Investors "flee" due to land conversion - Neither state nor companies know how much money is to be paid and when

Everybody who had something to do with this topic realized that the conversion of the right of use to the right of property of land is a political issue. Authorities were changing but none of them wanted to deal with the problem which is ten years old now. For years, investors have been waiting to start construction, and in the last ten days alone two foreign investors announced they would give up opening factories due to unresolved property relations.

In early February, the news that the Turkish company Jeanci which employs 400 people is leaving Leskovac shook the citizens at Veternica as well as the public in Serbia.

For three years now, Jeanci has been producing denim clothes for the world's most famous brands in its rented Leskovac-based facilities.

Investors expected permits by the end of 2013, and it was planned to provide job for 400 people more in the beginning of this season. However, the permit issuance date is not known because there is a land conversion issue.

The city administration in Leskovac is still optimistic and they are trying to keep the investor in any way possible.

- Chances that Jeanci will leave are minimal. The only thing left is to do land conversion so we asked for an opinion from the Government to provide us with guidelines so that we could solve this problem the town is facing – Sanja Sonic from the city administration in Leskovac says for eKapija.

If the Government does not find a solution for an investor to stay, Leskovac has Plan B.

- Since the condition of the investor to stay is not to pay the conversion totaling RSD 6, 5 mil, we have to find a solution, first of all for the workers which work in the factory. If the Government does not provide an answer, we are planning to subsidize new hires the where the town will set aside funds and thus “compensate” for the land conversion – our collocutor explains.

In Cacak also, foreign company has the same problem. Italian Nice, which was announcing opening of solar panel section production and the facility protection system at the West Morava where some 200 people would be hired, gave up. The reason is halting the conversion procedure into ownership over land.

As Slobodan Vasilijevic, the owner of Cacak-based Slovas, which is a business partner to the Italians, said for eKapija, Nice Factory delivered a part of the equipment to Cacak.

- Last year, Nice got subsidies for employment from SIEPA. They should have bought a piece of land with a hall from us at the Cer location and to start production in August. They brought the equipment but we still have not signed the contract with them due to conversion issue–Vasilijevic explains.

Vasiljevic asked help from both Leskovac and the Ministry of Construction.

Vasilijevic says they are expecting final answer from the Nice Factory on whether and when the investment cycle will continue.

Conversion of right of use into the right of ownership of construction land halted investments of many foreign companies. One of the best known examples which attracts huge interest of the public is the IKEA case.

For years, representatives of the Swedish company have been saying they are ready to start the construction of a department store in Novi Beograd, but they are only waiting for all the necessary documentation i.e. to solve the land conversion issue in order to get a construction permit.

Political “million dollar question”

It was obvious that all coalition partners in the Government will have to agree on whether buyers of companies will be able to acquire the right of ownership of attractive building locations at the original price they bought companies at or they will have to pay for conversion. The Law on Spatial Planning and Development which should have solved that question has not been adopted, but the solution acceptable to all the parties has not been agreed upon in the Draft of that document either.

Construction Minister Velimir Ilic said February 1 that the conversion of the right of use to the right of ownership of city construction land will have to be paid 100% of the market value.

The minister of construction said the Government prepared the Law on Spatial Planning and Development, but it is still pending approval with respect to conversion which is a political issue.

In December last year, the American Chamber of Commerce in Serbia (AmCham) and local and foreign investors requested changes to the Draft of the Law on Spatial Planning and Development in the part which refers to conversion, estimating that those clauses would paralyze construction sector and chase away investors from Serbia. They requested the conversion fee to be 15% or to cancel it completely.

In 2012, the major problem was inapplicable methodology of fee calculation which slowed down the payment collection and, thus, many lots at attractive locations remained unavailable until today. In 2013, the major problem was the fact that there was no solution. In early 2014, every solution is uncertain as we're awaiting the establishment of the new Government and its response to this “political issue” which impedes investments worth millions of euros.

Suzana Obradovic