Politics sours Serb investment climate
BELGRADE – The failure of Serbia’s leaders to agree on a coalition government two months after a general election is creating economic uncertainty that is scaring away investors, officials and analysts say. President Boris Tadic’s Democratic Party and Prime Minister Vojislav Kostunica’s Democratic Party of Serbia are still in talks this week over which party will fill the post of prime minister after the inconclusive January 21 elections. That leaves critical policy questions unresolved, such as how to manage the economy, handle the likely independence of the breakaway Kosovo province and mend uneasy ties with the European Union. «The biggest problem we face as a country is the perceived political risk,» said Jasna Matic, director of the Serbian Investment and Export Promotion Agency. «Investors see Serbia as a risky place, and the fact that there’s no government doesn’t help. We have investors who are interested but are waiting for a new government so they have someone to talk to.» The IMF and Serbia’s central bank have warned there are pressing questions to clear up, including tax and pension reform and the sale of state monopolies. The parties have offered little guidance and often squabble publicly over specific sell-offs. Economist Jurij Bajec said investors had hesitated «because they don’t know what Serbia’s policy will be in the next four years.» «Local investors are unsure for the same reason,» he said. «Each day of delay in forming a government means one less investment.» Slobodan Milosavljevic, head of the Serbian Chamber of Commerce, said the delay in forming a government was already derailing big privatizations planned for this year, such as the sale of oil monopoly Naftna Industrija Srbije (NIS). «Even if a government is formed tomorrow, it would be hard to finish the NIS privatization by year-end,» Milosavljevic said. The new government would need time to review the current process, call a tender and negotiate with bidders. After a record $4 billion of foreign direct investment in 2006, Belgrade had set its hopes on the NIS sale plus a number of investments such as commercial real estate projects and large-scale retail complexes for a combined income of at least $3 billion this year. Political indecision is also delaying long-term reforms. «There are 71 laws waiting to be passed by parliament,» Justice Minister Zoran Stojkovic told Reuters. The new government would have to examine them first and then send them to parliament, he said, leading to more delays. «Companies cannot implement long-term policies because the governments are inconsistent,» said Bojana Vukasinovic, head of the American Chamber of Commerce in Serbia. The coalition talks take place in the shadow of an imminent United Nations ruling that is expected to give supervised independence to Kosovo, run by the UN since 1999 NATO bombing drove out Serb forces accused of atrocities against civilians. Western officials have urged Tadic and Kostunica to reach agreement in order to keep Serbia out of the hands of the ultra-nationalist Radical Party, which won the most votes in the election but has no obvious partner. If no government is formed by mid-May, Serbia must call new elections. The Radicals would probably reap votes from anger over Kosovo, and the deadlock at the top would continue.
