Fiat Chrysler Automobiles (FCA) Serbia received 2.75 billion Dinars in state subsidies in 2018 and reported net profits of 1.5 billion, Belgrade daily Danas said on Wednesday.
The FCA received 1.9 billion Dinars in state subsidies in 2017, the daily said and added that the company received “additional subsidies” of 970.2 million Dinars last year.
According to notes annexed to the FCA financial reports, the state aid was paid under a December 2009 contract which expires later this year. Danas said that the criteria for the allocation of subsidies were not clear.
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The subsidies did not help FCA overall since the company reported losses of 64.3 million Dinars and reduced production at its plant in the city of Kragujevac.
Danas said that the total amount of state funds handed to the FCA are hard to determine because the government has given the company money, real estate and tax exemptions. Informed sources told the newspaper that the amount could stand at more than a billion Euros.
Professor at Belgrade’s Faculty of Economics, Ljubodrag Savic expects that Fiat will press the government to give even more money in order for the company to stay in Serbia.
“The deal with Fiat is the debacle of the century. This is not a deal that brings great benefits to the state, ” Savic told Danas.
Economist Milan Kovacevic says that nobody actually knows, apart from the Serbian government, how much the state has given to Fiat.
“I am afraid that Fiat will seek to have a new contract with the state, stipulating new subsidies, and I am afraid that we will go for it, at our expense but to their benefit,” Kovacevic warned.
The non-binding memorandum with Fiat was signed before the 2008 elections, Boris Tadic was the president of Serbia and Mladjan Dinkic was the Economy Minister.
The content of the contract was only partially revealed to the public, while the part about incentives was blurred. Fiat was given 10,000 euro per each new job they created, in addition for 1,000 euro per employee as “training costs”.
FCA practically does not pay any salary tax and contributions because the state has committed itself to refund a full amount paid to all workers for a period of 10 years. The company is also exempt from paying property tax and local fees. On top of all of this, the state has subsidized the sale of Fiat automobiles for several years with the amount of 3,000 euro per car.
By analyzing FCA’s balance sheets for 2013 and 2014, it is noticeable that, in those two years, FCA received over 6 billion dinars in subsidies.
The state justifies its investment in Fiat by the fact that exports increased by about 1.3 billion euro since Fiat came to Serbia. However, in addition to the biggest exporter, Fiat is also the biggest importer in Serbia, with the import worth around 1 billion euro.
The whole project in Serbia is now under question because there is no guarantee that Fiat will continue its production after 2019 when the contract expires.
(Nova Ekonomija, 03.07.2019)
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