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Serbia has invested almost one billion euros in the arrival of Fiat - Serbia Business

Serbia has invested almost one billion euros in the arrival of Fiat

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Serbia has invested almost one billion euros in the arrival of Fiat in Serbia, N1 announced, referring to the contract between the Republic of Serbia and the Italian car manufacturer, which was a secret for a long time.

Back in 2012, in the presidential campaign, Tomislav Nikolić stated that we invested one billion euros in Fiat, and later this figure could be heard in politicians’ statements regarding the largest investment in Serbia.

Also, in previous years, on the basis of the financial reports of Fiat, i.e. FCA, Danas wrote about state benefits, which were properly listed in the notes on the financial reports.

FCA received 14 million euros from the state last year, and more than 20 million euros the year before in the name of subsidies and grants.
In the beginning, the state paid (until 2012) 50 million euros as founding capital to the company, as well as another 50 million euros in real estate for a 33 percent share in a joint venture with Italian Fiat.

But this is far from the end of giving. According to the famous contract, which, at the request of the public and the Council for the fight against corruption, the then minister Mlađan Dinkić, who signed it, showed in front of the cameras completely blackened, the state had to pay another 50 million euros as a non-refundable donation in cash.

In addition, more donations were collected there. Let’s say for the asset restructuring plan item, 75 million euros came from the state, seven million euros for the construction of internal infrastructure in the factory, then for employee training, for benefits according to the so-called to a special account from which the costs of utility services and roof replacement, environmental rehabilitation and infrastructure for the supplier park were paid for more than 125 million euros.

The subsidy also includes a guarantee for a loan from the EIB of 500 million euros, of which the state guaranteed 170 million, on the basis of which FCA received an interest rate of 0.9 percent, instead of ten times higher market interest rates at that time. In terms of accounting, this is counted as a subsidy of 50 million euros.

Economic analyst Bogdan Petrović points out that reports show that another 137 million euros were given for social benefits, almost 82 million euros for interest and employment subsidies.

In total, about half a billion euros were given to Fiat.

n addition, the state has committed itself to the construction of infrastructure, railways and bypasses around Kragujevac, which, according to Dinkić, was an investment of around 300 million euros.

However, the state did not fully fulfill this promise.

Not only did Fiat extract subsidies from the state for itself, but also for its suppliers, more than 90 million euros, as N1 found was determined by the contract.

We should also remember the state subsidy for the purchase of a Fiat Punto, which cost around 12.5 million euros, and later also for the purchase of a Fiat 500l.

Aleksandar Vučić, who after coming to power promised to show the contract with Fiat, said in 2015 in the assembly to a parliamentary question that “they don’t ask him about secret contracts for Fiat” and that more money was given for that than for all others subsidies together.

But he also said that he wants to save Fiat, “we want that if the recovery of the world market in cars starts to continue that cooperation, we help as much as we can, but just keep in mind that it is not my fault, but those who are such a contract signed a contract containing a confidentiality clause”.

After the 10-year contract with Fiat expired in 2019, the state signed a new one last year on the production of an electric car and “squeezed out” another 48 million euros.

“In the beginning, half a billion euros were given, and that was at a time when both salaries and the budget were much smaller.” It is as if they would now give a billion euros for a third of the ownership in the company. And for that, the state never received a dinar in dividends, not a dinar from profit tax, property tax, local taxes, for ten years the state paid taxes and contributions to workers. It’s an unprecedented scandal”, Petrović told Danas.

He points out that the then government led by President Boris Tadić wanted to take advantage of Fiat’s arrival for the election campaign in 2008 and that is why they promised all that.

“And this new contract is also a scandal. How long will we continue to pay subsidies to Fiat. And that’s not all, but the state also paid severance pay to workers who did not want to go to Slovakia to work for 800 euros”, this expert notes.

Economist Mihailo Gajić from Lübeck points out that it is obvious that the “deal of the century” was not profitable for Serbia.

“Besides the goal was for that government to be re-elected, it was thought that by bringing in Fiat, the components would follow him. It turned out that it was without a foothold in the public eye.

This investment did not have enough spillover effects. Domestic small and medium enterprises that would become Fiat suppliers were not opened. “Components did come, but they also received subsidies and they were products with a low level of processing”, explains Gajić, adding that we will hardly ever know exactly how much the state gave to Fiat, because apart from the monetary benefits that can be seen in the financial statements, there are exemptions from taxes, gifts of land and other privileges.

“Since the state paid both dopinos and taxes for the workers, the only benefit from Fiat was about 2,500 net salaries for the employees. Those 30-40 million euros per year for the city of Kragujevac are not small, but the multiplier effect is very small, only 0.3″, he notes.

Gajić’s calculation shows that for those billion euros, when divided among 2,500 workers for the last 10 years, each of those workers could have been paid 3,500 euros per month to sit at home, Danas writes.