When the state launches large investment works, the goal is not only new roads, railways or power plants, but also the encouragement of domestic contractors and their suppliers; in 21st century Serbia, however, all the developers of major projects are foreign companies.
The “Kostolac 3” power plant is being erected by Chinese construction workers, who have previously had to increase the volume of coal extraction from the accompanying mine from nine to twelve million tons a year.
After building the “Mihajlo Pupin” bridge and connecting Srem and Banat for the first time, construction workers from far away began to build Serbian roads.
From Azerbaijanis to Americans
On our roads in recent years, construction workers from Azerbaijan, Greece can also be seen, while Russian engineers are designing and installing the Novi Sad – Stara Pazova stage of the “Eurocorridor 10”. The Chinese are at the first stage of Pazova to Belgrade.
The public has been reluctant to say that the future Nis-Pristina highway was commissioned by the Americans to facilitate the eventual mobility of NATO troops from the “Bondstil” base in Kosovo, so there is a reason for the Yankees to build it.
The trouble is that the Serbian taxpayers will pay the extremely high price, over twelve million euros per kilometer, when it comes to the section through Serbia to Medar.
The domestic ones are marginalized
There are no Serbian companies among the main contractors who sign the contract with the financiers. Domestic firms only like side jobs, sometimes, just like when building a bridge in Zemun, they only get crumbs.
Indeed, where are once so powerful domestic builders, whose power plants, dams, embankment, ports, airports, hospitals, roads still carry the glory of successful builders from the territory of Serbia and the former Yugoslavia.
Didn’t “Mostogradnja” build a worldwide reputation by connecting river banks across the globe; there were nowhere to be seen on the Zemun Bridge.
In the role of subcontractor
“Energoprojekt” “has built many larger and more complex facilities than those impressive and demanding which in recent seasons in Serbia are rapidly rising and even more projecting. Neither of these companies, from the very top of the construction industry, are present at the construction sites here.
Minister Zorana Mihajlovic explains that during the transition years and many troubles, Serbian companies have lost a lot of competencies. There is also the question of the capacity of domestic firms, in the decades of adversity accustomed to doing smaller jobs.
At the same time, the Minister points out that the state, when concluding a basic contract with the main contractor, looks to incorporate the obligation to engage local subcontractors and suppliers. Reportedly, domestic companies get half of total engagement, Mihajlovic ambitiously estimates.
Without their own money
The first people of “Gradjevinar” see the situation differently. It is true that they have lost some of their potential, however, they believe that they still have enough knowledge and equipment to do the most complex objects planned in Serbia.
They point out that the problem is not have their own funds, so the state of Serbia is embarking on arrangements with countries that are willing to place accumulated budget surpluses through loans across the globe.
China is the most active in this regard, but Serbia has made similar arrangements with Russia and Azerbaijan. However, as a rule, foreigners make the loan conditional on the prime contractor to be from their own country, and the company designated by the creditor.
Thus, a contractor was selected not on the basis of public competition and the quality of the offer, but with the will and interest of the financier.
The experience of the first decade of this century reminds us that it was not much better when similar deals, though of a slightly smaller scale, were funded by European Development Banks, the EBRD and the EIB.
True, there are calls for tenders for the selection of prime contractor, but with the conditions designed to eliminate domestic competitors in advance. The reference was set up so that it could not be satisfied by a company that has spent nearly a decade in a regime of harsh international sanctions.
Thus, Serbian companies lost the chance to win before the competition was announced.
Money was never cheaper
However, there is a possibility that the state of Serbia will borrow and finance the project with borrowed money, whether it is a highway, a power plant or a railway.
The question is why does Serbia not finance with a bank loan, especially since money in the financial market has never been cheaper, verified clients can borrow up to only two percent of interest, even lower?
The answer is not exactly the best indicators of Serbia’s financial solvency. Finance has settled, employment has grown, but banks estimate that the state of Serbia is still fragile to economic problems from the world market.
It is therefore logical for them to estimate that a substantial long-term debt would be an over-indebtedness without sufficient security. With this kind of estimation there is no such thing as loan.
In other words, in the financial market, Serbia is not yet perceived as a quality borrower. Therefore, it turns to countries willing to lend directly, but then there is the additional condition of designating a prime contractor.
In other words, the financial market sees a high degree of indebtedness, even more uncertainty about the contract, and the lack of rule of law is a barrier to lending.
The consequences are the reliance on one who agrees to finance the risky ones. Such willingness, however, carries an additional cost, this time in the form of imposing a prime contractor.
Lower and lower
The biggest casualties in the whole arrangement are domestic construction companies, which cannot get bigger jobs even when it comes to domestic projects.
As a result, they become smaller and smaller contractors for simpler and cheaper jobs.