Following Etihad Airways’ acquisition of a 49 percent stake in the Serbian national carrier, Abu Dhabi investment fund Mubadala is among a number of UAE companies in talks to help boost trade and investment between the two countries to nearly $3bn.
Etihad announced last week it had bought a 49 percent of Jat Airways, which has been rebranded as Air Serbia, and would invest up to $100m into the loss-making airline in a bid to return it to profitability.
The “groundbreaking deal” is part of wider investment in the central European country by the UAE. Earlier this year, the Gulf state made the largest investment in Serbia in more than 30 years, aimed at helping to lift the Balkans state out of a deep recession.
Serbia's economy, which has struggled to recover from economic sanctions and damage to its infrastructure during the 1990s Balkan wars, has been in desperate need of foreign investment, particularly since the global financial crisis sent it into recession in 2009.
It is aiming to offload loss-making state businesses, drugs company Galenika and the Zelezara Smederevo steel mill, to keep its 2013 budget deficit at about 4.7 percent of output and secure growth of up to 3 percent.
Evidence of the ties between the two countries was evident by the news the two countries are to solidify diplomatic relations by setting up embassies in each other’s capital cities.
“We know who the ambassador is going to be here in Belgrade and who the ambassador will be in Abu Dhabi,” Serbian Deputy Prime Minister Aleksandar Vucic told reporters at a media roundtable in Belgrade. “It is going to be a big embassy for us, we will bring 15 people, it is very important for us. We have a building and your people have a building, we are finishing everything.”
Vucic previously stated UAE-based company Mubadala may also put “about US$4bn” into Serbia in the coming years and confirmed the investment vehicle was one of a number of companies in active talks with the Belgrade government.
Spotted among the Abu Dhabi delegation in Belgrade attending meetings on the sidelines of the Etihad deal was Mubadala Development chief operating officer Waleed Al Mokarrab Al Muhairi.
At present, trade between the two countries amounted to EUR23.3m ($30.9m) in 2012, three times what it was in 2011, but politicians have plans for this to hit the billions of dollars within the next few years.
“I am absolutely sure it will increase fifty times [by the end of this year],” says Vucic. “I talked to [Abu Dhabi Crown Prince] Sheikh Mohammed bin Zayed and I hope we will be able to host him here soon and the whole community of Abu Dhabi in our country and they will find a lot of opportunities and that is important to us.”
Serbian Prime Minister Ivica Dacic added that trade will increase “then again by 100 times,” putting the total trade and investment between the two countries at over $3bn.
In addition to the talks with Mubadala, which Vucic said will focus on the semiconductor chip factory, energy renewables, property, aerospace and telecommunications, a number of deals have already been finalised, according to Serbian Finance Minister Mladjan Dinkic.
Abu Dhabi’s Al Dahra Agriculture is to invest $800m in Serbian agriculture through a $400m loan from the UAE Development Fund and a $400m deal to buy eight Serbian farming companies to grow and process food and fodder for export.
Under the agreement, Al-Dahra will use a third of its investment to purchase eight bankrupt agricultural firms, mainly in Serbia's fertile north, with the remainder to be invested in irrigation and the development of at least five fodder plants, Dinkic said.
“Also the Royal Bank of the Gulf, owned by Sheikh Hamed bin Zayed, is approaching the Central Bank and will be the first Emirati bank in this part of Europe,” Dinkic added. “The name of the bank here will be different but the owner will not be different. They have already appointed a CEO and are applying the papers for the licence. This is good as this bank will support companies coming to Serbia.”
Serbia certainly needs these deals with the UAE as Vucic is under pressure to meet some stringent financial plans and at a press conference with Serbian media after the Etihad showcase he revealed the Belgrade government had funds to cover government expenses, such as public wages, pensions and other budget liabilities, until the end of September but after that he declined to say.
Vucic said the investments currently in negotiation were only the tip of the iceberg and more deals were also likely in the near future: “We are expecting [Sheikh Mohammed bin Zayed] to return to Serbia soon and we will have more of these projects and it will be good for his country.”
A Mubadala spokesperson declined to comment on the specifics of the trip to Belgrade and said the “visit is part of ongoing discussions across a range of sectors”.