When the topic of regional development is raised in Serbia, the discussion almost always begins with the need to invest in physical infrastructure: where new industrial zones will be built and how many square meters of production space and factories will be constructed.
These are certainly important questions, but another equally important question is often missing – who will be working in those facilities in five or ten years, and with what skills? For this reason, the question “where should we build a new factory” should be reframed as “how can we build the competencies that will ensure every investment has a long-term impact.”
Regional differences in Serbia are visible in average wages and education levels, but they are particularly pronounced in the level of investment in research and development. According to data from the Statistical Office of the Republic of Serbia, investment in research and development in the Belgrade region amounted to around €498 million in 2024, while in the region of Southern and Eastern Serbia the amount was around €22 million. This means that almost 23 times more is invested in development and innovation in the capital than in the entire region of Southern and Eastern Serbia.
Data also show that the share of highly educated population in rural areas is significantly lower than in urban centres. The share of highly educated people is highest in the Belgrade region – 27%, while in Southern and Eastern Serbia it is more than twice as low – only 12%. At the same time, migration trends are highly unfavourable, as young people from these regions are increasingly moving to larger cities or abroad. As a result, regional differences are deepening not only in economic indicators but also in the structure of human capital.
However, when we analyse the structure of entrepreneurship across regions, certain specificities become visible in the relationship between the number of entrepreneurs and the number of people employed by them.
In 2024, there were 73,412 entrepreneurs operating in the Belgrade region, accounting for about 29% of the total number of entrepreneurs in Serbia. They employed 53,758 workers, meaning that each entrepreneur employed on average around 0.7 workers. Although Belgrade dominates in terms of the number of registered entrepreneurs, the average number of employees per entrepreneur is relatively low compared to other regions.
On the other hand, in Southern and Eastern Serbia there were 46,011 entrepreneurs (18% of the total), employing 54,425 workers, which means that on average one entrepreneur in this region employs 1.18 workers. This indicates a relatively stronger role of entrepreneurs in local employment and highlights the importance of individual businesses in sustaining jobs.
All of this shows that Southern and Eastern Serbia has a strong entrepreneurial base, particularly in micro and small enterprises and family businesses. These businesses dominate sectors such as agriculture, the food industry, crafts, and services, which could benefit significantly from modernisation.
Untapped potential and the need for modernisation open the door to innovative development models. One such model could be the concept of a “Startup Village”. This concept represents a model for fostering entrepreneurship and innovation in rural and less developed areas, with the aim of ensuring that economic growth is not limited exclusively to large urban centres.
A Startup Village involves providing the basic physical conditions for work, access to financing, the development of local leadership, connections with educational and research institutions, as well as access to legal, financial, and mentoring services. At the centre of the concept is human capital.
The focus is on activating the human capital that already exists – in communities where young people are already working online for global markets, where they want to start their own businesses, and where traditional producers are looking for new sales channels. This model has proven to be an effective instrument for retaining and attracting young people across European rural communities.
Serbia also offers an example demonstrating that when human capital is placed at the centre, large physical infrastructure is not a prerequisite for the emergence of innovation hubs. The Science and Technology Park Belgrade, which is today a key pillar of the country’s innovation ecosystem, did not begin as an impressive complex of buildings. Its first steps were made in an attic space, where young teams, with the support of the academic community and donors, were given the opportunity to develop their ideas. Only later did the construction of a modern campus and broader institutional support follow.
Buildings and factories can be constructed within a year. Human capital takes years to build – but only it can guarantee that those factories will truly be filled with people.
This leads to the conclusion that the same principle can apply to the south of the country. What is primarily missing is not a building, but continuous training, mentorship, access to financing, cooperation with universities and institutions, and networking opportunities. If a young woman from Leskovac with a business idea does not see a future in her own environment, the loss is not only hers – it is local, regional, and national.
The development of Southern and Eastern Serbia, which lags behind the national average, depends on whether we recognise that the key infrastructure is human capital. Buildings and factories can be constructed within a year. Human capital takes years to build – but only it can guarantee that those factories will truly be filled with people who contribute to sustainable local and regional development.
Author: Milica Dolašević, project manager, Institute for Development and Innovation
