Sand heavier than soil: UAE venture on agricultural land in Serbia

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European Western Balkans | 29 October 2018

Sand heavier than soil: UAE venture on agricultural land in Serbia

By Vanja Dolapčev
 
Starting from 2012, with the new Serbian government led by the Serbian Progressive Party stepping into power, one of the important foreign partners of Serbia participating in several economic ventures have become the United Arab Emirates (UAE), with its ruling dynasty, Al Nahyan, playing an important role. One of these ventures revolves around purchases and leases of agricultural land.
 
In previous decades, the state-owned agricultural land was leased to the local farmers. With UAE investors acquiring land, the Serbian government may earn less. According to some calculations, Serbia is losing around 1 million of euros per one land property. So, what is the reason for this arrangement? What is the motive of the Serbian government? The reason for this is a promise made by the companies from the UAE (and Serbian government) that the production and land quality will improve.
 
Why this and why now?
 
The agricultural land is one of the areas of investment opportunities identified both by the Serbian Government and the companies coming from the country situated in the oasis among the Arabian sand fields.
 
At the beginning of this arrangement, purchases and leases of agricultural land in northern Serbia, i.e. Autonomous Province of Vojvodina, have been articulated within the inter-state Agreement made by the authorities of Serbia and the UAE. The article number 6 of the Agreement states that all the agreements, contracts, programs and projects made in regard with this Agreement do not need to abide by the official public procurement rules and tender call procedures prescribed in Serbian legislature. Previously, UAE-Serbia business schemes, such as the “Etihad Airways” share in the ownership structure of the Serbian flag airline carrier and the “Belgrade Waterfront” project, were made in a similar way.
 
And here come the contestants
 
According to the research conducted by the Vojvodina Research-Analytical Centre of Independent Association of Vojvodina Journalists, public perceives “Al Dahra” and “Al Rawafed” as “land takers”. Both companies are related to the UAE authorities and are showing tendencies towards creating a monopoly. Both of these companies had to register their subsidiary companies in Serbia.
 
“Al Dahra” registered company under the name of “Al Dahra Rudnap” in September 2009 with the cultivation of fruits stated as its main business activity. “Al Dahra Rudnap” has already acquired land with the fruit plantations near Municipality of Irig. Total financial investment of around 373 million dinars (3 million euros) was made solely by the “Al Dahra Serbia Investment Inc.”. On the official website of the “Al Dahra Holding”, its parent company, Serbia is not presented as a point of operation. At least so far.
 
“Al Rawafed” has registered the company named “Al Rawafed Srbija Llc.” in 2014. The main activity of this company is a cultivation of wheat and oilseeds. The registered capital invested is 10 million dinars (84.5 thousand euros). The investment is a joint venture of “Al Rawafed International Investment Llc.” seated in Abu Dhabi, in the UAE (80.00%), and the Serbian Government (20.00%). The company’s website states that total investment is going to sum 105 million euros.
 
As it was presented, there is already some significant investment made both by the Emirati companies and by the Serbian government. All in all, there are already public funds in the game. That means there are some serious expectations on such investments, at least on behalf of the Serbian government.
 
But, what is this such an issue?
 
One of the illustrative cases in this regard is agricultural land within the limits of the village of Karađorđevo. The large part of the land situated there is in the possession of the state (Ministry of Defense). This land of 3,500 hectares was leased to the “Al Rawafed Serbia” for the next 30 years for the price estimated at 152.00 euros per hectare per year without even inviting to a tender. This price represents only half of the price paid by the local farmers in previous years and there would be practically no profit.
 
Although the investment of 140 million dollars was announced and served as a reason for optimism, there was actually no investment in the past two years, the land was not cultivated and local farmers lost an opportunity in a long period for using this land. Prior to that, Material Resources Sector of Serbian Ministry of Defense has issued the opinion to the Serbian Government that such acquirement is not acceptable.
 
“Al Dahra” company appeared for the first time in 2013 when negotiations on the investment into the state-owned agricultural land in Serbia took place. National Assembly of the Republic of Serbia has even ratified the agreements signed between the Serbian and the Emirati sides. In this case, it was a deal made with “Al Dahra” and facilitated at the time by Serbian Minister of Finance and Economy, Mlađan Dinkić. This arrangement was left without any implementation.
 
Even so, the momentum of enthusiasm for “Al Dahra” representatives lives on. Recently, “Al Dahra Rudnap” was the only entity to submit complete documentation needed for gaining an ownership of the “PKB Corporation” and its property estimated at 7,000 hectares of agricultural land and other resources for dairy and meat production. This corporation also represents one of the biggest landowners in the country. In the end, this corporation was sold to “Al Dahra Rudnap”. Although “Al Dahra” and its Serbian subsidiary were subjects of the controversial and failed arrangement in 2013, the results of their latest acquisition are yet to be seen.
 
In the area of private ownership in the agriculture in Serbia, there are battles to be won by the UAE companies. Currently, the biggest owners of the private agricultural land in Serbia are Serbian businessmen, Petar Matijević and Miodrag Kostić (upon some analysis, currently the wealthiest person in Serbia). Furthermore, according to the data given by the Serbian central bank, UAE is not ranked among the top investors in Serbia. Leading foreign investors are still those coming from the European Union member states and the United States of America.
 
It’s a problem, right?
 
As in any deal made by the Serbian Government and the Emirati companies, the biggest problem remains the non-transparent or even unpublished public call. As a reminder, it is all about the public-owned property.
 
Still, the citizens of Serbia are the biggest losers in this tricky game played by the UAE-based companies and the Serbian government. The involvement of the public funds invested by the Serbian government into the failed business venture is one part of it. Also, the land which was recently cultivated, used and improved by the 80 families is now being leased to the UAE-based companies, such as “Al Rawafed”, in the following decades. Not to be forgotten, local farmers were also investing in these lands in the years before. None of such investment was made by the UAE companies. Yet.
 
That is why it makes sand heavier than the soil.
 
This article was written as part of the project ‘Western Balkans at the Crossroads: Assessing Non-Democratic External Influence Activities,’ led by the Prague Security Studies Institute
Original source: EWB
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