Serbian potential.

BELGRADE, Serbia -- Among the first "tourist attractions" our guide pointed out to me on a city sightseeing outing were the still-devastated remains of the Serbian Army headquarters and Federal Police building. It's been seven years now since NATO pounded this jewel of a city at the confluence of the Sava and Danube rivers to force Slobodan Milosevic to withdraw his forces from Kosovo. Yet the hollowed-out shells, surrounded by bustling commercial activity, look like they haven't been touched since the U.S.-led raid.

To some residents here, the crumbling structures should remain as a monument to Milosevic's reign in the 1990s as a symbol of the cost of aggression in the name of building a Greater Serbia from the splintered remains of Yugoslavia. But they also are a reminder that even if Serbia wanted to raze the structures and rebuild on their sites, the country lacks the financial resources to do so after a decade of war and economic sanctions imposed by the United Nations.

Milosevic's nationalistic dream died with him and Serbia now seems ready to accept the fact that a Yugoslav reunion will never occur. Indeed, when tiny Montenegro, the last former Yugoslav republic to remain aligned with Serbia, voted for independence in May, Serbians I talked to here on the eve of the vote expressed a fatalistic good-riddance attitude. It's time, they said, for Serbia to go it alone. (Kosovo, which is predominantly Albanian and a protectorate of the United Nations, is still technically part of Serbia, but the province is likely to go the way of Montenegro soon.)

Today, the new Serbian government is determined to rebuild its economy by turning away from Milosevic's socialist path and pursuing free-market policies that encourage badly needed foreign investment.

A strong desire to put an ugly past behind was clear during a week I spent in Belgrade in May as a participant in an exchange program with journalism professors from the University of Belgrade, the University of Georgia, and Clark Atlanta University. One of the chief topics of discussion was how to foster a free press and create an economic climate that could support a proliferation of new media. They include hundreds of radio and TV stations, newspapers and magazines.

Just last spring, the government awarded News Corp.'s Fox TV network one of five highly sought national broadcast licenses. The ability of a U.S. company to win the coveted license is proof that Serbians have no lingering hostility toward Americans over the bombing campaign, certainly not when investment is at stake.

The United States is the largest source of foreign investment in the country, with more than $1 billion in commitments. Among the major acquisitions since 2002: Serbia's sole steel producer SARTID and six subsidiaries by U.S. Steel, the Nis Tobacco Factory by Philip Morris, water bottler Vlasinka by Coca Cola and a Greek partner, and tire producer Ruma Guma by Galaxy Tire. In addition, Ball Corp. has built a new factory to produce aluminum beverage cans in Serbia.

Still, this is a paltry flow of investment into the nation of 7.5 million. Total foreign investment last year was less than $2 billion, a fraction of the investment pouring into neighbors Bulgaria, Romania, and Croatia.

Serbia surely should be able to compete better for foreign funds given its advantage as a tourist destination for travelers beaten down by pricey destinations in Western Europe and looking for bargains in southern and eastern Europe.

The Serbian capital, Belgrade, is a gem worth visiting. The ancient city, with a population of 1.5 million (including its suburbs), boasts that it has been captured by forty armies and has risen from the ashes thirty-eight times. Today it seems to be in the midst of one of those many revivals.

Several residents remarked to me that Belgrade rivals western capitals for street activity and busy nightlife. I couldn't disagree. Throngs filled the streets at all hours. They bustled along the main thoroughfares. They strolled along the downtown pedestrian mall, which was dotted with kiosks, cafes, and a surprising number of high-end retail shops. They packed into the cobble-stone street that runs through the old bohemian quarter as bands serenaded diners in the restaurants that lined both sides of the street.

The food, which largely consists of grilled meats and fresh salads with Serbian cheese, is delicious. (We were warned to stay away from the fish because of radiation in the water from the NATO bombing.) The meals were inexpensive, less than $20 a person, including wine and beer.

Those looking for a different dining venue can head to the banks of the Sava River, where dozens of floating restaurants are docked along both sides of the river. Whether dining, shopping, or touring, everyone we encountered was friendly. And though we ran into few other Americans, I was surprised how widely English is spoken.

On the other side of the Sava River is New Belgrade, where the convention center and newest hotels are. It's also where most of the development is occurring. High-rise apartment complexes, high-tech office parks, shopping malls, even a Serbian "Wall Street" are going up on either side of wide boulevards. What New Belgrade may lack in charm it makes up for in updated infrastructure, including a modern international airport terminal.

The city also is preparing for an influx of tourists in 2009, when it hosts the world student games, the Universiad, the world's second largest sports competition after the Olympics.

Last March, Belgrade Mayor Nenad Bogdanovic traveled to Cannes to accept all award from the Financial Times, which named Belgrade the "City of the Future in South Europe."

Cynics might scoff that the FT got it backward: Belgrade is a city of the past, a hub of excitement in the communist world during the shrewd reign of Josip Broz Tito (1945-80) but on a steady, downward slide ever since.

True, Belgrade has suffered years of neglect and could use a major lace lift, much like a once wealthy dowager who has fallen on hard times. Yet the potential is there. Belgrade, along with the rest of Serbia, is poised to take its place as a tourist spot and a place to do business in southern Europe.

Owen Ullmann is Deputy Managing Editor for News at USA Today and Executive Editor of TIE.