ECONOMY

Serb gov’t seeks to allay investors’ stability fears

BELGRADE – Pro-Western members in Serbia’s coalition government yesterday told foreign investors they could count on long-term stability and growth despite the temporary uncertainty in the aftermath of Kosovo’s secession. Nationalist Prime Minister Vojislav Kostunica has recalled ambassadors from countries that recognize Kosovo as independent, unnerving investors already worried by sometime-violent protests that have targeted foreign businesses and embassies. But several ministers from pro-Western and technocratic parties in the fragile coalition are anxious to control the potential damage and reassure foreign firms which have invested nearly $15 billion since 2000. «We will fight for every single investor,» Deputy Prime Minister Bozidar Djelic told reporters after a meeting of foreign executives with senior government officials from the liberal faction of the government. «The government is united about Serbia being open to investors and guaranteeing safety to all of them.» Heavily reliant on foreign investment for growth, Serbia is believed to need between 3 billion and 5 billion euros a year to ensure solid economic growth, single digit inflation and financing of its massive current account deficit. «The government will ensure stability… and there will be no additional fiscal expansion,» Djelic said. «This year’s growth should be between 6 and 7 percent, inflation should be between 6 and 7 percent. To achieve that, we need at least -3 billion worth of foreign investments.» Foreign investment stood at $3.0 billion in 2007. Inflation hit 11.3 percent in February, its 14-month high, the dinar currency has lost 5.1 percent so far this year, the 2007 current account gap hit 16.1 percent of GDP and fiscal expansion produced a budget gap of 1.5 percent of GDP. Finance Minister Mirko Cvetkovic said «maintaining macroeconomic stability is key to ensuring growth,» and pledged there would be no additional fiscal expansion nor tax hikes. Not giving up on EU Local media have reported that around $750 million worth of investment are currently on hold while foreign firms try to assess the situation and gauge the climate in the long term. Companies mentioned included Italian shoemaker Geox, Indian property developers Embassy Group and Japan’s Asahi Glass. «The message we’ve got is about stability and predictability and I am looking forward to conveying it to our 175 members,» said Dejan Cvetkovic, head of the American Chamber of Commerce, which represents foreign companies. Stein Erik Vellan, Telenor Serbia CEO and chairman of the Foreign Investors Council (FIC), said the council would «advise existing and future investors to continue to invest in Serbia,» while Deutsche Bank issued a statement confirming its commitment to finance the 1.2-billion-euro Horgos-Pozega motorway project. The ministers also assured investors that Serbia would continue its path toward European Union accession. Serbia has initialled the pre-membership Stabilization and Association Agreement, but Brussels has blocked the signing of the accord until Belgrade delivers remaining fugitive war crime suspects to the United Nations tribunal in The Hague.