The Balkans are attracting some foreign money, which largely ignored the economically undeveloped, politically unstable region for years in favor of safer markets in Central European countries. Foreign direct investment more than doubled in Serbia last year to around $4.5bn, reached some $3.6bn in European Union hopeful Croatia, and exceeded 10 percent of the GDP in the Balkans as a whole.
The Austrians are leading the charge with acquisitions in the banking and telecom sectors, drawing oblique comparisons to their ultimately lucrative, initially risky investments in Poland, Hungary, Slovakia and the Czech Republic in the 1990s. The risk is arguably higher in the Western Balkans, but the reward could prove handsome, as these economies are some of the least developed in Eastern Europe.
"There are entire markets to be conquered, if you're willing to take the risk," says Claudio Viezzoli, director for the Western Balkans at the European Bank for Reconstruction and Development. For instance, returns can exceed 20 percent in the banking sector.
But investors would be wise to pause to consider the risk, Viezzoli adds.
Though countries such as Albania, Serbia, and Croatia are pursuing investment vigorously--and having some success--political instability and immature business environments are impediments to maintaining momentum. Namely, Kosovo's push for independence from Serbia is fueling regional tensions that aren't investor friendly.
Source: Business Week, http://businessweek.com