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Serbia's EU accession prompts foreign investment.

SERBIA is the latest European country to start formal accession negotiations with the European Union (EU) and as it prepares to joins the EU, its auto sector will have increasingly unfettered access to the EU's 500 million consumer market. To boost its own auto sales, Serbia has already agreed to shed import duties on EU-made cars through an interim cooperation agreement with the EU entering into force last February. It included promises to scrap Serbian auto tariffs by January 2012. But full free access to the EU market for Serbia-made cars will have to wait for successful negotiations on membership. These are now under way. Serbia made a formal application to join the EU last December and the EU Council of Ministers started formal proceedings in October.

These will doubtless take years--probably more than five years--but foreign investment is still pouring into Serbia's auto industry through Italy's Fiat, which has held 67% ownership of Serbian car manufacturer Zastava Kragujevac from 2008. It plans to invest close to Euro EUR1 billion in this company, the largest ex-Yugoslavia car manufacturer, by the end of 2012. This would fund an ambitious expansion program at the company's plant at Kragujevac, central Serbia, enabling Zastava to produce 300,000 cars annually in 2013 (and 200,000 in 2012). It would be a huge increase in production over the current levels: from April 2009 to December 2010, Zastava made just 33,000 cars, Punto Classics. The last old models--the Yugo, Zastava 101, Zastava 128 and Florida--rolled off the assembly line in November 2008. Besides the Punto, Fiat is planning to produce at Kragujevac a new five-seat B-class model for EU market, and a seven-seat minivan which will be exported to USA, competing with the Mazda 5 and Ford's C-MAX. Test data will be published in September 2011 and mass production is scheduled to begin after a launch at the Geneva Motor Show 2012, probably in March. Zastava's chairman Aleksandar Ljubic was a part of Serbian government delegation that recently visited Fiat's headquarters and design center in Turin, where Italian designers presented them with prototype models."I still cannot believe that we are going to produce such cars in Serbia. They have excellent modern Italian design and engines. The equipment that will be set in Kragujevac plant for this production is already ordered and its installation should start in the first quarter of 2011", said Ljubic. Serbian minister of economy Mladjan Dinkic was also in Turin and predicted strong sales amongst European female consumers for the five-seater, noting--rather quaintly: "It looks like a car made just for ladies and I was pleasantly surprised when I saw it, it's a lot more than I expected". He added that the new model would be a real Serbian car because 80% of its components will be produced in Serbia, (excluding the engines). Both models will have modern roof designs--although details are sketchy other than that they will have different colors from the rest of the car, and the five-seater is 4.15 meters long and seven-seater 4.4 meters. Everything else is top secret. Fiat expects to generate EUR500 earnings from these models in their first year of production, moving up to EUR1.3 billion in 2013. "That's one fifth of the Serbia's last year's total exports. Thanks to this investment, Serbia will finally begin with worldwide sales of high value finished products, not just cheap raw materials and intermediate products sales", said Dinkic. He expressed hope that new industrial investments for plants supplying components to these models would boost Serbian GDP. Key Fiat supplier Magneti Marelli talked to Serbian government this month about its plans to build a EUR60 million factory in Kragujevac next year. The Italians will invest EUR50 million and the Serbian government EUR10million. At first, two basic product lines will be installed in this factory, one for producing significant mechanical assemblies and the other, for producing exhaust systems.

Meanwhile, the EU accession negotiations, which will underpin the strategy of expanding Serbia's auto sector, continue. October saw a request from the 27 existing EU member states for the European Commission--the EU executive--to deliver a formal opinion on Serbia's application. Brussels officials have delivered detailed questionnaires to the Serb government to help it in its task, and further progress can be expected in 2011. Serbia already receiving EU finding in a range of ways, most recently (in July) it secured a EUR 200 million loan to help it recover from the global financial crisis. Negotiations will doubtless drag on for some years, even if the Serb government arrests and hands over the last remaining major fugitive sought by the International Criminal Tribunal for the former Yugoslavia in The Hague--Ratko Mladi?, the former Bosnian Serb army chief.
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Author:Conkas, Zlatko; Nuthall, Keith
Publication:International News Services.com
Date:Dec 1, 2010
Words:788
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