OP/ED: The agreement between Belgrade and Pristina will bring US funds to the region

OP/ED: The agreement between Belgrade and Pristina will bring US funds to the region

By Mirce Jovanovski

The agreement to improve economic relations between Belgrade and Pristina is in fact more than that, members of the Serbian delegation said in their first statements after the agreement.

Indeed, the agreement envisions a number of major infrastructure projects, as well as the opening of an office of the US International Development Finance Corporation (DFC) in Belgrade, which will be the only one in the area, which the Serbian side interpreted as the lever that allowed the financial agreement, with the participation of this institution. All this, according to them, will be of great importance for the country, but also for the wider region.

But what does the document, which was signed separately by US President Donald Trump, Serbian President Aleksandar Vucic and Kosovo Prime Minister Avdullah Hoti, provide?

The most important points of the agreement are summarized in the expansion of the “Mini Schengen”, to which, in addition to the founders Serbia, Albania and North Macedonia, Kosovo will join immediately, while they expect and hope that Montenegro and Bosnia and Herzegovina will also join. It also provides for the completion of the construction of the highway from Nis to Pristina, amounting to 1.1 billion euro, the Pristina-Central Serbia railway line that is valued at 1 billion euro, throug the Confidence Building Measures system.

These are projects that have a wider regional significance, because “Mini Schengen” actually means less waiting at the border for trucks and reducing costs, but also the recognition of government documents. The major infrastructure projects described in the agreement also mean connectivity, but also a faster flow of products and people, as well as a significant boost to economic growth (the Nis-Pristina highway and the railway provide Serbia with a direct connection to the Adriatic port of Durres).

Analysts say this is good news for the whole region, but on the other hand, the more restrained point out that they have not yet seen the full results. Especially after seeing how the EU, Serbia’s largest trading partner, will react first, as well as China, with the support of which Serbia is building high-speed railways from Belgrade to Budapest (especially since one of the points of the Washington agreement forces Serbia not to buy 5G equipment from unreliable suppliers). In addition, Chinese companies have invested in Smederevo ironworks but are also involved in other companies.

Official Belgrade places special emphasis on the opening of the US Development Agency office, which is expected to be a signal to investors, as well as that the agency will be a guarantor for the implementation of major infrastructure projects.

“We have an agreement that gives the whole region the opportunity to prosper even more economically”, said Finance Minister Sinisa Mali, who stressed that the agreement would contribute to even faster completion and economic development of the entire region.

“We have done our best, especially on issues that are important to the living standards of the people living in the Western Balkans”, Mali said, adding that the US government, through the DFC, has committed to funding the completion of the Nis-Pristina and the completion of the construction and reconstruction of the railway from Nis to Pristina.

This optimism was also fueled by a statement from DFC Executive Director Adam Beller.

“The International Development Finance Corporation (DFC) will actively support economic normalization between Serbia and Kosovo through the US Export-Import Bank (Exim Bank) and the Millennium Challenge Corporation. “DFC will open an office in Belgrade to support economic progress”, Beller wrote on Twitter in Serbian.

The American International Finance Corporation for Development, as stated on its website, is the Development Bank of America. DFC works with the private sector to fund solutions to the most critical challenges the developing world is facing today.

According to the media, this is in fact an American response to China’s economic expansion through the “New Silk Road”.

With the creation of this agency, the United States will be able to invest up to USD 60 billion in emerging markets to tackle, according what some in Washington believe, China’s intent to use debt to start an “economic war”, according to the media.

“DFC makes America a stronger and more competitive leader in the global development phase with a greater ability to work with allies on transformational projects”, the DFC official website said, adding that they provide developing countries with viable alternatives to unsustainable and irresponsible state initiatives.

This service is present in North Macedonia, where, according to DFC data, from 2009 to 2016, nine projects totaling USD 15.3 million were funded as a guarantee for the development of the agricultural sector, as well as for the financing of very small businesses.

DFC has developed a new system that evaluates whether a project will be funded – the so-called Impact Quotient (IQ) system for measuring impact. The IQ system has three main pillars: economic growth, integration and innovation. In each of them there are a number of possible development goals, such as job creation, inclusive supply chains or new funding structures that attract new capital.

This shows that the US agency provides funding for sustainable projects and that money is not just a word.

However, in Serbia they are convinced that DFC will co-finance large infrastructure projects and say they are committed to providing low-cost loans to support small and medium-sized enterprises. But also that its very presence in Belgrade will be a strong message to American and investors from other countries.

Some economists argue this could be a turning point in US investment funds in Serbia and the Balkans, and in the long run will bring new jobs and additional revenue to state budgets./ibna