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The concern is so great that some are worried that China might misuse the situation to continue expanding its political infuence in Serbia, while weakening the EU’s regional position. Others also warn that the boost of public support for China will diminish the already-fragile support of Serbian citizens for the EU. The basis for these fears can be found in the fact that Serbia indeed already stands out from the rest of the Western Balkan countries in terms of its level of political and economic cooperation with this Asian giant.

This policy brief argues that China is willing and able to step in and increase its foothold in Serbia, mainly due to the lack of genuine EU commitment of Serbian decision-makers, together with the EU’s geopolitical unpreparedness. This paper points out that China’s room to manoeuvre in Serbia strongly depends, therefore, on the level of the EU’s active engagement with Serbia. For this reason, a set of recommendations is developed, mainly focused on EU institutions and member states, as the EU is an actor whose further actions towards Serbia may prove decisive for the country’s future orientation.

This policy brief is based on a preliminary analysis conducted by the European Policy Centre (CEP-Belgrade) for the purposes of a Konrad Adenauer Foundation (KAS) funded project titled “Serbia at the Crossroads between the West and the East”. The views expressed in this policy brief are those of the authors and do not necessarily represent opinions of the KAS.

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Available data shows that the number of passengers and flights from the Nis Constantine the Great Airport have considerably increased ever since 2015. Considering that the Airport did not have a single regular commercial flight in 2014, while years before it had been offering a weak and unstable schedule of air companies, most notably by JAT and Montenegro Airlines, one could argue that every single passenger was a huge improvement. However, the importance of this airport becomes clear once the total numbers from 2017 are taken into account: there were more than 330.000 passengers, while the weight of cargo amounted to 2.500 tonnes.

Huge renovation and modernization plans for the airport were considered, while the number of low-cost flights simultaneously increased, as some tickets cost only 10 EUR. But how did it happen that such a

The disagreements were created once the City Council decided to cede governing rights to the state authorities. That is where the conflict between the government and public started, as the latter has shown discontent with the decision to give away what they believe rightfully belonged to them, that is, to their hometown. More specifically, the Public Company Airport and the City of Nis have not fulfilled the contract obligations signed with the Ministry of Defence, a body which had had the ownership of this airport until the year of 2010. Eight years from that moment, the airport was returned to the state level, as the city administration has not managed to complete the agreement about the expropriation of 160 hectares of the land whose governing rights were supposed to be transferred to the Ministry of Defence. The question, however, still remains whether it is important which level of government will manage the airport if it functions well and has a good perspective of progress. The airport is, anyway, owned by all taxpayers. In fact, the essence is a long-term plan and the cooperation of all relevant sides.

Even though the Government granted concession rights for the Belgrade Airport (largely under the veil of secrecy), as it hoped to attract investments and professional management, it has nevertheless shown interest in obtaining ownership and management over another airport. Such moves have caused protesters’ doubts on the Government’s further plans for the Nis Airport. The Government defended its move by arguing that nobody wants to risk investing in the infrastructure of this airport except the state itself. As the protestors were against the transfer of ownership to the state level, then the “bags of money” would be brought to some other places in Serbia, like Lađevci, Ponikve or Morava, as the state presence is wanted there. Furthermore, protesters that demand keeping the governing rights at the local level have no guarantees that the different level of governing would be better or worse for their link with the “world“ and place of employment. In fact, what matters the most for the taxpayers is the transparent contracting, and professional management, as they are the ones paying the subsidies assigned to the airport by the City of Nis and the investments coming from the state level. In other words, the question of how well the airport is and will be managed supersedes the issue of ownership.

The second thing that needs to be clarified here is the question of competition, as it is one of the market principles that Serbia aims to develop. The recommendations issued by the World Bank [2] for economic development reaffirm the fact that the problem does not necessarily lie in ownership and therefore these recommendations do not state that all public enterprises should be privatised, at least not in the first phase [3], but add that these enterprises should be reformed in such a manner to allow them to become self-sustained. In that case, public enterprises should operate in a manner that would not require subsidies and coverage of losses due to bad business practice (management) by the state and, in the final round, by taxpayers. The main reason for insisting on restructuring and privatisation is because state-owned enterprises tend to record losses caused by poor governance, although these companies have good potential and even sometimes a natural monopoly on the market. Financing such business failures from taxed money, represents a risk for the stability of public finances, and represents a violation of competition which was, among the other things, mentioned in the most recent European Commission report [4], especially in the part describing state aid.

What is usually mentioned about the Airport of Nis is that it represents a competitor to the Airport of Belgrade. In this case, the argument goes that the former would damage the interests of the latter, the one for which concession rights were previously granted. However, what is not to be neglected is the fact that these two airports have different target groups. Belgrade airport’s taxes are too high for low-cost companies, which is why they typically rely more on the Nis airport. At the same time, customers of the standard airline companies are two different market niches. For that reason, there is enough “room” for everyone, on both airports. That can also be confirmed by the fact that a large number of travellers from Serbia rely on the airports from neighbouring countries – such as airports in Timisoara, Budapest, Tuzla, Skopje, etc. – in search of more favourable tickets for the flights that are offered there.

On the other hand, even if these two airports were direct competitors, this would not have necessarily been a bad thing. As one of them is managed by the concessionaire, and the other one by professional management, this creates the basic preconditions for the development of healthy competition in the airline market, which would, consequently, also affect the better conditions for all users of those services. Even though this logic is known by the involved parties, statements on potential limitations in the development of Airport Nis – contained in the Concession contract for Airport Belgrade[5] – indirectly forced the European Commission’s Directorate-General for Competition (DG COMP) to become involved with this specific issue. Related to that, a group of dissatisfied citizens complained to the DG COMP referring to a violation of competition in the Serbian airline market. [6]. Now it remains to be seen what the decision of DG COMP will be. Whatever may be the case, more transparency in contracting the concessions is needed. Also, professionalisation and restructuration of management in public enterprises (both in ownership of local and state authorities) is a necessity. Once transparent, professional, and responsible management is ensured, the issue of ownership becomes of secondary importance.

[1] RS Government Act no. 343-2834/2018 from 29.03.2018, http://www.ni.rs/wp-content/uploads/GV-123-1.pdf (date of access: 26.04.2018.)

[2] Western Balkans Regular Economic Report: Spring 2018, p.60

[3] The EBRD report even warns that privatization, although it can bring some benefits, must be very well planned and implemented – The Western Balkans in transition: diagnosing the constraints on the path to a sustainable market economy, p.14

[4] European Commission – Serbia 2018 Report, p.41-48

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