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Serbia: Investments of €1bn in Capital Projects

Serbian Minister of Finance Mladjan Dinkic announced that the Ministry of Finance will submit to the Serbian government a proposal of the programme of investment in capital projects, worth some €1 billion, expressing hope that the proposal will be adopted within a month.

Speaking at a press conference at which the results of works of the Ministry of Finance over the past two years were presented, Dinkic specified that those funds will be used for the reconstruction of hospitals, equipping of schools and universities, building and reconstruction of religious facilities, and construction of apartments for those working in public services.

He explained that those funds will be redirected from privatisation proceeds.

Dinkic said that the acquisition of a nuclear scanner for early detection of diseases and other equipment needed by hospitals and maternity wards are planned, as well as reconstruction of all four clinical centres and 160 medical centres in Serbia, and construction of two new hospitals.

Dinkic added that some 30,000 computers will be purchased for 1,700 schools in Serbia.

As for the financing the construction of apartments for workers in public services, the Minister said that the state will ensure that the price of a square metre of such apartments will be €500.

He pointed out that funds will be set aside for investment in transport infrastructure and financing the realisation of the 50 best innovations in Serbia.

"We will increase investment in underdeveloped regions in order to encourage equal regional development," the Minister of Finance said, adding that funds will also be set aside for the reconstruction of religious sites, first and foremost for the completion of the Saint Sava's Temple in Vracar, and monasteries Zica and Hilandar.

One of the Ministry's tasks is the reduction of payroll tax, Dinkic said and explained that currently, out of 100 dinars of net salary, 73 dinars are given to the state.

He said that the Ministry plans to use the budgetary surplus and propose amendments to the Law on payroll tax, allowing for a tax reduction bringing it to 60 dinars.

The Minister announced that fiscal decentralisation will be carried out, i.e. that more funds will be transferred to local self-government, progressively to less wealthy ones, but their obligations will also increase as of January 1, 2007.

The Ministry's task will be to boost employment and to attract foreign investment, Dinkic announced and recalled that a competition for micro loans to boost employment is underway, for which 1 billion dinars have been set aside.

The Minister said that last year $1.5 billion in foreign direct investment was recorded, adding that this year that sum is expected to exceed $2 billion.

He said that as opposed to the previous period, Serbia now has the ability to direct all surplussurpluses from privatisation proceeds, together with the budgetary surplus, to public investments.

According to Dinkic, the Ministry will forward a proposal to the government that surplus revenues from privatisation, which are expected to amount to more than 100 million dinars this year, should be used for paying off debts, as well as for investment.

Dinkic said that last year a sum of approximately 40 billion dinars was realised through privatisation, and it has been planned that revenues this year will be around 30 billion dinars.

He added that since agreement has been reached with the Austrian consortium in connection with Mobtel, on the basis of that transaction alone the state will further obtain a minimum of €600 million.

He invited companies that deal with mobile telephony to participate in the tender which will be called in April, for the sale of the license and equipment of the company which will be jointly formed with Austrian investors this month.

Dinkic recalled that in the past two years, at the recommendation of the Ministry of Finance, the government adopted 102 laws and stability in public financing has been achieved.

He also said that the budget deficit of 4% of the gross domestic product (GDP) has been converted to a surplus of 1.3% of the GDP.

He said that the conclusion of the arrangement with the International Monetary Fund (IMF) represents a great success, which enabled Serbia to get a write-off for a $700 million debt.

He added that the international credit rating of Serbia was improved on two occasions in the previous year and a half.

Dinkic said that in the last two years economic growth of 8% was realised, and added that the Ministry of Finance significantly contributed to establishing financial discipline, advancement of the banking sector and returning citizens’ confidence in banks.

Dinkic said that a sum of €1 billion of old foreign currency savings was returned, and the savings in banks that in 2003 amounted to €800 million, currently stand at €2.3 billion.

He remarked that pensions are being paid out regularly.

He said that public expenditures in this time period were considerably reduced and presented the fact that from a participation of 44.3% in the GDP they were brought down to 41.3%, making them less by approximately 60 billion dinars.

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