Professor ZORANA MIHAJLOVIĆ, PhD, Deputy Prime Minister and Minister of Construction, Transport and Infrastructure: BUSINESS ENVIRONMENT IN SERBIA SIGNIFICANTLY IMPROVED

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I believe that the improvement of the bilateral relations between Serbia and the United States is in the best interest of the Serbian citizens because it implies stability, more investments and support for the reforms that we are implementing as a government. Serbia is a small country, with a good geographical position, and our strength lies in the connection with our regional neighbours and having good relations with all world powers. This is something that both the Serbian government and the country’s president have been working on,” says Professor Zorana Mihajlović, PhD, Deputy Prime Minister and Minister of Construction, Transport and Infrastructure.

The US ambassador to Serbia commended you on several occasions for your contribution to the implementation of reforms in Serbia and the development of the bilateral cooperation. What is your view of the current relations between Serbia and the US?

– When you are collaborating with the most developed countries in the world, such as the United States, there are a lot of things that can be done to make the bilateral cooperation even better, to the benefit of our citizens, first and foremost. Serbia benefits from re-establishment of Belgrade-New York flight, as well as when a globally active American company such as Bechtel comes to build motorway in our country, or when the United States monitors and supports the reforms we are implementing that will transform Serbia into a modern and well-organized society, as it was the case with electronic building permits. Personally, I am very proud of the recognition I received from the US Embassy for fighting against gender-based violence two years ago, under the auspices of the global campaign „16 Days of Activism against Gender-Based Violence“. Creating a violence-free society is important for all citizens of Serbia, regardless of their gender, and I am pleased that other countries and international organizations such as UN Women recognize Serbia’s achievements in this segment.

What is your assessment of the effects of the US Secretary of Commerce, Wilbur Ross’ visit to Serbia?

– The visit of the US Secretary of Commerce, Wilbur Ross is significant because, during his visit, Serbia and the United States signed the Memorandum of Understanding and Cooperation in Infrastructure which creates space for greater engagement of American construction companies and other US companies in Serbia. This is the first umbrella document stipulating cooperation between the governments of Serbia and the United States in infrastructure, that should also boost the interest of American companies in Serbia. After signing of this memorandum, Bechtel signed a memorandum regarding the Moravian Corridor project and it will be the first US company that will work on a large-scale infrastructure project in Serbia. This document also confirms the common interest in bolstering the business relations between the two countries and promoting the involvement of US companies in infrastructure projects in Serbia, with the support of the relevant US institutions, agencies and programmes. According to the Memorandum, all of this will be realized by Serbia exchanging information on priority infrastructure projects with the United States, while the United States will promote the participation of US companies in infrastructure projects in Serbia and provide information to private companies in the US on potential project financing opportunities.

During this visit, the Serbian government was given suggestions for improving the business environment. What do American companies need and don’t have here in terms of the business environment?

– The Government of Serbia is well acquainted with the requirements of foreign investors, given that we have very good and busy communication with all business and foreign investor associations, also through our joint working groups. In a regulatory sense, investors always insist on the predictability of the business environment and having a dialogue with companies before regulation is drafted. This is something that the Serbian government pays a great deal of attention to. The implementation of electronic building permits was declared “the reform of the decade” and is also a great example of domestic and foreign business associations and various experts working together. As a result, in the period of three years, Serbia has jumped from 186th to the 10th place on the World Bank’s Doing Business List in the segment of building permits. It is important for investors to see that the state invests in infrastructure and that it has good transport connectivity and good business environment. In this respect, Serbia has achieved good results and has clear plans for the future. Over the past four years, about 300 kilometres of motorways have been paved and more than 500 kilometres of railways have been restored. We are going to finish building Corridor 10 in 2019 and open a section of Corridor 11, from Obrenovac to Čačak, to traffic. At the same time, we are embarking on a new investment cycle, worth over 5 billion euro. The new investment cycle will focus on establishing links with the region, through the construction of the Belgrade-Sarajevo motorway (two routes), the continuation of the construction of Corridor 11, the construction of the Niš-Merdare-Pristina-Tirana-Durres motorway, the modernization of the Niš-Dimitrovgrad railroad and the construction of the Belgrade-Budapest fast railroad. In terms of issuance of building permits, Serbia stands shoulder-to-shoulder with the most developed countries in the world on the Doing Business List which speaks volumes about the quality of the business environment in the country. We are currently ranked 48th in terms of overall business environment but we are not happy with that and can do much better. Through reforming the cadastre and implementing a number of other reforms under the auspices of the Joint Group for the Advancement of Serbia’s Position on the World Bank’s Doing Business List, we are trying to further improve the business conditions and additionally boost the rating that we have as a country.

The US company Bechtel and Serbian authorities signed the Memorandum about the Moravian Corridor at the end of last year. How important is this project and the cooperation with this US company?

– The arrival of a great American investor such as Bechtel shows us how much the image of Serbia has changed in the world. So far, we have had contractors and financial institutions from the EU, China, and Russia as partners. Bechtel will be the first US company that we will have as project partners. This is important because Serbia is open to all everybody who wants to work in our country and who can bring the latest global experiences and new technologies. The value of the project is close to 800 million euro and entails the construction of a motorway, regulation of rivers, primarily the Western Morava and all of its tributaries, as well as the installation of telecommunication infrastructure along the motorway. Moravian Corridor is a very important project for Serbia because this is the first motorway that will connect Serbia from east to west, and connect Corridor 10 to Corridor 11, from Pojate to Preljine. About 500,000 people live in this part of Serbia and over 20,000 companies operate here. Also, there are more than 10 business zones and one free zone here. This motorway will connect all major towns in the region, which will also mean more work for our companies during the construction. In the long run, it will also bring more investments in this part of Serbia and expedite the development of this region. Our plan is to start the works on the motorway this year, in summer, because the project documentation has already been completed for two out of the three sections. When it comes to financing, both US and British capital are involved in this business through UK Finance Bank and EXIM Bank from the US, which are currently negotiating with our Ministry of Finance regarding terms and conditions of financing.

Do you expect to see cooperation with some companies from this construction field? How can Serbian and the US companies cooperate even more?

– American companies in Serbia employ more than 16,000 workers, and this is the best reference for new investments in Serbia. I believe that the cooperation with a global company such as Bechtel is also the best reference for other US companies to find out more about investment opportunities in Serbia in the field of infrastructure, especially considering that the new investment cycle is starting in 2019. I believe that most important thing in attracting more foreign investments, including investments from the United States, is for Serbia to maintain its political stability, to contribute to the stability of the region, and to do everything in its power to create a good environment for investments. The Serbian government is diligently working on this – from the infrastructure projects that we implement to all the reforms aimed at improving the business environment. I’m sure that investors are following what we are doing and I believe that this will positively affect their business decisions when it comes to investing in Serbia.

The Belgrade-New York flight was launched in 2016. What is your view of this move from today’s perspective and how important is this flight for the relations between Serbia and the US?

– Re-launching the direct flight between Belgrade and New York, 24 years after the last flight, was an important event for our air traffic and a good indicator of the better political and economic relations between our country and the US. On the one hand, Belgrade airport and our air traffic institutions have fulfilled the strict conditions of the US aviation authorities. Serbia has signed the Air Transport Agreement with the USA and is classified as Category 1 in the Air Traffic Safety Oversight Service in the international civil aviation of the US Federal Aviation Administration. On the other hand, this was important for further improvement of economic relations, new investments, and promoting Belgrade as a tourist destination. Currently, there are six weekly flights, which changes depending on the season. It is important for Belgrade to be the point that connects the region with Europe via a direct flight.

According to the latest AmCham survey, the reforms of public enterprises, healthcare and justice system did not yield expected results. Although your Ministry is not in charge of all of these segments, can you tell us what is the Government doing to improve these areas?

– Speaking about reforming public enterprises, we must bear in mind that the main reforms in the railroad sector began only in 2015 and that for decades before that, nobody had the will or the courage to try to improve the very functioning of the railway system. Now we have four separate companies to do that. For the first time ever, we have compiled a list of railway assets, we tackled the accumulated debts and we opened up the cargo segment to competition. The number of employees has been reduced thanks to the redundancy programme and after a long time, we started to employ younger train drivers. Today, we have a railway system that is very different from the one from 3 or 4 years ago. This was not only validated by the Serbian government, but also by the World Bank, the IMF and the EU. There is still a lot of work ahead of us because if we, as a state, are investing billions of euros in the modernization of the railways, we have to have companies that are able to execute that. The next big reform we started is the one in the road sector. After more than 20 years, for the first time ever, road maintenance companies are chosen via tenders. In the future, road maintenance companies will be paid according to the quality of their work and their performance, because we need to use the maintenance money more efficiently. Based on our Ministry’s experience with reforms in the construction sector, I can tell you that when there is enough political will and determination, it is quite possible to implement reforms that seem inconceivable at first. When we started implementing e-permits, Serbia was at the bottom of the Doing Business List in terms of issuing building permits. Today, we are competing with the best in the world, and the reform itself has been declared the best reform in the last few years. It would be good to have as many such examples as possible in all sectors and to have three or four reforms that are competing for an award at the end of the year.

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