|
EBRD increases support to cities in Yugoslavia
New EBRD Country Strategy focuses on banks, private sector and infrastructure
The European Bank for Reconstruction and Development today signed two new loan agreements worth €5 million each with the cities of Novi Sad and Kragujevac in the Federal Republic of Yugoslavia. The loans will fund urgently needed improvements to the cities' water supply and sanitation, as well as encourage the provision of public services to regional towns and cities. Such decentralisation is one of several key objectives outlined in the EBRD's first Country Strategy for Yugoslavia, also published today on its website: www.ebrd.com
The Country Strategy replaces the short-term Action Plan, adopted in January 2001, when Yugoslavia officially joined the Bank. The purpose of the Action Plan was to help kick-start the country's economy. To date, the EBRD has signed ten projects totalling €259 million. Investments have been made in energy, transport, municipal infrastructure, the financial sector and local private enterprise. EBRD projects have helped the Government focus on such urgently needed reforms as, for example, privatisation and secured transaction laws.
The signings in Novi Sad and Kragujevac are part of a €50 million programme established by the EBRD to improve urban transport, water supply, sanitation and district heating services for Yugoslav municipalities. The projects follow a similar agreement, signed earlier this year with Nis. The programme supports not only physical upgrades to infrastructure but also boosts the credit-worthiness of local utilities by helping them improve financial and operational management. The Bank expects to sign further deals later in the year with other municipalities.
The EBRD strategy paper acknowledges the remarkable progress Yugoslavia has made. It points to key achievements including macroeconomic stability, extensive price and trade liberalisation and re-integration into the international community. Moreover, both in Serbia and Montenegro, the two Republics that comprise Yugoslavia, the investment climate has improved substantially.
There are many challenges that remain, cautions the strategy paper. Yugoslavia must sustain macro-economic stability. The banking system remains in deep difficulties, with a low level of deposits relative to the economy and very limited access to loans. Most large enterprises lack a clear ownership structure and urgently need fresh capital and improved corporate governance. Much of the country's infrastructure is obsolete, holding back economic growth and investment.
Tackling these challenges will be a formidable task. Vigorous reforms, to which the authorities have already shown their strong commitment, will over the short-term lead to higher costs of living from tariff and other price increases, as well as lower job security as loss-making firms are closed or restructured. There will be an urgent need to show the benefits of reform, including better access to capital for enterprises and hence job creation, a greater volume of foreign direct investment and improved reliability of public services.
Continuing to focus its attention towards Yugoslavia's financial and enterprise sectors, the EBRD will build on its strong assistance to small and medium-sized businesses, help build public confidence in local banks and support the forthcoming foreign direct investor-led privatisation. The energy, municipal, agribusiness and transport sectors are also expected to benefit significantly in the Bank's forthcoming operations.
|
