VZCZCXRO8709
RR RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHBW #0864/01 2391055
ZNR UUUUU ZZH
R 261055Z AUG 08
FM AMEMBASSY BELGRADE
TO RUEHC/SECSTATE WASHDC 0334
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPARTMENT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 02 BELGRADE 000864 
 
SIPDIS 
USDOC FOR 4232/ITA/MAC/EUR/OEERIS/SSAVICH 
 
E.O. 12958: N/A 
TAGS: ECON EINV EFIN SR
SUBJECT: COMPLETING SERBIA'S MAJOR INTERNATIONAL HIGHWAYS - CORRIDOR 
10 
 
REF: Belgrade 770 and previous 
 
SUMMARY 
------- 
 
¶1.  The Serbian government has said that it would need approximately 
$2.6 billion to finish Corridor 10, the Pan-European transportation 
network passing through Serbia.  The goal of the new government is 
to complete Corridor 10 in two to three years with assistance from 
international financial institutions or state bonds.  Mladjan 
Dinkic, Deputy Prime Minister and Economy and Regional Development 
Minister, announced that negotiations with the World Bank would 
occur in September.  Serbia's financing efforts could be complicated 
by Senator Schumer's pressure on the World Bank to hold off on 
projects in Serbia as a result of the Kovacevic assault case. 
Corridor 10 is one of the main priorities of the new government. 
The Corridor 10 strategy includes not only road infrastructure, but 
also plans for railway lines, telecommunications infrastructure, 
hotels, gas stations, etc., with the goal of improving the business 
climate and opening new opportunities for U.S. and foreign 
investment in and around the Corridor.  END SUMMARY. 
 
CORRIDOR 10 
----------- 
 
¶2.  The most important highways in Serbia are part of the 
Pan-European Transport (PET) Corridors, which should link Western 
and Central Europe with the countries of South Europe and the Middle 
East.  Two PET Corridors, Corridor 10 and Corridor 7 (which is 
actually the Danube River), pass through Serbia.  The main route of 
Corridor 10 is: Salzburg (Austria) - Ljubljana (Slovenia) - Zagreb 
(Croatia) - Beograd - Nis (Serbia) - Skopje - Veles (Macedonia) - 
Thessaloniki (Greece), with branches coming from Budapest (Hungary) 
to Belgrade and from Nis (Serbia) via Sofia (Bulgaria) to Istanbul 
(Turkey). 
 
PRIORITIES 
----------- 
 
¶3.  Corridor 10 in Serbia is 792 km long.  Completed highway 
currently consisted of 500km.  Miodrag Jocic, former State Secretary 
at the Ministry of Infrastructure, told us on August 19 that the 
estimated cost of finishing Corridor 10 was $2.6 billion.  There are 
three unfinished portions of Corridor 10: the north-bound lanes of 
the highway from Horgos (Hungarian border) to Novi Sad; two southern 
spurs from Nis to the Bulgarian border and from Nis to the 
Macedonian border; and the road ring around Belgrade ("Belgrade 
bypass"). 
 
OBSTACLES AND OPTIMISM 
---------------------- 
 
¶4.  Jocic briefly discussed a number of obstacles to realizing the 
government's infrastructure goals.  The election cycle, lack of 
political will, and bureaucracy all worked to hold up the highway 
projects.  Three major elections in the last year and a half had 
distracted politicians and ministers from moving forward on 
significant infrastructure issues.  Since parliament was out of 
session until September 2, it could not ratify many 
infrastructure-related laws on the legislative agenda.  In addition, 
Jocic said a "big problem" was the long delay for trucks at border 
crossings requiring a new visa regime.  However, many ministers had 
to weigh in on the legislation, and the resulting bureaucratic 
fragmentation was slowing down the entire process. 
 
¶5.  Jocic expressed optimism about the new government's prospects 
for completing Corridor 10 and the Belgrade Bypass by the end of 
2012, noting that some politicians' claims of finishing the work 
within two to three years were less realistic.  The National Council 
for Infrastructure, a working group of ministers designed to focus 
on infrastructure projects and chaired by President Tadic, was a 
"good idea" and could help alleviate administrative bottlenecks and 
expedite paperwork and planning. 
 
FIGURES AND VALUES 
------------------ 
 
¶6.  Jocic said that construction of the north-bound lanes of the 
Horgos-Novi Sad highway should start soon since the technical 
documentation was prepared and $375 million was available from 
privatization revenues.  The 108 km Horgos-Novi Sad section should 
cost $225 million to $300 million.  The southern part of Corridor 10 
would be the most expensive and hardest to construct.  The 98 km 
portion from Nis to the Macedonian border was estimated to cost $900 
million.  Greece was expected to help with $150 million.  The 84 km 
spur from Nis to the Bulgarian border would require $975 million. 
Dinkic told us in July that he hoped to secure financing through the 
European Investment Bank (EIB) and the European Bank for 
Reconstruction and Development (EBRD), the World Bank and other 
 
BELGRADE 00000864  002 OF 002 
 
 
sources.  In the near term, Dinkic's financing efforts, especially 
at the World Bank, could be hampered by Senator Schumer's pressure 
on the Bank to hold off on loans to Serbia while Miladin Kovacevic 
(reftel), charged with assault in New York, remains at large in 
Serbia. 
 
 
¶7.  The Belgrade bypass will redirect the heavy traffic from the 
center of the city.  The 47km bypass was divided into three sections 
(A, B and C). The EIB and the EBRD approved $172.5 million for 
section A.  The Serbian Government provided $45 million for section 
B from the National Investment Plan in 2008, but needs an additional 
$195 million to complete construction.  Jocic said that talks on 
$300 to $450 million in financing for section C should start in two 
or three years. 
 
Comment 
------- 
 
¶8.  Corridor 10 is important for attracting greenfield investment 
and regional development in Serbia, as it would integrate Serbia 
more deeply with neighboring countries and stimulate commercial 
activity and new investment in the areas surrounding the highway 
network.  Corridor 10 represents the shortest West-East and 
North-South connection but it has declined in importance since the 
sanctions of the 1990s and workarounds that made Romania and 
Bulgaria increasingly attractive land routes.  Finishing Corridor 10 
will require the new government to demonstrate its capacity to act 
rather than just play politics.  Completing the Corridor is also a 
component of the physical foundation, in addition to the legal and 
regulatory foundation, that Serbia needs to construct if it is to 
move closer to EU membership.  In the meantime, Romania and Bulgaria 
continue to improve their transport infrastructure, drawing traffic 
and business away from the more direct Serbian route.  End Comment. 
 
 
MUNTER