In his decades long career, Enver Borogovac used to work away from his hometown where new projects were seen as a rare occurrence, but recently the Serbian Engineer participated in laying the groundwork for one of the biggest Foreign Direct Investment projects that his country ever hosted right here in Zrenjanin.
On the outskirts of Zrenjanin, 80 km north of Serbia’s capital Belgrade, Borogovac and his colleagues have erected a 4 km long wall to start building a 130 hectare tire manufacturing plant at an estimated cost of 990 million U.S. Dollars.
Linglong Tire, a publicly traded company headquartered in east China’s Shandong Province, began the construction of the plant in April, a milestone project that upon completion would churn out 13.62 million radial tires per year, equivalent to an estimated 600 million dollars in revenue.
It is also one of the latest signals of a deepening economic relationship between China and Serbia, the “all-weather friends” that have been reaping mutual benefits on the basis of strong and lasting friendship.
A Serbian plant will bring the Chinese tire manufacturer which has passed many European automobile makers supplier reviews closer to its main export market, notably its German and Czech clients, Wang Feng, Chairman of Linglong, said in a written interview.
Apart from slashed logistics cost and delivery time, a Serbian plant could take advantage of inexpensive local raw materials and skilled workers, Wang added.
For Zrenjanin, Linglong brings “many jobs, many employment opportunities to people,” Mayor Cedomir Janjic said.
Noting that the agricultural manufacturing is the dominant industry in Zrenjanin and its auto industry needs to be updated, Janjic said he expects other investors to come and invest in the city.
“For sure, this investment of Linglong will help us in this drive,” said Janjic.
The investment has also heightened the need for better infrastructure, Janjic said. “Thanks to this great investment, we are starting to discuss the construction of the highway Belgrade – Zrenjanin … this is yet another great benefit that follows this investment, and goes together with Linglong.”
To produce a vital chemical for the rubber vulcanization process, there are ongoing negotiations with a Chinese zinc oxide manufacturer over the construction of a factory in the city as well, Janjic said. Overall, “more than 2,000 job posts will open” as a result of the Chinese investments.
Across Serbia, Chinese investments have poured into such sectors as automobile parts, mining, steel, furniture and others, creating thousands of jobs, according to the Development Agency of Serbia, a government office on investment promotion.
That includes one of the most successful foreign acquisitions in Serbia, when a leading Chinese steel and iron producer breathed fresh life into the nearly bankrupt Smederevo steel factory.
In 2012, U.S. Steel, an American integrated steel producer headquartered in Pittsburgh, sold the Smederevo steel factory to the Serbian government for a symbolic 1 dollar, leaving the company and its 5,000 plus workers in limbo.
As Serbian President Aleksandar Vucic explained, “the steelworks consumed around 12 million euro of state funds of Serbia every month, and we did not know how to solve this problem. No one wanted to help us. Everybody was silent when the factory was returned to us for 1 USD.”
In 2016, the Serbian government signed a deal with HBIS Group, China’s largest and the world’s second-largest steel and iron producer based in northern China, to sell Smederevo steel factory, which was then renamed Hesteel Serbia, with the over 5,000 employees staying on at the new company.
Today, it is “the most successful factory and biggest exporter in Serbia in 2019,” Vucic said in September, two months after the steel plant kicked off a modernisation investment worth 120 million dollars from its parent HBIS Group.
Faith in Friendship
Zhao Jun, General Director of HBIS Serbia, told that the revival of the plant was based on the localisation of three key aspects, economic interests, staff and culture.
Wang stressed his confidence in government policies and business environment of Serbia.
As the largest Western Balkan Country by landmass and population, Serbia led the region in 2018 with a record 5.98 billion dollars investment in 105 greenfield projects.
In half a decade, Serbia has surpassed over 40 economies in the World Bank’s annual “Doing Business” report, which evaluates the overall business climate in a given country. In the most recent 2020 report, Serbia ranks No. 44 globally, ahead of such western European Union member states as Belgium, Italy and Luxembourg.
For Chinese investors, what made Serbia stand out from other potential investment destinations is the deep trust and friendship between the two peoples.
“China and Serbia are all weather friends and important cooperation partners,” said Chinese President Xi Jinping during a state visit to Serbia in 2016, when both sides decided to elevate bilateral ties to a comprehensive strategic partnership.
“Efforts should be made to well implement major cooperation projects in production capacity, infrastructure development and other fields,” Xi told visiting Serbian Prime Minister Ana Brnabic earlier this month.
Serbia is also among the first signatories to the Belt & Road Initiative, echoing China’s blueprint to bring the world closer through infrastructure and other projects.
In addition to building and investing in factories, Chinese companies have been constructing bridges and roads in Serbia.
Earlier this year, the Serbian government and China Road and Bridge Corporation signed an investment agreement on the establishment of an industrial park in Belgrade, with a land area of 3.2 square km. It will be a platform for overseas, high-tech companies to enter Serbia and the region.
“This friendship is now at the highest possible level. We understand, support and help each other, and this definitely contributed to strengthening the international reputation of Serbia,” said Professor Zarko Obradovic, Member of Serbian Parliament & President of the Friendship Group with China.