Serbia relies on Gulf cash for Belgrade waterfront development

Fri Jun 27, 2014 11:09am EDT

* Project to overhaul Belgrade waterfront to cost 3 bln euros

* Dubai-based construction firm Eagle Hills to provide financing

* Critics question viability, cost of project

By Ivana Sekularac

BELGRADE, June 27 (Reuters) - Serbia unveiled plans on Friday to redevelop the Belgrade waterfront, aiming to make the capital a tourism and business hub, in a controversial 3 billion euro scheme that will be funded by Gulf Arab cash.

The Belgrade Waterfront project promises office and luxury apartment blocks, eight hotels, a shopping mall and a tower resembling Dubai's landmark Burj Khalifa, albeit a quarter of the size at 200 metres, on the right bank of the Sava River.

It is the signature project of Prime Minister Aleksandar Vucic's two month-old coalition government, which has pledged to create jobs and growth and turn Belgrade into a business hub for the Western Balkans. But it has also drawn criticism from architects, economists and corruption watchdogs, who have raised concerns over its design, cost and transparency.

"It (the project) will make Belgrade a regional centre and it will attract many tourists," Vucic said at a press conference held at Geozavod, a renovated 1907 building that dominates the area and will house the Belgrade Waterfront Gallery.

The proposed area for development, Savamala, houses grand, century-old buildings that have become derelict, though the area has started to re-emerge as a cultural hub. Unlike some parts of Belgrade, the area escaped damage by NATO bombing during the Kosovo conflict in 1999 but the right bank of the Sava is blighted by a seedy central railway station and bus terminus.

The project is to be co-financed and led by Dubai-based construction company Eagle Hills, although Eagle Hills and the Serbian government have yet to form a joint venture and define a co-financing model. Eagle Hills has agreed to put up the 3 billion euro ($4.08 billion) cost of the scheme but the terms have not been settled and it is unclear how much the Serbia government will contribute in funds.

It is the latest sign of increasingly cosy economic ties between the United Arab Emirates and Serbia under Vucic, a former ultranationalist who has rebranded himself as a pro-European reformer.

In March, while Vucic was deputy premier, Serbia secured a $1 billion, 10-year loan from the United Arab Emirates to prop up its budget. Last year, Abu Dhabi's state-owned Etihad Airways bought a minority stake and gained managerial rights in troubled Serbian flag carrier JAT Airways.

Critics have pointed to the absence of public tenders for the project. Others question the economic wisdom and viability of the project in a country under pressure to cap its deficit and public debt, which stand at 7 percent and 63 percent of gross domestic product respectively. On top of building costs, the government will also have to compensate residents who will be relocated.

With unemployment running at 20 percent and the average net wage in Serbia just 380 euros a month, the project appears unnecessarily lavish to many members of the public, who say the government should be building roads and hospitals instead.

Developing the waterfront has been talked about by city officials since the 1970s, but successive governments have never managed to find the funds to finance it.

While that problem appears to have been solved, some economists now question whether there is enough demand for the amount of upscale office space or luxury flats envisaged in the project. ($1 = 0.7359 euros) (Editing by Matt Robinson, Zoran Radosavljevic and Susan Fenton)

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