Bombs away

the economist

Serbia's arms industry
Serbia's arms exporters are thriving

Jan 6th 2011 BELGRADE from PRINT EDITION

SERBIA’S victory in the 2010 Davis Cup proved, say Serbs, that it has the best tennis players in the world. It claims to be the world’s largest raspberry exporter. But the latest boast may come as more of a surprise: that the country’s once-renowned arms industry is making a comeback.
Before it fell apart in the wars of the 1990s, the former Yugoslavia was a big arms exporter. NATO damaged many of Serbia’s weapon factories in 1999 during the Kosovo war. But the industry has started to recover. In 2008 Serbian military exports were worth $200m. Last year they brought in twice that sum (not including a $400m contract, signed in November, to build three arms factories in Algeria). Yugoimport-SDPR, the trading arm for six of Serbia’s main producers, says sales have been growing by 30% a year since 2002. Defence accounts for 4% of Serbian exports and 10,000 jobs.
The industry is also growing in sophistication. Until 2007, says Dragan Sutanovac, the defence minister, ammunition accounted for the vast bulk of Serbian military exports. Many of the ammunition plants in the former Yugoslavia, including the Sloboda factory in Cacak, which was damaged by a series of (probably accidental) explosions on December 27th, were located in Serbia. But in the past few years Serbian companies have begun exporting modernised versions of older mobile howitzers, training planes and fire-control and anti-tank rocket systems.
Serbian officials seeking out new business are renewing contacts first made in the cold-war days, when Yugoslavia was a leading light of the non-aligned movement, says Daniel Sunter, editor of Balkan Intelligence, a newsletter. “We took out the books from the past,” says Mr Sutanovac. North Africa is a main target. Serbs receive a warm (and nostalgic) welcome in countries such as Libya, where many senior officers fondly recall their training in Belgrade more than 20 years ago.
The new year may offer some big prizes. Mr Sutanovac says Serbia is close to signing a $500m agreement to build a military hospital in at least one Arab country. He also hopes to win a $400m contract to modernise 149 M-84 tanks that Yugoslavia exported to Kuwait in 1991.
The M-84 was assembled in Croatia from components made throughout Yugoslavia. Now those ties are being restored. Serbian, Bosnian and Macedonian arms companies are working together, and a Serbia-Croatia defence agreement signed in June also envisages co-operation. If Serbia wins the Kuwait contract, says Mr Sutanovac, some of the work will probably be shared between Bosnian, Croatian and Slovene companies.
Mr Sutanovac says that NATO has given the Serbian arms industry the go-ahead to export to its armies. Much modernising remains to be done before that can begin in earnest. Still, says Mr Sutanovac, defence sales are the country’s fastest-growing industry after agriculture. Guns are also worth rather more than raspberries.

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