ЕКОНОМИКА Часопис излази Vol. 61, october-december 2015, № 4 ISSN 0350-137X, EISSN 2334-9190, UDK 338 (497,1) 97 ©Друштво економиста “Економика” Ниш http://www.ekonomika.org.rs Ivana Kostadinović 1 University of Niš, Faculty of Economics, Serbia Marija Petrović-Ranđelović 2 University of Niš, Faculty of Economics, Serbia THE ROLE AND IMPORTANCE OF FREE ZONES IN ECONOMIC DEVELOPMENT: THE EXPERIENCE OF THE REPUBLIC OF SERBIA AND THE EUROPEAN UNION 3 Abstract In the modern business conditions, the creators of the new industrial policy pay increasing importance to the development of free zones as an important instrument of business infrastructure. Free zones ofer huge chances for the establishment and development of small and medium-sized enterprises and improving their over- all business. Experience has shown that many countries owing to the free zones achieve signifcant development results in comparison with other countries. The countries that have developed free zones generate: signifcant infow of foreign direct investment and new technologies, rising living standards and increasing employment. Those countries that develop free zones have a greater competitive advantage, achieve faster economic development and efciently engage in inter- national fows. The aim of this paper is to, based on a comparative analysis of business zones in the Republic of Serbia and the European Union, indicate that the Republic of Serbia in recent years has improved its position and the investment climate, so that operation of the free zone is a lot easier. Whether the free zones in one country, and in the Republic of Serbia will be successful, depends primarily on the country’s attitude towards the concept of free zones and how that afects their development, as well as the new industrial policy, its objectives and instruments. It is important to emphasize that the role of the state has changed signifcantly in the development of free zones, which includes as well a brighter and better future in terms of stable operation of the free zones and achieve signifcant results. Key words: free zones, economic development, foreign direct investment, Re- public of Serbia, EU. JEL classifcation: E66, O10, O38 1 ivana.kostadinovic@eknfak.ni.ac.rs 2 marija.petrovic@eknfak.ni.ac.rs 3 Acknowledgements: Improving the competitiveness of the public and private sector by networking competences in the process of european integration of Serbia, Project no. 179066, fnanced by the Ministry of Education, Science and Technology Development - Republic of Serbia. SCIENTIFIC REVIEW ARTICLE doi:10.5937/ekonomika1504097K Received: September 17, 2015 Accepted: November 05, 2015 P. 97-108