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USAID/Serbia 

Operational Plan 

FY 2006 

June 13, 2006 
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Please Note: 

The attached RESULTS INFORMATION is from the FY 2006 Operational Plan and was assembled 

and analyzed by the country or USAID operating unit identified on the cover page. 

The Operational Plan is a "pre-decisional" USAID document and does not reflect results stemming 

from formal USAID review(s) of this document. 

Related document information can be obtained from: 

USAID Development Experience Clearinghouse 

8403 Colesville Road, Suite 210 

Silver Spring, MD 20910 

Telephone: (301) 562-0641 

Fax: (301) 588-7787 

Email: docorder@dec.cdie.org 

Internet: http://www.dec.org 

Portions released on or after July 1, 2006 
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Program Performance Summary FY 2005: I. Democratic Reform 

A. Country Situation: The assassination of Serbian Prime Minister Zoran Djindjic in 2003 marked at least 

a temporary end to most unified support for particular reform measures in Serbia. Democratic political 

parties have proved unable to form effective coalitions, leading to weak leadership and fragmented 

approaches to reform. Together with poor management of public information and high expectations for 

reform, this has produced a disillusioned public still waiting to see the tangible benefits of democratic 

government. Frequent elections in past years and changes of political appointments of even lower-level 

government officials have seriously undermined capacity and institutional memory. The Milosevic-era 

constitution of 1990 is still in place and important changes are needed to ensure effective checks and 

balances in government. The ill effects of these conditions are aggravated by corruption in all branches 

of government, and imbalances caused by the particularly weak roles played by parliament and the 

courts. Resistance to devolving resources and authority to local governments has further slowed the 

reform process. 

Since the democratic changes of October 2000, few of the NGOs that worked to oust Milosevic have 

succeeded to redefine themselves as effective advocates of reform. To fulfill their vital roles in 

representing the public interest and acting as a check on excessive government power, Serbian NGOs 

must have a more supportive legal framework, greater cooperation among themselves and with other 

sectors, a more positive public image, stronger staff and institutional capacity, and more diverse funding 

sources. Draft figures for the 2005 NGO Sustainability Index indicate that the sector remains in midtransition. Like much of Serbia’s realization of democratic promise, progress has for the most part 

remained stagnant. The overall question for the sector is whether the lack of needed changes, such as 

delays in passing a new law on NGOs, represents the maintenance of a status quo or demonstrates a 

worsening situation. 

The Serbian government has continued to fail in its responsibility to stabilize the still chaotic media sector. 

August 2005 amendments to an unimplemented Broadcasting Act now compromise the impartiality of the 

Broadcasting Council-the institution responsible for granting long overdue licenses-and frequency 

allocation has yet to take place. With more than 1,500 unregulated stations interfering with each other’s 

signals, irresponsible broadcasters with questionable backing undercut the survival of responsible 

stations. The August amendments further delayed the privatization of municipal broadcast media until 

December 2007, ensuring that these outlets remain subject to political influence during the next round of 

local elections. Changes to the criminal code removed prison sentences for slander and libel, but 

retained stiff fines. The print market is dominated by the lack of professionalism of sensationalist papers 

with dubious ownership, further compromising the reliability of information. 

At the local level, municipalities are trying to grapple with problems of high unemployment and nonperforming enterprises awaiting privatization. However, lack of delegated authorities and control of 

resources, as well an inadequately trained cadre of civil servants, have left them with insufficient tools to 

confront these problems. More than a decade of neglect has had serious negative consequences for 

many municipal infrastructure systems, putting an additional burden on municipal coffers. One of the 

bottlenecks in this respect is the fact that state property in the municipalities has not yet been transferred 

to local governments. This lack of collateral prevents the municipalities from acquiring credits to upgrade 

local public services, and the central government is reluctant to guarantee loans taken out by 

municipalities. As a result municipalities’ limited capacity to provide essential services to citizens and 

businesses constrain the economic growth needed to resolve these problems. The non-reformist SPS 

and SRS parties had a strong showing in the local elections in September 2004; mayors from those 

parties now control 40 of Serbia’s 164 municipalities. 

B. U.S. Assistance Priorities: These factors, combined with the political uncertainties and tough 

upcoming decisions concerning national status, exacerbate the region’s historical ethnic divisions and 

create a dangerous cycle of deteriorating performance by short-lived governments and increased public 

dissatisfaction with so-called reformers. If not addressed, Serbia’s future could easily include increased 

control of central and local government by non-democratic forces, or fragile governments of uneasy 

coalitions unable to pursue reform. USAID FY 2005 programs in Serbia focused attention on the 

institutions most critical as advocates for reform through activities that included working with other donors 
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to lobby for the independence of the judiciary; strengthening legal associations; providing grants, training, 

networking opportunities, and technical assistance to a broad range of civil society organizations; 

promoting NGO advocacy capacity; supporting efforts to reform the media framework and improve 

capacity; and improving the ability of political parties to communicate with the public. USAID has also 

funded several initiatives to promote Serbia’s cooperation with the International Criminal Tribunal for the 

Former Yugoslavia (ICTY). 

C. Program Performance 

Judicial Reform and Rule of Law: Analysis of the 2005 Judicial Reform Index for Serbia reveals that the 

republic has made some important strides in reforming the judiciary and providing structural safeguards 

for its independence. However, Serbian judicial reform has not yet resolved many obstacles to an 

independent, accountable, and efficient judiciary. USAID’s Serbia Rule of Law Project is designed to 

increase efficiency and reduce backlog in Serbia’s general jurisdiction courts and to provide assistance to 

Serbian law faculties. USAID also worked with key legal associations to help them develop as 

organizations that can respond to their members’ needs and provide important training. Among these, 

the Magistrates’ Association of Serbia is becoming a self-sustaining organization from which donors and 

national and international organizations may carry out their legal reform projects, while membership in the 

Young Lawyers of Serbia has grown from a handful of lawyers in late 2003 to more than 400 members in 

2005. USAID assistance has also focused on the development of the Humanitarian Law Center (HLC) 

as a research institution focused on truth and reconciliation. USAID funding has enabled the HLC to 

identify victims, their families, and witnesses; make arrangements for their travel to Serbia and 

accommodation in Belgrade for several war crimes trials; arrange for psychological counseling during 

their stay; and provide attorneys for victims and witnesses with legal questions. The commercial court 

assistance program has been actively engaged in a broad range of activities including training and 

professional development for judges and court personnel; improvement of court operational and financial 

management; development of new performance monitoring capabilities; support for change of outdated 

laws, regulations, and procedures; and, communications assistance for public education. 

Civil Society, NGOs and Small Grants: Draft findings from the 2005 NGO Sustainability Index show that 

progress has for the most part remained stagnant. Despite continuing problems the civil sector has seen 

some advocacy successes over the year. In November 2004, the Serbian Parliament adopted the Law 

on Free Access to Information after a two-year campaign of lobbying and pressure from the civil sector. A 

coalition of NGOs is now working to ensure the law’s implementation. The sector also continues to lobby 

the Ministry for Public Administration and Local Self-government, which has recently been responsive to 

civil society suggestions on the NGO draft law though the legislation has still not been passed after five 

years. Over the year, USAID issued 33 grants totaling just under $1 million to support diverse activities 

including free legal assistance addressing issues such as access to justice, police torture, and, the 

excess of police authorities; research on the movement of people and trade between Kosovo and Serbia; 

and development of a model for planning and implementing domestic violence protection measures. 

NGOs also played an important role in official acknowledgement of the 10th anniversary of the 1995 

Srebrenica massacre, including bringing to light the taped execution of six Srebrenica Muslims. USG 

programs with Serbian trade unions and associated civil society organizations implemented activities 

designed to encourage social dialogue, dispute resolution, coalition building, and educational services to 

workers' representatives and a new generation of union leaders. Three Labor Counseling Centers 

provided legal counseling to workers; technical assistance on collective bargaining; assistance in 

interpreting laws on privatization, bankruptcy, shareholder rights, and corporate governance; and advice 

to laid-off or retired workers. 

Media: USAID has been addressing the practical implications of media privatization, including technical 

support to municipal media managers in preparing privatization bid documents and distribution of a 

handbook on media privatization that will assist local media and municipalities in complying with the need 

to privatize. USAID supported training to a wide range of media professionals to raise the standards of 

professional journalism and technical capacity at selected outlets, support local associations, improve 

business management practices, encourage specialized reporting on transitional issues, and advocate for 

legal reform. USAID also continued assistance to Serbian media in covering war crimes trials from the 
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ICTY in the Hague and producing domestic programming on human and minority rights. With USG 

support, eight shows on truth and reconciliation, which encouraged debate about the way young people in 

the region can work together to ensure peace and forgiveness for the future, were broadcast on national 

television. The series attracted an average weekly audience of 400,000 with viewers watching and 

corresponding from neighboring states and across the world, including the United States. 

Political Process and Election Assistance: More than 50% of Serbian citizens believe their country is 

heading in the wrong direction. Many feel that their economic situation has worsened in the five years 

since Slobodan Milosevic left power, and few have faith that their situation will improve in the coming 

year. USAID assistance has focused on the critical area of communication, including a continuing need 

for the government and political parties to improve the ways in which they effectively communicate 

successes, respond to citizen concerns, and set realistic expectations regarding the reform process. 

Programs have helped central governing institutions to adopt more effective internal and external 

communication mechanisms and have supported civic organizations in contributing to public debate on 

political reform. Other activities included the promotion of participation by women and youth, short-term 

support for security sector reform, and the continued development of long-term local partner, the Center 

for Free Elections and Democracy (CeSID). 

Community Revitalization: USAID's Community Revitalization through Democratic Action (CRDA) 

program is the USG's most visible program in Serbia. By providing citizens with a means to voice their 

concerns and priorities, CRDA has motivated citizens to work together to achieve community goals and 

contributed to a strengthening of grass-roots democracy. By the end of FY 2005 CRDA was active in 

577 communities throughout the country, covering a population of more than four million people. The 

program initiated or continued work on 713 projects and completed work on 180 last year. Although the 

communities are highly appreciative and desperately in need of the improved infrastructure as well as 

income-generating activities that result from the activity, citizens consistently report that the most 

important aspect of the program is that for the first time they are being heard. By providing citizens with a 

means to voice their concerns and priorities, the program has motivated them to work together to achieve 

common community goals and contributed to strengthening grass-roots democracy in Serbia. 

Decentralization and Local Governance: Assistance has been provided to 83 municipalities throughout 

Serbia, covering more than 80% of the total population. Transparent and accountable budgeting and 

financing systems have been or are being established in 70 municipalities and 67 participating towns 

have held public budget hearings for the first time. Public-private partnerships to create business 

improvement districts have been established in four municipalities. In 2005, nine new citizen assistance 

centers and one-stop permitting centers started, bringing the project total to 23. Assistance was provided 

to the Serbian local government association, the Standing Conference of Towns and Municipalities 

(SCTM), to become an effective advocate for local governments. More than 95% of the Serbian 

municipalities are now participating in the SCTM's quarterly and annual meetings. The SCTM has also 

been officially recognized by the Serbian Government as the representative of local government interests. 

As of the end of FY 2005, the local government program had leveraged $3.7 million from other donor 

agencies, $0.2 million from international NGOs, and $2.9 million from participating municipalities, for a 

total to date of $6.8 million. 

II. Economic Reform 

A. Country Situation: FY 2004 saw a quickening recovery of Serbia's economy, which has continued into 

2005. Due to a slowdown in the first half of the year, GDP is projected to grow by 4.5% in 2005, less 

impressive than the 7.2% in 2004 but still an improvement on earlier years. Taming inflation remains one 

of the main macroeconomic challenges in Serbia. Annual inflation rose to above 13% by the end of 2004, 

and by November the year-to-date figure for 2005 was 15.2%. On the fiscal side, the Republic is 

performing above target. A revised budget for 2005 was passed by parliament in July, envisaging a 

surplus for the full year of about 2% of GDP. 

Tax reform advanced significantly in 2005 with the adaptation and successful implementation of the VAT. 

As of September the cash revenue increase in real terms was 40.2%. There was a virtual halt in 

privatization and enterprise restructuring in Serbia throughout 2004 due to lack of political will, but activity 
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appears to be picking up again in late 2005. By mid-2005 around 1,250 enterprises had been 

successfully privatized. A new bankruptcy law entered into force in February 2005. Financial 

intermediation also progressed. Interest rates on loans have fallen due to increased competition. Bank 

privatization has advanced in 2005 with the sale of several banks to foreign investors, and others are 

being tendered. Nevertheless, EBRD figures show that only around 7% of GDP was made up of 

domestic credit to the private sector in 2004, expected to increase slightly to 8.5% by end-2005, but still 

behind all the other countries in Central and Eastern Europe. 

The EBRD anticipates $1.6 billion in foreign direct investment (FDI) by 2005 year-end, a 60% increase. 

Foreign trade increased 12.3% to $12 billion in the first 10 months of 2005, and exports climbed 35.5% in 

January-October, bringing down the foreign trade deficit by 10.7% to $4.8 billion. There remains a great 

deal of room for improvement. The Economist magazine places Serbia as the worst performer in Central 

and Eastern Europe in estimates for exports of goods and services as a percentage of GDP in 2005. 

Though Serbia continues to experience high trade deficits, these have largely been offset to date by 

remittances (17% of GDP in 2004). Future direction in the balance of payments will largely be 

determined by a three-way race involving: decreasing trends in trade deficits, increasing scheduled debt 

payments abroad, and the ongoing stability of remittances. Trends in direct investment and funds lent to 

banks will also come into play. Though direct investment may wane after the sale of major assets, what 

has become a highly competitive banking sector could see additional funds flowing in. Proposed new 

restrictions on credit creation, however, could slow growth. 

The increase in FDI in 2005 is a sign of increased confidence, but risk perceptions continue to slow 

investment, fostered by among other factors a still underdeveloped business environment. Loss of 

markets, skills, and technology has impeded growth for many of the domestic private enterprises. 

Implementation of much of the business legislation remains slow, with one notable success in the area of 

facilitating business startups. The number of business associations is on the rise but the lack of 

coordinated private sector lobbying means business’ participation in the reform process, a crucial 

element, is limited. Unemployment remains a significant issue, which will be exacerbated in the shortterm by more active privatization. The large remittances, which served as an important subsidy source 

during the 1990’s and currently help balance trade deficits, may be serving a less valuable role by 

reducing incentives for employment. Around one third of the workforce holds their primary or secondary 

job in the gray economy. 

In line with the agreement signed with the London Club in 2004, in April 2005 Serbia’s debt was 

exchanged for bonds valued at approximately $57 million and listed on the Luxembourg stock exchange, 

and in November 2005 the rating agency Standard and Poor’s assigned a credit rating to Serbia. The 

Serbian government is currently in negotiations with the IMF, the successful completion of which would 

lead to a $700 million debt write-off from the Paris Club. The full reintegration into international capital 

markets resulting from these actions will provide enhanced financing options to foreign and local 

investors, and eventually for public finance. 

B. U.S. Assistance Priorities: Although there has been significant progress in a relatively short time 

frame, important steps remain to ensure sustained stability. Tax revenues have risen but are still well 

below target. Much work remains on improving tax administration, including improving the data base, 

accounting and recording process for statistics and working on a global income tax for individuals. 

Despite tough fiscal policies, domestic expenditure is still high, putting pressure on inflation and the 

budget. Growing domestic demand, driven by a credit boom and inflows of remittances, also has fuelled 

inflation and widened the current account deficit. Sustained higher growth rates over the medium term 

can only be achieved if reforms are implemented that will change the pattern of consumption-led growth 

exhibited so far. USAID objectives in FY 2005 were to improve economic policy and governance in 

Serbia, improve the business environment for private sector growth, enhance the financial sector’s 

contribution to economic growth, and increase Serbia’s participation in global trade and investment. In 

many instances, the focus shifted from drafting laws to successful implementation, as exemplified by the 

Bankruptcy Law. The political challenges of the coming year may distract attention from much-needed 

reform. However, with significant progress on these fronts in the past year, Serbia’s long-term outlook is 

positive. 
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C. Program Performance 

Economic Policy and Institutional Reform: USAID continued its focus on strengthening institutions that will 

promote and sustain economic reform. Assistance was provided to increase the ability of the National 

Bank of Serbia to effectively regulate the entire financial sector and support the development of a sound, 

stable and well-regulated insurance industry. FY 2005 saw the enactment of several key laws which 

USAID advisors helped to draft, including the Laws on Civil Procedure, Mediation and Enforcement 

Procedure, and Business Companies, with conforming amendments to the Law on Registration of 

Business Entities and the Collateral Registry. A modernized banking law was passed in November 2005, 

with significant drafting assistance from the USG. USAID also advised on other measures to strengthen 

implementation of existing laws, including amendments to the Privatization and Bankruptcy Laws. In 

support of a pending World Bank loan, USAID conducted a comprehensive actuarial analysis of the 

current state pension system to determine the extent of problems and analyze potential measures and 

their fiscal effects, for discussion with high officials of the Ministry of Labor, Employment and Social 

Affairs, the Ministry of Finance, and the State Pension Fund. 

In 2005, USAID assistance supported the establishment of three key institutions for business 

development: the Company Registry, which has cut the time for registering a new business from 51 to 15 

days and was cited by the World Bank as a major factor in naming Serbia as the year’s biggest reformer 

in its Doing Business in 2006 report; the Leasing Registry, which is a major contribution to business 

financing; and the Collateral Registry, which institutes a wholly new system of secured lending to promote 

access to credit. Work to strengthen the commercial court system has included the installation of a 

network linking 16 commercial courts, a new court data system to replace the old manual system (much 

of which is accessible to the public), and more than 100 training courses. 

Tax: The new VAT took effect as of January 1, 2005. At the urgent request of the Ministry of Finance, 

USAID became the main assistance provider in the introduction of the new tax. The result was a 

successful launch of the VAT and an increase in consumption tax revenues of 40% in real terms, which 

wiped out Serbia’s fiscal deficit and yielded a small surplus for 2005. 

Enterprise Development, Trade and Finance: Assistance was provided to business groups to advocate 

for policy changes and firms and business sectors to improve their market competitiveness. Notable 

successes in FY 2005 included a 63% increase in tourism revenues, and a 40% growth in fruit juice and 

fruit product exports. Clinical research organizations investing in Serbia more than tripled, with drug trials 

up over 50%. The new Law on Enforcement Procedure, passed by the Serbian National Assembly in 

November 2004, has reduced the average number of days for enforcing contracts from 1,028 to 635. In 

FY 2005, following agreement by the EU to allow Serbia and Montenegro to proceed on separate 

accession tracks, the progress of negotiations on each state’s gaining membership in the WTO quickened 

considerably. Accession for Serbia is now projected to come in 2008. USAID has advised on legislation 

to bring Serbia’s laws into conformance with international and/or EU standards, and a number of key laws 

were enacted in FY 2005, including Laws on Copyright, Trademarks and Consumer Protection, and 

amendments to the Laws on Customs and Value Added Tax. At the end of September, the USAIDsupported microfinance facility Opportunity International Serbia (OIS) was serving 2,998 clients, with an 

active portfolio of approximately $7.5 million. Since its inception, OIS has made 7,436 loans totaling 

around $20 million, with an excellent repayment record. To date, OIS loans have created 3,602 new jobs 

and sustained an additional 19,812 jobs. 

Community Revitalization through Democratic Action-Economic Focus (CRDA-E): This year, CRDA 

programming efforts through community-driven projects demonstrated a natural progression towards local 

economic growth activities. Over 85% of the project’s 713 projects targeted economic infrastructure or 

income-generating activities. As of the end of FY 2005, these activities created 10,700 full-time 

equivalent jobs and generated $22 million in additional income and $2.7 million in increased agricultural 

sales. The response of the communities has been extraordinary, with counterpart contributions averaging 

50% of total project costs, demonstrating excellent buy-in to the new economic emphasis of the CRDA 

program. 
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Development Credit Authority (DCA): The DCA is a tool that USAID is using to expand lending to 

municipalities as well as microenterprises and SMEs. A $10 million Loan Portfolio Guarantee for 

Municipal Lending with Raiffeisen Bank in Belgrade was signed in September 2005, and plans are 

underway to expand the program to other banks in FY 2006. This 15-year facility will enable 

municipalities in Serbia to get loans for capital investments on affordable commercial terms. Planning for 

two other DCAs started in FY 2005 to support lending to microenterprises and SMEs. 

Donor Relations: The United States is Serbia’s largest bilateral donor and coordinates its work closely 

with the Government of Serbia, other bilateral and multilateral donors, and international finance 

institutions. Other bilateral donors and their principal areas of focus include Germany (macroeconomic 

reform, municipal development through GTZ, infrastructure loans through KfW), Sweden (education and 

training, donor harmonization), Canada (social sector restructuring) and the United Kingdom 

(macroeconomic reform, local government). The primary multilateral donor in Serbia is the European 

Agency for Reconstruction (EAR), whose €154 million 2005 program focused on strengthening 

partnerships with the Government in its process of European integration, as well as fostering economic 

development and paving the way for investment from international financial institutions. Other multilateral 

donors include the World Bank (macroeconomic and public administration reform), the International 

Monetary Fund (fiscal and monetary policy), the European Bank for Reconstruction and Development 

(infrastructure and trade), the European Investment Bank (infrastructure) and the Organization for 

Security and Cooperation in Europe (civil society reform, rule of law). UNDP, with funding from the EAR, 

Germany, Canada, and the Netherlands, is working mainly in civil society development and the rule of 

law. Although humanitarian aid has dwindled significantly since 2000, a number of organizations such as 

UNHCR, the International Catholic Migration Commission, and the Danish Refugee Council still have 

small programs working with refugees and IDPs. On the strategic level, USAID participated in the Donor 

Coordination Group “Law in Transition,” along with major bilateral and multilateral donors that jointly 

presented a list of critical laws to the new ruling coalition. On the program level, USAID staff coordinates 

closely with all donors working in the relevant areas on both formal and informal levels. Implementers 

participate in working groups in the areas of Southern Serbia, commercial law, media, coordination for 

presidential elections get-out-the-vote efforts and the rule of law. 

III. Other Programs of Significance 

Anti-Trafficking: USAID’s program has included a number of measures aimed at prevention, victim 

protection, and assistance. These measures target foreign and Serbian victims, people at risk of being 

trafficked, and entities concerned with the care of trafficked victims. In FY 2005, 32 national and 28 

foreign victims of trafficking received assistance through the USAID program. Of this number, 31 national 

victims received reintegration assistance, while 21 foreign victims benefited from pre-departure and return 

assistance. Eleven of these foreign victims also received temporary residence permits, following 

successful efforts in FY 2004 to secure temporary legal status. Other activities included an 11-month 

information campaign to reach out to high-school age populations in Serbia, comprising the distribution of 

30,000 leaflets in Serbian, Roma language and Albanian, as well as the production and broadcasting of a 

TV spot and several radio shows. In addition, the Magistrates Association of Serbia provided training to 

almost all 800 Serbian magistrates on trafficking in persons, and produced three related training videos 

and a reference bench book. 

Anti-corruption: With an eye on compliance with international best practices in the area of anti-money 

laundering and financial crime prevention, USAID worked with the U.S. Treasury to assist the Serbian 

Financial Intelligence Unit (FIU) to finish the first phase of creating the necessary IT infrastructure to 

receive and analyze information in electronic form from banks, insurance companies, exchange offices, 

and other government agencies as well as the National Bank of Serbia. Under the local government 

program, several activities directly or indirectly promote transparency or reduce corruption at the 

municipal level, including training on budgeting and financial management, combined with public budget 

hearings as well as procurement training. Four civil society organizations received grants to address 

transparency and anti-corruption issues to improve the existing legal framework, interpret vague 

provisions, address conflict of interest issues more appropriately in new regulations, and enhance public 
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awareness of key issues, current and new legislation, and policy implementation. 

 

IV. Cross-cutting Activities 

Global Development Alliances and Partnerships: The Mission is exploring opportunities with the Global 

Development Alliance (GDA) program. Through the Development Credit Authority (DCA), the Mission 

signed a $10 million municipal loan guarantee with Raiffeisen Bank and is looking to expand the program 

in FY 2006. The Small Enterprise Assistance Funds (SEAF) has established a fund with USAID support 

to provide equity, in combination with technical and managerial assistance to SMEs, in companies across 

a diversified range of industries. Partners include donors, governments, the private sector, corporates, 

pension funds and foundations. Public-private partnerships to create business improvement districts 

have been established in four municipalities and a deal with Microsoft was signed to develop municipal ebusiness capabilities. The Mission has been actively exploring mechanisms to harness Diaspora funds 

and partnerships to support USAID objectives. 

Gender: A gender assessment for Serbia and Montenegro was completed in March 2005. The 

assessment identified a number of best practices and provided recommendations for future consideration. 

In USAID’s new strategy gender is a key cross-cutting issue. As under the former strategy, gender will 

continue to be integrated and institutionalized at all stages of the Mission’s work, e.g. policy or activity 

planning, implementation, and monitoring evaluations. 

For more information, go to www.usaid.org.yu 
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FY 2006 Program 

SO: 169-0131 Democratic Governance of Market Economy Strengthened 

Improve Economic Policy and the Business Environment 

Improve Economic Policy and the Business Environment ($4,115,000 AEEB, $700,000 AEEB prior year 

recoveries). USAID’s activities will improve economic policy and governance, promote private sector 

growth, strengthen the financial sector, and broaden Serbia's participation in global trade. A new 52-

month program, Serbia Economic Growth Activity (SEGA), will cover a broad range of macroeconomic 

issues: financial sector strengthening through work with the National Bank of Serbia (NBS) on banking, 

insurance, and private pension fund supervision; with the Securities and Exchange Commission (SEC) on 

capital markets supervision; and fiscal reform through close cooperation with the Ministry of Finance 

(MOF) on tax policy and administration, fiscal decentralization, and pension reform. Secured lending to 

the agriculture sector will be enabled through a Warehouse Receipts program allowing grain in storage to 

be used as collateral. Trade will be expanded through aid for Serbia's accession to the World Trade 

Organization (WTO) expected in 2008, and later to the European Union (EU), through help for bringing 

relevant laws into compliance with WTO and EU standards and negotiating a Stabilization and 

Association Agreement (SAA) with the EU. A new activity will focus on implementing the recently enacted 

Bankruptcy Law through training, information systems, and policy advice to help realize the potential of 

modern bankruptcy processes for strengthening the market economy. This activity will also improve 

confidence in the justice system by strengthening enforcement of commercial court judgments. Principal 

contractors: IBM Consulting and others to be determined. 

Strengthen the Justice Sector 

Strengthen the Justice Sector ($4,805,000 AEEB, $400,000 AEEB prior year recoveries). USAID 

assistance will focus on increasing efficiency of the courts, reducing the case backlog, helping Serbian 

law faculties orient their curriculum toward meeting the demands of a market economy, and providing 

capacity building and training to professional associations linked to the judiciary, including the Judges' 

Association, the Prosecutors' Association, the Magistrates' Association, and the Young Lawyers of 

Serbia. In FY 2006 USAID will initiate a new rule-of-law activity focusing on strengthening capacity of 

general courts, supporting economic growth as well as judicial ethics and transparency. The Commercial 

Courts Administration & Strengthening Activity (CCASA) will continue to improve the efficiency of the 

commercial courts and help the judiciary understand the new market-oriented laws so that entrepreneurs 

and investors get a fair hearing in disputes over contracts and other business matters. Principal 

contractors: Booz-Allen-Hamilton (BAH), the American Bar Association/Central European and Eurasian 

Law Initiative (ABA/CEELI), and others to be determined. 

Strengthen the Legislative Function/Legal Framework 

Strengthen the Legislative Function/Legal Framework ($4,000,000 AEEB, $400,000 AEEB prior year 

recoveries). In FY 2006, USAID plans to strengthen the legal framework for business development in 

Serbia through aid in formulating and implementing laws and regulations needed to build the market 

economy, in such areas as tax reform, financial sector supervision, secured lending, and international 

trade, through the new SEGA and Warehouse Receipts activities and the continuing WTO accession 

program. A new activity will strengthen the capacity of the Serbian National Assembly to analyze and 

deliberate on legislation and to assess the impact of legislation affecting economic growth and investor 

confidence. A particular focus will be on parliamentary oversight of government programs and public 

access to information on parliamentary activities. Principal contractors: to be determined. 

FY 2007 Program 

SO: 169-0131 Democratic Governance of Market Economy Strengthened 

Improve Economic Policy and the Business Environment 
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Improve Economic Policy and the Business Environment ($6,500,000 AEEB). USAID intends to further 

engage in the implementation of economic policy and financial measures designed to improve the 

investment climate. SEGA will begin work on a combined revenue collection and accounting system in 

the Serbian Tax Administration to establish individual accounts for tax and pension payments and support 

activities under the World Bank Pension Administration Loan. Assistance for Bankruptcy Law 

implementation and enforcement of judgments will continue, with development of key institutions and 

training of all personnel involved. Public information efforts will show the utility of financial reorganization 

under the Bankruptcy Law. Support for WTO and EU accession will continue as well as a focus on trade 

capacity development. 

Strengthen the Justice Sector 

Strengthen the Justice Sector ($4,500,000 AEEB). USAID intends to continue support for strengthening 

the legal framework for economic growth and to build on results achieved. CCASA will end during FY 

2007, with all information systems installed and extensive training provided to judges and other 

participants, resulting in significant improvements to the commercial court system. The rule-of-law activity 

initiated in FY 2006 will continue to strengthen general court systems and legal professionals. 

Strengthen the Legislative Function/Legal Framework 

Strengthen the Legislative Function/Legal Framework ($4,500,000 AEEB). USAID plans to assist the 

MOF and Treasury to implement the new income tax law resulting from FY 2006 assistance. The 

parliament support activity will get underway and will result in improved deliberations on economic 

legislation. 

FY 2006 Program 

SO: 169-0132 Enterprise Growth Increased In High Potential Sectors and Municipalities 

Improve Private Sector Competitiveness 

Improve Private Sector Competitiveness ($22,962,264 AEEB, $628,782 AEEB prior year recoveries). 

USAID will continue the community based Community Revitalization through Democratic ActionEconomic (CRDA-E) program to revive economic growth at the local level. This community-based 

program was revised in FY 2005 to focus on local economic development. CRDA-E engages key 

stakeholders at the local level in building economic growth through a sector- and municipal-level focus. In 

FY 2006 USAID will continue enterprise development by supporting accelerated growth in five sectors 

(fruit, apparel, information and communication technology, pharmaceutical research, and tourism) through 

the existing Serbia Enterprise Development Project (SEDP). Support for micro-enterprise and small- and 

medium-enterprise (SME) development will continue through existing programs on micro-enterprise 

lending. A new fund, the Small Enterprise Assistance Fund (SEAF), will provide equity and quasi-equity 

financing (long-term debt financing) to promote promising venture opportunities, in combination with 

technical and managerial assistance to South Balkan enterprises. USAID will expand its Development 

Credit Authority (DCA) program to increase key sectors' access to finance, enhance lending to SMEs, 

and enable municipalities to secure needed financing for infrastructure development and local economic 

development. USAID anticipates transferring $1,000,000 to a Development Credit Authority (DCA) to 

support $10 million in loans to SMEs; support for a bond guarantee to capitalize ProCredit bank for microenterprise lending; and funds for expanded municipal infrastructure loans. CRDA-E will continue to 

promote local economic growth and job creation, including access to credit, marketing and exporting for 

SMEs. In conjunction with SEDP, CRDA-E will increase competitiveness of the tourism industry, support 

community development centers and regional development agencies, and provide small grants to 

vulnerable populations to establish micro-enterprises. In addition, USAID will continue assistance to the 

Serbian Junior Achievement Program. Principal partners: Booz Allen Hamilton (prime), Opportunity 

International, America’s Development Foundation (prime), the University of Delaware’s FLAG 
12

International (sub), and the International Executive Service Corps (sub); Mercy Corps International 

(prime), Deloitte, Touche, Tomatsu (sub); International Relief and Development, Inc. (prime), the United 

Methodist Committee on Relief (UMCOR) (sub), Camp, Dresser, McKee International (sub); ACDI/VOCA 

(prime), Overseas Strategic Consulting, Ltd (sub); CHF International (prime), and others to be 

determined. 

Support Democratic Local Government & Decentralization 

Support Democratic Local Government & Decentralization ($7,982,736 AEEB, $250,000 AEEB prior year 

recoveries). USAID initiated at the end of FY 2005 a three-year Municipal Economic Growth Activity 

(MEGA). MEGA will build on the current local government program that is coming to a close, a capacitybuilding program that addressed key constraints in municipal management by focusing on the municipal 

role in local economic development. MEGA has four principal areas: national advocacy for 

decentralization; municipal economic development planning and implementation; private sector 

development; and capacity development in municipal functions key to economic development. During the 

first phase of implementation the new activity will focus on 10 municipalities that constitute centers of 

regional economic development to develop the skills of local governments and local business groups to 

foster economic growth and job creation, assist communities to put these concepts and skills into 

practice, and help them create business-friendly environments where the local private sector may flourish. 

Principal partners: the Urban Institute and DAI. 

FY 2007 Program 

SO: 169-0132 Enterprise Growth Increased In High Potential Sectors and Municipalities 

Improve Private Sector Competitiveness 

Improve Private Sector Competitiveness ($15,000,000 AEEB). USAID will continue support for SME 

development through existing lending programs, SEAF and further expansion of DCAs, to capitalize on 

micro-enterprise transitional growth as a result of prior assistance. New programs aimed at improving 

private-sector competitiveness and local economic growth will be designed to build on results achieved 

through major local economic development programs expected to end during FY 2007. New activities will 

focus on areas such as: business/trade development; association and capacity building; training of youth, 

and increasing public/private sectors investments. 

Support Democratic Local Government & Decentralization 

Support Democratic Local Government & Decentralization ($10,882,000 AEEB). As an adjunct to MEGA, 

USAID will initiate the City Links program to pair Serbian municipalities with American cities, promoting 

American best practices in local economic development and promoting bilateral ties between the United 

States and Serbia. USAID will continue support to select municipalities that constitute centers of regional 

economic development through MEGA and the City Links Program, pairing Serbian municipalities with 

the U.S. cities. The municipal DCA is expected to be supplemented with additional loans offered through 

various local banks. Other activities are under review for improving the business environment that could 

include expanding the MEGA program to other municipalities, supported with additional technical 

assistance and the capacity-building of national and municipal institutions for improving trade. 

FY 2006 Program 

SO: 169-0211 Risk of Political Instability Reduced 

Protect and Increase the Assets and Livelihoods of the Poor 

Protect and Increase the Assets and Livelihoods of the Poor ($6,900,000 AEEB, $250,000 AEEB prior 

year recoveries). This program will address local-level economic/social factors that contribute to the risk 

of instability or conflict. Activities will focus on several “vulnerable areas” or populations and develop local 
13

and national capacity to respond to different types of crises and emergencies. The program will initially 

rely on the existing Community Revitalization through Democratic Action - Economic (CRDA-E) program, 

particularly in Southern Serbia, to promote economic growth, security, and job creation. These activities 

will be complemented by other USAID efforts. The activity will also capitalize on existing local economic 

development committees, community development centers, and regional development agencies to 

promote micro-enterprise and will continue assistance to the Junior Achievement program. A new 

economic/social activity will be initiated in select vulnerable areas that will gear up as CRDA-E winds 

down. USAID will also design a new program to develop crisis planning and management skills at the 

local and national levels and to ensure rapid and effective response to potential crisis. Principal partners: 

Cooperative Housing Foundation International and others to be determined. 

Strengthen Civil Society 

Strengthen Civil Society ($3,000,000 AEEB). USAID will provide grants, training, and technical 

assistance to strengthen NGO capacity to support and monitor a range of democratic reforms (including 

human rights, truth and reconciliation, Serbia’s reintegration into the Balkans, accession to the European 

nion (EU), and transparency in government). The program will focus on non-governmental organization 

(NGO) advocacy skills, professional and financial management, and fundraising capacity; the legal 

environment for NGOs and independent media; media privatization; and professional and business skills 

for independent media. Principal partners: to be determined. 

Strengthen Democratic Political Parties 

Strengthen Democratic Political Parties ($1,400,000 AEEB). USAID will support a more responsive, 

democratic political system by strengthening the capacity of political parties to access and incorporate 

citizen input, develop party platforms and policies, and communicate effectively with party members and 

citizens. Assistance will also prepare democratic parties, both in and out of power, to govern more 

effectively, foster issue-based coalitions, strengthen political party caucuses, and enhance internal 

democracy. This work is closely integrated with support for free and fair elections, focusing on 

developing campaign messages, recruiting grassroots volunteers, and targeting voters. USAID 

programming aims to include ethnic minorities, women and youth in the political process. Principal 

partners: International Republican Institute and National Democratic Institute. 

FY 2007 Program 

SO: 169-0211 Risk of Political Instability Reduced 

Protect and Increase the Assets and Livelihoods of the Poor 

Protect and Increase the Assets and Livelihoods of the Poor ($3,071,000 AEEB). As the CRDA-E 

program closes out in late FY 2007, USAID will expand work initiated in FY 2006 to improve economic 

opportunities, enhance economic security in vulnerable areas, and continue developing local and national 

capacity to deal with various types of potential crises and emergencies. 

Strengthen Civil Society 

Strengthen Civil Society ($3,500,000 AEEB). In FY 2007, USAID will continue to build NGO capacity to 

conduct sustained campaigns to analyze and influence public policy and serve as government 

watchdogs, particularly on reforms required for EU accession, as well as support the professionalism and 

sustainability of independent, private media. 

Strengthen Democratic Political Parties 
14

Strengthen Democratic Political Parties ($1,400,000 AEEB). USAID will continue to build a more 

responsive, democratic political system by strengthening the capacity of political parties, with a greater 

emphasis on internal and external communication. USAID will also continue to foster issue-based 

coalitions, strengthen political party caucuses, and enhance internal democracy. Programming will 

continue to support the inclusion of ethnic minorities, women, and youth. 

FY 2006 Program 

SO: 169-0420 Cross-Cutting Programs 

Program Support 

Program Support ($2,600,000 AEEB, $3,286,313 AEEB carryover). Resources provide salary and 

logistical support for all of its program-funded personnel and the operational costs of the four field offices 

that currently monitor and manage many of USAID's programs in Serbia. The field offices may be relocated during this fiscal year as the Mission's new strategy begins implementation and the Mission can 

more accurately pinpoint where resources should be located in order to most effectively monitor its new 

programs. Additionally, the costs to design new activities planned under the new Strategic Plan, audits, 

and evaluations and assessments of ongoing activities will be borne by this objective. USAID intends to 

initiate a human and institutional capacity development activity in FY 2006 that will focus primarily on 

participant training and upgrading human capacity of Serbia's private and public sector. During FY 2006, 

the Mission intends to conduct the following assessments and evaluations: evaluation of Serbia 

Enterprise Development Project (SEDP) and assessment of current judicial apparatus for handling 

bankruptcy cases. 

FY 2007 Program 

SO: 169-0420 Cross-Cutting Programs 

Program Support 

Program Support ($2,327,000 AEEB). Resources provide salary and logistical support for all of its 

program-funded personnel and the operational costs of the four field offices that currently monitor and 

manage many of USAID's programs in Serbia. An increasing portion of the funds requested here (in 

comparison to FY 2006) will be used for activity design, evaluations, audit, and training. USAID intends 

to further expand the human and institutional capacity development activity initiated in FY 2006 that will 

focus primarily on participant training and upgrading human capacity of Serbia's private and public 

sectors. 
15

Results Framework 

169-0130 Accelerated Development and Growth of Private Enterprise 

Program Title: Economic Policy and Finance 

 IR 169-0131: Financial and Banking Systems Stabilized and Restructured 

 IR 169-0132: State and Socially-Owned Enterprises Privatized 

 IR 169-0133: Commercial and Related Laws Enhanced and Strenghtened 

 IR 169-0134: Serbia and Montenegro/Serbian Economy Reconnected to International and Regional 

Market Networks 

169-0131 Democratic Governance of Market Economy Strengthened 

Program Title: Economic Policy and Governance 

169-0132 Enterprise Growth Increased In High Potential Sectors and Municipalities 

Program Title: Local Economic Growth 

169-0200 More Effective, Responsive, and Accountable Democratic Institutions 

Program Title: Democracy and Governance 

 IR 169-0201: Capacity and Competitiveness of Independent Media Enhanced 

 IR 169-0202: Civil Society, Political Party, and Trade Union Capcity to Serve and Represent Citizen 

Interests 

 IR 169-0203: Rule of Law Increased 

 IR 169-0204: Record of Largely Free, Fair Elections Established 

169-0210 Increased, Better Informed Citizens' Participation in Political and Economic Decision 

Making 

Program Title: Community Development and Local Governance 

 IR 169-0211: Citizens Improve their Living Conditions through Participation in Community Development 

Committees 

 IR 169-0212: Improved Interactions Between Citizens and Local Governments 

 IR 169-0213: Transparent Financial Management and Improved Service Delivery by Local Governments 

 IR 169-0214: Broadened Minority Participation in the Political Process and Decision-Making 

169-0211 Risk of Political Instability Reduced 

Program Title: Democracy and Economic Security 

169-0230 More Effective, Responsive and Accountable Local Government 

Program Title: Local Governance 

169-0310 Humanitarian Community Services and Facilities 

Program Title: Humanitarian Assistance 

169-0410 Special Initiatives 

Program Title: Special Initiatives 

169-0420 Cross-Cutting Programs 

Program Title: Cross-Cutting Programs