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EBRD signs key investment in Yugoslavia
€60 million loan to the city of Belgrade for buses, water and heating
The European Bank for Reconstruction and Development is investing to improve the lives of the people of Belgrade with a €60 million loan to the municipality to get public transport moving, upgrade the water system and improve the efficiency and quality of district heating services.
The EBRD has set a high priority on helping the Federal Republic of Yugoslavia to build a market economy in the aftermath of the fall of the Milosevic regime. The EBRD has already financed a bank that extends loans to very small businesses, the Micro Finance Bank, as a first step to boosting the economy at the grass-roots level. At a donors' meeting in June, the EBRD pledged to provide €240 million of direct Bank funding in Yugoslavia by year-end.
The loan to Belgrade, signed today, carries no sovereign guarantee - an innovative-structure for providing commercially based financing to a local authority that is a particular strength of the EBRD. The investment will be channelled to three utilities: Belgrade's Public Transport Company, Water Company and District Heating Company.
A third of the EBRD investment will be used mainly to buy buses through an international tender, enhancing the local transportation system that is used by 80 per cent of the population of Belgrade. The bus system is currently unable to cope with demand, and delays are common. Another third of the loan will finance the completion of a new water-treatment plant. The water company serves the whole of Belgrade, estimated at nearly 2 million people. But the quality of water is low because the system is old and continuing decay is causing pollution to the water. The third component of the loan is for investments in the district heating network that will reduce energy consumption and water losses, improve the quality of services, and enable consumers to regulate their heat usage and be billed on actual consumption.
Olivier Descamps, the EBRD's Business Group Director for southern and eastern Europe and the Caucasus, signed the loan in Belgrade and met with Federal Deputy Prime Minister Miroljub Labus and Serbian Prime Minister Zoran Djindjic to outline future activities of the EBRD in Yugoslavia. Mr Descamps stressed the Bank's support for continued economic reforms. He hailed the passage of a privatisation law in June, for example, as a positive step forward, and said full and fair implementation will now be crucial.
Mr Descamps also discussed how the EBRD intends to support the rehabilitation of the country's ailing infrastructure and the acceleration of the real economy through foreign and local private sector investment. The Belgrade municipal project is just one of 14 projects that the EBRD is developing for Yugoslavia, including the rehabilitation of the railways, emergency power regeneration and further municipal projects with other cities, such as Nis and Novi Sad.
The EBRD hopes to make further investments this year to support small and medium-sized enterprises and trade flows, particularly by investing in banks that can serve as financial intermediaries. The EBRD also plans to set up a special Working Capital Facility to provide much-needed liquidity to larger companies that are committed to privatisation and with close commercial relationships with foreign companies. This facility is expected to be capitalised initially with €65 million. It will make individual investments of between €5 million and €10 million, based on the merit of each company.
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