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The Government of the Republic of Serbia

In the service of citizens

Government to contemplate measures for alleviation of possible financial crisis

Belgrade, 22 October 2008

Minister of Economy and Regional Development Mladjan Dinkic announced that the government will contemplate a set of measures to alleviate the impact of the global financial crisis and a proposal to alter conditions for privatisation.

Mladjan Dinkic

At a press conference regarding the Ministry’s first 100 days in office, Dinkic said that at tomorrow’s session the government will adopt the decision to increase the guaranteed savings deposit in banks from €3,000 to €50,000, temporarily suspend tax on interest on bank savings and tax on capital gains from securities, as well as to abolish tax on the transfer of absolute rights to securities.

Dinkic pointed out that the Ministry in its first 100 working days has obtained great results such as signing the agreement with Fiat, providing €1.2 billion for Corridor 10, paying off nearly 3,000 loans for those who have started a new business, initiating the process of abolishing unnecessary regulations and drafting the law on the employment of people with disabilities, as well as the tourism law.

Dinkic pointed out that Serbia’s strategic priority is further development of its car industry and recalled that the foundation stone for the new Reum GmbH car parts plant, which produces car parts for Mercedes, BMW and Porsche, was laid yesterday in Svilajnac.

The Minister added that Serbia’s economic perspective is not only the export of cars and car parts, but also of information technology and electronic industry products, and assessed that this year Serbia will profit by approximately €1 billion from exporting car parts and before 2011 it will profit from €2 billion to €3 billion from car exports.

The Ministry of Economy managed to provide funds for Corridor 10 by obtaining a €1.2 billion loan from the World Bank, the European Investment Bank and the European Bank for Reconstruction and Development, recalled Dinkic and added that the plans for reconstruction of railway infrastructure have been prepared.

He announced that a delegation of the Deutsche Bahn, the German railway company, which will assist in preparing developmental plans for Serbia’s railway company Zeleznice Srbije in the following five years, will visit Belgrade on October 24.

According to him, the Ministry paid off approximately 3,000 loans for beginners in business, and more than 50% of them are less than 30 years old.

Speaking about the announced “guillotine” of regulations, he said that 25% of regulations are to be abolished, and added that the first phase of the process will be completed by 2009, while the entire process will end in 2010.

He stressed that the government will also look at the proposal by the Ministry of Economy according to which participants in privatisation should pay 30% of the total price immediately and the remaining portion in instalments over a period of five years.

According to him, the amendments to the regulations regarding privatisation by tender and auction aim at speeding up completion of the privatisation process, whilst a customer will immediately obtain management rights it will only become the owner after paying off the last instalment.

Dinkic pointed out that the last auctions for state owned companies are to be announced by mid- December.

State Secretary for Economy and Privatisation Nebojsa Ciric specified that there are 442 companies still left for auction, while 69 more companies are to be sold on tender.

He added that the total number of companies include 155 firms with ownership shares from former Yugoslav republics, whose sales have been stopped.

Dinkic announced that the tender for sale of Galenika will be announced in 2009 and added that initial bids for the sale of other public companies from which citizens will receive free shares have been postponed until the recovery of the European stock market.

He announced that the shares of Telekom Srbija and Nikola Tesla Airport will be offered first.

He noted that, along with China, Serbia has a great chance of becoming an attractive investment target in 2009 despite the financial crisis.

Dinkic explained that the unprecedented world crisis first broke out in the US and then spread to EU countries, adding that its affect on Serbia and China was inconsiderable.

He said he expects large European and international producers to move capital to Serbia as foreign investors here have not recorded losses.

According to him, in the past five years Serbia has marked a huge GDP growth rate of over 6% a year, which should reach 7% by end-2008.

Dinkic recalled that GDP growth in early 2008 stood at 7.3% and specified that from January to July foreign direct investment amounted to around $2.5 billion and are to total $4 billion before the end of this year.

At the moment Serbia does not need a financial arrangement with the IMF, simply an advisory one, said Dinkic and noted that Serbia now has foreign currency reserves 3.5 times larger than the dinar money supply and a stable banking system.

The Minister stressed that the world crisis has revealed that a restrictive monetary policy was conducted for a reason, which other countries, even the EU, failed to do and noted that this has saved Serbia from the impact of the crisis.

Dinkic announced that Serbia can maintain a high rate of economic growth and influx of foreign investment during the current financial crisis, but the government must have a serious approach.

This is why a stablisation budget for 2009 needs to be adopted, to maintain the stability and strength of the banking sector he said, adding that the budget deficit should not be over 1% of GDP.