UAE investments in Serbia promise much, but can they deliver?

In October last year, the United Arab Emirates stepped in to bail-out the debt-ridden Serbian economy. The deal promised billions in loans and investments, averting a looming debt crisis and promising revitalisation of the agriculture, aerospace and construction industries. Although some high profile partnerships have now come good, scepticism still remains that all the money will actually be paid, particularly in the agriculture sector.

“There are a lot of press reports about Arab investors coming to Serbia,” explains Florian Bieber, a leading academic and Balkans expert, “but the government has been desperate in the past for foreign investment. Sometimes they’ve factored in foreign investments into their budgets and then the money hasn’t arrived.”

Bieber compares the situation light-heartedly to the recent Hollywood film “American Hustle”, in which a group of con-artists try to scam a naïve American mayor using a fake shaikh who offers bogus investment into the mayor’s pet construction projects. “It’s unclear whether the media or the government can tell the difference between serious investors and fake ones,” he says.

Belgrade officials were left-red faced in August 2013, for example, when a Maltese investor suddenly pulled out of a project to build the world’s largest solar farm on Serbian soil. According to Bieber, events like this, along with a general suspicion of government, means Serbians are sceptical whenever they hear that a big foreign investment is being made.

Vladimir Pekic, a Belgrade-based analyst and agriculture expert, told Middle East Monitor that serious doubts are now being raised over Abu Dhabi agribusiness firm al-Dahra, which last June announced a major investment programme in Serbia’s agriculture sector. “Since the preliminary agreement was signed in January a final agreement has not been signed and there has been markedly less talk in Belgrade about that deal. In fact, in recent months, there has been no talk about that deal at all.”

Food security is a key priority for the UAE, which imports 85 per cent of its food. In recent years, security issues in the Middle East and rising prices have threatened supply.

Al-Dahra, an Abu Dhabi-based company which already owns farms in Egypt, Pakistan, Egypt and the United States, planned to buy eight large state-owned farms as part of the Serbia rescue package. The deal came with an agreement to export food several times a year back to the UAE but provoked fierce criticism. “These farms are all formerly state-run enterprises and local farmers were expecting to be able to bid for the land,” observed Pekic. Critics also accused the government in Belgrade of giving away land at just €250 per hectare, when it is reported to be valued at an average of €900 per hectare.

Serbia’s Deputy Prime Minister, Aleksandar Vucic, confirmed in an interview with a state radio station in December 2013 that the al-Dahra deal was more than likely not going ahead, after fierce criticism led to street protests against the UAE company. The Deputy Prime Minister rebuked protestors for mocking “a serious company”, noting that some had “dressed up as Arabs” as part of their demonstrations.

Vucic explained that a new company was now in talks to buy the farms and confirmed that negative publicity had dissuaded al-Dahra from buying them.

“I expect that they will enter Serbia and in a very serious fashion at some point,” he added. “They said they will wait for better times, when they are more welcome.”

On top of the al-Dahra debacle, officials recently announced that out of a total of $200m promised to build up agricultural infrastructure, the Serbian government has only been able to find projects worth $38m. Doubts over the agriculture element of the rescue package have serious implications for the Serbian economy as agriculture represents 10 per cent of the country’s GDP and is seen as the single biggest economic opportunity to increase exports. Around one in three jobs in Serbia relies on the agriculture sector.

The outlook on other elements of the partnership is, however, looking more positive. The ailing national airline, Jat Airways, was re-launched recently as “AirSerbia” with Abu Dhabi’s Etihad taking a 49 per cent stake and a five year management contract.

Last month Arabtec, the largest construction company in the Gulf, announced a five-year high on its share price and celebrated by opening a new office in Belgrade.

Anaylsts are also confident about Mubadala Development Company, which is investing into the IT, aerospace, renewable energy and telecommunications sectors in Serbia, as well as Eagle Hills, a new construction company set up by the owner of Emaar Properties, which built the Burj al-Arab in Dubai.

The crown jewel of the partnership is looking to be the “Belgrade on Water” property project, which includes apartments, hotels, piers and an opera house in central Belgrade. It is reported to be worth $3bn.

The project will see attractive new buildings arranged along 2 miles of river bank. UAE property developers have, it is said, prepared the master plan in under a month. In an interview with local media, Vucic called the project “a game-changer” for Serbia.

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.