Transcript: Belgrade Waterfront - part one

The Mayor of Belgrade Siniša Mali: The Belgrade Waterfront project is the best contract for the City as well as for the Republic of Serbia. Why? The best. Great. For decades we've been hearing about the activation of the Sava promenade, the Sava amphitheatre. No one could ever do something about it, no one could find any investors. People see changes, and that is important. Because the Belgrade Waterfront is, in fact, a project of changes.

Every question about the Belgrade Waterfront construction, about the investors, the contract, special laws, changes made in the General urban plan, economic calculation for Serbia - in the past two years mostly lead to accusations about a foreign hirelings' campaign. The authorities claim that there is nothing unclear about it, that the political opponents are making a straw man argument because this is the best thing for Belgrade. Whenever the officials try to explain the benefits of the Belgrade Waterfront joint venture contract, they end up discrediting those who challenge the project from the very start. From the best to the worst ever contract for Serbia - these qualifications marked the implementation of this project.

The essence got lost in mutual accusations. According to Insajder research, there are many questions that have yet to be answered. What do Belgrade and Serbia get from this contract, is this an intergovernmental agreement or a commercial contract leading to numerous concessions to a foreign private company, what is the background of the company that constructs the Belgrade Waterfront and can the Republic of Serbia trust just one man engaging in such a big investment? How much do Serbia and Belgrade invest, and how much does the Arabian investor invest? Why is, due to Arab investments, Belgrade turned into Wild West where unknown masked individuals demolished buildings on the future Belgrade Waterfront site?

In February 2013, the bilateral agreement about the cooperation between the two countries was signed in Abu Dhabi. On behalf of Serbia, the signatory was Aleksandar Vučić, at the time the First Deputy Prime Minister and the Minister of Defence, and on behalf of the United Arab Emirates, the signatory was their Minister of Foreign Affairs.

One year after the signing of intergovernmental agreement, the media start to announce the largest investment for the city of Belgrade and the largest project in this decade - the Belgrade Waterfront. In December 2015, the Serbian National Assembly passed a special law on the Belgrade Waterfront.

In the meantime, the joint venture contract was signed. The joint Serbian-UAE company Belgrade Waterfront has been formed, with the goal to finish the project in the next 30 years. The Arabian company is the majority owner with 68%, and Serbia a minority one with 32%. According to the contract, the Arab party invests 150 million Euros and secures 150 million Euro interest-bearing loans. Serbia invests one hundred hectares of land, it has the obligation to clear the whole area and to provide infrastructure.

Siniša Mali: You failed to see the amount of 3.5 billion in the contract, but you saw 300 million Euros.

Brankica Stanković, Insajder: That is 90 percent less.

Siniša Mali: Just a moment. Around 150 through capital, 150 through the founder's loan. That's 300 million for the first phase. So, we assume that...

Brankica Stanković: Let's make it clear - they invest 150 million Euros right away?

Siniša Mali: The investor is bound by contract to invest around 300 million in phase one, his own money. Brankica, I can ask you immediately...

Brankica Stanković: But this is not in phase one.

Siniša Mali: Just a moment, let me ask you how much is that... has there been any larger investment in Serbia in the past two, three years... with 150 million, not 300. Because, you see, in 2013, when we signed the contract, people criticized us saying - these are just dreams, will this ever happen, it will never happen and so on. Now, when you walk along the Promenade, when you see that we finished the Promenade, when you see the construction of several structures, two residential towers by the end of the year already at the 10th floor... Energoprojekt, our firm, is doing the job. For the great Belgrade Tower, the future symbol of Belgrade, the digging is already done, the pillars are being done... They started to dig the foundations for the large shopping centre. That is the money that has already being invested. Your questions are perfectly alright. I just want to say that for us, as well as for all the citizens of Serbia, the bigger problem was whether this would happen or not.

Brankica Stanković: No, but that hasn't been the main issue. The main issue here was how much damaging this contract is for Serbia and the city of Belgrade?

Siniša Mali: Well, how can it be damaging for Serbia and the city of Belgrade, when someone offers money, offers tens of millions of Euros, hundreds of millions of Euros...

Brankica Stanković: Not hundreds.

Siniša Mali: Well, hundreds.

Brankica Stanković: Around 150 million.

Siniša Mali: Around 300 million. I'm sorry.

Brankica Stanković: Around 150 million, plus 150 million of credits. Isn't that right?

Siniša Mali: Not credits. That is a loan from the founder. That is his cash money. That is 300 million, Brankica. All I'm saying is that now, if we sit down and do an analysis of all the projects up to now, I don't know if we would've found a project worth 300 million Euros, 150 million Euros that somebody came and invested in Serbia.

The contract stipulates that the strategic partner, i.e. the UAE investor, pays the total of his financial obligations in accordance to the business plan.

Brankica Stanković: The business plan is a trade secret of the Belgrade Waterfront company and the public cannot see it?

Siniša Mali: That is only a question of dynamics. Why wouldn't we make it public? The whole contract is a public document.

Brankica Stanković: No, no. We asked to see it and they said it was a trade secret.

Siniša Mali: The whole contract regarding the rights and obligations of the Republic of Serbia is on the Republic of Serbia website. The commercial contract, the business plan, which is a trade secret, though.

Brankica Stanković: We cannot see how much money they will really invest, except what the contract stipulates. All we can do is trust your words.

Siniša Mali: Well, that's it, Brankica. Not my words. Trust the contract. The contract says that they have to do and construct two million square meters of business, residential... That is the subject... in order to get this project moving, they will invest 300 million of their own money immediately, to start the project immediately.

Brankica Stanković: How much have they invested so far?

Siniša Mali: So far, they have invested exactly 43 million Euros, according to the business plan, and in the next two months, 20 million capital increases will follow. So, the money influx pace follows the works in the field, and I must admit that the UAE investor follows the business plan to the letter and fulfils his obligations on the exact day, hour. That is very important. And you can see it on the spot, you can see the construction moving ahead, it doesn't stop at all. They wouldn't be constructing if they were not being paid, and through the control of the Belgrade Waterfront operations, we see when the money is being transferred, who receives the money and everything else. As you can see, so far, everything is going, knock on the wood, like clockwork.

Brankica Stanković: Alright. How much has Serbia, or Belgrade, invested so far?

Siniša Mali: Up to this day, the city of Belgrade has invested 1.350.000.000 dinars in the project of relocating 250 families from the Belgrade Waterfront area. There are six more families left to relocate in order to fulfil the plan we have until 2019, the plan for the second phase of the Belgrade Waterfront.

Brankica Stanković: Did Serbia raise a loan, or was this paid from the budget?

Siniša Mali: This is all from the City of Belgrade budget. All our money. During the past two years, as you know, we managed to cut the deficit, we managed to stabilize public finances. We have money for important projects.

The contract stipulates that the strategic partner will obtain a loan for the Republic of Serbia at a total amount of 130 million Euros. However, the Mayor of Belgrade says that this article of the contract is not obligatory for Serbia.

Siniša Mali: The Arabian investor said himself, 'Listen gentlemen, if you don't have enough money in the budget, we'll be glad to give you a favourable credit, just as we give it to the budget of the Republic of Serbia, to help you clear this if you need it. We say, 'Thanks, if we need it. A this moment, we don't need it.' With that option they wanted to help us, and we are grateful to them for that.

Brankica Stanković: Yes, but it says, market interest rates.

Siniša Mali: But only last... well, like any commercial loan. It doesn't matter. At this moment, we...

Brankica Stanković: It's not favourable at all. That is what I'm trying to say.

Siniša Mali: But we didn't raise it. That is their good will. So, it is not an obligation, it is their good will, and we will not use this option.

Brankica Stanković: You say that the financing will be secured by a combination of the money obtained from the buyers, and bank loans. Therefore, the investor will not bring in alone I don't know how many hundreds of millions. It will be a combination.

Siniša Mali: But Brankica, no one has ever said that the investor alone...

Brankica Stanković: But you did say it. That's what I'm talking about.

Siniša Mali: I said that?

Brankica Stanković: All of you said that.

Siniša Mali: No. Let's go through this one more time. It is very important to me that you, as well as the citizens, understand this.

Brankica Stanković: It is important to us, too.

Siniša Mali: Total investment is 3.5 billion dollars. That is the amount of money you need to build so many square meters, almost two million square meters, how much will be built for the Belgrade Waterfront project. Someone, in this case the UAE investor, pulled out 300 million Euros from his own pocket.

Brankica Stanković: Not yet, forty three.

Siniša Mali: But he pulls it out along the way. So far, everything is on schedule. There is no need for him to pull the money out, then to see that money idling on the account for the next year, or year and a half. The money transaction follows the pace of work, so the money can slowly follow the business plan we have adopted.

The joint venture contract on investment in the Belgrade Waterfront is a result of the intergovernmental agreement between the two countries. Agreements, contracts, programs and projects based on the intergovernmental agreement between Serbia and UAE are not a subject to public procurement, public tender, public competing procedure or any other procedure defined in National legislation of the Republic of Serbia.

On 26th April 2015, the contract on joint investments in the Belgrade Waterfront project was signed by the Minister Zorana Mihajlović on behalf of the Republic of Serbia, by the then acting Director Aleksandar Trifunović on behalf of the Belgrade Waterfront Ltd company, while Mohamed Ali Rashed Alabbar placed his signature on behalf of two companies - Belgrade Waterfront Capital Investment LLC and Al Maabar international investment LLC.

The key argument for those who dispute the whole project is the fact that the Belgrade Waterfront is being built by the private Arab investor Mohamed Alabbar, and not UAE as a country.

Siniša Mali: We wanted to find a partner with good references in this line of business, someone with experience. Mr. Alabbar, having in mind that he built millions and tens of millions square meters of such space all over the world...

Brankica Stanković: Where, exactly?

Siniša Mali: Well, take for instance the Burj Khalifa, the tallest structure in the world, take Dubai downtown, he made that, too...

Brankica Stanković: But he didn't do it with the company he uses to build here.

Siniša Mali: I'm sorry?

Brankica Stanković: Not with the company he uses to build here.

Siniša Mali: That's different. You have to know the building process. For each project, for each country, there is a specific project financing.

According to the research done by the Insajder reporters, Mohamed Alabbar founded the Arab company Eagle Hills in May 2014 for the Belgrade Waterfront project.

The media published biography of Mohamed Alabbar state that he was born in 1956 and that he made his way up to the top of the state leadership working at the Central Bank of the United Arab Emirates and the Government office in Singapore, where he worked in the economic development department. During that period, he establishes a close relationship with Sheikh Mohammed bin Rashid Al Maktoum, the Ruler of Dubai. Later, he founded the EMAAR company in which the UAE holds 29% and Mohamed Alabbar is the chairman of the Board. EMAAR is indeed a great company that has built the larger portion of Dubai. However, this company does not build the Belgrade Waterfront. In his interview with the Arabian Business magazine, Mohamed Alabbar explained that the EMAAR company is not interested in investing into Belgrade because he doesn't see any potential in the Serbian market. In the interview, Alabbar said, 'I believe that it is my patriotic duty to help the success of the Belgrade Waterfront project on such a high level'.

Siniša Mali: Mr. Alabbar stands behind this project along with his great company, the guarantor of the whole project. The company with more than two billion dollars of assets constructs all this projects all over the world... and for each project they form a specific legal entity, that is so-called project financing, we won't go into details now. That is the case with Eagle Hills, it was formed solely for investing in Serbia.
In the contract, the Almaabar company is the guarantor, and Mohamed Alabbar represents it.

Brankica Stanković: We couldn't connect him in any way with that company, Mr. Alabbar with the Almaabar company, stated as the guarantor.

Siniša Mali: Well, you can ask me, you can ask us, if you asked, we could have maybe...

Brankica Stanković: No, I'll tell you now. In the contract, he is the representative of that company, it says so, but his name is nowhere in the company website, he is neither the owner nor the chairman, we see only another sheik, and in his biography there is no connection with this company. Did you, as the government, do a check on him?

Siniša Mali: Absolutely yes, we have... for the company, we have the audit report, it is a company with decades-long history, and it is connected with all the projects.

Brankica Stanković: This company is indeed large, but there is no connection of Alabbar with that company.

Siniša Mali: Well, we can look into this, you ask about some details that I haven't...

Brankica Stanković: I want to know if anyone on behalf of the government checks...

Siniša Mali: But look, whether Mr. Alabbar is connected with the company is less important than facts about the company.

Brankica Stanković: Yes, but who can guarantee that he has any connections at all with this company?

Siniša Mali: If the report... as far as we are concerned, the state can guarantee.

Brankica Stanković: But he is the representative.

Siniša Mali: Abu Dhabi can guarantee, but as a guarantor behind a project... when you take a bank loan, you don't bring your parents to be the guarantors, you call your friends to be the guarantors.

Brankica Stanković: No, we're not talking about the same thing. In the contract, a large company is stated as the guarantor, but its represent...

Siniša Mali: We did a thorough check on the company.

Brankica Stanković: We did it, too.

Siniša Mali: We did a check, it is a company with more than two billion dollars of real estate only in its portfolio.

Brankica Stanković: Yes, but I want to say that this company does not appear as the owner and chairman, the signatory in the contract, only Alabbar appears as the representative of the company, but he is nowhere to be found in the company.

Siniša Mali: Whether he is there or not, that is not important. He has the authorization from the owner or the chairman.

Brankica Stanković: What do you mean, it is not important? Have you seen the authorization?

Siniša Mali: Of course we have.

According to Insajder research, Mohamed Alabbar has founded the Eagle Hills company for the Belgrade Waterfront project. In 2014, the Serbian Eagle Hills company entered into the records, with the Arabian Eagle Hills as the owner, at first. At the same time, the Serbian Government founded the Belgrade Waterfront company with the deposit of one million dinars. That was all before the signing of the joint investment contract between Serbia and Alabbar.
In March 2015, the Belgrade Waterfront Capital Investment LLC was entered into the Abu Dhabi Business Register.

Holding 68% of shares, that company becomes the majority owner of the Serbian-Arab company Belgrade Waterfront, while Serbia holds 32% of shares.

After joining the company, the Arab Belgrade Waterfront company made three payments of, in total 40.022.00 Euros.

In August 2015 they transferred 22.000 Euros, in September 2015 they transferred 20 million, and in late march 2016 another 20 million.

According to the financial report, the company that is supposed to complete a project worth 3.5 billion Euros had in average only eight employees during the past year and it is in the category of micro legal entities.

According to Insajder research, the Belgrade Waterfront Capital Investment LLC, the UAE company, the major shareholder of the Belgrade Waterfront Ltd, didn't have a valid licence in the country of residence for months. The official UAE Business registry shows that the company, founded on 11th March 2015 had a licence valid until 12th March. The licence hasn't been extended and according to the UAE Department of Economic Development website, the licence has been suspended until just a few days ago.

This is the reason why, a few weeks ago, we send a query to the Belgrade Waterfront Supervising Board asking whether anyone does a check on the strategic partner, does anyone check their licence. In the meantime, and probably as the result of this query, on 7th September this year, the licence has been extended.

Belgrade Waterfront Capital Investment LLC is at the same time the major shareholder of the Eagle Hills Properties, the company with flags all over the Belgrade Waterfront area founded on 15th August 2014 at Simina Street No. 18 in Belgrade. The Register has no data about the exact floor of the company headquarters, there are no contact details.

The company chairman is the citizen of Singapore Muhammad Salman Sajid. He is also a member of the Belgrade Waterfront Ltd Supervising Board as the foreign investor representative.

According to the Serbian Business Register Agency, Eagle Hills is registered for construction development and according to financial reports, it is a micro legal entity with no employees. The basic capital of the company is 100 dinars.

Brankica Stanković: What makes you so sure of this? How come you never did a background check on the Eagle Hills company?

Siniša Mali: What do you mean, we haven't? We vetted everything.

Brankica Stanković: You haven't, because they haven't done anything so far. Here, I'm sure you know about the American agency specialized for specific news and analysis...

Siniša Mali: Okay...

Brankica Stanković: You even spoke with them, Bloomberg, you heard about them?

Siniša Mali: Of course.

Brankica Stanković: In an article about the Belgrade Waterfront, they question the Eagle Hills ability to complete this project and say: "Still, city authorities seem bent on pushing the Belgrade Waterfront through without a proper vetting of Eagle Hills and whether it can afford to see the ambitious project through".

Siniša Mali: What can I tell you now about not being true? Everything has been checked. Eagle Hills, and I answered that question a moment ago, was founded for the purpose of investing into our country.

Brankica Stanković: But one individual, Alabbar, is both the contractor and the guarantor.

Siniša Mali: He is not the contractor, and I will say this once again, he is the investor.

Brankica Stanković: Well, okay, the investor and the guarantor.

Siniša Mali: The guarantor is the Almaabar company.

Brankica Stanković: No, Almaabar represented by Alabbar.

Siniša Mali: Okay, represented.

Brankica Stanković: Yes, he is, he is... on page 54 of the Contract, Representations and Warrants, let me just say...

Siniša Mali: Brankica, just tell me, what is disputable there?

Brankica Stanković: What do you mean, what is disputable? One individual guarantees everything.

Siniša Mali: No, a company worth two billion dollars guarantees everything.

Brankica Stanković: No, that is not true, because the contract here, on page 54, Representations and Warrants, states that "the Strategic Partner is ultimately controlled by Mr. Mohammed Ali Rashed Alabbar", that means one man, the contract says so, your contract.

Siniša Mali: Okay, the contract says so. And who is the guarantor of that contract, I'm asking you?

Brankica Stanković: Almaabar, represented by Alabbar.

Siniša Mali: It doesn't matter...

Brankica Stanković: You cannot find Alabbar nowhere on the Almaabar website, neither his biography states...

Siniša Mali: But Brankica, they could authorize me, or you, or anyone else.

Brankica Stanković: You have an individual to guarantee. Not a company with its capital.

Siniša Mali: No, a company guarantees. Who signed in the name of the company is one thing, but the company guarantees, it is clearly stated in the contract that they are the guarantor of all the obligations and rights that Eagle Hills took over by the agreement.

Brankica Stanković: Not them. Alabbar, Alabbar, who...

Siniša Mali: Just look at the cover page.

Brankica Stanković: The cover page is alright, I read everything thoroughly.

Siniša Mali: And, what does it say?

Brankica Stanković: Alabbar is both the representative and the signatory.

Siniša Mali: That's not important, but who is the guarantor?

Brankica Stanković: It says Almaabar company, represented by Alabbar, on page 54.

Siniša Mali: They could issue an authorization.

Brankica Stanković: But here, on page 54, it clearly states that it an individual.

Siniša Mali: I absolutely do not agree with you.

Brankica Stanković: Well, read the contract, page 54.

Siniša Mali: I read it, more than once.

Brankica Stanković: I read it also, thoroughly.

Siniša Mali: Almaabar company with its assets, worth two billion dollars is the guarantor, not Mr. Alabbar.

Brankica Stanković: But I just read it out loud to you.

Siniša Mali: Except, and I have to say this, it is very important to us that Mr. Alabbar is present. His references, his reputation of the most wanted person in the world, of someone who is engaged in the largest number of projects in the world, is also a guarantee that this project will be a success. Because it has never happened before that he engaged in a project and that the project failed. Not maybe just because of us, but because it could compromise his credibility in the other countries where he is doing business.

The first page of the contract states that the guarantor of the project is the Almaabar company, represented by Mohamed Alabbar. However, there is no Mohamed Alabbar on the management list found on the Almaabar company website never. The Mayor of Belgrade says that Serbia has checked all the authorizations and that this is pure construction.

He says that everything goes according to plan and that Serbian companies build the Belgrade Waterfront. However, the joint venture contract states that the foreign partner and related parties is the sole and exclusive provider of project design, development, management, sales and marketing services. The Mayor of Belgrade says the only reason for this is to prevent accusations of anyone fixing the jobs.

Siniša Mali: We chose not to have any say in who builds it, we don't want people to say later, 'He picked this one, he picked that one'. We want Mr. Alabbar, his professionals, people who do their job, let them pick the architects, designers, contractors and at the end of the day, domestic companies have the priority. Our local workforce, our workers earn their salaries there. There is not a single foreign company at the moment doing something on the Belgrade Waterfront project except the designers doing what we don't know - Chicago based SOM, the largest company for designing towers, they are doing the high tower design for us. London based RTKL is one of the best for designing shopping malls, they do that. We never made a shopping mall of 200.000 square meters.

Brankica Stanković: Let's go back to the providers of all services.

Siniša Mali: Okay.

Brankica Stanković: It says that they are entitled to percentage remuneration for services of the total development costs...

Siniša Mali: That's right.

Brankica Stanković: ...of the project. Does this mean that the foreign partner receives 3% fee?

Siniša Mali: That's right, that's right, they get 3% for management, that is a standard fee all over the world for management.

Brankica Stanković: That sums up to more than hundred million Euros, and they already got back a large portion of their 150 million investments, right? That is 3% of the whole project value.

Siniša Mali: Three percent of the total project's "phi", the sum they receive for their services on design, management and everything else, no matter how much, let it be even 100 million, whatever, it's their company.

Brankica Stanković: Okay, but they returned their money, so to speak, a portion of their money without any building at all.

Siniša Mali: All I'm saying is that this comes from the profit. So, if there is a profit, fine, but it is in our interest too...

Brankica Stanković: This doesn't mention the profit, that is why I ask.

Siniša Mali: They cannot pay from the investment, right? So, when you invest...

Brankica Stanković: Three percent of the total project value.

Siniša Mali: If you make a loss, you cannot pay up, right? So, if we make a profit, if both we and they make a profit, they get three percent from that, for their services, that is absolutely acceptable and according to standards all over the world.

City of Belgrade and the Republic of Serbia bear costs of clearance of the land, which means that they provide the investor with 100 hectares of prepared construction lot. This raises a question, why the City of Belgrade hasn't first cleared the lot, turned it into a construction lot, and then put up for sale a 100 hectares of exclusive land.

Siniša Mali: Why the previous City authorities didn't clear the lot? At this moment, we...

Brankica Stanković: Why couldn't you, for instance, reach a decision to clear the land from the City budget and then put it up for sale?

Siniša Mali: Because we found an investor. Brankica, for decades...

Brankica Stanković: Maybe you could have found a better investor?

Siniša Mali: Let me tell you, for decades back, there was no investor.

Brankica Stanković: Of course there wasn't, if he had to buy something that is...

Siniša Mali: One of them came here and said, 'Look gentlemen, I see a potential here, I want to invest my money now, I'll be gone in two or three months.' Alabbar will not sit and wait for us to clear, watch, and then to come again here from London, Singapore, or wherever he develops, to come back to Belgrade.

Brankica Stanković: Maybe you don't understand what I'm saying. In case you cleared everything and turned it onto a 100 hectares of construction lot in the most desirable part of Belgrade, maybe you would get more investors who would be interested in it. I'm not talking about the lot now, but about the way it was...

Siniša Mali: Maybe yes, maybe no. At this moment...

Brankica Stanković: But you didn't want to sell it.

Siniša Mali: Have in mind... to sell it?

Brankica Stanković: You said so, 'we decided not to sell it, we wanted to find an investor who...'

Siniša Mali: It is very important for the citizens of Serbia to know that we are not selling this land, and this land has not been sold. We wanted to have control over it.

Brankica Stanković: You conceded it.

Siniša Mali: No, it is not conceded. We wanted to have control over the whole process. Now you've got hundred of hectares of land. That land doesn't belong to the Arabs, the Republic of Serbia is still the owner, except a few lots where the construction is already on its way.

Brankica Stanković: You kept saying that the land was leased, just a minute ago you said for 99 years, that it is not ownership and so on. However, it is a lease without lease payment, that cannot be a lease whatsoever... Why do you call it a lease when... why don't you call things by their name?

Siniša Mali: There is, we did call things by their name, there is a lease without payment and a lease without...

Brankica Stanković: But a lease is when someone pays something.

Siniša Mali: There is a lease with payment and a lease without payment. It was a question of trust with the investor whether the lease... to have any kind of payment or to be co-owners of the Belgrade Waterfront project. Strategically, it is a very important message to us that the Republic of Serbia stands behind this project and for the lease we got 32% of ownership in the company and 32% profit from the project.

The foreign partner got the land in the Sava amphitheatre for 99 years without payment. When they construct a structure on a certain lot and get the occupancy permit, the lease right will be converted into ownership right, and the Arab partner will be able to give it away to a third party, or to sell it if he wants to.
However, the Mayor of Belgrade Siniša Mali explains that the government has secured the ownership over the state property in every way, but this fact is being on purpose ignored by the public.

Siniša Mali: The contract clearly states that the Republic of Serbia allocates the lots to the investor at the moment he is ready to develop.

Brankica Stanković: It says, gradually.

Siniša Mali: Gradually. Right. According to the business plan.

Brankica Stanković: Gradually allocation of land, but again according to the business plan not made public.

Siniša Mali: You see how it works. On the tower construction location they say, 'We are ready, the project is completed, we can build the tower.' We say, 'Fine, here is the permit, take the land, go ahead and build.' When they say, 'We are ready to build the shopping mall', we say, 'Fine, here is the permit, here is the lot, go ahead and build.' The other lots where they are not ready to develop remain in the ownership of the Republic of Serbia. And in 20 years, if they don't complete more than 50% of the project, as the contract stipulates, the land is ours. And the land value can only go up. Therefore, we are completely protected. If we sold the land at any rate, people would've said, 'You sold it cheap', it wouldn't matter if the price was one billion, 100 million, 20 million. People would've said, 'They practically gave away that land.' But we didn't sell it, because that would leave us without control. When you sell something to someone, that's it, it's his. This way, the Arab investor has to work with us, too keep the pace, it is up to us when are we going to give the lots and it will go on like this for years. When he finishes the construction, the land will follow the fate of the structure.

Brankica Stanković: "Conversion into freehold shall occur per land plot. The Company shall be entitled to conversion of leasehold into freehold once the occupancy permit for the structure(s) erected on the land plot becomes final." This means that...

Siniša Mali: Right Brankica, and it says there, when they obtain the occupancy permit.

Brankica Stanković: And when it becomes final.

Siniša Mali: And when the structure is finished. That's it, and then the land follows the fate of the structure, so the structure is being registered into the land lot as a...

Brankica Stanković: Once again, the ownership right is important, you don't become landowner immediately, you become that when the structure is completed.

The contract is not clear about whether the investors are exempted from paying the land development fee, and that has lead to numerous disputes of the contract. Analysis of Appendix 10 with the Resolution on the Zoning Plan for the Belgrade Waterfront specific purpose area, shows that the cost recapitulation part estimates roughly the profit of 470 million from the land development fee and connection to the utility systems. This would be more than the cost of infrastructure furnishing, but with a certain time gap between the investment and the profit.

Siniša Mali: Brankica, they are not exempted from anything.

Brankica Stanković: How come?

Siniša Mali: That is an urban legend, for years I've been hearing this story.

Brankica Stanković: Explain this.

Siniša Mali: The Belgrade Waterfront, namely, the Arab investor, pays all the fees.

Brankica Stanković: When?

Siniša Mali: When he constructs, the land development fee - that was always the question. They pay that fee.

Brankica Stanković: How is that? I found this in the contract. Do you want me to read it?

Siniša Mali: Of course.

Brankica Stanković: The part dealing with the fee.

Siniša Mali: There is a separate agreement with the Land Development Public Agency.

Brankica Stanković: I saw that one, too...

Siniša Mali: So, what does it say?

Brankica Stanković: It says here that "a long-term arrangement shall be reached to the full satisfaction of Strategic Partner", this is a part of the contract.

Siniša Mali: That's right.

Brankica Stanković: "To the effect of full set-off of all Land Development Fees against Public Land Development Costs on the Project level or other structure or measure, but always in line with the Serbian laws, which would result in non-payment by the Company of all Land Development Fees, subject to the Company incurring Public Land Development Costs on the Project level."

Siniša Mali: That's right.

Brankica Stanković: So, they pay public land development costs?

Siniša Mali: No, no, no. Let's make this clear, there are two options again, when you pay the Land Development Public Agency, you have the option to pay the fee, money, and then the Agency does all that needs to be done - water supply system, sewerage system, roads and so on, or you have the option, and that applies to all the investors, to do all the work by yourself, the roads, the sewerage system, the water supply system and then to make a compensation deal with the Agency for that sum. According to the contract, the foreign investor has the obligation to build the infrastructure within the lot.

According to the contract, the Republic of Serbia has the obligation to build the utility infrastructure and provide utility services - including water, electricity, gas supply, roads, sewerage system and telecommunications - up to the project perimeter, including all the external traffic solutions, line connections, subways and tram lines, at its own cost. Within the lot, within the project perimeter, the Arab strategic partner bears the costs of building infrastructure.

Siniša Mali: So, they pay the fee, how much they have to pay it, some 300-350 million Euros for the roads, sewerage, if I'm not mistaken, water pipes and everything else within the lot, all of that pays the Arab investor. But he builds...

Brankica Stanković: The land development fee in the central city zone is 500 to 550 Euros per square meter.

Siniša Mali: No, for a commercial structure it is around 27.000 dinars, and for a residential structure it is around 16.000 dinars.

Brankica Stanković: No, it is around 500 Euros per square meter, I talked to the investors.

Siniša Mali: No, that's how much it used to be. In the meantime we changed that and we want to be...

Brankica Stanković: You lowered the prices.

Siniša Mali: We lowered the prices for the whole city.

Brankica Stanković: But they either pay the fee to the Agency and then the Agency does the whole job, or they do it themselves, and later they settle up with the Agency. Both options are here. In this case, they settle up?

Siniša Mali: That's what they wanted, yes.

Brankica Stanković: I really cannot understand anymore what all this is about.

Siniša Mali: The Arab investor wanted, let me say this once more, they will invest the money, the other option was, let's make this clear, to pay the Agency those 300 plus million for something the Agency is obliged by law to do, to build the infrastructure there. So, the net effect is absolutely the same for us. City of Belgrade gets the infrastructure worth 350 million Euros, because at the end, when they finish building all the infrastructure, all those water pipes and roads become property of the City of Belgrade, that's the law, all that is not the property of the investor or any other individual. We have never exempted anyone from this, because that would put all investors in Belgrade and Serbia in an inferior position.

This project has to be completed in the next 30 years.

Brankica Stanković: Maybe we cannot calculate right, but something is not clear here - as far as I understand this, Serbia expects to profit something from this in the next 30 years.

Siniša Mali: Directly or indirectly.

Brankica Stanković: But only in 30 years.

Siniša Mali: You have to have in mind several aspects of this. You are on the right track. So, first of all, we have a direct investment worth 3.5 billion dollars...

Brankica Stanković: We don't have the investment.

Siniša Mali: Yes, you do, because when you build, I repeat, those square meters, someone has to invest the money.

Brankica Stanković: The contract is, in fact, worth 90% less, and that is 300 million. When you talked about 3.5 billion, you talked about the total investment sometime in the future?

Siniša Mali: No, the contract is worth 3.5 billion because the contract, the subject of the contract is constructing the Belgrade Waterfront project with 1.870.000 square meters, around two million square meters. That is the subject of the contract.