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The Government of the Republic of Serbia

In the service of citizens

Launch of €1 bln national investment plan in second half of the year

Belgrade, 1 May 2006

Serbian Minister of Finance Mladjan Dinkic said in an interview with daily Politika that the realisation of priority projects as part of the five-year national investment plan will start already in the second half of the year.

Dinkic spoke to Politika about inflation rate, monetary policy, private domestic and foreign investments and public investments as well as other current topics. The official website of the Serbian government brings excerpts from the interview.

The influence of inflation on continuation of economic reforms:

“Inflation is a problem, but it is not a danger for economic reforms in Serbia. Reducing unemployment is much more important than exceeding the projected rate by several percent. The government created conditions through savings for investment as precondition to long-term sustainable economic development, creating new jobs and upgrading citizens’ standards.”

Remarks that allocation of privatisation revenues for investments could stimulate inflation:

“Such fears are ungrounded, as this is not personal consumption, but investment which has no effect on inflation whatsoever. What is more, this is about long-term investment at realistic pace. So that no one would even think of using that money for salaries and pensions, so that €1.3 billion is not wasted, we will make an investment plan several months before the money arrives. Speaking of risk, there is more risk from the growth of foreign trade deficit, but we will overcome that by importing only products which are not produced in Serbia and we will also give advantage to local producers and construction firms.”

Monetary policy and national investment plan:

“Inflation does not depend only on fiscal and monetary measures, but also on specific factors connected to present phase of transition, so there is no room for more restrictions in monetary policy. It is also necessary to gradually increase communal and other prices which are under control. At the same time, in order to achieve sustainable growth in the long run, it is necessary to combine private domestic and foreign investments in those areas in which private sector is not that interested, such as infrastructure, ecology, health, education, as they are precondition for attracting private capital.

This is why the five-year national investment plan for the period until 2011, modelled after such Irish investment plan and due to be completed by the end of June (after line ministries in cooperation with professional associations send their priority proposals until May 15), will cover projects in 17 areas in seven crucial groups. They include projects in the education sector (so as to overcome the problem of missing adequate personnel, from mangers to executives in public administration, public sector and the economy sector), modernisation of health system and environmental protection, projects stimulating economic growth (incentives for employment and development of entrepreneurship, investment in energy, agriculture, science and tourism). The priority list will include projects in housing building, sports, culture, social protection and finally, projects for public administration development, including modernisation of the judiciary, police and army.”

The launch of realisation of most important project:

“Their realisation will begin already in the second half of the year. We expect a budget surplus this year of nearly 40 billion dinars with privatisation revenues of at least €1.3 billion, the amount which will be provided by the end of July from the sale of Mobi 63 and the other licence as well as from the sale of Vojvodjanska Banka and Panonska Banka. €1 billion will be invested at the beginning of realisation of this five-year plan. In addition, in the coming period, we also expect to privatise insurance company DDOR and state oil company NIS.”

Loans from international financial organisations for largest projects:

“The talks with the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB) about co-financing capital projects such as ring-road around Belgrade, the Vinca bridge and similar projects. The first phase of the ring-road around Belgrade will cost €150 million. Our idea is that such big projects are financed with two-thirds of the funds by the EBRD and EIB, while we should provide one-third from our own sources.”