My first questions, Mr. Djelic: The strategy for the first year in power for this Government was to achieve economic stability and a sustained growth. Once achieved that, what would be the goals to maintain the stability?
The Paris club negotiations have been concluded and we have received the most generous treatment for one 'intermediate' country since the London club session 45 years ago. The amount of money we were offered is enough to cover 51% of the total debt we have followed in 2-3 years time by further 15 or 66%. That is the most generous deal one country has ever got and it also comes with special element in the first three years where we will cut the price of interests for 60% which leaves just 40% price of the interest and that is more than generous. That indicates the difficult position Yugoslavia had so far being in isolation and under infrastructure and economic decay but it also shows the confidence of the International Committee and the strength of our economic programme that was highly graded on its presentation by the International Financial Institution. Our programme was recognised by many experts (among who were also EBRD, Mr Fischer-deputy managing director of MMF, Stability Pact) as one of the fastest reformers in transition. All that proves that the year 2001 was a year of a strong start of reforms with Paris club as a milestone.
Speaking from the experience of working for Polish, Romanian and Russian government this is the fastest reform I have ever seen. In '90 20 countries in transition were open for the world and the businessmen at that time did not have much experience with that. Today it is the opposite. We are the last country in transition but also with a reconstruction effort in front of us. We have the last big privatisation process in the region and are to be given a significant injection of foreign money for the reconstruction. We also have well equipped International financial institutions with ten years of experience and business people who know the region, so now we have 2004 as a landmark with three things to happen: It will be the 200 anniversary of the Serbian uprising and the Olympic Games in Greece where we want to be ready to fully benefit from transport, construction, food etc. The third thing we want to achieve is to become official members of EU accession by 2004. We traditionally have good relations with France and Germany that should be two big sponsors in EU, with Italy and Greece who play an important role in the region and with Russia as well we should have a strong backing. Therefore the next three years will be essential for the Serbian come back. This was the year for us to create as many favourable conditions as possible for that come back and there are some things that will really help like Paris club, IDA mixed status from the World Bank (we are the only country apart from Bosnia to have it), programme from MMF which will be a mixture of EFF and Poverty PRGF, three more donors conferences every year each time collecting 12.3 bil. $, etc. We are trying to use the given chance and recover our economy in order to once again become one of the leading countries of this region.
As for the budget it is difficult to be recovered after 12 years of Milosevic's regime, but what we are trying to do is to create a consolidated picture so that now we have the most transparent budget in the region, with no more quasi-fiscal deficits. We also made a modern organic law in 2001 and it took us three months for that, unlike some countries where it took years, which is another advantage of being the last one in transition.
This is the first time after 12 years that the budget did not betray the people like pensioners or other people expecting social transfers. The same is for revenues. After 5 weeks in office we changed 24 tax laws. The new system is much more transparent. We are leading a serious fight against the grey economy and we managed to put into order the whole gasoline sector that was previously part of the black market. The same case is with cigarettes where we managed to cut down the number of smuggled cigarettes from 70 to 20%. Our plan about the budget deficit is 6%, which is not too much for this phase of transition but since our privatisation revenues are delayed by 1/4 and the fact that foreign credits happen to be slower for realisation we haven't been able to do all this with only 1.2% of deficit of GDP. Next year we plan to 4.3%. On the revenue side we are going to continue fighting against the grey economy including the issue of employment making sure that all employees are legally employed. On expenditure side we are entering the cycle of public expenditure restructuring. Our rate of public finance to GDP is very high (around 48%) and I hope we will be cutting it down by about 4 or 5 points in the next three years. In order to achieve that we are now drafting a blueprint for reform in big spending items such as education, police, army, health, customs and IRS.
Are you expecting the process of privatisation to be a significant source of income?
Certainly. We expect round 220 million USD from privatisation next year of which a half should come from cement companies, which are to be sold and the other half from other already identified assets. The whole privatisation process should be accomplished by 2004. In our situation more important at the moment is who the investors are not so much what the price would be. Another issue is also the preparation for the privatisation. Zastava Company for example is the proof of how fast the transformations are being done. In just four months we managed to cut down the number of employees for a half and to dissolve the holding, which was blocking the total value and also to separate economic and social side of the company. Another thing we have to do is prepare nine big companies that are still in the government possession for privatisation among which are PTT Serbia, JAT, NIS, EPS and Telecom Serbia. They need to reduce the labour and all the other changes so that in two or three years time they are ready for selling the majority to the foreign partners. | In this process of transition what effects does it have on the people and how do you solve the problem of the lack of capital?
We are talking about two issues here. The weakest always suffer the most in this kind of circumstances. That is why we are doing all those reforms of the banking sector in order to provide people with appropriate social safety net programme. There are two levels of it and one is the case with people who are left without work. It is about creating an insurance that people changing jobs are dealt with carefully. Our labour bureau is going to set a net through Serbia with the help of foreign investors in order to reengineer the people and their skill set. Here we are talking about people from 45 to 58 years old, which is the generation I am most concerned about. This group is maybe the least flexible for foreign investors who tend to employ young generations and on the other hand they have another 10 to 15 years till the pension. This is the priority group that the government is focusing on.
The other issue are the homeless people. I am proud to say that in Belgrade you will not find many people lying on the pavements because they do not have a home. Even the 800 000 refugees are all provided with shelter. It does not mean we can offer generous social benefits because it depends on our available finances but this year we had for the first time regular child allowances. They are not much (just 10$ for the first two children and 20$ for the third one) but 300 000 poor families with children can at least have it regularly now. After that we have to take care of the pensioners and people that are in difficulties.
There are two ways of finding enough money for these programmes. One of them is foreign investors. At the moment we are creating some very attractive packages; tax package with again using the advantage of being the last ones in transition. Our team is looking and comparing the package deals that other companies have to offer and is trying to offer the most competitive one in the region. As well we are looking into making this place attractive for expatriates to come back. There is always that issue of Diaspora where we have about 200 000 highly educated people working in Silicon Valley, London, Stockholm etc. each of them with 200 000$ earned. What we are hoping fore is both human and financial capital to come back. On our most visited Diaspora site, which is www.balgrade.com, 800 people signed in, of whom we managed to get 100 back to the country. Many of them now working in the government or in our big companies are the people with wide experience from working abroad in many worldwide-recognised enterprises. Our human capital and capacity is more than average. Having this kind of people brings back the credibility in the companies, workers can see some dynamic changes and also the foreign investors have more trust.
Do you feel this country is bringing back its own image with the foreign investors?
Serbia had a lot of publicity over the last decade. Even being a bad one it is still publicity and it gets people interested in it. The bare name Serbia now rings the bell in everyone's head. We are doing a lot to improve the so far image and already enough responsible people from the former government were put in prison and corruption was cut down. Due to that I believe the image is the question of politics and economy. That is why we are working on privatisation process and law adjustment in order to show that something is happening here as a message for the foreign businessmen not to be too late to come here since this is the region of 55 mil people. I was in Paris two weeks ago and already 160 foreign investors were interested in us compared to 50 or 60 for the neighbouring countries. There are various possibilities for investments in reconstruction sector, which will be of a high interest and of course there are a lot of our people who want to come back now which is all good news for Serbia.
How did you manage to adapt to Belgrade after living in Silicon Valley and implement all your knowledge to your present job?
Silicon Valley and Belgrade are two separate things but they do have something in common and that is the ambition to be the best. That is what lies in this people. It is certainly a challenge for me to be here with all small and big victories. Small ones like advertisement campaign for cigarettes now that tells people to buy the ones with the legal stamp instead of smuggled ones because that way the money goes to health, science etc. The big things on the other hand are Paris club, donor's conference or the Economist's conference in Belgrade last September or some humanitarian work that both foreign and local organisations contributed to. The responsibility is extremely high because people are still reserved towards having a full trust in the government and are almost asking us not to disappoint them. We are a young team with an average of 43 years and therefore we should have enough energy and dynamism to overcome all the difficulties and challenges ahead of us.
Thank you very much for your comments, Mr. Djelic
Thank you
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V.I.P. INTERVIEWS 
