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The Government of the Republic of Serbia

In the service of citizens

Set of financial bills presented

Belgrade, 4 May 2004

Serbian Minister of Finance Mladjan Dinkic has presented a set of financial bills which will be debated by the Serbian parliament this week, including a bill on insurance and bill on the national corporation for housing loan insurance as well as changes to the Law on the National Bank of Serbia, Law on excise tax, Law on securities and other financial instruments, Law on public procurements, and Law on taxing procedures and tax administration.

Author: FoNet

At a press conference today, Dinkic said the bill on the national housing loan insurance corporation is one of the most important. He explained that banks currently lack long-term sources to boost home lending, which results in high interest rates and low supply in the housing loan market, he added.

In order to encourage home lending and housing construction, the state will set up a national corporation with the aim to reduce credit risk for banks, said Dinkic. The corporation will insure lenders against borrower default by taking over 75 – 85 percent of the lender’s risk, Dinkic explained and added that this should result in lower interest rates and longer repayment periods for home loans.

According to the bill, the state would own 100 percent of the corporation, with the initial capital of €10 million. The funds have already been earmarked in this year’s budget, according to Dinkic. He also expressed the hope that the bill will be passed by mid-May, while the corporation is expected start operations this fall. By 2005, the corporation will have branch offices throughout the country, said Dinkic, adding that it should employ up to 1,500 people within 18 months’ time.

Once home lending is widespread, banks will be allowed to transfer their outstanding home loans to the corporation, which will then create a housing loan portfolio within its balances and issue mortgage-backed securities to be traded in the financial market, Dinkic explained. The money that the corporation raises by selling these securities goes to the banks which approved the loans, said Dinkic and added that the banks will then use the money to disburse new loans.

Dinkic also said that the work of the corporation will have impact on Serbia’s economy overall, as the entire process represents an incentive to the country’s financial sector. The corporation will also give confidence to the construction industry as well as the manufacturing of home appliances and furniture, generating new jobs and fuelling overall economic recovery, said Dinkic. The corporation, according to some estimates, will influence as much as 40 percent of the gross national income.

The concept of the national corporation is based on Canada Mortgage and Housing Corporation (CHMC), founded in 1946, which currently insures some 450,000 housing loans, worth a total of around €132 billion.

The changes proposed to the Law on public procurements envision a 20 percent price advantage to domestic bidders, as is the case in developed countries, said Dinkic. The changes will also help to cut the costs of public procurement procedures, as tenders for goods and services worth three million dinars or less and work contracts worth 15 million dinars or less will be published in the Serbian Official Herald only, he added.

The obligation to advertise public procurement tenders in international media will be abolished, while translations of tender documentation into foreign languages will be required only for procurements worth more than 12 million dinars for goods and services and 120 million dinars for work contracts, according to Dinkic.

As for the insurance bill, Dinkic said that it is one of the system laws, given that this field is unregulated in Serbia. He pointed out that the bill is fully in line with European Union’s guidelines.

The changes to the Law on taxation and tax administration will impose harsher penalties for tax avoidance, Dinkic added.

Dinkic also told reporters that five more bills will be introduced this month – on games of chance, value added tax (VAT), contributions, and personal income tax as well as a bill on corporate income tax, which he said will be the most liberal in Europe.