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The Government of the Republic of Serbia

In the service of citizens

Outstanding achievements of government in the field of economy and European integration

Belgrade, 17 March 2008

Serbian Deputy Prime Minister Bozidar Djelic said in an interview to today's issue of the daily Danas that Serbia managed to complete negotiations on the Stabilisation and Association Agreement (SAA), which was initialled on November 7 last year, in record time.

The Serbian government's official website gives excerpts of the interview.

On European integration and the economy:

The SAA is the most important contractual relationship for our country. We initialled the agreement on visa relaxations and its implementation began on January 1, 2008. We have already started negotiating with the European Commission on the abolishment of visas for the EU for all Serbian citizens. We expect to receive the final criteria in April and fulfil them by the end of the year. European officials are mentioning for the first time the possibility of giving candidate status to Serbia by the end of the year. We have received a grant from pre-accession funds until 2011 to the amount of €1 billion. Our goal is to gain access to much larger EU structural funds by the end of the year.

Property tax for first home-buyers was abolished and VAT on IT equipment reduced. Agricultural producers were given considerable funds and that will be continued this year as well. We also paid-out old debt to pensioners. As of next year, pregnant women will receive full salaries during maternity leave. Our achievements in the field of economy and the European integration are truly outstanding.

Serbian President Boris Tadic said that he would sign the SAA if that was offered. However, the arrest of Ratko Mladic is still a precondition for that.

We will sign the SAA as soon as that is possible. Is the technical government able to deal with the issue of the Hague tribunal?

Everyone does their work, and the laws must be respected by the technical government as well. One of those is the Law on cooperation with the Hague tribunal. You said recently that the next Serbian parliament should initial the energy agreement with Russia. Did you mean that the sale of Serbian oil industry NIS should remain a part of the deal?

I will remind you that I was advocating the gradual privatisation of NIS, first through a minority sale on the capital market, and only after 5-10 years a majority sale. That is what we should do with the Serbian energy power industry EPS and make a Serbian version of the Czech CEZ, which is worth over $40 billion. In the meantime, the Russian-Italian construction project on the Southern Stream gas pipeline became clearer and it was in our interest for Serbia to become part of that project. We are completely dependent on Russia when it comes to gas because all other alternatives are very expensive. The Russian Federation and Gazprom had the choice of running the gas pipeline through Romania or through Serbia. For it to run through Serbia, their condition was to close the deal on the sale of NIS as well. Does that mean that as a man who advocates market economy, you will permit that the state's most valuable company be sold outside the tender procedure?

The energy sector is a very specific branch and what matters is not only the market, but providing a stable supply of energy products as well. In the years to come that will become a crucial question for many countries and it is of essential importance that Serbia is not one of them. Not to mention that for geopolitical reasons, the fact that the most important energy project in the next decade will pass through our country will be of great value for Serbia. So you will sell NIS for €400 million?

That is not just €400 million. There are also significant investments of at least €500 million and the fact that Gazprom Neft is the world’s leading oil company which has an oil processing surplus of 20 billion tons per year. That fact, not the Serbian-Russian friendship, is what will secure the future of our refineries in Pancevo and Novi Sad. We are yet to negotiate on many other elements of the agreement. Will you ask for a higher price for NIS?

That is not a personal issue. We are negotiating for the best interest of the state, Vojvodina and NIS. Can we assume then that national air company Jat Airways and the Airport are already in the hands of the Russians? Russian companies showed interest in them, and they could propose a similar deal in this situation as well.

Gas is a specific thing because we do not have an alternative. Jat will go to tender and the Airport to the stock exchange. There are speculations in the media that implementation of the concession agreement for construction of the Horgos-Pozega motorway is in jeopardy. What information do you have on that issue?

What I learned from the talks with Deutsche Bank is that they will remain partners in that deal. The latest information is that the first year of construction will be financed by the concessionaires, and not by financial partners. That is possible, but the government will have to take a stance on that issue. And what will that stance be? What will be your stance be? Will you close deals with firms that do not have all the banking guarantees?

Everyone is aware that it is in the state’s interest that that highway is completed. On the other hand, a company will have to provide financing for the entire project in order to become concessionaire. Let's wait to see the outcome of the negotiations that are underway, but it is clear that the concessionaire will be the one who gives guarantees to the Serbian government for the full amount of the project. You said that this year you expect €3 billion in investments. Are you including only the proceeds of privatisation or greenfield investments as well?

A number of privatisations were launched in the second half of 2007. The collection of payments for DDOR and RTB Bor mining and metallurgical complex is underway. The privatisation of Zastava, Jat Airways, JAT Tehnika, Lasta and Genex are to take place, and I also expect a number of greenfield investments that have been announced. Which of the greenfield investments did you attract because it is known that for a short period of time you had an advisor for attracting investments?

For reasons that I cannot understand, Goran Jesic had to resign only because he is a local government official as well. The Committee for solving the conflict of interests accepts that someone who works in the private sector can also be advisor to someone who works for the state. That is obviously not right and that practice should be changed. I participated in attracting the investment of French company Lor in Backa Topola. I am working actively on convincing the Japanese and world leader in production of glass Asahi Glass to choose Serbia instead of Croatia and that the Ball Packaging chooses us, and not Poland.

However, inflation is growing and the governor has asked the government to do something. What can be done this year to curb inflation?

The government made a budget according to which salaries of state employees will not grow in real terms this year, which is the most important thing for inflation. The other thing is that in the first two months we recorded a surplus in public finances. I expect that in the first three months we will achieve a balance so that the budget does not have an inflationary impact. We are trying to reduce the foreign trade deficit by activating exports. The government will not spend much money in the pre-election period as was the case before the January 2007 elections, when a lot was done to attract voters. This government will do nothing that might boost inflation. If pro-European parties win, I can only say that we will fight to achieve single-digit inflation. Even in these very difficult moments our economy continues to grow. In the past 12 months, industrial production has grown by 4% and construction by 14%. Estimates by economic experts show that Serbia still has the potential to record economic growth of 6% this year.