EBRD director in Kosovo: The government should strengthen support for municipalities

The government of Kosovo should strengthen the support for the municipalities, in the development of projects, said the director of the European Bank for Development and Reconstruction in Kosovo, Sergiy Maslichenko in KTV Interactive on Friday.

He said that Kosovo should work in several directions, as he mentioned transport, energy and municipal projects as the areas in which the EBRD can support more.

He stated that Kosovo is limited due to the punitive measures of the European Union, but reiterated that the EBRD as a bank has no limitations.

Full interview:

TIME: Mr. Maslichenko, it's a pleasure to have you as our guest!

MASLICHENKO: Thank you! It's a pleasure to be with you!

KOHA: The reason we have invited you tonight is the signing of the Memorandum of Understanding between the European Bank for Reconstruction and Development - EBRD and the Government of Kosovo in the amount of 400 million euros for the next four years 2024-2027. It was a big step in the EBRD's cooperation with Kosovo. What news is this development for you?

MASLICHENKO: Thank you! It is a great achievement both for the EBRD and for Kosovo, as we have worked here for many years on many projects. This agreement is called a Memorandum of Cooperation and is related to future projects that we plan to develop and sign with the Government of Kosovo in the next four years. It seems like a big amount, but if you divide it into these 400 million euros in four years, it is not such a big amount, from what we have this year, which is about 80 million euros. But still this is a very good framework for us as EBRD and the Government to work in several directions.

TIME: And where will this money be spent? Because the general public has only seen the process of signing the Memorandum of Understanding, but they do not understand for which areas this money has been allocated to be invested?

MASLICHENKO: As you know, the EBRD plays an important role in the private sector. Most of our projects are focused on private sector financing, financing of commercial banks and various companies. For example, last year we signed 16 agreements in Kosovo and 14 were in the private sector and one in the public sector. And for this, the private sector is dynamic and we have good cooperation. The last agreement has been reached for public sector projects. And we want to support the Government of Kosovo more and we want there to be other collaborations between us and the Government.

There are three areas that I would like to highlight. First, the transport projects, you know, we were already implementing the Railway 10 project, we were involved in the construction of regional roads, such as the roads to Prizren, Ferizaj, Gjilan. But we can do even more And I can stop and give even more details.

The second area is energy and energy efficiency. We have worked hard on renewable energy. There are two wind parks that were financed by the EBRD in 2019, i.e. 5 years ago. But, Kosovo has a great potential to do more in energy efficiency, public buildings, residential buildings in municipalities, as well as business enterprises.

And the third area that is very important for us is municipal projects, municipal services and environmental issues. We are talking here about central heating, drinking water and sewage treatment issues, public transport buses and so on. These are the primary areas which are very necessary for Kosovo to support economic growth and the private sector in Kosovo and for the EBRD, this is our main focus.

KOHA: As EBRD, you have mainly supported the private sector and now we see that the public sector is also being supported with these 400 million euros. Why is this happening now? Is it because of the projects that the Government has presented or because they obeyed their projects. Can you elaborate on that for us?

MASLICHENKO: This is an agreement of understanding. These are not signed projects that we have already agreed to. This is a list of projects for which we worked together with the Government of Kosovo during the past year. There are about 15 or 16 projects in the public sector, in energy, transport and other municipal sectors. As I said earlier, we are focused on the private sector but we can do more in the public sector. Last year we had 20 million euros. A year ago it was better because we had more, because we signed more projects. If you look at the neighboring countries, Bosnia-Herzegovina or North Macedonia, we have more projects in the public sector. We have between 50-100 projects every year.

KOHA: Does this show the inability of the Government of Kosovo to have more projects?

MASLICHENKO: It is not impossible. There is a guide to help the Government. There are some limitations here. The capacities of the Government and the capacities of public enterprises to prepare and proceed with these projects. But we also offer them our support. We call it technical assistance. We employ consultants who work with public enterprises and the Government and we work on the preparation of projects. But, yes. We all want the Government to do more and we are here to support the Government. But 20 million or 40 million euros per year for a country like Kosovo are not enough. In order to become attractive for foreign investment and to help the private sector, the country must enable a better environment: by building roads, railways, municipal services, renewable energy capacities.

KOHA: Am I reading in you a dissatisfaction of yours in this direction?

MASLICHENKO: We can always do more. You know, we can always say that's not enough. But yes, you see neighboring countries and other countries, 100 million or 200 million euros of investments per year are possible here. This is my answer.

KOHA: Where, in your opinion, should these funds be allocated and what should be the priorities in your opinion?

MASLICHENKO: The current priorities are part of the strategy that has been developed for Kosovo, which is called: The Strategy of Kosovo with the EBRD, which was also discussed with the Government of Kosovo. We have three areas: The first is an inclusive and competitive private sector, which, as I said, we are succeeding in this direction. We have lines of credit, and direct lending in the private sector. We can do more. We focus on the inclusion of young people and women in business, which is a very important thing for Kosovo.

The second area concerns the green energy transition. To help Kosovo make the transition to clean energy from coal power plants, you know that most of the energy is produced in Kosovo from coal. And this power plant is outdated, unstable and harmful to the environment and to people's breathing. You know, we live here in Pristina and we know what this means for us. And we have many ways to help the Government through organizing auctions. We have helped the Government to organize the first auction, but more can be done in this regard. But we also have the public sector. We have a lot of companies that want to develop projects and they feel a bit uncomfortable with that and we try to help them and the Government to bring more clean energy projects which is also important for business and foreign investment. to come to Kosovo and have stable and clean energy.

And the third area, as I mentioned, is regional connectivity, integration and foreign investment. Here we are talking about transport projects in which there is good progress, but there are a number of projects such as the Prishtina-Podujevo project and a ring to build, there are also ideas for building a railway...

KOHA: These are ideas that we have seen over the years and have not been implemented...

MASLICHENKO: Some of these have been discussed for years and others are new ideas, such as central heating companies. The government approached these companies to help them and this is based on the help we gave to the Central Heating Plant of Pristina, which was a historic project. And now there is a study of an institute that is our partner and we are happy to help.

I visited the central heating company in Gjilan and there are many other options. Preparing these projects takes time. It is usually 1-2 years because you need feasibility and technical environmental analysis and then time to implement 2-3 years. These things are not easy. Some projects were started by the previous government with which we signed an agreement, some projects we started last year, few projects, but we are open to doing more. We basically look for run institutions, so if you have more interest, more requests from the government, we have a lot of resources and a lot of experience in these projects.

TIME: EBRD has so far invested about 680 million euros in over 100 projects throughout Kosovo. But I have seen your listings on your website and there are some projects that have been canceled in the meantime as well. Now, when we see that this memorandum of understanding was signed by the EBRD and the Government of Kosovo, what should the Government do so that the projects do not fail in the future or are not cancelled?

MASLICHENKO: I mean, this is an issue, you know, with the previous government, there are many changes and every new government comes with their own ideas, approaches and they reconsider or cancel projects or make the whole process more complicated. I think that stability, political stability, is very important for these long-term projects everywhere, including Kosovo and the region.

TIME: Are you worried by the way about this? Because recently we have seen an increase in tensions, tensions that arose in the north, especially the warmongering discourse is widespread throughout the region in fact, especially in Kosovo's relations with Serbia, but also Bosnia. Are you worried about this?

MASLICHENKO: Yes, we are worried and this tense situation affected our project. We are talking about railway route 10, for example, which connects Hani e Elez, which is on the border with North Macedonia, with Lešak, on the border with Serbia. It is a three-phase project. So we are now actively implementing 2 phases from the border of North Macedonia to Mitrovica which are being built, we hope to be finalized soon. But the rest from North Mitrovica to Leshak, we cannot move forward with the project because of political issues, because of security, because of this railway controlled by the railways of Serbia.

KOHA: You were not able to work on this project?

MASLICHENKO: Now the consultants are preparing the feasibility study, the design study and they have problems with the experience to prepare the project because it has been affected by the political negotiations and the impossibility to progress with the work because, as you mentioned, there has been an instability and events in this part , this has affected our projects.

KOHA: So political stability is crucial. What else is important so that projects are not cancelled?

MASLICHENKO: Yes, political stability is very important, not only external, but internal. You know, we know history and we have seen it for international agreements that are approved by Parliament. But also the consensus on the ground between different political parties is important for investors and for international institutions like us to come here and help. Because if there's a lot of, you know, discussion of difficulties, it's hard to bring good projects. What is more important, I think, is that a government can strengthen their role in supporting municipalities and public enterprises for the development and implementation of these projects. You know that for every big project like the road or railway with a cost like INFRAKOSI or solar heating with "Termokos". We also have a project with KOST. It is a big project. You need people for project management, and usually we create a so-called project implementation unit. We support them with consultants, the best international consultants. But, it is the responsibility of the company and the government that manages this company to implement. I think that at this point there are many issues and we always advocate that the government hires professional people with market salaries, because we are talking about projects of 100 million euros. So for this you need a professional with a good salary to implement them faster. If you don't have this, projects are delayed and not implemented on time. Another issue is land expropriation.

KOHA: This is an important issue in Kosovo.

MASLICHENKO: Yes, it is a big issue and many projects have been stalled or delayed due to land expropriation and different roles in municipalities and central government. You know, sometimes there is a discussion about who is doing this part, and because of this discussion and clarity, projects are delayed.

KOHA: You mentioned the importance of cooperation between the municipal level and the central government, and here in Kosovo there is sometimes quite a heated debate with the opposition accusing the central government of non-cooperation at the municipal level, where their parties govern these municipalities. In your opinion, how have you seen this cooperation after you have been in Kosovo for more than 12 months and do you have an opinion about this or not?

MASLICHENKO: Yes, no, I mean there are some success stories that I have to tell and there are some good collaborations and in some cases there is not so much collaboration. I mean, maybe it depends on the president, also on the political affiliations, but for different reasons. You know, in some cases there is no good cooperation.

TIME: Can you give us a practical example?

MASLICHENKO: No, let me make a general point. In Kosovo, it's mainly the central government's finances, you know. Municipalities do not have sufficient own revenues and also have limited opportunities to work with us, as with other lenders if we look at the law on public debt. So they cannot borrow without the Ministry of Finance. So this is why central Government is crucial and important for big infrastructure. If you talk about the 20 million sewage treatment plant or if you talk about regional roads and garbage, unfortunately you see garbage everywhere. And it is not addressed, because this issue is between the Municipality and the Government. I think that the Government in my view needs to play a more active, more leadership role to encourage and sit together at the table and find the solution that we have actually started recently. We had a very good meeting with representatives of the cities with the Minister of Finance last week and I think it was a very good meeting. But we just started this process of discussing the issues and trying to solve it all together with different ministries. They were the Minister of Infrastructure and the Minister of Economy. This is a process, it is also a complex project.

But in the city you are looking for, for example, we have good cooperation with Gjilan. For this wastewater treatment plant project, we have an understanding, and we also have good cooperation with another project, the wastewater treatment plant in Mitrovica. The project there is not going so well, because I think there is not that good cooperation. This is an example from what I see.

KOHA: Why is there no good cooperation in this case? How can we understand?

MASLICHENKO: No, they are different reasons. Maybe it is difficult for me to comment on the cooperation between the municipalities, but I think it is for the benefit of Kosovo, for the benefit of the cities and for the benefit of the central government to sit together and discuss all the issues and find a solution for the project move forward and it has not stalled due to miscommunication as you say or for other reasons. But this is what I see. Okay, I can't go into too much detail. But it has to do with land expropriation in part, but also in general, perhaps with cooperation.

KOHA: You mentioned the key issues faced by Kosovo in the implementation of projects and so on. If you were to compare the involvement of the EBRD with Kosovo and the region, what would be your assessment of where Kosovo stands, how is Kosovo absorbing EBRD projects? Are you showing good skills in doing so?

MASLICHENKO: As the director of the EBRD in Kosovo, of course I want to do more and I think we are doing the minimum that is needed like five years or three years ago and there is a time to step up and do more. And I mentioned Bosnia-Herzegovina, North Macedonia, for example they sign 120 or 150-million projects in the public sector, roads, railways. Here in Kosovo we have signed 20 million contracts. So, you can judge from these figures also about access to EU funds. Unfortunately, you know that Kosovo is limited due to the EU's punitive measures against Kosovo, but we as a bank do not have any restrictions. We continue to support the Government. We offered our funds, those of our donors to help the Government, and some projects such as the sewage treatment plant in Podujevë this year will be supported by EBRD funds. But, nevertheless, for the medium term, you should have access to EU funds in order to have more proposals. If you look at the list of proposals, I would like Kosovo to have more projects on the list.

KOHA: I have seen the list of projects that you have supported as EBRD, and I have seen that the private sector has been supported a lot. I would be interested to see if you have seen any changes since the pandemic and if the private sector has had more needs. I could actually see in the list that there are more projects in the last five years, for example, if you were to compare with the period of 10 years ago in the private sector: what does that tell us?

MASLICHENKO: No, actually the private sector is a private initiative and it is dynamic. Kosovo has many entrepreneurs, family businesses and they are doing wonderful work that we support as advisors. You know we have advisory group in the bank. We supported more than thousands of projects, but also with direct or indirect financing through commercial banks and after the pandemic we also see a good interest, but it is also important to improve the business climate and regulations for them. And for this purpose, we also work with the Government to create this public-private partnership. We also had the first round table meeting two weeks ago, where we brought together the private sector and the Government, including the Prime Minister in this National Economic Investment Council to discuss all the outstanding issues.

And there are a number of issues that we identify. I think so, the private sector is very good and that is why we have an important focus on the public sector. Public sector, we also create jobs for the private sector. It will produce more revenue for the Government and for more taxes and it will create the conditions for foreign investors to come because they have to transport goods. You need, they need to, you know, have access to renewable energy and reliable energy, which is not available right now and you know, environmental infrastructure like public transportation, utilities and so on.

TIME: At the Summit in London, where the Prime Minister then signed the Memorandum of Understanding with the EBRD, Kurti mentioned that there are three priorities and the first was central heating, the expansion of central heating in other cities as well. The second was the construction of Ibër-Lepenc and the third project is the construction of the Duhël-Shtime-Lipjan road. It is not that these three priorities are often discussed here in Kosovo, as the discussion of the Prizren-Tetovo road has occupied more discussion. How did you see these three priorities that Kurti added?

MASLICHENKO: No, these are shared priorities. We put it on the table, because we have already worked, as is the case with Ibër-Lepenci. We have been working for several years on this project. We mobilized consultants and then prepared the preliminary project. I think this will be a great project for the country. You know that it will supply clean water for 400,000 inhabitants of the southeast of Kosovo. This is essential and the Government understands it and we work together on this particular project. As for heating, I call it central heating. Basically, it is the central heating network similar to Pristina and Gjakova. We don't have many other cities, but the idea is to implement it in other cities. This is also in our plans, but it is more for the medium term. It will take several years to prepare this project, but it is important. We have the Gjakova heating project, which we visited and would like to finance. This is possible this year because they have to expand the network. They have already done a good job, but they can expand with the side road or the bypass that connects the R6 highway with the R7 from Lipjani to Suharekë, which is also important in our priority. But it was recently launched by the Government together with us.

KOHA: We have seen that this project will cost around 400 million euros. Is it a lot of money for this project?

MASLICHENKO: We don't have an estimate of how much it will cost exactly.

KOHA: But you have seen how much the Government has given for this project. The Prime Minister gave these figures.

MASLICHENKO: We will have to see the preliminary design and then estimate the full cost. Now it's hard. It won't be cheap for sure. It's about 30 kilometers as I remember, 31 kilometers.

KOHA: Mr. Maslichenko, the highway connecting Pristina to Skopje was originally said to cost 600 million euros, and it is a long territory that the highway passes through, so about 400 million euros will be paid for this project.

MASLICHENKO: A feasibility study will be done by independent international consultants who verify this, like any other project. The EBRD uses the best expertise to estimate and it often costs, because you know it takes a while to implement, and with the cost of time increasing due to inflation. You know that in this particular case it is a very early stage, it was initiated like two months ago or so. So we're still in the early stages of talking about cost, but as I understand it, it won't be cheap at all. I think if we talk about 30 kilometers multiplied by our experience, 10 to 12 million per kilometer. If we are talking about the highway, the minimum will be 300 million euros, that's for sure. And then the details will certainly be checked during the due diligence process. If I can, at the Summit for the Western Balkans, I also wanted to underline that there was a special panel on green energy and where the Government of Albania and that of Serbia presented their success that they achieved in a period of 2-3 years. And then this is the area where you know we've done a lot in the region, a lot like for 2-3 years. In Albania, we helped them to tender 600-megawatt projects and Serbia 700-megawatt.

KOHA: Are you calling on the Government of Kosovo to do more projects in this direction?

MASLICHENKO: Yes, I think so, I think that Kosovo can benefit from this expertise and we as EBRD would be very happy to help the Government do more for renewable energy. And this is really essential for Kosovo. And I think it is one of the priority sectors, because it is green, this is the future of the planet and this government should pay special attention to this area.

KOHA: Mr. Sergej Maslichenko, thank you for being on our program!

MASLICHENKO: Thank you! It was a pleasure!