With a new investment cycle that has an estimated value of five billion euros, the sectors of construction and infrastructure will continue to provide a strong contribution to GDP growth and to support Serbia’s ambitions to continue expanding its exports and to become the focal point of connectivity between Europe and growing eastern markets
One of the key factors in connecting the Western Balkans and the wider region to the European Union is the construction of transport infrastructure. Major investments in this sector simultaneously contribute strongly to both current and future economic growth.
In this interview with Serbian Deputy Prime Minister and Minister of Construction, Transport and Infrastructure Zorana Mihajlović, we discussed these and other projects of the Ministry in the context of reforms and Serbia’s new programme with the International Monetary Fund.
What was Serbia brought with the summits in Sofia and London, and the new ’16+1’ summit with China?
– Serbia returned from previous summits with valuable contracts and that was also the case with the Sofia summit, which we returned from with the most valuable contract signed at the summit. This relates to a commercial contract worth €943 million for the construction of the third section of the Belgrade-Budapest hi-speed railway with the ’China Railway International’ consortium of Chinese companies and the China Communications Construction Company (CCCC), which is already conducting works on this railway’s Belgrade-Stara Pazova section.
It could be said that, for Serbia, this summit was completely devoted to railways, because we also signed a memorandum with company China Road and Bridge Corporation (CRBC) on the reconstruction of the Belgrade-Niš railway. The modernisation of tracks on the Corridor 10 railway, parts of which include the Belgrade-Budapest and Belgrade-Niš railroads, will enable an increase in freight transport on the railways, or rather Serbia will indeed become a transit country when it comes to rail transport.
Do you see a further room in your sector to increase public investments that are considered a key factor in accelerating economic growth?
– We are currently at the stage of finalising the unfinished projects that we inherited, many of which were also delayed – in the sense that loans were taken but works began much later due to design projects not being completed. In 2014 we inherited the incomplete Corridor 10, which we are completing this year, with a frozen Russian loan for the railways, that we have negotiated fully in the meantime and which we have used to modernize more than 200 kilometres of railroads.
In parallel with the completion of these projects, we are preparing a new major investment cycle worth more than five billion euros, within the scope of which we will build the Niš-Merdare-Pristina highway, the section of Corridor 11 from Čačak to Požega, then the Moravian corridor, or the Pojate- Preljina highway, the Frušk Gora Corridor, i.e. a hi-speed road from Novi Sad to Ruma and its continuation to Šabac and Loznica. Activities on the project of the circular Belgrade-Sarajevo-Belgrade highway are also being intensified.
By reforming the cadastre and adopting amendments to the Law on Planning and Construction, we will create better conditions to invest in Serbia and enable Serbia’s further progress on the Doing Business Index
The new arrangement with the IMF will again place the focus on further the restructuring of public enterprises, including those in the transport sector. What further measures is your Ministry preparing in these areas?
– Our reform of railway companies received the highest ratings from the World Bank and the IMF, while many estimates suggest that it can be an example for other countries. Four special railway companies have been established, which today operate more efficiently than the former unified company, while the number of employees has also been reduced, mostly through natural outflows.
We have also launched a reform of the road sector, with the aim – among other things – of increasing the efficiency and quality of road maintenance, and of increasing the efficiency of Public Enterprise “Roads of Serbia”. It is important for the efficient maintenance of the road network that we have “Roads of Serbia” as a company that’s efficient and sufficiently strong and stable financially, in order for it to receive the least possible funding from the state and for roads to be maintained to a high quality.
When it comes to “Corridors of Serbia”, it will continue operating even after completing its main job of constructing Corridor 10. This company is much better organised today than it was a few years ago, and the experience it has makes it important for the new investment cycle that lies ahead.
Considering that Serbia’s road network is being renewed rapidly, do you consider it necessary to further improve the quality of the management of state roads?
– The roads that we are constructing today will not have the correct value if we do not invest in their maintenance, and that’s what we want to improve through the reform of the transport sector. Road maintenance according to the new model, which is based on public calls, has now commenced on 3,000 kilometres of state roads that are managed by “Roads of Serbia”. And this is just the initial step because the goal is to maintain the entire road network in this way.
How successful is Serbia in collecting revenues from toll roads?
– Given the increase in vehicle numbers on our highways, it is logical that toll road revenues are also increasing. Toll road revenues increased by several percentage points in previous years, while in 2017 they increased by more than 20 per cent, amounting to 20.6 billion dinars. Simultaneously, according to PE “Roads of Serbia”, payment effectiveness in Serbia is among the highest in Europe, totalling 99.9%.
In parallel with the construction of new roads and railroads, Serbia is also working with all its neighbours and on the removal of non-physical barriers
The number of vehicles included in the electronic payment system for toll roads is also increasing. The share of electronic payments in total toll revenues increases every year and reached a total of around 47 per cent in the first six months of 2018.
You stated recently that this is the right time for investors to invest in Serbia through public-private partnership projects. In which areas would this form of investment prove most desirable?
– For many years, the first association of many people with the PPP concept was the failed concession for the Horgoš-Požega highway, but this image changed with the concluding of the concession contract for Belgrade Nikola Tesla Airport, which will secure investments of around €730 million in the development of our largest airport. The many decades of problems hindering the Vinča landfill site will also be resolved through a public-private partnership, the contract for which has also been signed.
In the transport field, we have several potential projects that include the possibility of investing via PPPs. In the area of road infrastructure, those are primarily the final section of the Corridor 11 highway, from Požеga to Boljar, the construction of which has an estimated value of between 1.5 and 1.8 billion euros, as well as the Fruška Gora Corridor, or the Novi Sad-Ruma hi-speed road link. When it comes to railroad transport, one of the projects where the possibility exists for implementation through a public-private partnership is the construction of the rail link from Nikola Tesla Airport to New Belgrade.
To what extent does the development of transport infrastructure support the ambitions of Serbia and the region’s other countries to continue the expansion of exports?
– Serbia has recognised that it is not enough that we are building new roads and railways if we do not solve the problem of long waiting times at border crossings, and we have accordingly launched initiatives with all neighbours aimed at simplifying certain procedures at the borders or establishing joint border crossings with Bosnia-Herzegovina, Macedonia, Bulgaria and Montenegro, where border and customs procedures would be carried out at “one counter”.
How do you see a solution to the challenges faced by companies in the process of converting construction land, whether that’s due to restitution or inconsistencies in calculating the conversion fee?
– During the drafting of the Law on the Conversion of Usage Rights into Ownership Rights over Construction Land, special consideration was given to ensure that its provisions did not lead to a reduction in the rights of previous owners in the restitution process, particularly by not allowing a reduction in the market value of construction land, provided a request for that construction land is submitted in accordance with regulations on the return of confiscated property.
The modernisation of tracks on the Corridor 10 rail route will really enable Serbia to be a transit country when it comes to rail transport
The Ministry conducts oversight of the application and implementation of the Law on Conversion and removes all observed shortcomings in a timely manner.
Following a major breakthrough in the issuance of building permits, do you envisage additional measures that could support the expansion of construction works in the private sector?
– With the implementation of the Law on Registration Procedures in the Real Estate Cadastre and Utilities, adopted by the National Assembly in May, Serbia has completed the package of reformist laws in the construction field, which also included the passing of the Law on the Legalisation of Properties, the Law on the Conversion of Usage Rights into Ownership Rights over Construction Land for a fee and the Law on Planning and Construction. Thanks to the reform of building permit issues and the introduction of e-permits, Serbia is now ranked 10th in the world in this area according to the World Bank’s Doing Business Index.
In order for us to enable the continuation of reforms, primarily towards the more efficient implementation of unified procedures and simpler procedures for investors in the part relating to spatial plans, we have prepared amendments to the Law on Planning and Construction. Through these amendments, it will be proposed – among other things – that the general regulation plan is applied directly, that all planning documents be publicly available in the Central Register of Planning Documents, followed by a shorter procedure for amending planning documents, extending the validity of location conditions and the possibility of phased construction.
Considering that traffic is among the biggest polluters, do you intend to introduce incentives to modernise fleet vehicles, including the introduction of incentives for the procurement of electric vehicles?
– We’ve already done some things in this direction, although this doesn’t relate to incentives, rather the introducing of charging stations for electric cars along Corridor 10, together with free wireless internet. If we are completing Corridor 10 and have the most modern highways, then it’s important for those roads to be adequately and qualitatively equipped. Here we’ve also taken care of the drivers of electric cars, for whom we’ve established five devices for fast charging along Corridor 10, in Bubanj Potok, Preševo, Šid, Subotica and Dimitrovgrad.
The roads that we are constructing today will not have the correct value if we do not invest in their maintenance, and that’s what we want to improve through the reform of the transport sector
Our reform of railway companies received the highest ratings from the World Bank and the IMF, while many estimates suggest that it can be an example for other countries
Following e-permits and the e-cadastre, we want to bring to life the reform of e-space, i.e. to also introduce a unified procedure in the area of issuing spatial plans