human Drugs,
Dental, Veterinary, and OTC products, and six departments
based on pharmaceutical forms.
Tablet and coated tablet department
Largest share in the overall company production. Manufactures
tablets, film and sugar coated tablets. With completion of additional
new facilities and modern equipment installed, the annual output
of the Department, based on two shifts, will be 3 billion tablets.
Pharmaceutical raw materials
This production forms an important segment of company operations. It is based on synthesis and biotechnology. Overall, owing
to a modern manufacturing concept, Galenika a.d. remains a competitive drug supplier both in the domestic and foreign markets.
Ampoules and solutions department
Produces preparations in ampoules, in vials for parenteral use, eye drops and infusions.
Annual output: 45,000,000 ampoules and 4,000,000
vials, in two shifts.
Syrups department
Produces syrups in solution and suspension form, and
oral gels in sachets.
Annual output: 30,000,000 units.
Ointments and aerosols department
Manufactures medical creams and ointments in
dosage forms from 3.5g to 100g, suppositories and
vaginal suppositories, aerosols, and a wide range of
cosmetic products.
Annual output: 25,000,000 units.
Antibiotics department
Manufactures preparations for parenteral use.
Annual output: 50,000,000 vials.
Dry suspension preparations.
Annual capacity: 4,000,000 vials.
Capsules department
Produces finished drugs in capsule form.
Annual output: 220,000,000 capsules.
Investment projects in progress
To enable Galenika's full potential, in both domestic
and foreign markets, several investment projects were
initiated to modernize facilities, upgrade and harmonize
standards to meet world requirements. These changes
were made to facilitate exports to all world markets.
All of these newly planned buildings will be constructed on vacant plots of the 55 hectares of land at the
Galenika a.d. site in Zemun, 15 km from the center of
Belgrade. The following projects are currently in
various phases:
NEW SOLID FORMS FACTORY
Basic Plan
Building of a factory (extended preliminary design – finished).
Total project value: €40,000,000.
Extended Plan (optional)
Building of an additional R&D, Quality Control, and
Quality Assurance premises, new warehouse for raw
materials and packaging material, and reconstruction of
the finished drugs warehouse (with planned conditions
for GMP and FDA approval inspection).
Designed capacity:
• Tablets (2 billion);
• Capsules (15 million).
Total project value: €75,000,000.
Production predominantly based on imported raw
materials (90%) purchased at global market prices.
DENTAL PRODUCTS
Option 1
New dental products factory (conditions for CE approval
provided)
Total project value: €12,000,000.
Option 2
Reconstruction of the existing factory. Located in the
centre of Belgrade (value: €100,000).
Investments for new equipment/products:
• Acrylic teeth (value: €450,000);
• Dental alloys (value: €130,000).
Total project value: €680,000.
Production predominantly based on imported raw
materials (70%) purchased at world market prices.
MEDICINAL BAND AID FACTORY
Reconstruction of the existing facilities (all needed
equipment already acquired). Planned to meet production
needs for the domestic and foreign market (conditions for
CE approval provided according to EU Directive 93/42).
Total project value: €1,000,000
Production predominantly based on imported raw
materials (70%) purchased at world market prices.
21
Background
West Pharmacutical Services Beograd d.o.o. Kovin is a
dynamic and developing company based in Serbia and
Montenegro, with an extensive presence in the local
market. It is a subsidiary of US–based West International
Group and its activities are focused in the pharmaceutical
packaging materials sector. West Pharmacutical Services
Beograd d.o.o. Kovin is a legal successor of the former
Pharma Gummi – Beograd Kovin, which was founded in 1978.
Manufacturing
The company produces rubber stoppers for vials containing penicillin and other antibiotics, IV platelets and
plungers for pre–filled and disposable 3–piece syringes.
The company is a holder of the DIN EN ISO 9001:2000
22
QA certificate. The production facility is based in Kovin,
while sales and administration are located in Belgrade.
People
Currently, the company has 140 employees.
Plans for the future
The company decided to extend its production capacity
and invest nearly €10 million in coming years. The first
phase started in November 2004 with the construction of
a new production building.
The operations will primarily be focused on export. The
investment will generate new jobs in the local area and
new export within the first year.
Useful Contacts
GALENIKA
Phone: +381 11 190 902
Fax: +381 11 616–306
11080 Zemun, Batajnički drum b.b
[email protected]
www.galenika.co.yu
ZDRAVLJE Actavis
Phone: +381 16 242–414, 2455339
Fax: +381 16 50–511
16000 Leskovac, Vlajkova b.b.
[email protected]
www.zdravlje.co.yu
HEMOFARM
Phone: +381 11 344 26 63
Fax: +381 11 344 17 87
11000 Beograd, Prote Mateje 70
[email protected]
www.hemofarm.co.yu
ZORKA PHARMA
Phone: +381 15 368–500
Fax: +381 15 368–444
15000 Šabac, Narodnih heroja b.b.
[email protected]
JUGOREMEDIJA
Phone: +381 23 522 430, 544 556
Fax: +381 23 541 615
23000 Zrenjanin, Pančevačka b.b.
[email protected]
Medicines and Medical Devices Agency of Serbia
Phone: +381 11 246 83 22, +381 11 460 250
Fax: +381 11 397 43 40
1152 Belgrade, Vojvode Stepe 458
[email protected]
www.alims.sr.gov.yu
PANFARMA
Phone: +381 11 627–257, 32 83 052
Fax: +381 11 632–555
11000 Beograd, Strahinjića Bana 32
[email protected]
EBRD, Belgrade RO
Phone: +381 11 311 2921
Fax: +381 11 311 4571
11000 Beograd, Bulevar Avnoja 64a
www.ebrd.com
SRBOLEK
Phone: +381 11 2646 199
Fax: +381 11 646–622
11000 Beograd, Sarajevska 84
[email protected]
Internationa Finance Corporation
Phone: +381 11 30 23 760
Fax: +381 11 30 23 733
11000 Beograd, Kneginje Zorke 96
[email protected]
www.ifc.org
23
Serbia Investment and Export Promotion Agency
(SIEPA) is a government agency established in 2001 to
facilitate and support foreign direct investments and
promote Serbian exports.
The list of services that SIEPA provides to foreign
investors:
• analyzing Serbia’s business environment and providing
critical information regarding the process of
setting–up a company in Serbia,
• preparing sector analyses and studies that give a
thorough overview of the state of particular sectors
of the Serbian economy,
• providing help in identification and acquisition of
attractive Greenfield and Brownfield sites,
• assistance in obtaining necessary permits and licenses,
thus speeding up the completion of investment projects,
• helping in finding partners and suppliers among
Serbian companies.
Only by effectively networking with public and private
sector bodies, SIEPA can best respond to the needs of
foreign investors. In particular, SIEPA works in close
cooperation with the following institutions:
• all government ministries and other governmental bodies,
• municipal authorities and local self–government,
• Building Directorate of Serbia and Agency for Building
Land and Construction of Belgrade,
• tax and customs authorities,
• statistical bureaus,
• chambers of commerce,
• National Bank of Serbia,
and all other institutions related to the process of
establishment and successful pursuit of business
ventures in Serbia.
24
Design: Saša Đorđević
Serbia Investment and
Export Promotion Agency
Supported by United Nations
Development Programme
Funded by the Government of the
Netherlands
Vlajkovićeva 3
11000 Belgrade
tel.: +381 11 3398 550
+381 11 3398 653
+381 11 3398 772
fax: +381 11 3398 814
[email protected]
www.siepa.sr.gov.yu