How much did “the deal of the century” cost Serbia?

After a new period of paid leave, the production in Fiat’s factory in Kragujevac has continued.

Fiat’s arrival in Serbia was characterized by high expectations, huge media attention, and political controversy. However, the nation never had a real picture of the conditions and circumstances under which this renowned car manufacturer arrived in Kragujevac. The vrelegume.rs website analyzed the current situation and the results of this investment.

The contract, worth 300 million euro, was signed between the Serbian government and Fiat in the autumn of 2008. It stipulates production of cars and car parts in Kragujevac; the town where, 60 years ago, the country’s post-war industrialization was launched and with high hopes of Kragujevac becoming the driving force behind Serbia’s economic development.

The contract, lauded by the government and at the same time, strongly criticized by the opposition, still remains a secret although the then opposition promised to publish the entire contents of the contract. However, despite several changes in the government, Fiat continued receiving the same subsidies from the state and the contract has never been publicly revealed.

The opening of the plant in 2012 and the launch of the production of the new Fiat 500L have had a positive effect on the morale of the population. Similarly, this has had a positive impact on the development of the town of Kragujevac. Numerous automotive companies have come to Serbia, following Fiat’s arrival, and the Kragujevac plant itself employs 2,500 workers. All this seemed to be the “light at the end of the tunnel” for the town which population is 180,000.

But, this was the image perpetuated by the media and there is the other side of the coin.

Whether the arrival of Fiat has been a success can be concluded from the available balance sheets. These documents have helped to create a clearer picture of the “deal of the century” and the way in which the authorities keep it alive. For instance, state subsidies granted to the company were and still are almost 50% higher than corporate profits. Serbia has committed to exempting investors from paying salary contributions and tax for the period of 10 years, as well from paying profit tax. Staff training is also subsidized.

In addition, the Italian car manufacturer does not pay property tax and gets 10,000 euro in subsidies for each new employee. Plus, the Serbian government is a guarantor of the 500-million-euro loan related to the investment.

The average wage of the workers at the Kragujevac plant is 350 euro. This is four times less than the salary of their Italian colleagues doing the same job. Reduced working hours and income leave workers in a sort of existential fear. As if that were not enough, once again there are rumours about the possible departure of Fiat from Serbia.

Much has changed since the record-breaking year of 2013, when 117,000 cars were made in the Kragujevac factory.

In the first half of this year, only 21,000 Fiat cars were produced in Kragujevac. Considering that this year’s suspension of production will last much longer than last year (about 140 days), one can expect a sharp drop in operating revenues.

The fear that Fiat will insist on concluding a new contract with the Serbian government, stipulating the continuation of subsidies and benefits, is quite justified. In such a scenario, it is not difficult to imagine Fiat sending its employees to another paid leave. This would strengthen its already strong negotiating position, and would indicate that they have a strong trump card.

People in Serbia can only hope that the state can regain its long-lost integrity and properly assess the situation; and not agree to “buying a pig in a poke” again.

(021.rs, 10.07.2019)

https://www.021.rs/story/Info/Srbija/218570/Koliko-je-zaista-Srbiju-kostao-posao-veka.html

This post is also available in: Italiano

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