HOW THE DFC WILL SUPPORT INFRASTRUCTURE

DRAGOLJUB CIBULIC, SENIOR PARTNER AT BDK ADVOKATI

How Will The DFC Support Infrastructure Projects In Serbia?

Over a month has passed since DFC's representatives visited Belgrade, and now might be a good time to highlight a couple of points related to the announced arrival of the DFC in the region

At the outset, it is worth recalling terms of the potential to ease tensions and how many additional major infrastructhat the Development Finance between Serbs and Albanians and achieve ture projects the treasury can sustain. PPP Corporation (DFC) is already long-term stability. and concession structures are also more present in the region. This newly The DFC approach to developing infra- desirable from the perspective of competicreated U.S. development bank is the structure differs from the approach of other tiveness and transparency of the approval successor to OPIC, which was involved development banks, in that DFC does not process. Their downside, however, is in the in a number of projects in Serbia and the lend directly to governments but instead fact that they are more time consuming region, primarily in issuing guarantees for supports private investments in such pro- and, at the end of the day, may still require a sector-specific lending programs carried jects through public-private partnerships certain level of governmental support if the out by local banks. and concession structures. In order to utilize development of the relevant infrastructure

What’s new is that the DFC has an in- the DFC’s funds in the development of vital is not bankable on its own. creased lending capacity of $60 billion infrastructure projects, Serbia will have Serbia is currently showered with offers (twice that of OPIC) and an expanded remit to adjust its preferred structure for the of significant development funds from the allowing it to invest in equity and world’s three superstates – the project pre-development studies. U.S., EU and China. Some of these However, the most important In order to utilize the DFC’s funds investment offers overlap. The change is its mission, which is for the development of vital infrastructure Serbian Government has so far to advance U.S. foreign policy projects, Serbia will have to adjust its shown readiness to go beyond and offer “a robust alternative to preferred structure for the development the usual and even split a prostate-directed investment that of infrastructure, which has been to ject between interested parties often leaves countries saddled take out a sovereign loan from (with the Belgrade Metro, for with debt”. Obviously, the DFC’s a development bank to finance example). However, it will not be mission is to counter the Belt and Road initiative and provide works carried out by a contractor easy to maintain that approach, given that different actors have an alternative source for devel- conflicting interests. The Serbian oping countries to finance infrastructure development of infrastructure, which has Government should choose the appropriate development. been to take out a sovereign loan from a structure for specific investments care-

It is therefore not surprising that the development bank to finance works carried fully, and the optimal source of financing flagship projects featured during meetings out by a contractor. A different approach for them. Most importantly, the selection between the DFC and Serbian officials could be beneficial for the national budget, of projects should be based on a national are two transport infrastructure projects which has taken a major beating from the investment strategy that’s coherent and that are of major political significance in ongoing pandemic. It is questionable whether publicly scrutinized.