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Actual Status of Chemical Industry and Allied Industries in Serbia

The most successful period for chemical industry, as well as for the complete industry of Serbia, were the 1970’s. Concerning effects of erected manufacturing facilities, the most favorable times were the 1980’s, when chemical industry and rubber industry of Serbia had 6 to 8 thousand of various products in their production programs and global production volume at the level of 8-10 million tpy.

Record volume of production chemical industry achieved in 1989 and rubber industry in the middle of the 1980’s. In the year 1989 a record was reached in employment, which equaled about 63,000 in chemical industry and 20,000 in rubber industry, and also in share of chemical industry and rubber industry in gross domestic product of industry, which was 10.6%.

Record export level of chemical goods of around 600 million $, which was approx. 11% of the value of the total export of Serbia, was reached in 1990.

In the year of 1991, geopolitical disintegration of the former Yugoslavia was in process and economic processes became irregular, which was especially emphasized by the sanctions of the United Nations imposed on newly formed country FR of Yugoslavia, the federal unity of the Republic of Serbia and the Republic of Montenegro.

Establishing of multi-party system in Serbia and the disintegration of the former Yugoslavia modified significantly economic conditions. Firsts of all, important changes appeared in property relations. State (public) property, social property and private property were formed. Transition has started but it is neither finished nor stabilized. Liberal conditions for registration of the companies resulted in a great number of new companies being established on the basis of private capital. Only in the field of manufacturing chemical industry, over 1,500 companies were registered. However, great majority of these new companies are still today without legal status and practically without the chance for manufacturing activity. Besides, there is no accurate evidence regarding volume and assortment of production of the private companies that are really active, which hinders making analysis, estimations and taking certain steps for the improvement of business activities.

On the other side, the disintegration of the former Yugoslavia caused essential reduction in the market as well as the reduction in domestic offer, having in mind that a significant number of facilities for production of chemical goods, mainly those more sophisticated, were developed in Slovenia and Croatia.

Finally, embargo on the imports of crude oil, gas and other raw materials imposed by the United Nations by the end of 1992, practically closes many industrial facilities and almost 100% facilities of the basic chemical industry, especially petrochemical. Owing to this, in 1994 the volume of manufacturing of basic chemical industry and rubber industry was at the level of only 16%, 19% respectively, of the realization in the record year of 1989. (In the manufacturing section of chemical industry, in spite of the embargo, level of about 42% average was achieved in 1989).

It is interesting, however, that important efforts were made in the field of domestic crude oil and gas extraction precisely during the period of UN embargo. Thus, production of crude oil amounted to 1,165,000 tons in 1992, and of natural gas amounted to 962 million cubic meters in 1993, both quantities belong to the group of records.

The disintegration of SFRJ, followed by the sanctions of the UN, resulted in serious consequences for Serbian chemical and rubber companies. After the disintegration of the country, Serbia was left without a large number of products that had been provided on the domestic market. The important ones are products from the group of polymers such as PS, PET, ABS, a part of the assortment of chemical fibers and a significant number of base organic products (especially aromatics) and their derivatives, especially those from the group of fine or special chemicals.

In the field of inorganic chemicals Serbia was left without domestic offer of soda ash, calcium carbide, carbon black, titanium dioxide, sodium perborate, hydrogen peroxide and some explosives and other chemicals. Motor-car industry was left without numbers of plastic accessories. Rubber industry was left without a great number of assortments of heavy pneumatics and a part of rubber-technical goods.

Upon imposing the UN sanction, almost total basic production stalled, and the industry was almost totally left without organic chemicals, polymers, synthetic resins, synthetic rubber, caustic soda, mineral fertilizers and other products of basic chemical industry. Within the basic chemical production, manufacturing of plant protection preparations was the most successful. Oil refineries reduced their capacity utilization to the level of supply from domestic oil-fields.

Processing capacities, however, more easily survived stresses stemming from the disintegration of the former SFRJ and sanctions. The most successful one was pharmaceutical industry, in most of the situations taking over parts of manufacturing assortment of medicaments from the disintegrated republics by overcoming the problems of imports of raw materials, and even struggling for new markets.

The United Nations’ sanctions against FR of Yugoslavia were canceled in the second half of 1995. Restoring of production activities, especially those in the basic chemical sector, and regaining the lost positions at world market required an enormous effort from the exhausted domestic manufacturers.  The realization of the above mentioned tasks could not be a fast process, so more serious effects regarding production and marketing activities were still visible in 1997.

Unfortunately, already in 1998 the crisis in Serbia’s autonomous province of Kosovo & Metohija rose by spreading up of the Albanian separatists' terrorism. This crisis had been internationalized and Serbia was accused of using over-measure force. At the beginning of 1999 NATO submitted an unacceptable ultimatum to the Serbia's government, which refused it, so in March 1999 Serbia was attacked. Many industrial facilities were seriously damaged or completely destroyed during the 78 days of NATO’s air-campaign and it should be underlined that the bombing was focused on refineries and chemical plants. The petroleum refineries in Novi Sad and Pancevo have been almost totally destroyed, as well as several large-scale chemical plants located in Pancevo, Lucani and Baric. Especially significant financial and ecological damage has been made in the town of Pancevo, where chlorine, VCM and ammonia plants were bombed and badly ruined.

Development of Production by Branches Since 1998

Source: Statistical Office of the Republic of Serbia


When NATO military intervention against Serbia ended, the domestic chemical industry was, for the third time in the last decade, at a new beginning, starting from scratch. In other words, domestic chemical industry entered the 21st century after about 10-12 years of minor technological and technical development and almost completely financially exhausted. Apart from that, most of export markets have been lost and possibilities of approach to the international financial resources were still poor, which definitely was not a favorable position.

It is obvious that current problems of domestic chemical industry cannot be overcome immediately.

Bigger complexes of basic chemical industry, having facilities largely exceeding necessities of domestic market, are in a specific position. This kind of local chemical manufacturers will very likely have to think of their future through mergers or cooperation with some foreign companies. The field of the chemical industry’s processing facilities should be oriented to the enlargement of production assortment and compliance of the quality of products with the requirements of the world market, since it is already very clear that the dimensions of domestic market will be small to absorb the production of various chemical goods while available production facilities are used.

However, processing capacities more easily survived stresses stemming from the disintegration of the former Yugoslavia and UN sanctions. The most successful one was pharmaceutical industry, in most of the situations taking over parts of manufacturing assortment of medicaments from the disintegrated republics by overcoming the problems of imports of raw materials, and even struggling for new markets.

In spite of the above-mentioned long-term troubles, domestic chemical industry still plays a very important role in the Serbia's economy and external trade achievements. Its share in gross domestic product of the overall industry of Serbia is about 10.5%. The share of both chemicals & chemical products and rubber & plastic products in total industry’s gross domestic product overcame 14.2% in 2004.

Participation in Gross Domestic Product of Overall Industry





Chemicals and chemical products play a very important role in external trade of Serbia. In 2004, chemicals & chemical products were in first place according to the share in total value of imports and in third place according to the share in total value of exports. The share of both chemicals & chemical products and rubber & plastic products in total exports of Serbia overcame 20% in 2004.

Share of chemicals & chemical products in total external trade of Serbia




Previously mentioned problems are doubtlessly the limiting factor regarding:

·         Possibilities for recovery of production activities in a number of chemical factories that operate at minor level of capacity utilization;

·         Competitiveness of domestic manufacturers at the world market;

·         Perspectives regarding future development. 

However, there are several factors that could be considered as comparative advantages of domestic chemical industry. By order of their relative importance those factors could be as follows:

·         Well developed market of demand, both in Serbia and Montenegro, and gained export markets, especially in Russian Federation and other countries of South-East Europe;

·         Well-skilled staff with extensive experience in production management and project management;

·         Available sources of still non-exploited raw materials as follows:

o       Metallic ores and non-metallic minerals for use in inorganic chemistry (copper, manganese, fluorides, borates, phosphates …),

o       Sources of vegetable and animal origin for use in “green chemistry” and oleochemistry,  

o       Some of basic petrochemicals (propylene, raffinate-2, methanol, acetic acid) that are available for use in the  production of down-stream derivatives.

All competitive weaknesses and advantages of domestic chemical industry have been evaluated in sub-project “Chemical Industry”, which was an integral part of global project named “The Strategy of Economy Development in Serbia up to 2010”. This project had been organized and coordinated by the Government of Serbia and Prime Minister personally. It started at the end of 2001 and ended in the summer of 2003. The chemical industry is classified in the group of domestic industrial sectors having the best chances in realization of the export oriented development strategy. The summary of investments needed for realization of such a strategy and expected effects is shown in Figure below.

Finally, almost all more important chemical companies in Serbia already entered the process of privatization (achieved by merging firms at tenders or auctions) or into the process of restructuring (which will also end in privatization). Some of them have already been bought by foreign companies or local managers. The change of property structure should be a real driving force regarding future development of domestic chemical industry.

Serbian chemical industry is probably a “small player” at World or European scale but should be considered as “a very important player” in the region of South-East Europe.



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