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The Government of the Republic of Serbia

In the service of citizens

Ratification of SAA to bring larger EU funds

Belgrade, 9 September 2008

Serbian Deputy Prime Minister and Minister of Economy and Regional Development Mladjan Dinkic said today that one of the most important ways in which the public will benefit from implementation of the Stabilisation and Association Agreement (SAA) is a reduction in prices of a large number of products imported from the EU.

Speaking at a press conference held at the Serbian government, Dinkic said that this means that goods imported from the EU will be available at lower prices, while from January 1, 2009 the customs duty on cars imported from the EU will be two times less, a reduction expected to result from implementation of the transitional agreement with the EU, that also includes gradual reduction of customs.

Dinkic said that according to the transitional agreement customs duty will be 14%, and Serbia will recommend amendments to the customs law at the same time when the budget law for 2009 is adopted, to lower the customs duty on cars imported from the EU to 10%, while the duty will remain 14% for other countries.

The Minister stressed that when Serbia achieves candidate status, which is expected to happen in the first half of 2009, it will also have access to larger pre-accession funds beginning from 2010.

He recalled that Serbian President Boris Tadic has already launched this initiative and Serbia will take a number of diplomatic steps in that area. He added that accelerating the process of EU integration will also lead to the removal of visa restrictions for all Serbian citizens.

The Minister said that construction of the Horgos-Novi Sad section of road will not be subject to the negotiated termination of contract with concessionaries Alpina –Porr.

He explained that most probably a tender will be called for construction of this part of the road, and details regarding terms and funds will be made public after a session of the national council for infrastructure.

Dinkic stressed that expert analysis has shown that the price of €200 million offered by the consortium Alpina-Porr is unrealistic and construction of this part of the road cannot cost more than €150 million.

This part of the motorway cannot be subject to the negotiated termination, a tender will be called, and whoever accepts these conditions and offers the lowest price for construction and best deadlines, will be awarded the project, said the Minister and pointed out that it is realistic that this part of the motorway will be completed within 15 to 18 months once construction commences.

Dinkic also said that dividing construction of this part of the motorway into different parts will also be considered, in order to create maximum competition on the domestic market, reduce the price and accelerate the pace of construction.

According to Dinkic, bearing in mind the problems faced to date concerning construction of the motorway, international negotiation standards will be introduced and attempts will be made to make it possible to engage the services of other concessionaries if the original concessionaire fails to meet deadlines.

Responding to the question why the concession contract cannot be simply terminated, the Minister said that experts have advised that this would not be simple and could lead to arbitration, and even though Serbia would win the arbitration, a lot of time would be wasted.

Dinkic said that work on the agreement on joint investments by Fiat and the Serbian government is in the final phase and the document will be forwarded to the Fiat management next week.

He explained that following this a date will be decided on to sign the agreement, and confirmed that all is going as planned, although the work of defining every paragraph of the agreement is very intense and legally demanding.

He said that the government is determined to develop the car industry in Serbia, and representatives of one of Italy’s largest truck manufacturers Iveco arrived in Belgrade today.

According to Dinkic, they are interested in making serious investments in Kragujevac, but not to manufacture trucks, rather buses. For Serbia it is important to make this industry competitive and to begin exporting consumer goods, rather than importing them.

We should attract investors who will produce consumer goods and export them from Serbia, and the car industry is an excellent partner in these efforts, said Dinkic.

He said that he will visit Germany next week, where he will meet with Mercedes and Volkswagen representatives.

The Minister recalled that the state provided various incentives to Fiat for investing in Serbia, and added that the government will recommend that only one other large producer should receive such incentives.

We must act according to the principle of offering the best conditions to the investor who comes first, whoever comes later is very welcome, but can not count on major state incentives, rather only the regular ones, said the Minister.

Dinkic said that the market estimate of the Serbian oil industry NIS, made by Deloitte Touche Tohmatsu shows its value to be €2.2 billion and must be used as a basis for negotiations for the sale of the company to the Russians, since this is a fair price.

He said that he is pleased that the energy agreement with Russia was ratified today and added that the government is ready to begin negotiations on accompanying agreements immediately.

He said that legally speaking the protocol, which states that the price of 51% of the capital of NIS is €400 million with Gazprom’s obligation to invest €500 million by 2010, is not part of the energy agreement with Russia.

However, he added, that it does imply a certain moral obligation since the protocol was signed.

Gazprom will also be under obligation to buy shares from the public and NIS employees who receive free shares at a price which will be determined on the basis of the estimate made by Deloitte Touche Tohmatsu that the market value of the 100% capital of NIS is €2.2 million, said the Minister.

Dinkic recalled that 12,126 current and former NIS employees have applied for shares, who will receive nearly 4.4% of shares.

The state will have 21.6% shares, the public 15%, employees 4.4%, and Gazprom Neft 51%, said the Minister.

He said that the 10 billion cubic metres annual capacity of the gas pipeline Southern Stream through Serbia is inadequate to make it a main gas pipeline, and said that the capacity should be increased to 18 billion cubic metres annually.

The Minister said that realisation of the regulatory reform project began today and will cut down bureaucratic procedures and is expected to be completed within 18 months.

He said it has been estimated that nearly 15,000 various laws, by-laws and regulations exist in Serbia on the republic level, of which one third should be removed.

Dinkic said that this will reduce administrative costs by 25%, and added that an electronic data base of regulations will also be prepared as part of this project in order to simplify business for enterprisers and companies in Serbia.

According to Dinkic, the project will be implemented in several phases, the phase of preparing an electronic data base will be followed by an analysis phase from March 31 to the end of August in 2009, during which the public, NGOs, businesses and enterprises will be included in the process.

They will all be able to make recommendations to the Serbian government about what to remove from the complicated system, then objections by regulatory bodies will be made, and finally a government session will be held at which a number of regulations will be removed from the legal system.

Dinkic said that administrative silence will be introduced in order to implement the project in the shortest possible period of time, and explained that this is a process by which if a certain administrative organ does not react to the elimination of certain regulations within a given period of time, it will be considered that the organ has accepted the change.

Dinkic said that there are positive examples of the regulations guillotine in the world, and mentioned Korea, where following implementation of similar reforms nearly 49% of regulations were eliminated, and 22% were simplified.

In Mexico, nearly 54% of regulations were removed, and 27% simplified, said the Minister and added that similar successful reforms were seen in Sweden and Belgium, while Croatia has recently completed this process.

This project will have priority in the upcoming period and all ministries will be obliged to appoint coordinators for implementing it, said Dinkic.