Benetton is to invest EUR43m (US$62.5m) in a clothing factory it is purchasing in the southern Serbian city of Nis, in a bid to strengthen its position in the Balkans.

The Italian knitwear giant is expected to become an official owner of the currently government-owned Nis-based 'Nitex' textile factory after a sale set for 13 May. A Benetton spokesman said production would start immediately.

A four-year operation plan involves the Italians using the plant for knitwear and woven textile clothing production, primarily for export worldwide, contributing EUR72m to the group's annual turnover.

"By the end of 2011 Benetton expects to produce 1 million garments in [the] Nitex [plant] and the quality of produced brands will be the same as in any other country," says Sven Bichler, the president of ChemCo, Benetton's brand agent for southeast Europe.

And the Serb government is actively helping Benetton. To ease customs procedures and hasten exports for this significant investor, it will establish a dedicated customs office for the Nitex plant.

Meanwhile, Benetton opened an office this February in the Serb capital Belgrade, from which it plans to plot the launch of retail outlets across the country. "That means opening more than 50 stores in Serbia over the next three years," says Bichler.

By Zlatko Conkas.