In previous years, the construction industry was one of the engines of the development of the domestic economy. In the period from 2017 to 2021, the construction industry in Serbia grew from 2.5 billion euros to around five billion euros, which is a growth of 100 percent, and this is data that few countries can boast of. The estimated fall in the value of construction works at the annual level of 10 percent for last year will not greatly reduce the overall results because permits were issued for large infrastructure projects, says the Minister of Construction, Transport, and Infrastructure, Goran Vesić in an interview for our magazine. We also discussed the ministry's strategy and plans to improve the construction industry in the coming period, increase energy efficiency in the real estate sector, encourage green construction, and continue extensive projects for the further development of road and railway infrastructure.
The construction industry is one of the most dynamic sectors of our economy, and in the three months since you have been a minister, one gets the impression that you haven't had a single day off. You have been on the field every day and have already announced numerous new laws and measures. What will be the first change that the Ministry will insist on in the construction sector?
Back when I took over the post of minister a few months ago, I said that I would work with the construction industry because the participation of that sector in our GDP is significant, and every dime invested in the construction industry is multiplied three times in the GDP. It is necessary to maintain and improve the construction industry in these times of crisis, when almost all countries stop investing. That is why, at the very beginning of my mandate, I held a meeting with representatives of construction companies and told them that I would fight for the construction industry, that I am always ready to hear their problems, and that they should see the Ministry as a partner for cooperation, for mutual benefit. We should work together towards building the country, ensuring that construction companies are doing well, with higher salaries for employees, and that the construction department is constantly developing. Among the changes I will insist on are amendments to the Law on Construction, the abolition of the conversion fee, a shorter and more transparent procedure for obtaining building permits, and general improvements to the construction industry.
President Aleksandar Vučić and Goran Vesić in Stepanovićevo during a tour of the works on the Novi Sad-Subotica railway
In recent years, the construction industry in Serbia has seen a noticeable expansion and has been one of the main engines of GDP growth. What are the results in 2022, especially in light of the global crisis that has affected this sector in various ways?
In previous years, the construction industry was indeed one of the engines of the development of the domestic economy. Between 2017 and 2021, the construction industry in Serbia increased from 2.5 billion euros to around five billion euros, a 100 percent increase. Few countries can claim these results, and this shows how important the construction industry sector is for the overall economic progress of Serbia. At almost every corner, citizens could see how much construction was going on.
We do not yet have precise data for last year, but we estimate that the construction industry will drop by 10 percent as a result of the impact of the crisis on the private sector. Despite the fall in the value of construction works at the annual level of 10 percent, their value in 2022 will be higher than those recorded in 2017, 2018, 2019, and 2020 because permits for large infrastructure facilities were issued in 2021.
The reasons for the decline in the construction sector, which is happening in almost all European countries, are multiple. First, because of the war, there are fewer investments, and investors are more conservative. Then, due to the increase in the price of construction materials as well as energy, the price per square meter increased, and at the same time, housing loans became more expensive, so that they were more difficult to obtain. One of the problems in Serbia was the lack of labor, although in 2022, more than 35,000 foreign workers were contracted. Unfortunately, some local governments have completely failed when it comes to issuing building permits. The city of Belgrade, for example, fell by around 25 percent in the third quarter. But all this does not mean that we cannot change things when it comes to the construction sector, so we will take a whole series of measures to change the situation, from the liberalization of labor legislation to amendments to the Law on Planning and Construction to make procedures faster and more transparent. In the first three quarters of last year, the construction industry accounted for 5.21 percent of our GDP, and in that period it generated 1.4 billion euros, which is by far the highest value in the countries of the Western Balkans since the next country is Albania, with 830 million euros. Compared to the countries of the European Union, Serbia belongs to the group of countries where the construction industry plays a significant role in the creation of GDP. The average net salary per employee in construction in Serbia in 2022 increased by 12.1 percent compared to 2021, and the average salary in November last year was 64,521 dinars. The average net salary in the construction sector is one of the highest compared to other countries in the region.
It should also be noted that we have the same level of investment in government projects, whereas private construction has a more difficult time deciding on investments because no one knew what would happen next with the euro or the availability of energy sources.
You held one of your first meetings as a minister with representatives of construction companies, and you promised that this would be a regular practice. Which issues, according to them, are now having the greatest impact on the construction sector and pose the greatest threat to their companies?
It was important for me to speak directly with representatives of the construction industry and hear what is bothering them. The state will assist as much as possible because it is critical that the country continue to be built and that construction companies thrive. In this way, we can ensure and maintain the overall economic progress and growth that Serbia has been recording for the last few years. However, since the economy is the most sensitive to all challenges on a global level, all disruptions in the world inevitably affect the domestic economy as well. Our construction industry is also bearing the consequences of the war in Ukraine because there has been a disruption in the construction materials industry, prices, transport... These are the problems that are bothering them the most at the moment: the supply of materials and their value. I told them then that in the coming period we would also discuss the subject of conversion, the abolition of compensation, and the problems they face in that area.
Goran Vesić at Nikola Tesla Airport
You announced amendments to the Law on Planning and Construction as one of the priorities. You also stated that building permits would be issued more quickly, but that investors would face increased obligations. What would these changes include, and when could they be implemented?
Amendments to the Law on Planning and Construction will certainly be among the priorities, because they should introduce greater transparency in that area, speed up procedures in construction, encourage green construction, but also improve the work of the Cadastre.
Among the most important provisions in the proposed law amendments will be the requirement for all investors to submit a report on the condition of the roads surrounding the construction site as well as a financial guarantee prior to the start of the works, so that the local government can be compensated for any damages if the investor leaves the streets in poor condition and how their repair would not be financed from the budget, that is, with the money of all citizens who are not to blame. Investors will also have the obligation, when obtaining a use permit, to attach proof of the movement of construction waste and that it has been handed over to the operator in order to prevent the emergence of wild landfills throughout the country. They will also have to get an insurance policy against damage to third parties, the value of which will depend on the location, so that citizens can be compensated for any damage caused by negligent construction. The idea is to introduce a legal obligation for every third parking space in new buildings to have an electric charger.
The current Law on Planning and Construction is good, but it is time to adapt to the new circumstances to make it even more efficient. Thus, the location conditions will no longer be issued on paper but via the e-space system, and the obligation of all public office holders will be to permanently update the conditions in the e-space with very clear deadlines. We will also propose that in the future all newly built state buildings have a green certification, and we are thinking about a must-have green certification for all buildings over 10,000 m2, as well as introducing incentives for those whose buildings are certified. For example, the first building in Serbia with a green certificate was built a decade ago, in 2013, and in September 2022, there were 110 of them. This indicates that there is a market for such facilities. Also among the important regulations is the adoption of the Law on Infrastructure Maintenance, which will enable the inventorying of state infrastructure and its appropriate maintenance. If we knew the condition of state assets, less money would be spent on reconstruction, and some accidents could be prevented.
In the spring, we are expecting a whole set of laws that the Ministry of Construction, Transport, and Infrastructure will submit to the National Assembly for adoption.
Energy efficiency is a priority in the real estate sector this year, and by all accounts, it will be even more so in the future. One of the ways to improve energy efficiency is to promote green construction. You recently announced the possibility of introducing incentives for investors who build green buildings. What incentives are we talking about?
The Republic of Serbia has a comprehensive and coordinated approach to the rationalization of energy use and the general improvement of energy efficiency as one of its strategic goals in the field of energy consumption. The Government of Serbia, at the proposal of the Ministry of Construction, Transport, and Infrastructure, i.e., the Sector for Housing and Architectural Policy, Communal Activities, and Energy Efficiency, in February of last year adopted the long-term strategy to encourage investment in the renovation of the national building fund of the Republic of Serbia until 2050. It is a strategic document that, among other things, envisages the construction of new buildings according to the Nearly Zero Energy Building level and above. One of the measures is also a non-financial regulatory and incentive measure, referring to the implementation of voluntary certification systems, such as in green construction. This measure, in fact, includes incentives for voluntary certification of ecological, green, and sustainable buildings, which not only develops awareness of this type of construction and its competitiveness on the market but also encourages the further development and application of new technologies (for example, special certificates, public recognition).
By amending the Law on Planning and Construction, we introduce the obligation that all public buildings, as well as buildings with a gross area of over 10.000 m2, must have a green construction certificate, as well as the obligation of local governments to give investors in such buildings a 10 percent discount on the payment of construction contributions.
Also, in addition to establishing clear criteria by which buildings would be certified as green, it is necessary to foresee and provide financial incentives that encourage such a construction concept, taking into account that a higher standard of construction implies a higher investment. Construction should also take great care of resources, biodiversity, sustainability, and the reduction of negative impacts on climate change, especially with the introduction of green standards.
Elaboration and implementation of these measures, which are defined by the strategy, will be possible after the creation of the action plan for its implementation, and I expect that in the next few months we will receive that document. Our Department for Energy Efficiency is actively working on its preparation. In January, a public call for the engagement of experts who will provide professional support to the Ministry in the preparation of that document was completed, and the start is planned after the official signing of the contract on their engagement.
Goran Vesić at the Novi Beograd-Surčin highway section
Renovation of the existing housing fund is the biggest challenge since old buildings consume the most energy, and it is very difficult to make tenants agree on a joint investment in the building. Is there a way to approach this problem more strategically in the future?
Buildings consume 36% of energy and emit 39% of carbon dioxide, according to data. This is exactly why the rehabilitation of the existing housing stock is a real challenge. One of the ideas is to create a special fund to help owners of apartments in buildings built in the second half of the last century renovate them so that they can get a green certificate. It does not require large investments, and it is very important because it saves energy and reduces greenhouse gas emissions.
Renovation of buildings also brings other benefits, such as social and health aspects, the reduction of construction land, and the preservation of agricultural land. In addition, the economy is also boosted through the creation of new jobs in the construction industry.
As one of the measures, the strategy defined the development of the Program for the renovation of multi-family buildings. This is one of the steps in achieving the goal: renovation of existing single-family buildings to the energy-efficient level, multi-family buildings to the enhanced energy-efficient level, and commercial buildings to the cost-optimal level. The development of this measure should include issues related to joint investments in the energy renovation of buildings, that is, the development of a sustainable model for the participation of housing communities in energy renovation.
We also need to raise citizens' awareness of energy savings in residential buildings and ensure that all buildings, commercial and public, are energy efficient.
European countries offer us various examples of how the construction and real estate sectors can be greener, more sustainable, and more energy efficient—mainly through laws that oblige investors to have new office buildings with green roofs or solar panels, to apply for green certificates, to use recycled building materials, etc. What could we learn from these European good practices?
The building renovation strategy defines a "sub-goal" within the framework of one special goal, which is the climate-neutral principle of building construction: the formation of a legislative framework that enables the dynamic change of regulations, laws, technical standards, as well as planning documents, in order to encourage action in the field of low-carbon buildings, in accordance with Serbia's international obligations, for which a number of measures have been determined and which will be elaborated through the creation of an action plan for the implementation of the strategy. Given that this is a multi-sectoral and multi-ministerial issue, it is necessary to form a working group that will be more active in solving this very important topic.
The large influx of citizens from Russia and Ukraine influenced a dramatic jump in real estate rental prices in Serbia, especially in Belgrade, which caused a major disruption in the real estate market. Rent prices have risen so much that local tenants cannot afford them with their incomes, and the proposal that the state should intervene with some measures is being mentioned more and more.
It is an honor for our country that the citizens of Ukraine and Russia feel at home here and that they can feel that they are welcome. We sympathize with Ukrainian citizens who have had to flee their homes because of bombs and fear for their lives. We offer them every kind of hospitality. The government is aware of the problem with the increase in rent prices, and there were several meetings where it was discussed.
From the state budget for 2023, 288 billion dinars, or 2.5 billion euros, have been allocated to the Ministry of Construction, Transport, and Infrastructure, which is 40 billion dinars more than in 2022. What part of this money will be directed to the further construction of road infrastructure, and what will be the priority in that sector in 2023?
Serbia is one of the few countries that, despite the crisis, has allocated as much as 40 billion dinars more in the MCTI budget, which means that we are very serious about completing all planned projects.
This year, in March, the 18-kilometer section of the Moravian Corridor from Pojate to Makrešane will be completed, and by the end of September, the 28-kilometer section to Koševo, above Kruševac. Other sections are also under construction, up to Adran and between Čačak and Kraljevo. A part of the bypass in Kragujevac, the road towards Mrčajevci and the connection with the Moravian Corridor are under contract. In March, the Surčin-Novi Beograd section, which is eight kilometers long and represents the closest connection of that part of the city to the Miloš Veliki highway, will be opened to traffic. In June, the bypass around Belgrade, to Bubanj potok, will be opened to traffic, which we will continue to build, along with a road-railway bridge over the Danube, near Ada Huja, to Pančevo. The high-speed Iverak-Lajkovac highway, which will connect Valjevo with the Miloš Veliki highway, is also being completed. By the end of the year, the section from Pakovraće to Požega will be completed, and then it will take just one hour and 20 minutes to get from Belgrade to Požega. The section Ruma-Šabac, as part of the high-speed road Ruma-Šabac-Loznica, is under construction and will be completed by August or the beginning of September. In addition, we expect that the works on the Kuzmin-Sremska Rača section, with the bridge over the Sava, towards Republika Srpska, will be completed this year. We also work on high-speed roads in the east, from the Požarevac highway and further to Veliko Gradište, Golubac. The Požarevac-Golubac section, 70 kilometers long, is being worked on without interruption, and the design of the Danube main road will continue since a tender for the design of that part has been announced.
Work is being carried out on the Niš-Merdare highway, on the section from Niš to Pločnik, which is 33 kilometers long. We also anticipate signing a contract this year for the construction of a high-speed road between Sombor, i.e. Bački breg and Kikinda, as well as Belgrade and Zrenjanin. We will also build a new expressway, Novi Pazar-Kraljevo, 103 kilometers long. Work on the construction of the Fruškogorski Corridor is ongoing.
We want to network Serbia, not only from north to east but also from north to south, so that a large number of cities and municipalities are connected by high-speed roads or highways. Every highway, every expressway, means new investments, factories, and thus more jobs and a better life for citizens. As the President of the Republic of Serbia, Aleksandar Vučić, said, with all the projects started in the last 10 years, by the end of 2023, as many roads will be built as were built during the time of Josip Broz Tito, Slobodan Milošević and DOS together.
You recently stated that the next decade will see significant investments in railroads. What is the Ministry's plan for the next year when it comes to the procurement of new trains, the continuation of the electrification of the railways, but also the further construction of the high-speed railway to Subotica as well as the section to Niš?
The railroads and railway infrastructure have been in poor condition for decades. No investment was made in railway infrastructure or in new trains. Even when we had secured money for the reconstruction of the railways, for reasons unclear to me, it was delayed for several years. I'm talking about the reconstruction of the Niš-Dimitrovgrad railway line, where, unfortunately, we recently had an accident with a train derailment. The contractor was chosen last year, and the reconstruction of the railway will begin in April. We must invest in railroads, both building and restoring them, because railroad transportation is becoming increasingly important as it is more environmentally friendly. Serbia can play a significant role in this segment because, thanks to high-speed railways and intermodal terminals, one of which we are constructing in Batajnica and the other in Makiš, it will become an important logistics center in this part of Europe, resulting in increased traffic of goods, the majority of which will be transported by rail.
There are about 3,400 kilometers of railways in Serbia, of which slightly less than 1,300 kilometers are electrified, which is about a third. The average age of the electrical infrastructure in Serbia is about 45 years. Railway modernization projects in Serbia include the reconstruction of the electrotechnical infrastructure on electrified railway lines as well as the electrification of around 450 kilometers of railways that have not been electrified until now. The most significant project is the modernization and electrification of the Niš-Dimitrovgrad railway, which was built in 1886–1887 and is the only section on the entire European international railway Corridor 10 that is single-track and non-electrified. The 108-kilometer-long railway reconstruction project includes the reconstruction, modernization, and electrification of the existing Niš-Dimitrovgrad railway as well as the construction of a new, single-track, electrified bypass railway around Niš with a length of about 22 kilometers. In this way, we will create the conditions for greater transit rail traffic through Serbia and solve the issue of the Niš railway junction and traffic in this city. 134 million euros were provided with a loan from the European Investment Bank, while 61.24 million euros came from the Serbian budget, and 73.04 million euros were provided in the form of a donation from the Investment Framework for the Western Balkans (WBIF). Although this project has been talked about for decades, the state for the first time in 2018 provided the means to realize it, and upon completion, traffic bottlenecks between Serbia and Bulgaria will be removed, the quality of travel will be increased, travel time will decrease, and trains will no longer pass through the center Niš.
In addition, the plan is to reconstruct and electrify the Stalać-Kraljevo-Rudnica railway(149 km), then Vršac-Sombor (52 km), as well as Pančevo Glavna-Vršac (75 km). On the 20-kilometer-long electrified Batajnica-Ostružnica single-track railway, the construction and electrification of the second track is planned, while as part of the bypass around Belgrade (sector C), we will also build a new, 29-kilometer electrified section Beli Potok-Vinča-Pančevo, with a road-railway bridge over Vinča. The strategic plans also include the construction of a new, electrified line, Zemun Polje–Nikola Tesla Airport–National Stadium (center of Obrenovac), with a length of 19 kilometers, and the preparation of this project is underway.
Soon we expect the signing of a contract with the European Union on the start of work on the construction of the Belgrade-Niš high-speed railway, which should be completed in 2028. Also, the restoration of the Bar railway through Serbia, from Valjevo to Vrbnica, will follow.
All these investments in infrastructure will certainly be accompanied by the purchase of new trains.
FROM BELGRADE TO SUBOTICA IN ONE HOUR AND 15 MINUTES BY FAST TRAIN
Photo: Aleksandar Milutinović
The Novi Sad-Subotica railway is 108 kilometers long, and it is the third section of the railway for high speeds of 200 km/h through Serbia, from Belgrade to the state border with Hungary. The goal is to shorten the deadline for its completion as much as possible, by the end of 2024, while, according to the announcements of the Hungarian partners, the section from the border to Budapest will be completed by the end of 2025. A total of 58 new projects will be built on the Novi Sad-Subotica route: 30 overpasses, 13 underpasses, 5 galleries, as well as two pedestrian and two bicycle underpasses and support structures next to the gallery. In addition, two viaducts will be built: the most difficult and most complex in Vrbas with a length of 1,465 meters, as well as a viaduct in Mali Idjoš with a length of 500 m. Four bridge structures will also be built on the route over the Danube-Tisa-Danube canal. Everything will be done in accordance with European interoperability standards; the railway will be electrified and equipped with modern signal-safety and telecommunication devices. There will be no road crossings on the Belgrade-Novi Sad-Subotica-state border with Hungary. Trains will cover this entire route in one hour and 15 minutes, and from Novi Sad to Subotica in 42 minutes.
By: Gordana Knežević Monašević
Photo: Predrag Mitić