Consequences of the secret agreement with Fiat

While the workers at the Fiat’s factory in Kragujevac are still on strike, the representatives of the Serbian government and the Serbian President, Aleksandar Vucic have been constantly appealing for negotiations to start.

At the same time, they are still treating the information regarding the size of the state’s investment in Fiat Kragujevac from 2008 onward as confidential. One of the arguments used by the government was the problems that the country and Kragujevac could encounter should Fiat decided to leave.

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Not only that, they were asking workers to show “a bit of affection towards Serbia”, and “to be aware that they are chasing foreign investors away with their behaviour”, while PM Brnabic also claimed that there was “a political interest” behind the strike.

Furthermore, Serbian President made it clear that government’s hands were tied because they had only a minority share in Fiat. Regardless, he asked all the concerned parties to do everything in their power to resolve the problem.

And the problem started nine years ago…

Serbian citizens know nothing about the agreement between the government and Fiat, as well as about how much money did the state give to the company.

The only public information made available to the Serbian people was an agreement on joint investment that was signed on 29th September, 2008, which stipulates that the joint venture company would have an initial capital of 300 million EUR with the Serbian government providing 33%, i.e. around 100 million EUR.

However, other information contained in this document was not made public, namely how much in state subsidies did Fiat receive. For years, the state authorities have been refusing to divulge how much exactly did they invest in Fiat.

Still, a lot of valuable information could be found in Fiat’s financial reports. Insajder’s reporters have found out that the agreement with Fiat was amended and certain paragraphs were added in December 2009 according to which Fiat was granted different subsidies and was exempt from paying various taxes.

As Insajder finds out, following a decision made by the Serbian government in 2009, Fiat Serbia is exempt from paying taxes and contributions on employee salaries, income tax for the period of the next 10 years starting with the year when the first taxable income is registered, property tax, spatial plan tax, trademark display tax etc.

The company’s financial report also states that Fiat has been granted investment subsidies and loans from the Serbian government, that it has also received funds for employee training, and that it pays a discounted price for the energy it uses.

Also, on 31st December, 2014, Fiat Serbia was given 161 million EUR from the Serbian budget which was supposed to be used towards utility services, replacing the factory’s roof, environmental protection and construction of a supplier park.

Serbia’s investments in Fiat did not end there…

According to Insajder, based on the relevant contract, Serbian authorities have also participated in the costs of asset restructuring with up to 75 million EUR. Additionally, Serbia gave Fiat 50-million-EUR worth of grants. In line with the incentive plan, the Serbian government invested another 17 million EUR in developing internal infrastructure at the Supplier Park, as well as another million euros in Fiat’s training academy, i.e. in employee training.

Furthermore, Fiat concluded an agreement with the European Investment Bank stipulating a 500-million-EUR loan to be spent on implementing the company’s investment plan. The Serbian government and the Italian Export Credit Agency are the guarantors of this loan.

In May 2014, the then Serbian PM, Aleksandar Vucic promised that the confidential agreement with Fiat, signed by the previous government, would be publicly revealed. In August of the same year, he recanted his earlier statement, saying that the other side would not allow for the agreement to be revealed.

To remind, ten days before the 2008 presidential and parliamentary elections, the then Economy Minister, Mladjan Dinkic and Vice President of Fiat, Alfredo Altavilla signed a Memorandum of Understanding stipulating joint investment by Serbia and Fiat the result of which would be the opening of a factory in Kragujevac.

Presidential candidate, Boris Tadic heavily used Fiat’s investment to further his presidential campaign, while the political party United Regions of Serbia, helmed by Mladjan Dinkic, claimed all the credit for bringing Fiat to Serbia. The political opposition at that time was very critical of the investment and the fact that the agreement with Fiat was confidential.

The factory was finally opened twenty days before the 2012 parliamentary elections with the then PM Mirko Cvetkovic and other Serbian officials in attendance.

(Insajder, 18.07.2017)


This post is also available in: Italiano

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