Business

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Serbia: Carmaker signs deal with FIAT to revive industry

Belgrade, 29 Sept. (AKI) – The Serbian government and the Italian carmaker FIAT on Monday signed a one billion euro joint venture deal which is expected to revive the country's car industry.

Under the deal, FIAT will invest 700 million euros in the Zastava plant in Kragujevac and the Serbian government will provide 250 million euros in infrastructure and tax cuts, Serbia's Tanjung news agency reported.

The deal was signed by Serbian Economy Minister, Mladjan Dinkic, and President of the FIAT Group, Sergio Marchione.

Serbia's President Boris Tadic, Prime Minister Mirko Cvetkovic and Italy's Foreign Minister Franco Frattini (photo) attended a ceremony to endorse the deal in the Serbian capital, Belgrade.

Dinkic said the new factory will provide close to 5,000 new jobs and produce 200,000 automobiles by the end of 2010, with the capacity to produce 300,000 automobiles annually in the future. Another model would be produced in 2010.

FIAT will own 67 percent of shares in the new joint company and the Serbian government 33 percent.

Tadic said it was “a great day” for bilateral relations and the friendship between Serbia and Italy.

Italy has been Serbia’s leading trade partner and Tadic said he hoped the deal with FIAT will stimulate new Italian investments.

He praised Italy and Frattini for supporting Serbia’s drive to join the European Union and for the Stabilisation and Association agreement on closer EU ties it signed earlier this year.

“Franco Frattini is a friend of Serbia and Italy is a European country of great importance for our economic and political future,” Tadic said.

Relations between the two countries had become strained after most EU members, including Italy, recognised the independence of Kosovo - declared by majority ethnic Albanian politicians in February.

Tadic said Serbia will continue to fight for Kosovo “in a peaceful, European and diplomatic manner.”

Serbia has initiated a resolution in the UN General Assembly to demand the International Court of Justice to assess the legality of Kosovo's independence.

Frattini said he believed that EU countries would abstain from voting in the General Assembly, but would not block Belgrade’s initiative.

“Italy has always pointed to the importance of the International Court of Justice and we think it wouldn’t be good to deny one country the right to appeal to that court,” Frattini said.

The Zastava plant, based in Kragujevac, 120 kilometres south of Belgrade, is Serbia's only car manufacturing plant.

It has been producing Fiat-based automobiles since 1955 for Eastern European markets.

The plant was badly damaged during NATO's bombing campaign in 1999, launched to end late Serbian leader Slobodan Milosevic's campaign in Kosovo.