Identifier
Created
Classification
Origin
07BELGRADE1323
2007-09-28 12:06:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Belgrade
Cable title:  

ECONOMIC TRAIN NOT (YET) DERAILED BY KOSOVO

Tags:  EFIN ECON EINV KIDE KPRV SR 
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RUEHLN RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHBW #1323/01 2711206
ZNR UUUUU ZZH
R 281206Z SEP 07
FM AMEMBASSY BELGRADE
TO RUEHC/SECSTATE WASHDC 1503
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC 0006
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
UNCLAS SECTION 01 OF 02 BELGRADE 001323 

SIPDIS

SENSITIVE
SIPDIS

USDOC FOR 4232/ITA/MAC/EUR/OEERIS/SSAVICH

E.O. 12958: N/A
TAGS: EFIN ECON EINV KIDE KPRV SR
SUBJECT: ECONOMIC TRAIN NOT (YET) DERAILED BY KOSOVO


Summary
-------
UNCLAS SECTION 01 OF 02 BELGRADE 001323

SIPDIS

SENSITIVE
SIPDIS

USDOC FOR 4232/ITA/MAC/EUR/OEERIS/SSAVICH

E.O. 12958: N/A
TAGS: EFIN ECON EINV KIDE KPRV SR
SUBJECT: ECONOMIC TRAIN NOT (YET) DERAILED BY KOSOVO


Summary
--------------

1. (U) During introductory meetings with Serbian government
leaders and the U.S. business community the Ambassador heard
positive messages that economic reform activity is moving
forward. Despite the fact that economic issues are pushed
off the front page by Kosovo, there are areas of progress and
efforts by some political, economic and business leaders to
push ahead with economic reforms which are important in
sustaining Serbia's current economic growth. U.S. firms
report continued interest from Serbian government officials
to hear business community concerns. End Summary.


Dinkic Focused on Privatization, Jobs and Investment
-------------- --------------


2. (SBU) Economy Minister Mladjan Dinkic highlighted several
goals for the coming months during a September 14 discussion.
Dinkic will focus on finishing the privatization of socially-
owned firms (generally midsize companies, which exclude the
largest state-owned firms) by the end of next year. He plans
to use bankruptcy procedures for an increasing number of
firms that do not attract bidders. Dinkic's goal is to move
firms through bankruptcy in four months, but this is
dependent on capacity in the municipal courts. He also hopes
to pass several amendments to the recent bankruptcy law to
smooth the process. Commenting on the prospects for
privatization of the state-owned oil firm NIS, Dinkic
lamented the plan to sell just 25% of the firm initially as
inadequate, but that Deputy Prime Minister Djelic is from the
"French school of economy" and prefers to maintain a state
hand in the firm.


3. (SBU) Turning to his other priority, jobs and investment,
Dinkic highlighted his ministry's focus on the automotive,
electronics, technology and tourism industries. Dinkic hoped
to attract international bidders, especially GM, to bid in
the planned December tender for state-owned automaker Zastava
(Yugo). (Note: Dinkic hopes to meet with senior GM officials
in Detroit during his mid-October visit for the fall
IMF/World Bank meetings. End Note.) Dinkic looked to India's
technology parks as a potential model for Serbia and has
authorized investment subsidies of $2700 to $14000 per job
for new investors in targeted sectors.

Permits and Regulation
--------------


4. (U) Dinkic recognized that the construction and
permitting process required significant updates and
simplification of procedures. This theme was also
highlighted by companies on the AMCHAM board in earlier
discussions. Dinkic is leading a legislative reform council
with the goal of simplifying regulatory procedures, and he
has a World Bank advisor to support this effort.

AMCHAM Finds Access
--------------


5. (U) During an introduction to the AMCHAM's programs and
goals on September 12, AMCHAM board members outlined their
companies' experiences in Serbia. Overall, AMCHAM members
reported that they have adequate access to senior
policymakers, and that their concerns are heard by the
political leadership. They noted that the bureaucracy
remained entrenched and often required pressure from above to
reform. AMCHAM members noted that while their operations are
profitable, they are frustrated with the lack of 'aftercare'
from the government on items ranging from permitting and
licensing to occasional public criticism by government
officials in the media.


6. (U) During a September 11 meeting with Parliament Speaker
Oliver Dulic, Dulic emphasized that parliament was moving
legislation and that it was not paralyzed by the political
situation. He hoped to direct the parliament to focus beyond
Kosovo to measures that would improve Serbia's economy and
the standard of living of its people.

Comment
--------------


7. (SBU) While Kosovo remains the number one item on the
government's agenda, and on the front pages of the newspaper,
there are efforts by some in the economic field to press
forward with the economic agenda needed to move Serbia toward
the EU. Political uncertainty has, surprisingly, not stopped

BELGRADE 00001323 002 OF 002


the Belgrade Stock Exchange sentiment index from nearing its
highest levels since its inception in June 2005. Business
and economic leaders are realistic about the political
challenges Serbia faces in the coming months, but many remain
optimistic about the economic opportunities ahead. End
Comment.

MUNTER