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The Government of the Republic of Serbia

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Report on "sugar affair" to be prepared soon

Belgrade, 17 May 2004

A report on the "sugar affair" acceptable for the European Union will be completed in a few days, which will allow for the ban on export of sugar from Serbia under preferential rates to be lifted sooner than planned, said Serbian Minister of International Economic Relations Predrag Bubalo in an interview to the Economist magazine. The official web site of the Serbian government brings excerpts from the interview.

"Sugar affair" and the possibility to return preferential rates to Serbia:

The sugar affair has caused many problems to Serbia, and is one more obstacle to the positive assessment of the Feasibility Study. Positive assessment also required improvement of the economic legislation on the state level, and that task was done by the Serbian and Montenegrin ministries of international economic relations. I can claim that that requirement has been met, and the European Commission has confirmed that in its report. That was achieved by passing a common customs law, setting up a common customs office and issuing the EUR 1 form for the control of the origin of goods. However, the European Commission's negative assessment referred to the investigation which should be conducted by the police and customs organs. I think that that job is also drawing to an end, and that a report acceptable for the European Union will be prepared soon. I think that that report could allow for the ban of the export of sugar under preferential rates to be lifted sooner than planned. That would be a green light for the feasibility study and even more for the textile agreement, which is of the greatest importance for Serbia's entire industry. My opinion is that the ban will be lifted in August.

Completion of the feasibility study:

Particularities concerning the institutional functioning of the state union have not yielded expected results so far, which slowed down all processes. The Serbian parliament was paralysed almost a year, which influenced the work of the Serbia-Montenegrin parliament and therefore the union failed to form all institutions prescribed by the Constitutional Charter. If we looked at individual results, we could find motives for optimism. In the recent period, both parliaments became functional, a number of laws and free trade agreements were ratified in the state union's parliament and judges of the court of Serbia-Montenegro were appointed. These are positive signals.

A strategy to speed up the resolving of existing problems:

My strategy is for Serbia-Montenegro to join the European Union as soon as possible, and to accept all the solutions imposed by the EU in order to achieve that goal. This means that Serbia-Montenegro must have a single territory when it comes to the customs or market. There must be the free movement of people, goods, capital, and services.

The arrival of foreign investors to the domestic market:

The current political instability is linked to the entire region, and such an image is very hard to change. We cannot escape it, but rather try and do everything we can to eliminate that political instability. It seems that the atmosphere we have in the Serbian parliament today is essentially different, since the government now treats the legislature with much more respect. Today, the government does not run the parliament, but respects it, and we are really striving to ensure the separation of the executive, judicial, and legislative powers. In my opinion, we are entering a period of greater political stability, and our recent agreement with the IMF will also contribute to that. As for international forecasts that differ from ours, I think that their projection of 1.5 percent GDP growth is entirely wrong, because initial indicators have already shown different trends. In the first three months, industrial production rose 11.4 percent. It seems that 4 or 5 percent growth is much closer to the truth, which is also included in the agreement with the IMF. One thing that could improve our image is a recent greenfield investment to build a can factory, by the Ball Packaging Corporation. That is the best invitation to other investors to come to Serbia. The biggest merit of the agreement with the IMF is not in the credits that are to be approved, but rather in the signal to foreign investors that this government’s macroeconomic policy is acceptable.