Belgrade Airport Nikola Tesla concession given to France
Dušan D. Nešić 2018-01-07 Belgrade
Nikola Tesla Airport, the biggest airport in Serbia has been given in concession to Vinci Airports, a branch of the famous French infrastructure management company. Vinci, the biggest construction and concession company in Europe, has won on a public tender for the 25 year concession of the airport. Reuters says that the price Vinci will pay is 501 million Euros for the concession (603 million USD) with a promise of 732 million Euros (880 million USD) over the course of the contract.
Serbian president Aleksandar Vucic has announced that this is a very important deal for Serbia, as it allows the government to use the money to pay back the government debt. This comes in the middle of a major resurgence of talks about the debt in Serbia since the government has recently managed to reduce the debt to 57% of GDP which is less than the Maastricht Accords ask from developing countries in Europe. By lowering debt Serbia has left the list of “heavily indebted” countries and is on the way to higher financial independence.
Sale of concessions for the airport have been surrounded by news of Serbia’s recovery as a tourist destination. After Etihad Airways bought 49% of Yugoslavian Airways and rebranded it as “Air Serbia” Belgrade airport Nikola Tesla has seen steady yearly increase in number of passengers, reaching 5 million last year. Vinci expects the number to climb to 10 million in 2030, but provide no data to support such claim and no specific investment plans in airport development. Tourism itself has been a growing industry in Serbia with a 18% increase in number of tourists, most notably from the region, Israel and of course China, which got a visa free travel system last January 15th .
Our take on it is mixed. On one hand, as experts have noticed, previous sales of state owned enterprises under the drive for privatization in Serbia have either been unsuccessful or wasted opportunities. This is a huge opportunity for Serbia to make things right. The money from concessions in short term is significant, the contract details that were made public seem favorable to both parties, and Vinci is one of the top five companies in the world in its field – making it a reliable partner for a developing country government. The reputation Serbian government can get through successful ventures is also important for the country, as attracting FDI is crucial for further development of the country’s infrastructure and companies.
A choice lies ahead though, as what will be done with the money is uncertain. Last time a large sum of money came into the budget, from privatization of the National Telecommunication Company, money was given to other state owned enterprises to pay off debts, and some of the money was used for pensions and wages. This is most unwise though, since with the Airport, government is giving up on a crucial piece of capital infrastructure, so the money should likely go into investment, perhaps in another large infrastructure project such as Corridor 10 which would connect it better with Europe.
Another risk is the fact that Nikola Tesla airport is almost a monopoly. Save for the smaller airport in Nis which is used by low cost companies exclusively, Serbia has no other airports, and none very close to the capitol. As an opposition party has stated “the only monopoly worse than a state
Dušan D. Nešić,Partner of Silk Passage Business Consultancy
2018-01-07， Belgrade, Serbia
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