property

Dubai hand in Balkan ‘tourist city’

Multibillion Dubai investment builds mega project in southeast Europe

00:00 March 15, 2017

It came as a bit of a surprise when a Dubai developer in November 2015 announced that it discovered a new investment destination. “We came to see the country and we were surprised. It is a very nice place, with good nature and good life,” says Ismail Ahmed, CEO of Dubai-based Buroj Property Development, talking about the scenic location around Mount Bjelasnica. “So we decided to start making plans.”

Ahmed signed a contract to build a “tourist city” at the foot of the Bjelasnica mountain, near the small town of Trnovo, which has a population of 2,000, in Bosnia and Herzegovina. His project is not just the odd hotel resort, but a completely new village with some 1,000 luxury villas, 160 residential buildings, more than 75 hotels and serviced apartments, a commercial centre, a huge shopping mall, a hospital and even a cable car.

The project will cost around $2.4 billion (Dh8.81 billion), or more than 15 per cent of Bosnia-Herzegovina’s nominal GDP and ten-fold the total foreign direct investment in 2015. The city will be called Buroj Ozone and will span over 1.37 million sq m. It is so far among the largest single foreign investments in southeast Europe, along with Belgrade Waterfront, a project by Abu Dhabi property investor Eagle Hills, which is expected to cost over $3 billion.

The cornerstone of Buroj Ozone was laid on September 17, 2016, in a ceremony attended by government officials, prominent businessmen, members of the diplomatic corps and numerous citizens.

Fadil Novali, the prime minister of Bosnia and Herzegovina, Ramiz Salki, vice-president of the Republic of Srpska, and Stipe Mesi, former president of Croatia, could be seen.

“I sincerely believe in this project because I am convinced that Bosnia and Herzegovina is an important global tourist destination that has yet to be discovered,” says Ahmed.

“This is my life project and I hope that we will finish it without delay.”

He says the initial investment in the project will be around $1 billion, while the rest will spread over the next eight years. The project will create at least 10,000 local jobs, he adds.

Why these mountains?

The Bjelasnica and neighbouring Igman and Treskavica mountains, around 20km southwest of Sarajevo, used to be quite popular winter holiday destinations in former Yugoslavia for Western and Eastern European tourists alike after they became widely known as prime skiing locations when the 1984 Winter Olympic Games were held there. The place, of course, lost its appeal when the Balkan Wars rampaged, and then faded into oblivion.

Buroj’s mega project is likely to bring this attention back. The shopping mall – Zayed Shopping Mall – would be the largest in Eastern Europe and also feature previously unknown attractions in the region, such as a “dancing fountain”. A three-bedroom villa in the city would be priced at about $250,000. That will make Buroj Ozone one of the most expensive and biggest tourist resorts in Southeast Europe.

The project, however, could be an economic game-changer, attracting much-needed investment, particularly from Arabs, in a country where around half or the majority of the 3.8-million population is Muslim.

While Bosnia-Herzegovina had a very strong industrial export-oriented economy in the 1970s and 1980s as a result of Yugoslavia’s unique and comparably successful economic policy based on workers’ self-management and associated labour under former president Josip Broz Tito, the war in the 1990s caused a dramatic change. GDP fell by 60 per cent and the destruction of physical infrastructure, plants and factories devastated the economy. With much of the production capacity unrestored, the country still faces considerable difficulties as well as the complex problem of rebuilding a war-torn country and introducing transitional liberal market reforms at the same time.

Today, the economic base of Bosnia-Herzegovina is construction, infrastructure development, telecommunications, finance and foreign direct investment mainly from Austria, Serbia, Croatia, Slovenia and Russia. But tourism remains another big driver, with arrivals having grown an average of more than 20 per cent annually since the end of the war in 1995, to around two million visitors in 2014. The World Tourism Organisation forecasts that Bosnia-Herzegovina will have the third-highest tourism growth rate in the world up to 2020. This growth is seen to be partly spurred by visitors from the GCC, and there is also a growing number of Middle Eastern property buyers attracted by the country’s picturesque landscape.

Other projects

The Buroj project has already triggered some sort of domino effect. Qatar committed $11 million to build a sports, recreation and tourist centre near the central town of Bugojno mainly for handball games. Project coordinator Asim Sahman, a resident of Bugojno, worked in Qatar in recent years as a handball coach. Work on the project started last year, and is expected to be completed by the end of next year. After the completion of the venue, which will also host international, club and representative matches, the investors plan to construct hotel facilities, a football stadium and two more sports halls.

Furthermore, a Kuwaiti-funded tourist resort launched in 2015 with an investment of $30 million at the southeast outskirts of Sarajevo has attracted a sizeable number of Kuwaiti and GCC buyers. The resort, when finished, will boast more than 400 housing units and several recreational facilities. It is spread over 160,000 sq m and has capacity for over 1,100 tourists. According to Jassem Ahmad Al Kanderi, chairman of Kuwait’s Gulf Real Estate Co, which developed the project, the resort is primarily aimed at guests from the Middle East and the GCC as a summer retreat.

Another project is a Saudi company’s residential housing project comprising 200 villas in the hills of Sarajevo, slated for completion this year.

In the long run, Bosnia-Herzegovina plans to improve its investment regulations for other industries too. So far, investors have reported cumbersome bureaucratic procedures and a certain degree of corruption when starting businesses, as well as a still-unstable political situation. “Many people still associate this country with the war, but our project will help change that image,” Buroj’s Ahmad says.

Still, investment guides recommend pondering the pros and cons of investing in Bosnia-Herzegovina. The weak points continue to be a complex legal and regulatory framework of a country divided into two government entities, a lack of transparency in business procedures, especially in calls for public tenders, which are not always transparent, and a weak judicial structure. On the upside, the country’s strong points are that it has one of the fastest growth rates in the region, one of the lowest inflation rates in the region with a currency pegged to the euro, low corporate income tax at just 10 per cent, a relatively well-developed banking sector and candidacies for both the European Union and the World Trade Organisation accession.