is a small town of 40 000 people,
to which Bulgarians lay claim as
a former settlement. However,
several differences strike you
when you enter the town, apart
from the general cleanliness.
Parking areas for bicycles are
everywhere, even in front of
the FZP buildings, testament to
the two-wheelers’ popularity.
This mode of transportation is
used by people of all ages. The
town’s pedestrian area is also
quite large for Pirot’s modest
size. A communist-era cube-style
hotel serves as a kind of
signpost to the town, standing
on the intersection leading to
the centre. The so-called ‘kale’, a
medieval fortress just next to the
town, is a prominent local landmark.
Photos: ELITSA GRANCHAROVA
Nesko Madic, a member of the Free Zone Pirot management board, briefed journalists about the largest tax-exempt zone in Serbia and similar administrative systems worldwide. He described Free Zone Pirot (FZP) as the most lucrative investment area for Bulgarian companies.
Currently, 130 firms operate on the 17ha tax-exempt zone, 90 of them Bulgarian. Among the Bulgarian companies trading at FZP are Apix, Balkanpharma, MM Pharma and Actavis, with others operating in raw materials, vehicle parts and textiles.
FZP’s advantages are self-evident. The zone guarantees company benefits and concessions in its business dealings, as well as exemption from customs taxes and value added tax. Businesses exporting from FZP to Russia, for example, do not have to pay customs duties. Exporting from Bulgaria, by contrast, would incur tax payments of about 45 to 50 per cent to border authorities.
FZP has also forged tax-free trade agreements with Macedonia, Bosnia and Herzegovina, and Moldova. Tax exemptions are, however, invalid on excise articles such as cigarettes.
Madic said that Bulgarian business interest in the FZP emanated from trade firms, but other companies – producers of confectionary, big freight bags, and chemical industry operators – have also expressed an interest in tapping into FZP. He said that he believed that Serbia and Bulgaria would continue close co-operation despite Bulgaria’s recognition of Kosovo.
FZP is also working on several European Union schemes, including the joint Pirot-Pernik project, aimed at facilitating the access of Bulgarian and Serbian goods to the large markets of the EU and Russia. Pernik is about 30km south of Sofia, with a population of 100 000. FZP will receive about 300 000 euro for investment in this project while Pernik will earn a similar sum for developing, together with FZP, a tax-exempt zone on its territory. “By assisting Pernik to finance a tax-exempt zone within the PHARE programme (a pre-accession instrument financed by the European Union), this bolsters us as well,” Madic said. FZP pledged to use its experience to help Bulgaria create similar areas for tax-exempt trade and industry.
Another project, developed in co-operation with several other Bulgarian municipalities, is the Stara Planina venture, which concerns tourism and environmental protection. This involves the construction of a joint 100 million euro ski centre on both sides of the border.
Madic described FZP as perhaps the most successful of Serbia’s three tax-exempt cordons. He said that about 10 000 similar tax-free zones operate worldwide, employing about 40 million people. Bulgaria and Romania each have six of these zones. Madic said that Ireland’s adoption of its tax-free zone had enabled it to become one of Europe’s most developed countries. He also cited Turkey, which has 17 such areas and a special ministry for such zones. But the tax-free world miracle remains China, where more than 30 million people are employed, implementing the most modern technologies in numerous such areas.
FZP’s turnover in 2007 was 324 million euro, with Bulgarian companies contributing about 50 million euro. However, Madic expects an increase in turnover of at least 15 per cent this year, as tyre producers Michelin and Serbian Tiger increase production.
“The zone combines many complex logistics activities carried out at the same place,” Madic said.
FZP is a joint stock company in which the Serbian tyre producer Tiger owns 70 per cent, the Serbian construction company Progress has 18 per cent and Pirot municipality owns the remaining 12 per cent. “We produce, finish and work with materials supplied by the client and execute all kinds of activities except those involving products deemed to be environmental pollutants,” Madic said.
FZP has received funds from the Serbian government to develop another 280 decares of industrial park. Construction will start later this year. Madic expects the new industrial park to attract huge interest and about 200 million euro in investment, which is currently concentrated in Serbia’s Vojvodina Free Zone.
