BALKAN CHRONICLES: Bulldozing Belgrade

BALKAN CHRONICLES: Bulldozing Belgrade
Belgrade Waterfront is becoming a project mired in controversy.
By Alex Young in Belgrade  June 21, 2016

The opulent former Belgrade Cooperative Palace, known locally as “Geozavod”, in the city’s Savamala district has been meticulously restored. It now houses a fine dining restaurant, Salon 1905, and an exhibition for Belgrade Waterfront (“Beograd na vodi” in Serbian) – the ambitious Sava riverside project that is courting considerable controversy. The courteous attendant, dressed like an air-hostess, will field any questions one may have. She boasts about the sale of 80% of the first apartments on offer, their two-year completion timeframe and the commencement of the symbolic Kula Beograd tower. But when asked who is actually constructing the complex, she says she does not know. Amidst the flashy video presentations and detailed scale models, the most obvious of questions goes unanswered.   

Whilst votes were being counted following the general election in late April, some 30 men in balaclavas descended upon the Savamala district armed with bats and a bulldozer. Alarmed calls to the police were ignored; witnesses were intimidated. After two hours, some 12 properties –  including the Savksi Ekpres kafana, a pub – lay in ruins. Having been accused of bulldozing various regulations and pieces of legislation, the Serbian government is now accused of actually bulldozing the very buildings that dared stand in the way of the much-hyped Belgrade Waterfront. 

For most voters, it is inconceivable that in today’s Serbia the country’s prime minister, Aleksandar Vucic, wasn’t at least aware of the planned demolitions. Many suspect he gave the final permission. In insisting upon the signed terms and conditions, Belgrade Waterfront’s investors appear to be one actor capable of holding Vucic to account. Others – namely the EU and US – will likely be placated through resignations. Whilst Belgrade’s mayor, Sinisa Mali, may not yet drown, Serbia’s interior minister, Nebojsa Stefanovic, could quickly find that his position is flimsier than the rights of those whose property is earmarked for the Belgrade Waterfront redevelopment.

All this comes as Vucic struggles to put together a new coalition government following the April election, which was won by the prime minister’s Serbian Progressive Party (SNS). Vucic said on June 21 that the creation of a new government would be most likely formed by July 3. He had earlier set June 16 to form a government, but this deadline was missed because of domestic political considerations and a visit by the Chinese president.

Secretive terms

Belgrade Waterfront is spearheaded by Eagle Hills, a UAE-based purveyor of luxury property developments in Bahrain, Jordan, the UAE and elsewhere. It emphasizes mixed use developments, combining residential with commercial space (hotels, shopping malls etc.). The model to be transplanted into the heart of Belgrade is in keeping with the prefabricated vision they’ve exported elsewhere.

Whilst the headline investment figure of $3bn has been much publicised, the financial terms of the deal remain the subject of considerable speculation. Serbia is understood to hold a 32% stake, with the remaining 68% in the hands of Eagle Hills, with the latter undertaking to invest some €300mn. Transforming Belgrade’s infrastructure, especially transport, to accommodate the project is estimated to cost upwards of $1bn.

There remains a lack of clarity as to what guarantees the Serbian state has provided if, for instance, demand for the commercial/residential space is less than envisaged. There has been no open tender process. The Commission for Public-Private Partnership’s approval has not been sought, whilst they’ve also been denied the opportunity to verify the project’s supposed profitability. Deadlines have been extended and now have little credibility. 

In April 2015, Serbia’s National Assembly adopted in urgent procedure a “lex specialis” to ensure the necessary conditions for the project’s realization – broadening the notion of public interest, and establishing special procedures for issuing construction permits and expropriating land. The amended notion of “public interest” was particularly controversial, as it overrode the ownership safeguards of the Law on Expropriation to remove obstacles to the Waterfront’s construction. Adoption of the law had been preceded by a “spatial plan for the special purpose area” and a declaration that the project was of “special significance” for the country and the city. 

Energoprojekt – the SNS’ cement mixer

Energoprojekt Visokogradnja – a part of Energoprojekt Holding, in which the Serbian government holds a 33% stake – has been named the main contractor for construction of the Waterfront’s first residential premises (BW Residences). Energoprojekt has become something of a favourite of the governing SNS. Only several years ago the company faced severe financial difficulties, but a spate of government contracts has driven a rapid turnaround in its fortunes.

Energoprojekt was entrusted with the landmark construction of the new central railway station in Belgrade, Prokop. They have also carried out Russian-supported improvements to Serbia's railway infrastructure, whilst Energoprojekt Oprema completed works at the Thermal Power Plant Nikola Tesla in Obrenovac. Energoprojekt has also been involved in projects in Russia, Belarus, Kazakhstan, Qatar, Dubai and the UAE, among others. 

Most significantly, another of Energoprojekt’s units, Energoprojekt Niskogradnja, was subcontracted by Shandong International Economic and Technical Cooperation Group as part of the Chinese-funded (through a $301mn loan from the Export Import Bank of China) road construction of a section of Corridor 11, which links Belgrade and Montenegro.

In 2014, Energoprojekt Niskogradnja itself awarded a $75mn sub-contract without a public tender to a three-firm consortium. One of those firms, Inkop, was managed by Zvonko Veselinovic, a controversial businessmen from north Kosovo. Veselinovic maintains a number of links with the ruling SNS, including through Vucic’s brother, Andrej.

Dragan Veljic, a senior SNS official and legal director at the state-owned electricity provider EPS, is a member of the Supervisory Board of Energoprojekt and a member of the board of directors of Energoprojekt Niskogradnja. A former member of the Serbian parliament stated that it was a “public secret” that the SNS controls Energoprojekt.

Dubious subcontractors

Several local companies have been subcontracted to work on Belgrade Waterfront, including Novkol, Millennium Team, PMC Inženjering and Mašinoprojekt Kopring. The Serbian investigative TV programme “Insajder” (Insider) has linked Millennium Team’s owners, Stojan Vujko and Ivan Bosnjak, to Dusan Bajatovic, general director of Serbia's state-owned natural gas provider Srbijagas.

Millennium Team was awarded contracts for gasification works at Srbijagas, the legality of which was questioned by “Insajder”. Serbia’s Minister of Construction, Transport and Infrastructure Zorana Mihajlovic referred to them as “Ivica’s company” –  “Ivica” being Ivica Dacic, Serbia’s foreign minister and head of the Socialist Party of Serbia (SPS), a member of the governing coalition.

PMC Engineering is a subsidiary of JugoImport-SDPR, a public defence sector company. In 2014, JugoImport-SDPR signed a $200mn deal with UAE’s Emirates Advanced Research and Technology Holding (EARTH) pertaining to Serbia’s ALAS (Advanced Light Attack System) missile system. Ties between the UAE and Serbia have flourished on a number of fronts, including Etihad Airways substantial investment in Air Serbia, and an increasingly tangled web of deals in various sectors is quickly becoming the norm.

From yellow rubber duck to balaclava

Having cleared legal and physical obstacles to its construction, the Serbian government is now confronted with persistent protests against Belgrade Waterfront, or “Belgrade Waterfraud” as it’s become increasingly known.

The image of a balaclava is now akin to the clinched-fist of Otpor (the protest movement which ultimately overthrew former dictator Slobodan Milosevic), superseding the carnivalistic yellow rubber duck employed by the Don’t Drown Belgrade (“Ne davimo Beograd”) movement in earlier protests. Any further mishandling of the Belgrade Waterfront project will cause considerable political damage to Prime Minister Vucic and the SNS.

In the end, it may well be the Serbian government, not Belgrade, that is ultimately drowned.