The UAE has approved a $400 million loan to Serbia, boosting the Balkan country's drive to find investors from outside the crisis-hit euro zone to help pull it out of recession.

Serbian finance minister Mladjan Dinkic, visiting Abu Dhabi, said on Wednesday the emirate's Etihad airline could also become a strategic partner of Belgrade's loss-making JAT Airways.

With its traditional trading partners in the euro zone struggling with a debt crisis, Serbia is looking to other potential investors such as Russia, China and the UAE.

The country, which is a candidate to join the European Union, is hoping to secure 2 percent growth this year after a drop in gross domestic product of about 1.9 percent in 2012.

Under the loan deal with the UAE's development fund, some $200 million would be invested in irrigation throughout Serbia, the finance ministry said in a statement.

"The other half would be spent for favourable long-term loans for farmers for the purchases of (agricultural) equipment," Dinkic was quoted as saying.

Agriculture made up 20 percent of Serbia's exports in 2012, but it suffers from a lack of modern irrigation systems and is prone to damage from floods and droughts.

Subsidies for agriculture account for 3.7 percent of the total 2013 budget, a quarter higher than in 2012.

AIRLINE PARTNERSHIP

The finance ministry also said fast-growing Abu Dhabi-based carrier Etihad could take a 49 percent stake in Serbia's indebted JAT Airways and become its long-term strategic partner.

"I believe we will have good news by mid-April and that ... we could complete talks about a strategic partnership between JAT Airways and the Etihad within the next two months," Dinkic said.

Last week, the Serbian government said it was ready to take on 170 million euros ($218.6 million) of debt from its national airline, pay leases for six new aircraft from EADS's Airbus and secure severance payments for redundant workers.

Previous attempts to sell JAT have failed due to lack of interest in the company, which currently operates 10 ageing Boeing 737-300 jets and four ATR 72-200 turboprop aircraft on 30 routes within Europe and to the Middle East.

In January the UAE and Serbia signed a 100-million-euro ($132 million) weapons deal and said they were considering a separate multi-million joint investment in the development of a guided surface-to-surface missile. – Reuters