Overview
Digitalization of the economy and digital transformation are the key priorities for the Serbian Government. The Serbian Government has announced investments of over $70 million in Artificial Intelligence (AI) and other related technological and scientific research and development. Also, Serbia will chair the Global Partnership for AI (GPAI), an OECD initiative, for the next three years and will host an annual summit in Belgrade with the first iteration occurring on December 3-4, 2024.
In 2021, Serbia established its state-owned Data Center in Kragujevac city, hosting key information and communication infrastructure for the country. The center is equipped with the latest generation Nvidia supercomputer featuring an AI platform that is available for commercial lease. The Serbian Government recently announced its plans to acquire a second supercomputer in 2025. In 2022, U.S. IT giant Oracle Cloud opened its first regional private sector data center within the Kragujevac Data Center, using its capacity to offer a number of data processing services to the Serbian Government.
The main scientific innovation institutes in Serbia are: BioSense, Research and Development Institute for IT in biosystems, focused on digital transformation of agriculture; and the Centre for the Fourth Industrial Revolution (C4IR Serbia) jointly established by the Government and the World Economic Forum in February 2022. C4IR focuses on two priorities: biotechnology and the application of artificial intelligence in healthcare. ICT infrastructure and smart technological solutions for applied sciences present a growing opportunity for cooperation with U.S. companies and implementation of advanced technologies and solutions. In 2021, Serbia notably established the first AI Research Institute in Southeast Europe and was one of the first country in the region to develop its National AI strategy.
The U.S. is the largest trading partner for Serbia in the ICT sector. The ICT sectors is also the largest net exporting industry of the country, with exports of $3.9 billion in 2023, and annual growth of annually over 26% in the past decade. Serbian technology companies produce software for industries ranging from agriculture to medicine, as well as tracking and cloud applications, online games, and testing. They also run call centers and customer helplines, ranging from low-skilled to very high-tech. According to the official government statistical data, almost 110,000 people are employed in the sector, as of 2024.
Recently local ICT companies and developers are showing a growing interest in investing and expanding their business to the U.S. Major U.S. companies and their affiliates, such as Oracle, Rivian, Microsoft, NCR, Cisco, IBM have established R&D centers and campuses in Serbia.
Serbia is still not a member of the EU. For EU related digital issues, please visit CSEU Digital Economy Chapter:
Market Challenges
Public Procurement
For all government funded projects, one of the biggest challenges is transparency of the public procurement process. U.S. companies often complain that the public procurements are either predetermined with biased technical specifications or awarded directly by utilizing a plethora of G2G agreements with foreign governments, thus circumventing the public procurement process. Commercial Service Serbia regularly utilizes the USG Advocacy process to level the playing field for U.S. companies and/or works with the International Financing Institutions, often financing the tenders, to ensure the tenders are being published with neutral technical specifications.
Artificial Intelligence
The use of Artificial Intelligence (AI) in Serbia is not legally regulated, except partially in the context of personal data protection. The development and application of AI by both public and private sectors provides wide business opportunities, but also opens numerous legal, ethical and security questions.
In its first regulation step, the Government of Serbia established the National Platform for Artificial Intelligence. The development of the National Platform is defined by the goals and measures of the Strategy for the Development of Artificial Intelligence for the period 2020-2025. The Strategy identifies AI as a key contributor to the development of economic growth, digitalization, and education. It also recognizes the risks, including data protection, transparency, and new types of jobs that are in demand, which will require changes to the education system. The new National Strategy for Artificial Intelligence for 2024 - 2030 is currently in the adoption process and is expected to be finalized by the end of 2024. With this new Strategy, the goal is to create a legal, ethical and institutional framework, further application in the public sector and economy, and improve the infrastructure and the amount of data used for AI. AI is still a broad and insufficiently explored sector in Serbia. This creates demand for not only technological innovation products for public administration, private sector, science community, but also consulting services and cooperation with experts on different regulatory matters and best practices in application. Telecom companies in Serbia have been using AI and machine learning to improve back-end processes, while banks and the retail sector have been trying to implement AI in customer service, e.g. intelligent chatbots.
Cybersecurity
In 2023, the Ministry of Information and Telecommunications prepared a new Draft Law on Information Security, which harmonizes the domestic legal framework with the new EU legislation, improves the institutional and organizational framework and capacities, but also tackles some of the challenges previously identified in practice. The new Law is expected to be adopted before the end of 2024. The Law regulates recovery measures after the incidents, envisions the establishment of the Office for Information Security and the strengthened role of National Computer Emergency Response Teams (CERTs). The Law also introduces the Operators of Significance, namely critical infrastructure and priority sectors such as energy, financial and banking, healthcare, digital infrastructure and water management and wastewater management, but imposes sets of obligatory measures for all ICT operators. Once adopted, the Law envisions a transitional period before full enforcement, that will open the demand for consulting services related to future application. The Government is continuously taking measures to educate public and raise awareness, especially since the cyber-attacks that affected state-owned company Electric Power of Serbia and Public Land Registry in 2023. The application of the Law will open a substantial market for the provision of cybersecurity services.
Cloud Technologies
The Serbian Law on Electronic Administration mandates that all government entities’ electronic registers, records and electronic communication, must be stored in data centers located within the territory of the Republic of Serbia. This provision limits the advantages of commercial cloud technologies on remote servers. Furthermore, the Republic of Serbia currently does not have a regulatory framework that would enable the classification of state authorities’ data based on sensitivity, enabling categories of data to be allocated to remote cloud servers, and allowing classified data to remain exclusively on servers within the country.
The business community, as well as U.S. government agencies, are raising the issue and working on resolving this barrier. Currently, the Government of Serbia is open to use of cloud solutions and services, but the potential providers should be aware of the obligation to localize servers within the country.
Chinese Influence
Western telecommunication equipment providers (such as Nokia, Ericsson, Cisco, Siemens, and Juniper) are active in Serbia. However, the Chinese technology giant Huawei stands out as a significant contractor, supplier, and advisor. Huawei supported the state-owned Data Center in the city of Kragujevac by providing cloud infrastructure and developing an AI platform. Huawei is strongly positioned within the Ministry of Interior and has reportedly supplied them with 1,000 digital surveillance cameras (including license-plate scanning and facial recognition) to support a Safe City Initiative. In 2019, the Government of Serbia also signed a memorandum of understanding with Huawei to develop Smart Cities projects in Belgrade, Novi Sad, and Niš. In Belgrade, Huawei has opened the Huawei Innovation and Digital Transformation Center, envisioning it as a regional hub for the Western Balkans.
Huawei has had a traditionally solid status within state-owned companies such as Telekom Srbija, and strong political ties with the government. In the past couple of years, another Chinese company, ZTE, has started to position itself in the market, presenting a problematic competitor for the Western providers.
Mobile operators in Serbia have traditionally used Huawei’s equipment for previous generations of networks. Companies have complained that Telekom Srbija increased Huawei use for cellular, including up to 4G. Huawei also provides equipment for Telekom Srbija’s fiber optic network. This means that Huawei has its foot in the door when it comes to developing 5G. The other two operators are moving away from Huawei equipment. Yettel, the Czech-owned operator is being sold to a Saudi buyer and had relied heavily on Huawei, including for 4G, but is now switching to Ericsson, in part due to U.S. and EU pressure. The third mobile operator, Austrian/Mexican-owned Austria Telekom A1, does not work with Huawei in 5G.
In May 2024, during the visit of Chinese President Xi Jinping, who led a large business delegation, the Government of Serbia signed over 30 documents, including Memorandum of Understanding on Cooperation in the Field of Information and Communication Technologies and Memorandum of Understanding on Strengthening Cooperation in the Field of Digital Economy. The latter is aimed towards establishing cooperation in the development of the digital economy and strengthening digital transformation, innovative application of digital technologies, development of AI and deepening of cooperation in the field of smart city development. China also negotiated a Free Trade Agreement (FTA) with Serbia that went into official effect on July 1, 2024. According to the terms of the agreement, approximately 90 percent of the products traded between China and Serbia will be exempted from tariffs, while over 60 percent of them began to enjoy zero tariffs immediately after the FTA went into effect.
The U.S. Government, on behalf of industry, is engaged in combatting unfair economic practices and supporting fair competition in the private sector. Even though the Serbian institutions and users are under constant political influence and pressure to opt for Chinese solutions, the technical management traditionally pushes for U.S. quality and solutions given the proven track record and positive life cycle costs for U.S. equipment.
Digital Trade Opportunities
Broadband Connectivity
Mobile broadband connectivity is developed and widespread in Serbia, with 3G covering almost 99% of the population and 4G covering more than 90%. In addition to strong 3G and 4G networks, the Government of Serbia and the top mobile network operators are planning to roll-out 5G networks in 2025 through spectrum allocation auctions. Key mobile operator companies are state-owned Telekom Srbija, and EU based Yettel and A1.
Despite strong mobile connectivity, the Serbian Government recognizes the need to expand and strengthen its digital infrastructure. The Strategy for the Development of Next Generation Networks in the Republic of Serbia illustrate this recognition and promotes the use of cloud computing, the Internet of Things and 5G connectivity. Contrary to mobile broadband, fixed-broadband connectivity in Serbia will require further strengthening and expansion, with only18% of the population having access to fixed broadband.
The Law on Electronic Communications foresees the adoption of incentive measures for the improvement of the electronic communications market, which are particularly related to the development of broadband communication infrastructure in rural and underdeveloped areas. The Government adopted the Regulation on establishing the Program for the Development of Broadband Communication Infrastructure in Rural and Underdeveloped Areas of the Republic of Serbia for the period from 2024 -2026, aiming to provide internet connection to approximately 880 schools, public institutions, local institutions, as well as approximately 152,000 households. The intention is to enable rural areas to get access to modern electronic services, and boost the economy, especially through micro and small businesses. This will enable the joint construction of broadband communication infrastructure throughout the country, where there is less economic interest of operators to build a network. The implementation of this project will, require adequate infrastructure solutions, telecommunications equipment and software.
Next Generation Networks
Originally scheduled for 2020, the Government has delayed its 5G auction for more than three years and is falling behind other countries. The Government of Serbia adopted the Strategy for the Development of the Electronic Communications System for the period until 2027. The 2023, Law on Electronic Communications recognizes the next-generation networks and in accordance with EU regulations, regulates the management of the radio frequency spectrum, the issuing procedure licenses, and the scope and the content of granted rights. The Ministry of Information and Telecommunications still needs to adopt the Rulebook on the minimum conditions for issuing licenses for the 5G network, which will establish the parts of the spectrum at 700MHz, 2600MHz and 3.4.-3.8. GHz for the auction, number of individual licenses, obligations of coverage and deadlines. Ministry of Information and Telecommunications announced that the Rulebook should be approved in Q3 2024 and the 5G auction should be conducted by RATEL in Q4 2025. The expected 5G coverage will be 10% in 2026 and 40% in 2027, including the EXPO 2027 complex. It is expected that the spectrum will be divided between the three largest mobile operators - Telekom Srbija, Yettel and A1. The operators are planning to make significant investments in infrastructure including radio equipment, network architecture, network software and intelligence.
Digitalization
Since 2017, digitalization is a key priority for the Government of Serbia — particularly for public administration, education, and the economy. In 2017, the Government established the Office for Information Technologies and e-Government to centralize administration, communication infrastructure, and government websites into one digital structure. The Office also coordinates the work of the National Center for Security of the ICT System (national CERT) and operates under the Ministry of Information and Telecommunications.
In December 2018, the Office for Information Technologies and e-Government created the National Open Data Portal, a central portal for government data/information available to the public. This National Open Data Portal is directly linked to the Open Data Portal of the European Union. The biggest accomplishment is the establishment of an e-Government portal, which digitalizes the set of administrative services, with a catalogue reaching 1,000 different services in 2024. The Government is making constant investments in digitization across every sector. Increasingly, government platforms are moving online as Serbia adopts e-government solutions.
However, a large portion of the public administration remains on paper, and procedures require physical engagement from the citizens. Upcoming projects include optimization and digitalization of judicial administration, e-health, digitalization of tax administration, vast and cross-cutting e-archive for official documents, as well as unified digitalization of customs and inspections procedures for foreign trade. Digitalization of government services will continue, as technologies progress, creating a constantly growing market for software companies offering government services, procedure optimizations, digitization, AI applications and other.
Smart Cities
There are several initiatives in the fields of smart mobility, digitization of public services, integration of new intelligent systems, public lighting, and charging stations for electric vehicles. Serbia is also progressively developing smart energy: smart public lightening, energy efficiency in public buildings as well as projects in smart communication: city cloud data centers, public Wi-Fi access and, smart benches. For the biggest cities, Belgrade, Novi Sad, Niš, Kragujevac, the Government is developing smart security projects connected with traffic and video surveillance, in connection to projects in smart environment. Smart Cities initiatives and commitments from Serbian government create opportunities for companies offering urban smart solutions and applications.
Blockchain and Gaming
The Government is looking to implement blockchain technology in healthcare, urban planning, and other areas, but has yet to move forward with any specific projects. Serbia is also introducing tax incentives for technology startups - the tax rate is only 3% (half of the regular corporate tax). The main market developer is the Serbian Blockchain Initiative (SBI), established in 2018, with three main goals: to increase local capacities in this area, provide regulatory support, and promote Serbia on the global blockchain market.
Serbia has also made steps towards regulating Crypto economy, with the Law on Digital Assets adopted in 2020, enabling companies to participate in crypto exchanges as licensed operations. Serbia’s gaming software industry is one of Serbia’s fastest growing sectors. According to the Serbian Games Association, Serbia is home to more than 70 companies employing over 1,500 professionals. Leading local gaming companies are U.S. owned Nordeus and 3Lateral, followed by GameCredits and OriginTrail.