Third Business Round Table with the Government of Serbia - Q&A with the Ministers
16. October 2009. 10:00 - 14:20
Serbia, Hyatt Regency Hotel, Belgrade
Organiser: Ekonom:east Media Group
It is time for open questions and tangible answers. With the organization of this unique luncheon, Ekonomist Media Group will give you the opportunity to hear first hand from the Serbian government what their plans are as we move into 2010. You will have the opportunity to speak one on one with the members of the government of Serbia, to ask them your questions and to get answers.
In addition to the ministers of the Republic of Serbia, the participants of this event will be foreign investors, general directors and board members of the largest companies present in Serbia, as well as foreign ambassadors, economic attachés and foreign chambers of commerce from the countries of the region.
Participants will be able to ask the members of the government their questions regarding business and economic tendencies in Serbia over lunch. In this more relaxed atmosphere you will have the opportunity to sit with the ministers, business community and representatives of the foreign diplomatic community. Take advantage of this unique opportunity to speak directly to the Serbian government representatives about anything that interests you.
Branislava Samardžić Jennifer Grubač Tanja Paunović
+381 11 3333008 +381 11 3333009 +381 11 3333032
+381 11 3333028
09:00-10:00 Registration and coffee
10:00-10:15 Opening remarks, Mirko Cvetkovic, Prime Minister
Mladjan Dinkic, Minister of Economy and Regional Development
Bozidar Delic, Deputy Prime Minister and Minister of Science and Technological Development
Milutin Mrkonjic, Minister of Infrastructure
Slobodan Milosavljevic, Minister of Trade and Services
Jasna Matic, Minister of Telecommunications and Information Society
Diana Dragutinovic, Minister of Finance
Bojan Markovic, Vice-Governor, National Bank of Serbia
Dragan Marković, State Secretary, Ministry of the Interior
- The recession in Serbia – past or future
- Will Serbia be ready for D-Day after the global financial crisis is over?
- Effects of the measures taken by the Government of Serbia for mitigating consequences of the world crisis
- Effects of the stand-by arrangement with the IMF – what is the government’s strategy before the third review mission on October 20, 2009.
- Savings measures vs. increasing the VAT rate
- Public enterprise reform strategy
- Is the government preparing new measures for economic policy
- How will macroeconomic framework look in 2010, in light of preparations for adopting the new budget (projected basic economic indicators for the end of this year and for next year)
- Effects of infrastructural projects (Corridor 10) on economic growth in 2009, and plans for 2010
- What can the Government do for increasing Serbia’s attractiveness for foreign investments, and the expected foreign capital inflow for 2010
- Increasing competitiveness, anti-monopolistic policy, and consumer protection
- Government measures for preserving existing and creating new jobs
- Changes in the legislative framework for faster development of the capital markets
- Benefits and drawbacks of the (one-sided) execution of the Free Trade Agreement
- Monetary policy of the National Bank of Serbia in the upcoming period
12:15-12:45 Sponsor Presentations
13:15-14:15 Discussion / Closed session
14:15-14:20 Closing remarks
Second Business Round Table with the Government of Serbia .
October 27. 2008. Srbia, Sava Centar
Mirko Cvetković, Prime Minister of Serbia
Mlađan Dinkić, Serbian Deputy Prime Minister and Minister
for Economy and Regional Development
Radovan Jelašić, Governor of the National Bank of Serbia
Božidar Đelić, Deputy Prime Minister and Minister of Science and Technology Development
Milutin Mrkonjić,Minister of Infrastructure
Petar Škundrić,Minister of Energy and Mining
Slobodan Milosavljević, Minister of Trade and Services
First Business Round Table with the Government of Serbia .
July 3. 2007.Serbia, Hotel Hyatt Regency Belgrade
Božidar Đelić, Deputy Prime Minister for European Integration
Mlađan Dinkić, Minister of Finance
Radovan Jelašić, Governor of the National Bank of Serbia
Janko Guzijan, State Secretary in the Ministry of Finance
Predrag Bubalo, Minister of Trade
A Report from the Second Business Round Table with representatives of the Government of Serbia, October 27, 2008, Belgrade, Sava Center
Crisis means savings
Authors: : Ivana Pavlović, Snežana Krivokapić
Foto: Branislav Ješić
Next year less budget money will be spent on unproductive consumption, while the largest expenses will be made for investments in capital infratsructural projects. In aggrevated conditions of bank crediting, the only thing to be done is attracting direct investments.
Besides the trust in the banking sector, the world crisis will also affect Serbia’s economic growth, which will next year most likely amount to about four percent. This was the main message of Serbian Prime Minister Mirko Cvetkovic from the round table with representatives of the Government, organized by the Ekonomist magazine.
„Having in mind that for the last several years in a row Serbia has had growth rates of about seven percent of GDP, we consider this a recession,“ Cvetkovic said.
One of the answers to the crisis, on which other ministers will insist as well, will have to be a more restrictive fiscal policy, especially when it comes to unproductive public consumption. Although the budget will be intensively discussed in about a month, for the time being it is known that the budget deficit in 2009 should be lower than two percent, while the public consumption should not exceed 44 percent of GDP. Prime Minister announced that the 2009 budget would include assets intended for urgent interventions for the banking system, which would be used „if the situation demanded that“.
Four-percent growth of GDP in 2009
Although Cvetkovic didn’t mention precise proposals for this purpose, it could be heard at the Round Table that the Government should think about an increase in liquidity of the entire real and financial sector.
“Banks are already noticing liquidity problems of some companies, and chances for indebting will be even narrower, since there would be no trans-border credits, while central banks’ credit lines would be considerably poorer. Limited and expensive credits will slow down the economic activity,“ concluded Vladimir Čupić, President of Hypo Alpe Adria Bank Executive Board, asking how to lead a restrictive monetary policy without undermining the economic activity.
However, the answer of Governor of the National Bank of Serbia Radovan Jelasic is that the Serbian central bank, unlike European banks that wanted to revive the economic activity through reducing the reference interest rate, will not do such a thing, since it might lead to a further increase in the interest rate and a decrease in the economic activity at the same time. The turbulences in the international financial market will also affect the domestic currency value, which has depreciated by 5.8 percent since the beginning of the year, as well as the role of the domestic currency in the banking sector.
This means that there will be cheaper dinar loans only if the inflation and inflatory expectations are lower, which on the other hand affects a decrease in the reference interest rate. Governor Jelašić announced that NBS would have to continue leading a restrictive policy, since the inflation hadn’t been defeated yet. In his opinion, the key for a struggle against inflation and current balance of payments deficit is in hands of fiscal authorities, since monetary measures have already been sufficiently tightened, and serious reforms of public enteprises could hardly be expected.
However, Jelašić warns that the first drafts of next year’s budget seem pesimistic. A considerable part of the budget inflows has been brough into question, since the privatization funds have been spent, and there is a question whether new privatizations will occur. At the same time, VAT collection will be lower. On the side of expenditures, the increased public consumption might press out necessary investments in the private sector, which is dangerous, Governor Jelasic thinks.
Arrangement with the IMF
In the case there are problems with covering current payments deficit, Serbia might ask the International Monetary Fund (IMF) for help.
Each month Serbia needs 600 to 800 million Euros for covering the current payments deficit, and the main sources of this money are foreign investments and loans, said State Secretary at the Ministry of Finance Janko Guzijan. According to Guzijan, in the case there are problems with covering current payments deficit, Serbia might ask the International Monetary Fund (IMF) for help. However, he underlined that this scenario was quite unlikely to occur.
The upcoming negotiations with the IMF mission, as announced, will not be dedicated to a financial arrangement, but to the budget of Serbia for 2009 and contracting of a new, non-financial arrangement. Among the Round Table participants in the audience it could be heard that it would be better if Serbia concluded a credit arrangement with the IMF before the country got into troubles.
Guzijan said that the Law on Income Tax was under preparation, and that the law stipulated an increase in the non-taxed part of income from the current 5,000 to 8,000 dinars. According to his words, the Ministry of Finance is not for extreme reduction of the public consumption, since it would additionally slow down the economic activity. “Our standpoint is that taxes shouldn’t be increased,“ Guzijan said.
In the upcoming period the Government will focus on infrastructural projects, as well as completion of privatization. They intend to invest 1.6 billion Euros in construction of roads on Corridor 10 in the upcoming two and a half years. „Corridor 4, which goes through Romania, will be completed in three years, and it will draw away a great deal of freight transport. That’s why it is important to complete the works on Corridor 10 prior to that,“ explained Minister of Infrastructure Milutin Mrkonjic, adding that in the upcoming period main tasks were completion of the by-way around Belgrade, the section Horgos-Novi Sad and roads in the south of Serbia.
Public consumption accounts for 44 percent of GDP
Mrkonjić said that 1.1 billion Euros were needed in the upcoming four years for modernization and completion of hubs in Belgrade, Nis and Novi Sad. Borislav Radosavljević, General Manager of OMV Serbia, said that only along Corridor 10 the company had paid 50 million Euros of taxes and fees and opened a lot of new jobs.
Tenders for the Mining-Smelting Basin Bor and selection of a privatization consultant for Galenika will be announced these days. According to Minister of Economy and Regional Development Mladjan Dinkic, ten tenders for sale of socially-owned enteprises will be announced till the end of the year, and they also intend to announce 209 auctions. „We will try to find strategic partners for some socially-owned enterprises, and those that fail to find a buyer will have to go to bankruptcy,“ Dinkic said.
The budget drafts for next year seem pesimistic. A considerable part of the budget inflows has been brough into question since privatization incomes have been spent, and a question is whether there will be new privatizations.
Tenders for strategic partners for completion of construction of the thermal power plants Kolubara B and „Nikola Tesla“ B3 should be announced till the end of the year. 750 million Euros should be invested in Kolubara B, while 900 million Euros are needed for „Nikola Tesla“. We are also considering a possibility for announcing a tender for restructuring and expansion of facilities in the 400-megawatt thermal power - heating plant Novi Sad, worth 160 million Euros – Minister of Energy Petar Skundric said.
Škundrić announced that a joint venture with the Republic of Srpska, which would deal with construction of the hydro-power plant Buk Bijela on Drina, would be established until the end of the year. Minister also said that the state should remain the major or at least dominant owner in the electric power system. „The Power Company of Serbia is worthier than everything we have privatized so far, and with other investments and the market price of electricity its capital value might be twice higher,“ he says.
In order to create more favorable investment ambient, tenders for wireless telecommunications and Internet technologies – WiMax and CDMAT, will be announced till December 31 at latest. Jasna Matić, Minister of Telecommunications, said that a tender for introducing electronic governments had been announced recently. She announced staging of a public discussion on the telecommunications development strategy dynamics over the upcoming 30 days.
Ministers of the Serbian Government are aware of the fact that due to the liquidity crisis it won’t be easy to attract foreign investments. However, as a blessing in disguise they underline that in the time when a lot of world industrial giants are considering a decrease in expenses and displacement of factories, Serbia might be a destination for new investments.. “FIAT has arrived and we are negotiating with Swedish Ikea,“ Dinkic says, pointing out that stimulating measures for attracting Greenfield investments have already been taken.
Slobodan Vučićević, President of the Serbian Association of Managers, said that at this moment Serbia wouldn’t know how to appropriately spend 20 billion Euros even if the country obtained the money from the EU, since it had no trained staff for such projects. „Since the future of Europe and the USA is related to education, Serbia should also invest its available assets in the same thing in the time of the crisis,“ Vučićević concluded.
On the other hand, Vuko Dragašević, Executive Director of Atlas Group, commenting on the necessity of direct foreign investments, concluded that it was also necessary to reduce the barriers in order to support Serbian exporting companies, since Serbia’s exports amounted to only a billion Euros, 65 percent of which went to the Republic of Srpska. Dragašević asked ministers whether the Government planned some steps in that direction in order to support Serbian enteprises. However, ministers didn’t mention whether domestic companies, especially export-oriented ones, could expect support in the aggravated crediting conditions and decreasing foreign demand.
Stanislav Brodnjak, Mercator Ljubljana: A big problem of foreign investors is that they don’t have ownership right over land, but they can only rent it. Is the Government going to launch ownership transformation?
Mirko Cvetković: As far back as the time I was a minister, the Ministry of Finance and Ministry of Justice had draft laws dealing with problems related to the environment. We are about to deal with this reform.
Milutin Mrkonjić: The concession for Prokop has started, and the land issue hasn’t been solved. It is one of the burning problems, but Mercator, for instance, can get concession for construction of a shopping mall under the existing Law.
Slobodan Radić, Hewlett Packard (HP): International corporations are displacing some of their activities to other countries, which is a form of soft investments, since production is not displaced, but people are employed at the same time. HP opened such subsidiaries in Poland, Romania and Bulgaria, and a reason for which Serbia was not considered is that there are no conditions for such a thing. The situation is the same with working at home, or renting employees for a limited period of time. These fields are also unregulated. It seems that people here have no understanding for large companies’ needs.
Božidar Đelić: The Government’s responsibility is to launch a deep reform, since there are laws, but sublegal enactments that would enable us to implement the legal framework haven’t been written. We have to find a way to connect ourselves with technology leaders. I intend to visit 50 companies by the end of the year. A lot of companies are ready to allocate corporate functions in the crisis.
Andrej Beslać, City Express: When can we expect establishment of the Agency for Postal Services, which should solve the problems in the courir shipment industry?
Jasna Matić: We have sent a request for nomination of the Management Board, which is the first step for establishing the Agency, and we expect this to happen the soonest possible.
Branislav Bogdanović, AC Broker: Legal persons investing on Belgrade Stock Exchange this year are in trouble, since their assets have lost even up to 70 percent of their value, and it is a big absurd to pay taxes on these impaired assets. How to explain the tax on these impaired assets to foreign investors? Standardization of tax administration is also needed. It is difficult to explain to investors why they need various documents in various municipalities for paying taxes.