Serbia's economy, which has struggled to recover from economic sanctions during the Balkan wars and damage that the NATO bombing of 1999 did to its infrastructure, has been in desperate need of foreign investment, especially after the economic crisis sent it into contraction in 2009.
But speaking after a two-day visit to the United Arab Emirates (U.A.E.), Deputy Prime Minister Aleksandar Vucic said that the oil-rich Arab state on the Persian Gulf would eventually invest up to $4 billion in Serbia and that the money the U.A.E. intended to put into a microchip factory represented "the biggest investment in Serbia since 1980."
"In four years' time, the investment will come to $220 million," Vucic said on February 24 after signing three deals with U.A.E. Foreign Minister Sheikh Abdullah bin Zayed.
Vucic said that the U.A.E. company Mubadala would make major investments in the missile industry, agribusiness, and the building of a hotel on the site of former military headquarters in Belgrade that had been destroyed in 1999.
The deputy prime minister also vowed that all deals with the U.A.E. would be made public, highlighting the issues Serbia has had with corruption and an opaque investment climate, as well as failed privatizations of the past.
The government of Prime Minister Ivica Dacic needs to find some economic good news, with Serbia's economy estimated to have contracted by almost 2 percent in 2012, unemployment around 25 percent, and an International Monetary Fund (IMF) loan on hold over concerns about Serbia's budget deficit.
Despite talk of investment from Russia as well as the European Union and the United States, Serbia has seen foreign direct investment (FDI) plunge since 2009. Russia has offered loans, but even the proposed building of a 400-kilometer segment of the planned South Stream natural-gas pipeline and the accompanying investment of over $2.5 billion -- allowing Serbia to buy even more Russian gas -- continue to face delays.
And the headline U.S. investment in Serbia, the purchase in 2003 by U.S. Steel of the Smederevo plant for $33 million, came to an ignominious end last year when Belgrade bought the debt-plagued plant for a symbolic $1. In 2010, the plant had $35 million in foreign sales, making up 10 percent of Serbia's exports. But the global economic downturn hit the plant hard, and it reported $73 million in losses in 2011. The government planned to offload the Smederevo plant as soon as possible but has found no takers.
Even hopeful talk of investment by China has produced little, with Chinese investors seeming to take a wait-and-see attitude.
All the more reason for Serbia to do whatever it needs to do to move closer to the European Union -- especially with the top five origins of foreign investment in Serbia being Italy, Austria, Norway, Belgium, and Greece. Small wonder Belgrade has agreed to meet with Kosovo officials to discuss "normalization" with its erstwhile province, despite its declarations that "Kosovo is Serbia" forever.
-- Dan Wisniewski