EN    EN EN 
 
EN    EN  EUROPEAN COMMISSION 
Brussels, 9.11.2010 
SEC(2010) 1330 final 
  
COMMISSION STAFF WORKING DOCUMENT 
 
SERBIA 2010 PROGRESS REPORT  
 
  
accompanying the 
 
COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIA MENT AND THE COUNCIL 
 
Enlargement Strategy and Main Challenges 2010-2011
 
{COM(2010) 660 final} 
 
EN 2   EN TABLE OF CONTENTS 
1. Introduction................................................................................................................ .. 4 
1.1. Preface................................................................................................................... ....... 4 
1.2. Context ................................................................................................................... ...... 4 
1.3. Relations between the EU and Serbia .......................................................................... 5 2. Political criteria .......................................................................................................... .. 6 
2.1. Democracy and the rule of law .................................................................................... 6 2.2. Human rights and the protection of minorities .......................................................... 12 2.3. Regional issues and international obligations............................................................ 18 3. Economic criteria ....................................................................................................... 22 3.1. The existence of a functioning market economy ....................................................... 22 3.2. The capacity to cope with competitive pre ssure and market forces within the Union
............................................................................................................................... ..... 28 
4. European standards .................................................................................................... 30 4.1. Internal market ........................................................................................................... 30 
4.1.1. Free movement of goods............................................................................................ 30 4.1.2. Movement of persons, services and right of establishement...................................... 31 
4.1.3. Free movement of capital........................................................................................... 32 4.1.4. Customs and taxation ................................................................................................. 33 4.1.5. Competition............................................................................................................. ... 34 
4.1.6. Public procurement .................................................................................................... 35  
4.1.7. Intellectual property law ............................................................................................ 35 4.1.8. Social policies, employment and public health policy............................................... 36 4.1.9. Education and research .............................................................................................. 38 4.1.10. WTO issues ............................................................................................................. ... 40 
4.2. Sectoral Policies......................................................................................................... 40 
4.2.1. Industry and SMEs..................................................................................................... 40  
4.2.2. Agriculture and fisheries............................................................................................ 41 4.2.3. Environment............................................................................................................. .. 43 
4.2.4. Transport policy ........................................................................................................ . 44 
 
EN 3   EN 4.2.5. Energy .................................................................................................................. ...... 46 
4.2.6. Information society and media................................................................................... 47 4.2.7. Financial control....................................................................................................... .. 48 
4.2.8. Statistics .............................................................................................................. ....... 49 
4.3. Justice, freedom and security ..................................................................................... 49 4.3.1. Visa, border management, asylum and migration...................................................... 49 
4.3.2. Money laundering ...................................................................................................... 51  
4.3.3. Drugs................................................................................................................... ....... 52 
4.3.4. Police.................................................................................................................. ........ 52 
4.3.5. Fighting organised crime and terrorism ..................................................................... 53 4.3.6. Protection of personal data......................................................................................... 55 
 
EN 4   EN COMMISSION STAFF WORKING DOCUMENT 
2010 Progress Report 
1. INTRODUCTION  
1.1. Preface 
Since March 2002, the Commission has reported re gularly to the Council and Parliament on 
progress made by the countries of  the Western Balkans region. 
This progress report largely follows the same st ructure as in previous years. The report: 
– briefly describes the relations between Serbia and the Union; 
– analyses the situation in Serbia in term s of the political criteria for membership; 
– analyses the situation in Serbia on the basi s of the economic criteria for membership; 
– reviews Serbia’s capacity to implement Eur opean standards, that is, to gradually 
approximate its legislation a nd policies with those of the acquis , in line with the 
Stabilisation and Association Agreement a nd the European Partnership priorities. 
The period covered by this report is fr om mid-September 2009 to  early October 2010. 
Progress is measured on the basis of decisi ons taken, legislation adopted and measures 
implemented. As a rule, legislation or measures  that are under preparation or are awaiting 
parliamentary approval have not been taken into account. This approach ensures equal 
treatment across all reports and pe rmits an objective assessment. 
The report is based on information gathered and analysed by the Co mmission. In addition, 
many sources have been used, including contri butions from the government of Serbia, the EU 
Member States, European Parliament reports1 and information from various international and 
non-governmental organisations. The Commission draws detailed co nclusions regarding Serbia in its separate communication 
on enlargement
2 based on the technical analysis  contained in this report. 
1.2. Context 
Serbia is a potential candida te for EU membership. On 29 April 2008, Serbia signed a 
Stabilisation and Association Agreement (SAA ) and an Interim Agreement on trade-related 
measures with the EU. The Interim Agreement entered into force on 1 February 2010. On 14 
June 2010, the Council agreed to launch the ratification process for the SAA.  
On 22 December 2009, the Serbian President and Prime Minister handed over the country’s 
application for EU membership. The accomp anying Government Memorandum highlighted 
that the application reflected an overall social consensus on the European orientation of Serbia 
and its aspiration to EU membership. 
                                                 
1 The rapporteur for Serbia is Mr Jelko Kacin. 
2 Enlargement Strategy and Main Challenges 2010-2011 (COM(2010) 660 of 9.11.2010). 
 
EN 5   EN 1.3. Relations between the EU and Serbia 
Serbia is participating in the Stabilisation and Association Process . The Stabilisation and 
Association Agreement (SAA) provides a framew ork of mutual commitments on a wide range 
of political, trade and economic issues. Th e SAA was signed, along with the Interim 
Agreement, in April 2008. EU ministers agreed to submit the SAA to their parliaments for 
ratification and the EU agreed to implement th e Interim Agreement on trade and trade-related 
matters as soon as the Council decided that  Serbia was fully cooperating with the 
International Criminal Tribunal for the form er Yugoslavia (ICTY). Serbia started on 1 
January 2009 to implement the Interim Agreement. Following ICTY Prosecutor Brammertz’s report to the UNSC in December, the Council decided to start implementing the Interim 
Agreement. The Interim Agreement entered in to force on 1 February 2010. At the 14 June 
2010 Foreign Affairs Council, Ministers agreed to submit the Stabilisation and Association 
Agreement to their parliaments for ratification and took note that Serbia had applied for EU 
membership on 22 December 2009.  
The EU is providing guidance to the Serbian author ities on reform priorities as part of the 
European Partnership. The Serbian governme nt has continued to implement a national 
programme for integration into the EU and ha s used quarterly reporting as a monitoring 
mechanism. Progress made on reform priorities as  part of the European integration process is 
encouraged and monitored by the Interim Comm ittee and its structure of sub-committees and 
the Enhanced Permanent Dialogue (EPD).  An EPD plenary meeting was held in July 2010. 
Several sub-EPD meetings took place during the reporting period,  covering all sectors of the 
SAA that are not included in the Interim Agreem ent, such as energy, the environment, social 
policy, justice, freedom and security. A political dialogue  at ministerial le vel took place in 
Brussels in January 2010. Economic dialogue took place in a bilatera l meeting with the 
Commission and Serbian senior  officials in November 20 09. Moreover, the multilateral 
economic dialogue between the Commission, EU Member Stat es and potential candidate 
countries in the context of the pre-accession fiscal surveillance took place in an expert 
meeting in June 2010. 
The first meeting of the Interim Comm ittee took place in March 2010 in Belgrade. 
Subsequently, a number of sub-committees al so met, including on the internal market, 
competition, transit traffic, trade, customs, taxation, agriculture and fisheries. Serbia has 
continued to build a positiv e track record in implemen ting the Interim Agreement. 
Visa liberalisation for Serbian citizens travelling to the Schengen area was granted by the  
Council, after consultation with the European Parliament, as of 19 December 2009. It applies 
to holders of biometric passports travelling to  the Schengen area. This  decision was based on 
substantial progress in the areas of justice, freed om and security and fulfilment of the specific 
conditions set out in the road map for visa liberalisation. 
As a potential candidate for EU  membership, Serbia aligned its elf with 51 CFSP declarations 
out of a total of 74 relevant d eclarations adopted by the EU dur ing the reporting period (69%).  
Serbia receives pre-accession financial assistance  under the Instrument for Pre-accession 
Assistance (IPA). IPA is implemented by the EU Delegation in Belgrade. A decentralised implementation system (DIS) for managing aid remains a short-term objective for Serbia. Under the adopted roadmap, management units in  line ministries have  been established. 
Preparation for DIS has continued at a slow pace. However, further extensive efforts including on staff, are necessary in order to put Serbia in a position to take over responsibility 
 
EN 6   EN for implementation of all IPA components and for future management of Structural and 
Cohesion Funds.  
Serbia’s national IPA allocation for 2010 totall ed €197.9 million. Financial assistance focuses 
on areas such as strengtheni ng the rule of law, human ri ghts, education, transport and 
environmental protection. Serbia participates  in the IPA multi-beneficiary programmes 
including in an IPA crisis  response package developed in 2008. The package is fully 
operational in 2010. Serbia has continued to ta ke part in cross-bo rder cooperation with 
neighbouring countries across a range of areas su ch as infrastructure, environmental issues, 
cultural exchanges, research, job creation, secu rity and crime prevention. The first €50 million 
instalment under the IPA 2009 budget support in itiative was disbursed in December 2009. 
The purpose of the budgetary support is to ease the social and economic consequences of the 
current economic downturn in Serb ia, and help Serbia to pursue the pace of EU integration-
related reforms. An Agreement on Macro Fi nancial Assistance was signed in July 2010 
between the EU and Serbia.  
Concerning EU programmes, the EU has co-finan ced Serbia’s participation in the Seventh 
Research Framework Programme, the Culture , Fiscalis 2013, Customs 2013 Programmes as 
well as the Programme for Employment  and Social Solidarity (PROGRESS). 
2. POLITICAL CRITERIA  
This section examines progress made by Serb ia towards meeting the Copenhagen criteria, 
which require stability of institutions guarant eeing democracy, the rule of law, human rights 
and respect for and protection of minorities. It also monitors regional cooperation, good neighbourly relations with enla rgement countries and Member States, and compliance with 
international obligations, such as cooperation with the UN International Criminal Tribunal for the former Yugoslavia (ICTY).  
2.1. Democracy and the rule of law 
Constitution There has been some progress in implementing the November 2006 Constitution, which is a 
key priority of the European Partnership. In November 2009 the Serbian parliament adopted a 
Decision endorsing the draft Stat ute of Vojvodina, and the law determining the competencies 
of Vojvodina. The Statute was proclaimed in the Provincial Assembly of Vojvodina in 
December 2009 and came into force in January 2010. However, as regards Vojvodina, the laws on public property and on its own resource s required by the Constitution have not yet 
been adopted. This impedes the effectiv e exercise of the new competencies.  
Overall , implementation of the new c onstitutional framework is we ll advanced. However, the 
laws regulating public property and Vojvodina ’s own resources are still to be adopted.  
Parliament  
In February 2010, parliament adopted the La w on the National Assembly, required by the 
Constitution. The law establishes parliame ntary budgetary autonomy through a separate 
budget as opposed to the previous practice of gove rnment-decided allocati ons. It also provides 
for procedural innovations, in pa rticular the establis hment of a parliamentary collegium which 
formalises the earlier ad hoc  practice of consultations between the Speaker and the heads of 
political groups in the parliament. New parlia mentary rules of procedure were also adopted. 
 
EN 7   EN The new rules of procedure consolidate the ex isting instruments of c ontrol over the executive 
and further clarify the legislative procedur es. However, some provisions related to 
parliament's relations with other state bodies and institutions have been criticised by the 
Ombudsman and by the Commissioner for Free Access to Public Information as an attempt to 
interfere on the functio ning of the independent regulatory bodies.  
The current legislature has continued to be activ e in adopting legislati on. However, the quality 
of the legislative output has been affected by the practice of lawmaki ng by urgent procedure. 
This continued to be used frequently and for major systemic pieces of legislation. Public consultation on content and impact of dr aft laws has remained insufficient.  
The new rules of procedure provide for a reduc tion of the number of standing parliamentary 
committees from 30 to 19. However, this provisi on remains to enter into force for the next 
legislature. The functioning of the committees remains largely reactive and their effectiveness 
varies significantly. There is a lack of ade quate expert and support staff to assist the 
committees. Parliament has continued with re gular hearings of the government. However 
these remain formalistic rather than substantive in nature. Inflammatory and offensive language has continued, with sanctions  being applied in some cases.  
The electoral framework legisla tion has been partially  revised. Parliament adopted the law on 
the single voter register in December 2009. This legislation regulates in a coherent and 
consolidated way the establishment and manage ment of the permanent central register of 
voters, including Serbian citizens residing abroa d. The register will take the form of an 
electronic database managed by the Ministry for Public Administration and Local Self-
Government. However, the Law on the Stat e Electoral Commission has not been adopted. 
Constitutional and legal provisions which do not meet European standards remain in force. These relate to political party control over th e mandates of the MPs and parties' ability to 
arbitrarily appoint MPs instead of following the order of candidates from electoral lists.  
Overall , further steps were taken to improve  the functioning of parliament through  the 
adoption of a new Law on the National Assembly  and new rules of procedure. However, 
efforts are necessary to further improve the qu ality of the legislative output. The electoral 
framework legislation needs to be brought fu lly into line with European standards.  
Government 
The government remained stable and continued to demonstrate a high degree of consensus on 
EU integration as a strategic priority. The government continue d to implement provisions of 
the Interim Agreement of the SAA in line with  the agreed liberalisation schedule and took 
additional measures in the areas of compe tition and state aid. The European Integration 
Council, chaired by the Prime Minister and invo lving civil society representatives, met once, 
giving its full political support to gover nment European integration efforts.  
The government adopted a Decision, in Janua ry 2010, activating the Coordinating Body for 
accession to the EU chaired by the Prime Mi nister. The Coordinating Body met once during 
the reporting period. The Serbian European Integr ation Office has continued to function well 
and was exempted from the overall cuts in numbers of employees.  
The government has been drafting a number of bi lls aimed at further alignment of national 
legislation with European standards. However, the quality of the legislation was uneven and continued to be affected by inadequate imp act assessment of proposed  acts. The government 
 
EN 8   EN lacks coherent rules and prac tices for public consultations. Effective implementation and 
monitoring of the adopted legisla tion still need to be improved. 
There was no public condemnation from the gove rnment in reaction to repeated threats 
against the State Secretary for Human and Mi nority Rights for his defence of rights of 
vulnerable groups.  
Ministries abided to a varying degree by the opinions and recommendations of independent 
regulatory bodies, including the State Audit Institution.  
As regards local self-government, decentralisation has continued and a number of 
competencies have been transferred to the local level. However, this was done without 
ensuring sufficient capacity and resources at  local level. There has been insufficient 
consultation with local authorities in the decisi on-making process relating to the development 
of new legislation or amendments to existing laws that have implications at the local level. The law required by the Constitution to restore public property at municipal level has not been adopted. In April 2010, the Consti tutional Court ruled that the provisions of the law on local 
elections establishing blank resi gnations and allowing political pa rties to arbitrarily allocate 
seats are not in line with the Constitution. 
Overall , the government continued to be stable, a nd the consensus on st rategic priorities, 
including EU integration, was maintained. Howeve r, both the preparati on and implementation 
of new legislation need to become more effective.  
Public administration 
There has been some progress in  public administration reform.  
The law on administrative disputes, which regu lates judicial scrutiny of administrative acts 
and the work of the Administrative Court, was adopted in December 2009. As part of an arrangement with the In ternational Monetary F und (IMF) to reduce the fiscal deficit, a law 
was adopted on reducing the number of employe es in the administration by 10%. The overall 
level of staff effectively employed in the field of European integration has been maintained. 
Changes to the law on civil servants from December 2009 introduced quarterly appraisal of 
the work of civil servants instead of an a nnual appraisal. The Law on Ratification of the 
Agreement Establishing the Regional School of Public Administration was adopted in June 
2010.  
However, the legislative framework remains incomplete. The law on administrative 
procedures has not been adopted yet. The law on administrative di sputes is not fully in line 
with European standards. Further efforts are n eeded to introduce a merit-based career system 
and effective human resources management. Th e capacity of the public administration in 
certain sectors is weak and coordination is not fu lly ensured. In view of an intensification of 
the EU integration process in the coming years, Serbia needs to further strengthen capacity on 
EU integration, in particular the central coor dination between the Gene ral Secretariat, the 
Serbian EU Integration Office a nd in Ministry of Finance.  
The various Ombudsman’s Offices at both state and provincial le vel were very active. They 
reported an increase in the numbers of complain ts, showing increased trust in the institution. 
In addition to dealing with in dividual cases, they pr oposed amendments to legislation, issued 
a number of opinions and recommendations, vi sited various institutions and organised 
 
EN 9   EN activities aimed at promoting and protecting human and minor ity rights. Cooperation with 
local ombudsman’s offices was also enhan ced. In June 2010, the state Ombudsman opened a 
local field office in Southern Serbia. In Vojvodina, the Ombudsman and his two deputies 
were elected but the Vojvodina Ombudsman passed away in July and a new one was 
appointed in October 2010.  
The Office of the Commissioner for Informati on of Public Importance and Personal Data 
Protection has stepped up its activities. Change s to the law on free access to information of 
public importance as of May 2010 introduced a mechanism for the enforcement of the 
Commissioner’s decisions. They empower th e Commissioner to impose fines on persons 
responsible for breaches of the law. However, the office still lacks permanent premises and 
suffers from staff shortages. 
Concerning other independent regulatory instituti ons, the State Audit Institution has expanded 
in terms of both staff and office space. However,  it has only performed a partial audit of the 
2008 state accounts. The Competition Protection Commission, the Public Procurement Office 
and the Commission for the Protection of Bidders’ Rights had difficulties in carrying out their 
duties owing to lack of resources and, in some  cases, delays in the implementation of the 
relevant legislation.  
Overall , the capacity of the public administration is good but reform in this area is advancing 
at a slow and uneven pace. Further improvement  of the legislative framework and a stronger 
commitment to respect the mandate of indepe ndent regulatory bodies and provide them with 
adequate resources are needed.  
Civilian oversight of th e security forces  
Parliament adopted six new legal acts in Oc tober 2009, completing the legislative framework 
for defence reform. These comprised the nationa l security strategy, th e defence strategy, the 
law regulating the military intelligence and militar y security agencies, the law on the military, 
labour and material obligations, the law on civilian service and th e law on the use of the army 
and other defence forces in multinational opera tions outside Serbia. The law on civilian 
service replaced the previous government decree and regulated th e constitutionally guaranteed 
right to conscientious objecti on. This also fulfilled one of Serbia’s obligations under its 
Council of Europe post-accession commitments. A section for cooperation with the EU was 
established in 2010 as part of the overall restructuring of the Ministry of Defence.  
Parliamentary oversight of the s ecurity forces remains weak, howev er, as the legislature is not 
proactive and lacks capacity. The head of the parliamentary committee for security and defence was dismissed in March 2010 on abuse of office grounds.  The committee has limited 
resources to deal with its wide scope of work , which covers internal affairs, defence and 
security. 
The State Ombudsman carried out the first inspecti on of the state security agency in February 
2010 to review the legality of measures with implications for human and minority rights. The 
overall assessment was that, in performing its functions that have an impact on human and 
minority rights, the agency ab ides by the legal order. 
Overall , there was further progress towards comple ting the legislation pr oviding for civilian 
oversight of security forces and implementing constitutionally guaran teed rights. However, 
 
EN 10   EN civilian oversight, including the work of the relevant parliame ntary committee, needs to be 
reinforced.  
Judicial system  
Serbia made little progress towards further br inging its judicial system into line with 
European standards, which is a key priority of the European Partnership.  
The Law on the Judicial Academy was adopted in December 2009 and the Academy 
established as the body respons ible for the vocational traini ng and continued professional 
development of judges, prosecut ors and judicial sta ff. New Court Rules of Procedure were 
adopted in December 2009. They regulate the work of courts and the internal organisation of 
the new court network. A new Law on Expe rt Witnesses was adopted in June 2010. 
The reappointment procedure for all judges and prosecutors was carried out under the lead of 
the Ministry of Justice in th e second half of 2009 and took effect as of January 2010. The 
overall number of judges and prosecutors was reduced by 20–25%. More than 800 judges 
were not reappointed, out of previously around 3.000 judges and misdemeanour judges.  
A new structure of the court network was implemented as of January 2010. The 138 
municipal courts were reorganise d into 34 basic courts. In add ition, there are 26 higher courts, 
4 courts of appeal and the S upreme Court of Cassation. The or ganisation of the prosecution 
service was changed accordingly. The service wa s divided into basic, higher and appellate 
prosecution offices. Special depa rtments exist for war crimes and for organised crime. The 
new Administrative Court became operational in January 2010. In July 2010, the appointment of members of the Constitutional Court was completed.  
However, major aspects of the recent reforms are a matter of serious concern. The 
reappointment procedure for j udges and prosecutors was carried  out in a non-transparent way, 
putting at risk the principle of  the independence of the judiciary. The bodies responsible for 
this exercise, the High Judicial Council and the State Prosecutorial Council, acted in a 
transitory composition, wh ich neglected adequate representa tion of the profession and created 
a high risk of political influence. In addition, not  all members had been a ppointed to either of 
the councils. Objective criteria for reappoin tment, which had been developed in close 
cooperation with the Co uncil of Europe’s Venice Commi ssion, were not applied. Judges and 
prosecutors were not heard during the procedure and did not receive adequate explanations for 
the decisions. First-time candi dates (876 judges and 88 deputy prosecutors) were appointed 
without conducting interviews or applying merit-based criter ia. The overall number of judges 
and prosecutors was not calculated in a reliable  way and adjusted several times after the re-
appointment had already been carried out. The right to appeal for non re-appointed judges was 
limited to recourse to the Constitutional Court, which does not have the capacity to fully review the decisions. Out of more than 1,500 a ppeals, only one case has been dealt with. In 
this case, the Constitutional Court, for procedur al reasons, annulled the initial decision.  
The High Judicial Council and the State Prosecut orial Council have not yet been elected in 
their permanent composition. New court presiden ts have not been appointed. The respective 
legal deadlines expired in July and March 2010 . The planned new Criminal Procedure Code, 
the new Civil Procedure Code, the law on enfo rcement of judgments and the law on notaries 
have not been adopted.  
 
EN 11   EN The large backlog of pending cases remains a matte r of concern, in particular as the recent 
reforms impacted negatively on th e overall efficiency of the j udicial system. The reduction of 
the number of judges and prosecutors was not ba sed on a proper needs assessment. Under the 
new court system, courts which were closed con tinue to function as cour t units, in which civil 
cases are heard. This means that judges and judici al staff have to travel between courts and 
court units requiring significant resources and creating security  concerns. A uniform system 
for organising the work of the court seats and the new court uni ts has not been established. 
Case registration and the IT system connecting all courts and court units and allowing access 
to files are not fully operational.  
The Constitutional court faces a backlog of some 7,000 pending cases, including the appeals 
filed by judges and prosecutors who have not been reappointed. The setting up of the Judicial 
Academy still is at an early stage and vocational trainings have not yet started.  
Progress on domestic cases of war crimes c ontinued to be slow. There are 20 ongoing court 
cases and investigations against 103 individuals.  
Overall , Serbia’s judicial system only partially meet s its priorities. There are serious concerns 
over the way recent reforms were implemented, in  particular the reappo intment of judges and 
prosecutors.  
Anti-corruption policy  
Serbia made some progress in the fight agains t corruption. Implementati on of the outstanding 
GRECO recommendations of June 2006 continued. Amendments to the Law on Civil Servants and the Law on Free Access to Info rmation introduced the obligation for civil 
servants to report corruption and provided a cert ain protection from reta liatory measures. Also 
the access to information was improved. As regard s the processing of corruption cases, there 
is good cooperation between the po lice and the state prosecution. 
The new Anti-Corruption Agency started its wo rk in January 2010. It is competent for 
preventive measures and the supervision of conf lict of interest cases and funding of political 
parties. It received asset declarations fr om around 16,000 of the 18,000 officials who were 
required to submit such a declaration. The Agency  maintains an asset register on its website. 
In March 2010, the Agency issued  rules on the content of reco rds and financial reports of 
political parties. It maintained the earlier deadline of 15 April for parties to submit their 
annual reports and all parliamentar y parties abided by the deadline. 
The Anti-Corruption Council continued its advisory  activities and raised  public awareness of 
several high-profile cases.  
However, implementation of the Action Plan was slow. There has been little progress in the 
investigation and prosecution of  corruption cases, with the number of final convictions 
remaining low, in partic ular in high level cases. 
The Anti-Corruption Agency is not yet fully staffed and lacks permanent premises and 
technical equipment. It still has to establish a track record of its  capability to efficiently assess 
the correctness and completeness of asset declarati ons of public officials.  In this respect, the 
Agency has little competencies on its own and remains dependent on the cooperation of other 
state bodies and the effectiveness of  law enforcement authorities.  
 
EN 12   EN New legislation rendering the financing of political parties more transparent and providing for 
better control of expenditure ha s not yet been adopted. The existing legislation has significant 
shortcomings and does not provide the Anti-Corr uption Agency with sufficient investigative 
and sanctioning powers to monitor party fundi ng effectively, in part icular during election 
campaigns.  
Following efforts by the Anti-Corruption Agency to enforce the ban for officials to hold more 
than one public function, the relevant law was changed in July 2010 to partly suspend this 
ban. This raises concerns over the respect for decisions of the Agency and political will to support its work. The constitutionality of th is suspension is subj ect to a case in the 
Constitutional Court.  
Public procurement, privatisati on procedures and public expenditu re continue to be areas of 
serious concern, as independent supervision is  not yet ensured. The setting up of the State 
Audit Institution remains slow and the first a udit report produced covere d only a small part of 
the state budget. Effective le gal protection of whistleblower s is still missing, despite the 
newly introduced reporting obliga tion for civil servants. Protection is only applicable in cases 
where whistleblowers disclose information that is  not classified. There is a lack of practical 
guidance on protective measures. Corruption with in the police remains a matter of concern. 
Overall,  the institutional framework to fight corruption is in place with the Anti-Corruption 
Agency starting its work in January 2010. Howe ver, corruption remain s prevalent in many 
areas and continues to be a serious problem. The legisl ative framework still shows 
shortcomings, in particular with regard to supervision of political party funding and the 
protection of whistleblowers. The Anti-Corr uption Agency needs to be strengthened. 
Implementation of existing laws needs to be improved. Further efforts are needed to better process corruption cases, from inve stigation to final convictions.  
2.2. Human rights and the protection of minorities 
Observance of international human rights law Concerning the ratification of human rights instruments , Serbia has signed and ratified all 
significant international instruments.  
The European Court of Human Rights (ECtHR)  delivered since October 2009 45 judgments 
finding that Serbia had violated the European  Convention for the Protection of Human Rights 
and Fundamental Freedoms (ECHR). Over the sa me period, a total of 1364 new applications 
were made to the ECtHR. The largest number of judgments refers to the violation of the right 
to a fair trial due to the length of the pro cedure. As of September 2010, there were over 3,000 
eligible cases pending before the ECtHR regarding Serbia.  
There has been some progress in the promotion and enforcement of human rights . Several 
state bodies contributed to awareness-raising on human rights by organisi ng various activities 
addressing issues relating to different human  and minority rights. The Judicial Academy 
provided regular training on human  rights standards for relevant  professionals such as police 
officers, judges and prosecutors. However, the enforcement of the relevant ratified 
international agreements needs to improve. The State Secretary for human  rights resigned in 
September 2010. 
 
EN 13   EN Overall,  the legal framework for human rights prot ection is in place and generally respected. 
However, further efforts in education on in ternational human right s standards and their 
implementation are needed.  
Civil and political rights 
There has been little prog ress in further improving the  prevention of torture, ill-treatment and 
the fight against impunity.  Police detention procedures are sti ll of great concern, as well as the 
lack of internal and independent  external oversight mechanism.  
Additional efforts aimed at preventing any further cases of torture and ill-treatment are 
needed. The Deputy Ombudsman in charge of th e protection of persons deprived of their 
liberty is operational but still not fully effective.  
The obligation to establish a National Preven tive Mechanism in accordance with the Optional 
Protocol to the Convention agai nst torture and other cruel, i nhuman and degrading treatment 
or punishment, has not yet been fulfilled. 
The parliamentary commission provided for by th e law on enforcement of criminal sanctions 
of 2006 has not yet been set up. 
Access to justice is generally ensured, but there has been  no further progress as legislation and 
funding for a more effective system of free legal aid is still missing.  
Serbia made little progress in the reform of its prison system . A strategy to prevent 
overcrowding was adopted in July 2010. In order to  address drug abuse, five ‘drug-free’ units 
were established. Efforts to provide training and adequate medical se rvices to prisoners 
continued. However, poor conditions in prisons  and in police detention facilities are of 
concern. Prisons remain significantly overcro wded with a prison population of over 11,000 
for a capacity of 6,000 persons. This led to se veral protests and riots in prisons in 2010. 
Decisive action is needed to develop an effici ent probation system and to introduce alternative 
sanctions on a broader scale. The availability and use of illicit drugs by prisoners and shortcomings in the provision of me dical services remain of concern.  
The general constitutional and le gal framework for the protection of  freedom of expression  is 
in place and generally respected. However, inci dents involving death thr eats, attacks and hate 
speech, in particular against journalists, have  continued. The response of the police and 
prosecution has improved. However, further effort s are needed to ensure adequate follow-up 
by the courts. There is still no pr ogress in the investigation of the murders of journalists which 
took place during the 1990s and in  2001, and of the attempted mu rder of a journalist in 2007.  
The legal framework generally allows the media to operate freely. In  July 2010, acting on 
motions by the State Ombudsman and other organi sations, the Constituti onal Court ruled as 
unconstitutional several amendments to the P ublic Information Law, adopted in August 2009. 
The Court struck down the provision restricti ng the right of domestic legal persons to 
establish a public outlet, as well as the pr ovisions which introduced heavy fines and other 
penalties.  
Freedom of assembly  is guaranteed by the Constitution and in general respected. Police 
response to acts of violence has improved. The acting state prosecutor filed a motion to the 
Ministry of the Interior to prohi bit organised gatherings of extr emist organisations of football 
fans following the murder of a French citi zen in September 2009. The police took additional 
 
EN 14   EN measures to prevent sport-related incidents a nd some matches were closed to the public. The 
police also prevented a rally by members and supporters of a neo-Nazi group in December 
2009. The Belgrade Pride Parade took place in Oc tober 2010 thus representing a step forward 
in promoting constitutionally guaranteed fundamental rights . However, violent clashes 
occurred between the police and rioters protesti ng against the Parade. Rioters also targeted 
state institutions as well as ruling parties' premises. The response of the police was adequate 
and a large number of perp etrators were arrested.  
Freedom of association  is guaranteed by the Constitution and respected. The process of re-
registration of existing political  organisations and registration of new ones was completed in 
January 2010. 72 parties were registered, including 42 parties representing national 
minorities. 501 organisations that failed to abid e by the new criteria were deleted from the 
register. Motions were filed by the state pros ecution for the banning of two extreme right-
wing organisations. The Constitutional Court started to process a motion filed by the acting state prosecutor in October 2009 to ban 14 sports fans organi sations. This was on the grounds 
that their activities sought to violently overt hrowing the constitutional order, violated human 
and minority rights and were an incitement  to racial, ethnic a nd religious hatred. 
Civil society organisations  continued to be active in the social, economic and political life of 
Serbia and remain important in promoting democratic values. The Office for Cooperation 
with Civil Society was established by the gove rnment in April 2010. Ho wever, the Office is 
still not operational and cooperation between state authorities and civil society is still uneven. 
Legislation implementing the law on citizen’s associations to prevent possible abuses 
regarding financing from the state budget is  not yet adopted. Human rights defenders 
continued to be subject to harassment, verbal threats and physical attacks.  
Constitutional guarantees providing for freedom of religion  are in place and generally 
respected. In practice, the inter-faith situati on has improved and fewer religiously motivated 
incidents were recorded. In February 2010, the long outstanding cas e concerning Jehovah’s 
witnesses was settled and this organisation was registered. However, the 2009 annual report 
of the State Ombudsman identified an insufficient level of transp arency and consistency in the 
registration process as the main obstacle to some smaller religious groups exercising their 
rights. Several cases, including the outstanding case of the Montenegrin Orthodox Church, are 
pending before the courts.  
Overall,  the constitutional framewor k providing for respect for civil and politi cal rights is 
largely in place. However, full implementati on and enforcement remain to be ensured. 
Relevant legislation remains to be brought more closely into line with European standards. 
Further action by the authorities in comba ting violence of all types is needed.  
Economic and social rights 
There has been some progress on economic and social rights.  
Concerning women's rights,  the law on gender equality, aime d at improving the position of 
women, was adopted in December 2009. Different pr ojects and activities were carried out by 
Vojvodina provincial bodies and NGOs with a view to implementing Vojvodina’s strategy for 
protection against domestic violence and other fo rms of gender-based violence. However, the 
action plan for the implementation of the Nati onal Strategy to improve the position of women 
and promote gender equality is  still pending. In practice, women remain discriminated 
against, particularly in the labour market. T hose facing the most discrimination are disabled 
 
EN 15   EN women, single mothers, older women and those living in rural areas. There has been an 
increase in domestic violence. This situation remains insufficiently reported and the institutions responsible often fail to respond adequately to ge nder-based violence. The rules 
on legal protection of women during court proceedi ngs are not sufficiently applied in practice.  
In relation to children’s rights  there has been progress in strengthening the system for 
protecting children suffering from  abuse and negligence. In May, the Ministry of Education 
adopted rules of procedure on violence in educational institutions aimed at replacing the separate protocols existing signed on this issu e with relevant ministries. Various training 
programmes were implemented. Some aim at po lice officers, others at raising awareness 
among pupils in elementary schools. Two new she lters for street children were opened in 
Novi Sad and Nis. The parliamentary working group for children’s rights, established last 
year with the aim of enhancing the role of parliament in improving the position of children, 
continues its activities. It regularly assesses al l legislation, reports and other documents that 
affect children’s rights. 
However, in practice, there is a lack of follow up by state bodies  of the requests for protection 
of pupils’ rights in edu cational institutions. The rate of school attendan ce, particularly by 
Roma girls, is still of concern. There has been  some progress towards inclusive education, but 
implementing legislation remains to be adopted . Amendments to the Family Law prohibiting 
corporal punishment are still pending. The revisi on of the national action plan for children, to 
include the protection of child ren from pornography and other form s of exploitation, is still 
awaited. Violence against children continues to be of great concern. Different measures 
available for the protection of children dur ing court proceedings are not sufficiently 
implemented.  
As regards socially vulnerable persons and persons with disabilities,  the law on vocational 
rehabilitation and employment  of disabled persons entered into force in May 2010. The 
process of de-institutionalisation for parentless children has continued. Initiatives have been 
taken to prevent institutionalisation, for ex ample by promoting day care centres. However, 
both capacity and resources n eed to be strengthened. 
In the area of labour rights and trade unions , the general agreement with the trade unions and 
the employers’ associations continues to be suspended due to the ec onomic crisis. In the 
private sector, the number of employees no t receiving full wages or not having social 
contributions regularly paid has been in creasing. Social dialogue remains weak and 
consultation of social partners irregular. The Economic and Soci al Council is still not playing 
an active role in strengthening the social di alogue and remains rather marginalised, also 
including in the consultation proc ess for legislation fa lling under its remit. Local councils still 
exist only in a small numbe r of municipalities, and th eir role remains marginal. 
The legislative framework prohibiting any kind of discrimination  and establishing a 
mechanism for protection against discrimina tion is in place. The equality protection 
commissioner mandated to ensure full impl ementation of the law on the prohibition of 
discrimination was elected by parliament in May 2010 but is not fully operational yet. In 
practice, discrimination continues, particul arly against the Roma, the LGBT community, 
women, national minorities, and persons with di sabilities. These gro ups, but also human 
rights defenders and journalists, are exposed to hate speech and threats that are rarely 
followed up by the authorities.  
 
EN 16   EN With regard to property rights , the implementation of the law regulating private ownership of 
urban construction land adopted in September 2009 has been slow and inefficient. There has 
been little conversion of the ri ght of usage into ownership of  construction land. The issue of 
ownership over land acquired thr ough the privatisation process ha s not been solved. The legal 
situation in this respect remains unclear. The announced legislation on restitution has not yet 
been adopted.  
Overall,  the legal framework for the protection of social and econom ic rights is broadly in 
place. However, the protection of women and child ren against all forms of violence needs to 
be ensured. Further measures fighting all kinds  of discrimination remain to be introduced. 
Further efforts are required to  clarify property rights.  
Respect for and protection of minorities, cultural rights 
Good progress has been made in the protection of  minorities. The first direct elections for the 
National Minority Councils were held on 6 J une 2010. The Councils have to be consulted on 
legislation relating to minority languages, ed ucation, culture and media. Councils were 
elected for 19 national minorities. Four nationa l minorities formed and elected their councils 
for the first time. Both the number of register ed voters and the turnou t were relatively high. 
Elections were assessed by the OSCE as meeting international standards. Some irregularities 
and difficulties were reported, including durin g the registration process, although these did 
not significantly affect the overall results of  the elections. The Councils are yet to become 
operational. Difficulties were experienced in th e formation of the Bosniak National Minority 
Council which remains to be formally constituted.  
In October 2009, the Republican Council for Nati onal Minorities held a session, due to a 
change in its composition. However, it has on ly met once. Information and education in 
minority languages remains to be improved and the relevant legal framework clarified. This is 
particularly the case for the Bosniak, Bu lgarian, Bunjevci and Vlach minorities.  
The inter-ethnic situation in Vojvodina  continued to improve. The implementation of the new 
Statute and of the law on dete rmination of competencies is  ongoing. The adoption of new 
laws on public property and on pr ovincial own resources is s till pending. The overall number 
of inter-ethnic incidents has on the whole been decreasing. The provincial authorities 
continued organising re gional youth camps to promote tole rance. Regular cooperation and 
coordination has been established with the state authorities, in particular the Ministry of the 
Interior, and joint visits to vulnerable commun ities have been organised. Investigations by the 
police into inter-ethnic incident s has improved, as well as police se nsitivity in treating them as 
ethnically motivated acts as opposed  to the previous practice of classifying them as ordinary 
incidents. Their legal follow up has however be en insufficient. The prosecution continued to 
dismiss them as criminal ac ts and referred them instead to misdemeanour courts. The 2009 
annual report of the Provincia l Ombudsman noted that out of 730 complaints received, 25 
(3.42%) related to rights of national minorities.  
The situation in  southern Serbia  was on the whole stable but tense. In October 2009, bilingual 
branches of the faculties of law and of  economics were opened in Medvedja. The 
establishment of the task force intended to fo llow up the feasibility study on the development 
of higher education in Presevo and Bujanovac ha s been stalled. No sustainable solution has 
been found yet to the issue of th e recognition of diplomas issued by the University of Pristina. 
The Albanian National Minority Council was established followi ng direct elections. Tensions 
between Albanian political parties preceded th ese elections. The Council  is however not yet 
 
EN 17   EN fully active, since the parties have not been able to agree on distri bution of posts. Some 
parties continue with the boycott of the council . An agreement was signed on the inclusion of 
Serbs in the local government in Bujanovac. A decision was made on opening additional vacancies in State institutions, which will al low for integration of Albanians in public 
administration. This decision remains to be implemented.  
Clashes both between ethnic groups a nd within the Muslim community in Sandžak have 
continued. Tensions persist in particular betw een the two existing Islamic organisations. In 
September 2010, incidents occurred in Novi P azar during a protest over a land dispute 
between the local Islamic organisation and the municipal authorities. The Bosniak National 
Minority Council, which members have been elec ted in June 2010, is not yet registered and 
fully functional due to a number of op en issues related to its constitution. 
There are approximately 83,000 refugees  and 205,000 internally displaced persons  (IDPs) in 
Serbia, according to the United Nations High Commissioner for Refugees. The number of 
collective centres has decreased. Changes were ma de to the law on refuge es enabling refugees 
to buy out their apartments when these had been built from donations. The programme to support municipalities that prepar ed local action plans for the im provement of the status of 
refugees and IDPs who opt for local inte gration has continued. An additional 81 
municipalities have received donations for the implementation of their plans. However, the 
situation of refugees and IDPs remains very difficult. Further improvement is needed to 
address the housing situation. Many refugees and IDPs are unemployed and live in poverty. 
The national strategy on refugees needs to be revised.  
There has been some improvement in the position of the  Roma  population. Some affirmative 
action measures have been undert aken in the educati on sector with the goa l of enhancing the 
status of Roma. Actions aimed at raising pub lic awareness for Roma inclusion have been 
conducted on different occasions such as in ternational Roma day. Action plans for the 
improvement of the status of Roma have been  adopted in a number of  municipalities. An 
additional 15 health mediator s and 179 pedagogic assistants  have been employed during 
reporting period. 
However, the Roma minority continues to fa ce discrimination. Most  Roma people live in 
extreme poverty and illegal settle ments. Problems with access to personal documents persist 
for Roma people living in illegal settlements without a registered address or who are 
homeless. A simplified procedure for recogn ition of legal subjectivity and subsequent 
registration in citizens’ registries has not b een introduced yet. This adversely affects the 
exercise of their social and ec onomic rights. Relocation of ille gal Roma settlements is often 
conducted inadequately, resulting in breaches of basic human rights. The Roma population, 
especially Roma women, are discriminated in the labour market and only 5% of the Roma 
population have a permanent job. Roma women and children are frequently subject to 
exploitation and family violence, which often passes unreported.  
Overall , the legal framework on the respect for and protection of minorities in Serbia is in 
place. The National Minority Council elections were on the whole successfully organised. 
Some improvements were recorded towards addre ssing the issue of the st atus of refugees and 
IDPs. However, the National Minority Councils ar e yet to become operational. The number of 
IDPs remains high and their situation critical. The majority of the Roma population lives in 
extreme poverty and continues to face discrimination in particular as regards access to 
education, social protection, health ca re, employment and adequate housing.  
 
EN 18   EN 2.3. Regional issues and international obligations 
There are no outstanding issues in connec tion with Serbia’s compliance with the 
Dayton/Paris peace agreement.  Serbia has demonstrated a constructive approach in 
connection with developments in  Bosnia and Herzegovina.  
The Prosecutor of the International Criminal Tribunal for the former Yugoslavia (ICTY)  
noted in his latest report to the UN Security C ouncil that Serbia’s responses to the Office of 
the Prosecutor’s requests for access to documents , archives and witnesses have been timely 
and adequate and that no requests remain out standing. He also stressed the professionalism 
and commitment of the operational services working on the search for fugitives. The report however recommended that Serbia review the st rategies employed to apprehend the remaining 
fugitives, Ratko Mladi ć and Goran Hadži ć. The need for an increase in Serbia's operational 
capacities and the adoption of a more rigorous and multi-discipli nary approach to arresting the 
fugitives was also highlighted by the ICTY repor t. Full cooperation with the ICTY remains an 
essential condition for membership of the EU, in line with the Council conclusions of 25 
October 2010. 
The status of the former State Union Law on th e freezing of assets of ICTY fugitives, which 
was adopted in 2006, has not yet been clarified. In practice, the freezing of assets has been 
implemented on the basis of a decision made in 2005 by the war crimes chamber of the 
Belgrade District Court. The legal basis for th is decision was the Criminal Procedure Code.  
Good cooperation with EULEX has been established in relation to war crimes  in Kosovo
3. 
The investigative capacity of the police in war crimes was hampered by the lack of expert 
staff such as military analysts and intelligence officers. This adversely affected the quality of 
the work of relevant services. Problems of ex tradition and recognition of sentences with some 
countries of the region continued to exist.  
Serbia’s policy regarding the International Criminal Court  continues to be in line with the 
EU’s guiding principles and th e EU Common Positions on the inte grity of the Rome Statute. 
The Serbian government has continued to contes t Kosovo’s declaration of independence. The 
case before the International Court of Justice (ICJ), initiated by Serbia, came to an end in July 
2010 with the issuing of an advi sory opinion. The Court concl uded that the de claration of 
independence of Kosovo adopted on 17 February  2008 did not violate ge neral international 
law and the UN Security Council Resolution 1244 (1999). The Serbian parliament consequently adopted by an overwhelming majo rity a decision reiterating Belgrade’s policy 
of non-recognition of Kosovo and supporting the government’s initiative to have the issue 
referred to the UN General Assembly. Serbia has also maintained its opposition to the 
participation of Kosovo in regional meetings  and initiatives othe r than under the UNMIK 
umbrella.  
The UN General Assembly adopted on 9 Septembe r a joint resolution tabled by Serbia and 
co-sponsored by the EU as a follow-up to the ICJ advisory opinion on Kosovo. The resolution 
acknowledged the content of th e ICJ advisory opinion and we lcomed the readiness of the 
European Union to facilitate a process of dialogue between the part ies; the process of 
dialogue in itself would be a factor for peace, s ecurity and stability in the region, and that 
                                                
 
3 Under UNSCR 1244/99.  
 
EN 19   EN dialogue would be to promote cooperation, ac hieve progress on the path to the European 
Union and improve the lives of the people.  
In Kosovo, Serbia maintained parallel stru ctures and organised parallel municipal by-
elections. Serbia also discouraged Serb particip ation in the municipal elections organised by 
the Kosovo authorities in November 2009. Serbian officials visiting Kos ovo continued to give 
prior notification to UNMIK and EULEX for the pur pose of obtaining securi ty escorts. Serbia 
failed to play a constructive ro le in the return of Kosovo Se rb and Kosovo Albanian judges 
and prosecutors back to Mitrovica District  Court, which remains staffed only by EULEX 
personnel. The Serbian government protested ag ainst the disconnection and dismantling of the 
Serbian mobile phone transmitters in Kos ovo which had operated without a licence. 
The policy on Kosovo has also affected Serbia’s bilateral relations with its neighbours. The 
Serbian government still does not accept th e Kosovo customs stamps notified by UNMIK, 
blocking Kosovo’s exports to Serbia and hamper ing transit of Kosovo goods for export to the 
EU by EU hauliers.  
In August 2010, a total of 14,631 persons were still missing as a result of the conflicts in the 
region. Of these, 10,402 cases were related to the conflict in Bosnia and Herzegovina; 2,392 
to the conflict in Croatia and 1,837 to the conflict in Kosovo according to figures provided by 
the Red Cross (ICRC). The process for solving th ese cases has been very slow. Solving these 
remaining cases within a reasonable time limit is  essential for the reconciliation process. The 
working group set up between Belgrade and Pristina met three times under ICRC auspices, 
but progress on resolvin g cases has slowed because of the lack of information on gravesite 
locations.  In 2010, the Serbian Commission for Missing Persons received for the first time 
copies of documents from the archives of th e Serbian Ministry of Defence in response to 
detailed requests for information submitted by the ICRC on persons who went missing in 
Kosovo in 1998 and 1999. The Serbian Police also  provided the ICRC-chaired working group 
with new information from its own archives. The Belgrade-Pristina working group met in May 2010 and discussed a newly di scovered location on the territory of Serbia that is 
suspected of being a mass grave. The Serbia n war crimes prosecution proposed opening an 
investigation into this matter. The Commissi on on Missing Persons – a b ilateral forum set-up 
between Belgrade and Zagreb to deal with the issue – meets only irregularly.  
Fresh impetus was given to the Sarajevo declaration process  following the Ministerial 
meeting held in Belgrade in March 2010, at Serbia ’s initiative. This br ought together Bosnia 
and Herzegovina, Croatia, Montenegro and Serbia , all of which agreed to work together in 
order to clarify refugee statistics. The c ountries also committed themselves to work towards 
solutions to a number of outstanding issues by the end of the year. However, there are a 
number of difficult issues, in particular that of occupancy and tenancy rights, which still need to be tackled with the objective of finding mutually acceptable solutions. The Sarajevo Process was initially launched  through the Sarajevo Declara tion of January 31, 2005. Bosnia 
and Herzegovina, Croatia, Montenegro and Serbia  cooperate within th is process to find 
solutions for refugees and other persons who were  displaced as a result of the armed conflicts 
in ex-Yugoslavia between 1991 and 1995.  
Regional cooperation and good neighbourly relations  form an essential part of Serbia's 
process of moving towards the European Un ion. The Serbian government has declared 
regional cooperation one of its priorities. Serbia continued to be an active participant in regional initiatives, including the South East  European Cooperation Process (SEECP), the 
Regional Cooperation Council (RCC), the Centra l European Free Trade Area Agreement 
(CEFTA), the Energy Community Treaty (ECT ) and the European Common Aviation Area 
 
EN 20   EN Agreement (ECAAA). Serbia participated in the technical negotiations for the Transport 
Community Treaty, the signing of which has been delayed over differing positions on 
Kosovo. Serbia held the Chairmanship of  CEFTA in 2010. Serbia has been actively 
participating in the preparations for the fort hcoming Danube Strategy. Se rbia participated in 
the EU-Western Balkans High-Level Meeting that took place in June 2010 in Sarajevo. However, regional cooperation was affected by  a lack of agreement between Serbia and 
Kosovo on the latter's participation in va rious regional meetings. An acceptable and 
sustainable solution for the part icipation of both Serbia and Ko sovo in regional fora needs to 
be agreed as soon as possible. This is es sential for inclusive and functioning regional 
cooperation. 
Trilateral meetings took place in 2009 between Turkey, Serbia  and Bosnia and Herzegovina. 
In April 2010, the heads of state of Serbia a nd Turkey, and the Chair of the Presidency of 
Bosnia and Herzegovina signed a Declaration in  Istanbul endorsing the territorial integrity, 
sovereignty and legal personality  of Bosnia and Herzegovina. 
President Tadi ć, together with the Chair of the Presid ency of Bosnia and Herzegovina and the 
Presidents of Croatia and Mont enegro, attended the May 2010 summit of the Igman Initiative 
in Sarajevo. This year marked the 10th anniversary of this initiative involving more than 140 
NGOs from the region which is aimed at pr omoting and facilitating local and regional 
cooperation.  
Bilateral relations with other enlargement countries  developed further. Judicial cooperation 
in penal matters has improved between Bosnia and Herzegovina, Croatia and Serbia. Serbia signed an agreement with Bosnia and Herzegovina in February on mutual recognition and enforcement of court rulings in criminal matters. The new agreements introduce the possibility of forced transfers of convicted persons to serve imprisonment. The convicted 
person could, according to the previous agreements, not be transferred from a country where he had a citizenship without gi ving his consent. The new bilate ral agreements put an end to 
this possibility to escape imprisonment, in particular for persons with dual nationality. 
There was good progress in relations with Albania . In March 2010, the Alba nian Minister of 
Foreign Affairs visited Belgrade for the first visit of this kind in five years. On this occasion, 
an agreement on cooperation in fighting organise d crime, international drug trafficking and 
international terrorism was signed. As a follo w-up to this visit, in April 2010 Albania 
abolished visas for Serbian citizens.  
Relations with Bosnia and Herzegovina  have improved. The Serbia n parliament adopted in 
March 2010 a Declaration conde mning the crime in Srebreni ca and referring to the 
International Court of Justice ruling on Srebre nica. The preamble to this Declaration also 
restates the commitment to respect the territ orial integrity and sovereignty of Bosnia and 
Herzegovina. President Tadi ć attended in July 2010 the Srebrenica commemoration. The 
Speaker of the Bosnia and Herzegovina House of Peoples met the President of Serbia in 
Belgrade in June. A new ambassador from Bosn ia and Herzegovina was accredited after the 
post had been vacant for three years. In March 2010 the Serbian parliament ratified the agreement on determination of border crossings with Bosnia and Herzegovina. The Inter-State 
Cooperation Council for the border between the two countries met in May 2010 for the first 
time after four years. The Economic Co operation Agreement between Bosnia and 
Herzegovina and Serbia entered into force in April. Amendments to the agreement on mutual 
legal assistance in criminal matters were si gned in February 2010. A bilateral agreement on 
police cooperation in areas such as organise d crime and terrorism was signed, as was an 
 
EN 21   EN agreement on culture and sport. However, border demarcation remains an open issue. 
Republika Srpska continues to cooperate closel y with Serbia on the basis of the Special 
Parallel Relations Agreement and the related Protocol on Cooperation. 
Relations with  Croatia have gained a fresh impetus. Following the election of President 
Josipović in Croatia, the two Presidents and other senior officials met several times, both 
bilaterally and in the margins of regional and international events. A Serbian parliamentary delegation visited Zagreb in February 2010 a nd a return visit was made by the Croatian 
parliament in June 2010. The Croatian Presiden t visited Serbia in July 2010. The inter-state 
border commission met in April 2010 for the firs t time in seven years. A Police Cooperation 
Agreement entered into force in May 2010. A defence cooperation agreement and an agreement on inland water navigation were si gned. An agreement for the extradition of 
citizens suspected or convicted of serious crimes was signed in June 2010. However, outstanding issues remain. In December 2009, the Serbian government lodged a counter-suit against Croatia in the ICJ on the grounds of  genocide allegations. The issue of missing 
persons is still problematic.  
Relations with the former Yugoslav Republic of Macedonia  are overall good. The President of 
Serbia visited Skopje in June 2010. The Serbia n authorities maintained their policy of non-
recognition of the border demarcation agreemen t between the former Yugoslav Republic of 
Macedonia and Kosovo. In September the countrie s signed a bilateral ag reement to facilitate 
traffic over the local border cr ossing points. Unresolved issu es concerning relations between 
the Orthodox churches in th e two countries remain.  
There were mixed trends in relations with Montenegro . The Serbian President visited 
Montenegro in July 2010. An agreement on cooperation in the military sector was signed by the two Ministers of Defence in April 2010. The Serbian government protested over the 
establishment of diplomatic relations betw een Montenegro and Kosovo and temporarily 
recalled its ambassador from Podgorica in January 2010. The ambassador returned in 
February 2010. There were also outstanding issues  in connection with th e finalisation of the 
distribution of assets and liabil ities, citizenship rights, and the fight against organised crime. 
Agreements on judicial cooperation and extradit ions were ratified by Serbia in May 2010, but 
do not provide for the extr adition of own nationals. 
There was significant progr ess in relations with Turkey . The new format of regular trilateral 
meetings at the level of Ministers of Fo reign Affairs with Turkey and Bosnia and 
Herzegovina was launched in 2009 and severa l meetings took place. The summit of the 
Presidents of Serbia, Turkey and of the Bosnia and Herzegovina Presidency took place in Istanbul in April 2010. The Turkish Prime Minister visited Serbia in July 2010. The Serbia-Turkey free trade agreement ente red into force in September 2010. 
Relations with  Romania, Bulgaria and Hungary are good. In April 2010 the Bulgarian Prime 
Minister visited Belgrade. The Serbian and Bulg arian Interior Ministers signed an agreement 
on the establishment of a joint contact centre  for police and custom s cooperation. High-level 
meetings with Hungary took place at bilateral level and in the new trilateral format of 
cooperation with Hungary and Croatia. In Ju ne 2010 the Romanian Minister of Foreign 
Affairs visited Belgrade. The two countries also  maintain a high level of cooperation between 
their police departments.  
Overall , Serbia’s international obligations are broadly complied with. Despite the active on-
going cooperation of Serbia with ICTY, the two remaining fugitives are still at large. 
 
EN 22   EN Domestic processing of war crimes  cases  continued. Regional coope ration has improved and 
Serbia made significant progress in its bilateral rela tions with other enlargement countries, 
particularly Croatia and Bosn ia and Herzegovina, while con tinuing to have good relations 
with neighbouring EU member states. Region al cooperation was affected by a lack of 
agreement between Serbia and Kosovo on the latte r's participation in regional meetings. An 
acceptable and sustainable solution for the participation of both Serbia and Kosovo in regional fora needs to be agreed as soon as possible. This is essential for inclusive and functioning 
regional cooperation. 
3. E
CONOMIC CRITERIA  
In examining economic developments in Serbia, the Commission’s approach was guided by 
the conclusions of the European Council in Copenhagen in June 1993, which stated that 
membership of the Union requires the existe nce of a functioning market economy and the 
capacity to cope with competitive pressure  and market forces within the Union. 
3.1. The existence of a functioning market economy 
Economic policy essentials In January 2010, the government submitted to the European Commission its economic and 
fiscal programme for the period 2010-12. The pr ogramme sets out a revised macroeconomic 
and fiscal policy framework for the medium term based on the supplementary budget for 2009 
and the 2010 budget that we re both adopted by parliament in December 2009. Overall , the 
programme is an appropriate medium-term po licy document, presenting a realistic macro-
fiscal scenario that is broadly consis tent with the country’s reform agenda. 
Serbia’s macroeconomic policy has been anchored by the economic programme supported by 
the International Monetary Fund (IMF) under th e Stand-By Arrangement (SBA) since early 
2009. Pursuant to the SBA requirements, a numbe r of fiscal measures were implemented 
throughout 2009 and in early 2010. Notwithstanding a number of adjustments, including an 
upward revision of fiscal deficits in 2009 and 2010, the SBA has been on track. The 
government made significant strides towards e nhancing fiscal respon sibility by adopting 
amendments to the budget system law and a new pension bill. However, comprehensive structural reforms that would gear the economy towards a more sustaina ble path will need to 
be further pursued and implemented.  
Overall , macroeconomic stability was broadly pres erved against the backdrop of the global 
crisis owing to the adoption of timely measures in agreement with the IMF. There is consensus on the fundamentals of a market economy. Medium-term fiscal and structural 
reforms will have to be implemented without de lay to enhance the resilience of the economy. 
Macroeconomic stability 
In 2009, Serbia’s GDP shrank by 3% in real te rms as a consequence of the global economic 
crisis, interrupting a pe riod of steady growth with an annua l average rate of 6% recorded 
between 2005 and 2008. The 2009 average per cap ita GDP in purchasing power standards 
stood at 37% of the EU-27 average, up margina lly from the year before. The recovery has 
been under way since early 2010 but the pick-up in economic activity has been slower than 
expected, prompting the IMF and the national au thorities to revise downwards their initial 
GDP growth projection from 2% to 1.5%. While economic growth in the past was driven by 
 
EN 23   EN domestic demand, it has been recently fuelled mo re by export expansion. This shift remains to 
be sustained, based on the strengthening industri al production. While in  2009 industrial output 
was some 12% lower than the year before, with  manufacturing recording the sharpest fall, the 
negative trend has reversed in 2010. Overall , the Serbian economy continues to be affected by 
the global economic crisis while reco very has been slow and fragile. 
In 2009, international trade and financial transac tions were significantly affected by the global 
economic and financial crisis. At 5.8% of GDP , the current account deficit was considerably 
lower compared to levels of 10-18% in previous years. This was mainly due to a sharp decline 
in imports as well as an increase in net inflows of remittances. As imports fell faster than exports the merchandise trade deficit also narrowe d as compared to past levels of above 20%. 
However, at 15.5% of GDP it remained substan tial. In 2010, as the international economic 
environment improved, Serbia’s external position stayed solid. In the period to September, the 
trade deficit was narrowing compared to last ye ar on the back of vigorous export growth as 
exports of intermediate goods soared following  the revived industria l activity in  the EU, 
Serbia's main trade partner. Annual import gr owth turned positive in May following a marked 
pick-up in imports of energy, part ly due to the higher internationa l oil prices, and intermediate 
goods against the backdrop of a gradual recove ry in domestic production while investment 
activity was subdued. 
Financial and capital flows rema ined modest. In 2009, foreign direct investment (FDI) fell by 
a quarter compared to a year earlier, to €1.37 billion, accounting for 4.3% of GDP. At the same time, long-term borrowing by the corporate sector at €600 billion was only a quarter of 
the 2008 level while short-term borrowing at €200 million was down by almost 60% on the year before. Notwithstanding the slowly reco vering economic activity as of 2010, foreign 
currency inflows have remained subdued. Over th e eight months to September, FDI and other 
investments were substantially lower than a year ago. The capital and financial account increased as a consequence of domestic commer cial banks resorting to  additional long-term 
borrowing while hefty repayments by corporate sect or of the pre-crisis foreign loans and an 
outflow of cash and deposits have been taking place. Still, total foreign exchange reserves remained largely stable during 2010 at over €11 billion, i.e. more than a third of GDP or 
sufficient to cover some 10 months’ worth of  imports. Serbia’s foreign debt has been 
increasing since 2009 while capital inflows have b een largely insufficient to cover the current 
account deficit. By end-July 2010, gross extern al debt had risen by around €0.5 billion since 
the beginning of the year, to €23.3 billi on, i.e. close to 80% of projected GDP. Overall , the 
Serbian economy saw a substantia l external adjustment in 2009 reflected in a considerably 
narrower current account deficit as well as a lowe r merchandise trade deficit compared to past 
levels. In parallel, foreign exchange reserves  were built up and are now maintained at a 
comfortable level. External de bt is, however, high and growing indebtedness remains an issue 
of concern. 
The unemployment rate in 2009 increased to 16.1%. 2009 saw significant wage moderation 
owing also to the nominal free zing of salaries in the public  sector, with nominal wages 
increasing by 6.9% on average compared to 17.9% a year earlier. Moreover, real wage growth 
slowed to only 0.3% per annum, which was substantially lower than in 2007 (19.5%) and 2008 (3.9%). While economic activity has been pi cking up gradually, the situation on the 
labour market has worsened in 2010. In the firs t half of the year, em ployment continued to 
fall in annual terms, with the number of empl oyed persons dropping to historic lows at 1.85 
million. According to the national labour force survey of April 2010, the unemployment rate 
soared to 19.2%. The poor labour market perf ormance has further undermined the social 
conditions. Wage growth has remained broadl y constrained during 2010. In the period from 
 
EN 24   EN January to July, the average net wage increase d compared to the same  period last year, by 
6.7% in nominal and 2 .5% in real terms. Overall , under the impact of the economic crisis 
labour market conditions deteriorated as em ployment fell and unemployment approached 
20%. Salaries remained almost unchanged in real terms.  
The current monetary policy framework has b een in place since January 2009 when the 
National Bank of Serbia (NBS) committed itself to price stability based on consumer price index (CPI) inflation instead of core inflati on. The NBS’s target was to keep annual CPI 
inflation between 6% and 10% throughout 2009.  At end-December 2009, CPI inflation stood 
at 6.6%, largely in line with th e projections, bringing the yearly average inflation rate of 8.1% 
well within the target  band. In 2009, inflation was largel y fuelled by an increase in 
administered prices of oil derivatives and communal servi ces. For the end of 2010, the NBS 
set the inflation target band at between 4% an d 8%, where the main contribution to overall 
price growth would come from the rise in regu lated prices and excise duties. Disinflation was 
on track in the first half of the year. However, inflationary tensions were rekindled by rising 
food prices and the dinar depreciation. The renewed pressures were also based on the 
expected strengthening of do mestic demand in line with th e gradual pick-up of economic 
activity and higher bank lending. The acceler ation of inflation prompted the NBS to 
discontinue the course of a gradual relaxation of monetary conditions. Since the second half 
of 2009, the key reference interest rate was cu t in a number of consecutive steps from its 
October 2008 peak at 17.75% to 10% by end- December 2009, and further to 8% by early 
May. Following the two latest rate hikes, the interest rate currently stands at 9%. Overall , 
disinflation has remained the key policy objec tive, but price developments need to be 
monitored carefully as further inflationary pr essures might be genera ted by the increases in 
regulated prices of energy, gas and oil as well as the pass-through effect  of the depreciating 
dinar. 
Since late 2009, the NBS has been actively engage d in preserving exchange rate stability. As 
the pace of the dinar depreciation in Decembe r 2009 was deemed to undermine the process of 
economic stabilisation, the NBS started intervening again in the interbank foreign currency 
market. After two interventions at the end of the year, the operations became more frequent in 
2010, especially from mid-May when the pressure  on the exchange rate again intensified. 
Despite the NBS’s interventions, the dinar conti nued to slide, rising to RSD106.2 per euro at 
end-September, i.e. losing about 10% of its valu e since the beginning of the year. By then, the 
NBS had sold more than €2 billion in tota l with the aim of buffering extreme daily 
fluctuations in the dinar’s value. Overall,  the dinar has been on a depreciating trend since 
December 2009. In line with the policy of prev enting excessive volatility of the exchange 
rate, the NBS’s interventions on the interbank mark et were considerable in the first half of 
2010 and have, in practice, somewhat overs hadowed its inflation targeting policy. 
The year 2009 saw a shift in the fiscal stance as the e xpansionary policy of 2007 and 2008 
became constrained by the SBA programme requirements. Ad hoc  short-term measures were 
introduced to mitigate the sharp deteriorat ion of public finances during the economic 
recession, resulting in two 2009 budget revisions. The consolidated fiscal deficit in 2009 widened to 4.1% of GDP from 2.4% of GDP a y ear earlier. A set of emergency expenditure 
measures only partly compensated for the sizeabl e revenue shortfall. The fiscal adjustment 
came largely from restricted hiring in the pub lic sector and a nominal freeze on public sector 
wages and pensions. Capital expenditures were  again reduced in comparison with a year 
earlier. Extensive lay-offs in the private sector and salary freezes in the public sector 
translated into a shortfall in  personal income tax revenue. Furthermore, VAT plunged due to 
restrained domestic demand. Because of the drop in imports and also th e lowering of tariffs 
 
EN 25   EN following the start of implementation of th e trade agreement under the SAA, customs 
revenues were much lower compared to past y ears. Conversely, excise taxes increased as a 
consequence of the hike in ex cise duties on diesel and gaso line. During 2010, public finances 
remained under pressure as the fiscal policy allowed automatic stabilisers to operate. In 
agreement with the IMF, Serbia announced a supplementary budget to allow for a higher 
budget deficit in 2010. At 4.8% of GDP, the deficit would be the highest in the past decade, 
but driven by lower-than-planned public revenue  rather than growing public expenditure. 
However, in the period to September public  spending was contai ned largely through a 
significant cut in capital expe nditure, while current expenditu re, accounting for the bulk of 
total outlays, was in line with the plan agains t the freeze of public admi nistration salaries and 
pensions. As of 2009, public debt has been in creasing steadily and stood at close to €11 
billion, i.e. some 36% of GDP, at end-August. With the aim to strengthen fiscal discipline, 
Serbia adopted the amendments to the budget sy stem law. These amendments introduce a set 
of quantitative fiscal rules to underpin fiscal consolidation over the medium term. 
Furthermore, improved procedures as well as th e setting-up of a fiscal council are deemed to 
anchor fiscal responsibility. However Serbia st ill needs to adopt the new pension law which, 
for the purpose of strengthening public finances  in the long run, includes an extension of 
working period and age for assuming pension right s as well as adjustments to the indexation 
mechanism. Overall , given the adverse impacts of the economic crisis and despite the ad hoc  
fiscal adjustments, the 2009 budget deficit was s ubstantially higher than in previous years. 
The corrective short-term measures will need  to be backed up by full-fledged systemic 
reforms, such as reform of the pension and hea lthcare systems, to improve fiscal sustainability 
in the medium to long term.  
Expansionary fiscal policy and the increasi ng gap between savings an d investment of the 
private sector, which fuelled external imbala nces in the years prior to the 2009 economic 
downturn exacerbated the economy’s vulnerabilitie s to adverse shocks such as a global 
recession. The negative effects of the last cris is have been partly cushioned by the economic 
measures implemented under the IMF SBA progr amme. However, the macroeconomic policy 
mix has proven rather limited in  responding to the crisis. Effec tiveness of monetary policy has 
been restricted given the high degree of euro isation and the NBS effectively pursuing dual 
objectives, i.e. smoothing the exchange rate de preciation while being committed to inflation 
targeting. Moreover, counter-cyclic al fiscal policies, which woul d have been necessary in the 
period of low economic activity, could not be imp lemented. This was due  to the pre-crisis 
fiscal expansion and the low capit al market integration. To broadl y preserve the stability of its 
economy, Serbia had to apply budg et tightening measures, incl uding expenditure cuts, which 
tend to operate pro-cyclically in such circumstances. Overall , the economic policy mix in 
place has proven limited in facing the crisis. However, the accompanying policies and measures agreed with the IMF under the SBA programme have provided an adequate 
response towards the most pressing negative macroeconomic effects. 
Interplay of market forces 
The price liberalisation process slowed down in 2009, with the sh are of administrative prices 
still representing about a quarter in the CPI infl ation basket. The market formation of prices 
was challenged in mid-2010 as th e state intervened following th e shortage of basic food items 
such as dairy and cooking oil. The share of th e private sector remained small, accounting for 
55-60% of total output and about 60% of the total number of employees. Finalisation of the 
process of privatisation and/or liquidation of socially and stat e-owned enterprises remains one 
of the key priorities of the Eu ropean partnership for Serbia. 
 
EN 26   EN Privatisation of the socially owned companies continued in 2009 but at a slower pace as only 
95 such companies were sold. Privatisation proceeds amounted to about €81 million. By the end of 2009, the total number of companies priv atised through tenders a nd auctions, since the 
start of the process in 2002, had risen to over 2,300, with privatisation revenue totalling about 
€2.6 billion. The least attractive companies re main unsold. The number of privatisations 
annulled — due to non-compliance with the cont racted obligations — rose to almost one 
quarter of the firms initially scheduled fo r privatisation. The government extended the 
deadline for finalising priva tisation of the socially owned companies to 30 June 2011. 
Overall , progress in selling socially owned companies was limited, while the number of 
revoked privatisation deals increased.  
Given the economic circumstances in 2009, priva tisation of the large state-owned companies 
was delayed. As the situation in the global markets gradually improved, the government 
announced privatisation strategies for a number of  companies. A few were slated for sale by 
the end of 2010. Privatisation of the pharmaceu tical company Galenika failed, however, and 
has been postponed. The initial procedures were launched for the telecoms incumbent Telekom but the tender had not be en called by the end of Septem ber, as planned. As regards 
the sale of the national air car rier JAT Airways, the government  decided to establish a new 
national airline company that will take over the assets and some of the staff. The debt 
estimated at €146 million (€25 million in 2009 al one) would be left to the old company, 
which will remain in state ownership. To facilitate  the sale of the remaining state-share in the 
oil company NIS, the government distributed  free shares to the population in mid-2010 and 
announced further distributions (Belgrade Airp ort, Telekom, the electricity operator EPS). 
Privatisation of about 500 utilit ies in the local communities is outstanding. Their restructuring 
and reorganisation has not yet begun and the st rategy for privatising th em remains undefined. 
Overall , limited progress was made in  finalising the privatisation process. Privatisation of 
socially owned companies has advanced but in  the meantime a number of  privatisation deals 
have also been cancelled. State-owned comp anies have not initiated the restructuring. 
Market entry and exit 
In 2009, some progress was made in facilitatin g market entry. The number of registered 
companies stood at 113,000 in May 2010, up from 106,000 in April 2009. At the same time, about 225,000 entrepreneurs were registered with the Serbian Business Registry Agency, i.e. 
around 5,000 more than a year earlier. The one -stop-shop system for registering a company 
has been in place since May 2009. It now takes on av erage 5 instead of 23 days to register and 
has been estimated to significantly lower admini stration cost for companies. The Agency has 
also further extended the number of registers, including the Registry for Financial Statements, 
which will do away with the past practice of multiple submissions of these statements to 
various state bodies. Nevertheless, further effo rts are needed to improve the conditions for 
starting-up a business, particularly in the area of construction permits, where implementation 
of the new Law on planning and construction from 2009 has been very slow. With regard to 
market exit, a new Bankruptcy Law came into effect in January 201 0 but the number of 
pending cases remains very high. Overall , there has been some progress, particularly 
regarding the registratio n of new companies and submission of the financial statements of 
those already operating. However, excessive red ta pe and complex legislation remain in place 
and continue to hamper the business environment. 
Legal system 
 
EN 27   EN Some progress was observed in adopti ng new legislation in line with the acquis . However, 
preparation and implementation of the laws are sometimes slow and uneven. Also, legal 
enforcement is weak due to technical and personnel shortcomings  in the courts and 
administrative bodies. Inconsistent implementa tion of laws and very lengthy procedures, 
which frequently exceed the deadli nes set by law, hinder investment. Overall , weaknesses in 
the rule of law and prevalent corruption continue d to limit legal predictability and undermined 
trust in the legal system among economic operat ors, in particular as regards effective 
enforcement of property rights. 
Financial sector development 
The number of banks decreased from 34 to 33 af ter the merger of two state-owned banks in 
September 2010. There are now 3 majority state- owned banks, holding a 2.6% market share. 
Foreign ownership has risen to al most 75% of the total banking se ctor and currently 21 out of 
33 banks operating in Serbia ar e owned by foreign entities. Subs idiaries of Austrian, Greek 
and Italian banks are within the top five banks in  terms of assets and together control almost 
60% of the market. Domestic private banks ar e small with only one of them among the top 10 
banks. 
Serbia’s financial sector has been relatively unscathed by the international financial crisis. In 
line with the agreement reached in March 2009 (‘Vienna Initiative’), the parent commercial 
banks having subsidiaries in Serbia maintained  their exposure in the Serbian market at the 
pre-crisis level and effectiv ely increased their capital ad equacy ratios in 2009. Given the 
positive results of the economic stabilisation programme, it was agreed that exposure commitments could be reduced as of Ap ril 2010, from 100% to 80% of the end-2008 
exposure as a first step toward s phasing-out of the initiative.  Deposits, of which 70% are in 
foreign currency, represent almost 60% of the to tal liabilities of the banking sector. Similarly, 
loans account for some 60% of banking sector  assets. Over three quarters of loans are 
denominated in foreign currency or are foreign- currency linked, predominantly in euros. More 
than half of the loans are gran ted to the corporate sector (m ainly to trade and industry — 
around 20% each) while about a third is for househol ds. Since the crisis credit growth for the 
private sector has decelerated  substantially and the governme nt has put in place a support 
scheme to subsidise commercial bank loans to companies and households.  
Capitalisation of the banking sector is high. The average capital adequacy  ratio stands at 21% 
while all systemic banks maintain it above the prescribed minimum of 12%. However, the 
asset quality of the banking se ctor has worsened, with a rise  in bad loans since 2009. The 
gross non-performing loans ratio peaked at 17.5% by the second half of 2010. A systemic 
liquidity crisis is unlikely as liquid assets acc ounted for over 36% of total assets at end-June. 
The NBS can release ample amounts of liquidity  by further relaxing re latively high reserve 
requirements, which were introduced with the ai m to limit rapid credit growth prior to the 
crisis. The high capital and re serve requirements have been partly responsible for the 
generally low profitability of the Serbian banking sector by regional standards. Stress tests for 
31 banks carried out in 2010 concluded that banks are sufficiently resilient to further adverse 
shocks but remain vulnerable to credit risk. The weak performance of th e corporate sector in 
the face of the slow economic recovery may ra ise defaults in the servicing of loans. 
Furthermore, there is some exchange rate risk on the borrowers’ side given the high degree of 
euroisation of Serbia’s economy. Overall , financial intermediation growth has slowed down 
against the backdrop of the economic downturn. The banking sector remained generally sound 
and profitable, but a close watch needs to be ke pt for possible deterior ation in the repayment 
 
EN 28   EN capacity of borrowers due to the relatively high share of bad loans and considerable exposure 
to exchange rate risk. 
At the end of 2009, there were 26 insurance companies operating in Serbia, up from 24 a year 
earlier. 19 insurance companies are in ma jority foreign ownership while 7 rely on 
predominantly domestic capital. The recession ha s impacted the performance of the sector, 
with premium income having risen only by 2.6% on the year in 2009. The insurance sector’s 
share of capital in the total financial sector dropped to 3.9%. Overall , progress in development 
of the non-banking financial sector slowed dow n and consequently its size in financial 
intermediation remained limited. 
3.2. The capacity to cope with competitiv e pressure and market forces within the 
Union 
Existence of a functioning market economy The overall economic climate deteriorated in the face of the global crisis  but the authorities 
have succeeded in broadly maintaining macr oeconomic stability to  support the continued 
transition to a market economy. In particular, the monetary authorities applied timely and 
adequate measures to restore trust in the bank ing system. On the fiscal side, the corrective 
short-term measures will need to be backed up by full-fledged systemic reforms to ensure 
fiscal sustainability in the medium to long term. The adopti on of the fiscal responsibility 
legislation is an important st ep, which paves the way towards bolstering fiscal discipline. 
Pension reform will also contribute will also contribute to the long-term sustainability of 
public finances However, the weak corporate governance and the deficiencies in competition 
continue to be barriers to business. Overall , in the more challenging environment the 
previously identified handicaps have become more acute. Market mechanisms remained 
hampered by distortions, legal uncertaint y, heavy state involvement in production, and 
insufficient competition. 
Human and physical capital 
Some progress was observed following the accelera ted reform of the education system, which 
is poised to better meet labour market demand. Nevertheless, the gap between demand for and supply of skilled workforce identified in previo us reports continues to be a drag on FDI and 
the development of new segments of the econo my. The attitude toward s lifelong learning and 
mobility has been improving, albe it at a rather slow pace. P ublic education expenditure 
accounted for 3.3% of GDP in 2009, lower than the planned 3.9%. Overall , the economy 
continues to suffer from a s hortage of skilled la bour while supply has been only gradually 
adjusting to market needs. 
In 2009, investment activity was constrained and the private investment  rate dropped to 20% 
of GDP. Net FDI fell by almost 25% on the year before, to €1.37 billion, bringing the 
cumulative inflow since 2000 to €12.2 billion. Th e three sectors receiving most FDI were 
financial intermediation, manufacturing, and transport and telecommunication. However, a 
large share of FDI was destined  to the non-tradable sectors of  the economy, which contributed 
to the increasing external imbalances. In 2009,  domestic investment dwindled. The funds of 
the National Investment Plan were slashed to €210 million, a third of the 2008 amount, and 
were used for various projects related to the development of communal and road 
infrastructure in the 40 least developed municipalities but also  in support of industrial hubs 
(such as Kragujevac) along Corridor X, as we ll as for construction of social housing. For 
 
EN 29   EN 2010, the National Investment Plan was further reduced to about €100 million. Overall , 
domestic investment has been declining as lo cal sources have been scarce and FDI has also 
lost momentum given the globally unfavourable economic conditions. 
Sectoral and enterprise structure 
The restructuring process has advanced only sl owly. The shift of economic activity towards 
the service sector has stabilised, with servi ces contributing more than 60% of GDP. The 
public companies still generate a large part of  Serbia’s output. However, their performance 
has been undermined considerably by the cr isis, with the erosion of capital and the 
accumulated loss rising to €3 billion, i.e. more th an a quarter of their total capital at end-2009. 
The private companies account for a smaller shar e of production but the bulk of foreign trade. 
Around 75% of Serbia's export is undertaken by companies in predominantly foreign 
ownership. Small and medium-sized enterprises contribute for just over 51% of the total 
value-added and slightly more than 57% of the overall employment. The informal sector, 
fuelled by weaknesses in tax and expenditure policies, as well as in law enforcement, including the fight against corruption and organi sed crime, remains large. It reduces the tax 
base and the efficiency of economic policies. Overall , structural adjustment of the economy 
has been lagging on the b ack of the slow reform process,  which has been hampered by the 
economic crisis. The informal sector remains an important challenge.  
State influence on competitiveness 
State subsidies were relatively high at around 2.2% of GDP in 2009 following a nominal 
increase of almost a quarter compared to 2008. The amount of subsidies could be 
underreported as the state schemes as well as th e individual state aid are not systematically 
referred for prior approval. The legislation on state aid control from July 2009 needs to be 
effectively enforced by the recently establis hed State aid authority, but an appropriate 
monitoring mechanism is still missing. The state- controlled monopolistic structures remain in 
place. Overall , the state continues to influence subs tantially on competitiveness through its 
legal and financial mechanisms. 
Economic integration with the EU 
The EU has remained Serbia’s main trading part ner, accounting for 58% of the country’s total 
exports and 57% of the total imports. The negati ve trade gap which Serbia had with the EU 
was declining steadily in the period to August 2010. Serbia also continued to improve a trade 
surplus with the countries in the region. The CEFTA countries account for 16% of Serbia’s 
trade. 
Export price competitiveness improved in 2009. Real gross wage growth at 0.2% was 
considerably smaller than aver age labour productivity growth, whic h translated into a 3% fall 
in real unit labour costs. In real effective te rms, the dinar lost 3% of its value, despite 
consumer prices growing faster on the domestic ma rket than abroad on average. In the first 
half of 2010, the real effectiv e exchange rate of the dinar weakened further by some 7%. 
Against the background of subdued wage growth  and increasing unemployment, unit labour 
costs continued to drop in real terms. Overall , trade integration with the EU remained high 
and export competitiveness continued to improve. 
 
EN 30   EN 4. EUROPEAN STANDARDS  
This section examines Serbia’s capacity gradua lly to approximate its legislation and policies 
to the acquis  related to the internal market, sectoral policies and justice, freedom and security, 
in line with the Stabilisation and Associa tion Agreement and the European Partnership 
priorities. It also analyses Serbia’s administrative capacity. In each sector, the Commission’s 
assessment covers progress achieved during the reporting period, and summarises the 
country’s overall level of preparations.  
4.1. Internal market 
4.1.1.  Free movement of goods 
Progress can be reported in the fi eld of the free movement of goods. 
Legislation aligning with the New Appro ach Directives on safety of machinery, 
electromagnetic compatibility and low voltage  equipment was adopted. The Ministry of 
Economic Affairs and Regional Development conti nued to play a central role in coordinating 
the establishment and improvement of the horiz ontal legislation, the qu ality infrastructure 
institutions and the transposition of the acquis  on free movement of goods. Its capacity in this 
area has been strengthened with  additional human resources.  
Cooperation between the ministry and the Serb ian Standardisation In stitute, the Serbian 
Accreditation Board and the Directorate for Measures and Precious Metals has further 
improved. 
As regards standardisation , the change of status of the Serbian Standardisation Institute 
(ISS) from an independent non-pr ofit organisation to a public in stitution came into force in 
January 2010. During the reportin g period the ISS further incr eased the number of adopted 
European standards (ENs), to a total of 8.986. The ISS is no longer responsible for type approval of vehicles, as the Traffic Safety Agen cy developed the capacity to take over this 
task. However, the chairman and members of  the supervisory board have not yet been 
appointed.  
In the area of conformity assessment  and accreditation, the number of accredited conformity 
assessment bodies (CABs) rose to 413. Implementing legislatio n to the law on technical 
requirements for products and conformity a ssessment of products has been adopted. 
There has been good progress on accreditation . The Law on Accreditation, fully aligned with 
the new legislative framework (765/2008), was adopted. The Serbian Accreditation Board 
extended the scope of its activities. It continue d to provide training and seminars for assessors 
and its own staff and carried ou t awareness-raising activities. However, the chairman and the 
members of the supervisory board have not ye t been appointed. The administrative capacity 
of the Board needs to be strengthened. 
In the area of metrology , progress was made with the adoption of the new law in May 2010 
and implementing legislation. Th e Directorate for Measures a nd Precious Metals has been 
restructured to implement the new law, a nd the government appointed the Metrological 
Council. The Directorate has been participating in the activities of international and European 
metrology organisations. However, further effort s are needed to continue aligning with the 
acquis , notably by implementing the already existing legislation and improving the limited 
capacity of the Directorate. 
 
EN 31   EN There has been progress on market surveillance . Implementing legislation in the area of 
general product safety and the Market Surv eillance Strategy for the period 2010-2014 was 
adopted. The rapid exchange system providing information on dangerous products similar to 
RAPEX, NEPRO, was established. However, new legislation in this area, fully implementing 
the 2008 horizontal acquis  on marketing of harmonised produc ts, remains to be adopted. The 
capacity of the market inspec torate needs to be strengthe ned, not least through training. 
Coordination between the different market surv eillance authorities needs to be established, 
including the development of a common database. 
There has been good progr ess in the field of consumer protection.  The Law on Consumer 
Protection was adopted, transposing 14 relevant EU directives. A Consumer Protection Centre 
was established within the Ministry of Trade and Services aimed at solving the complaints brought by consumers, notably on contract warran ty. Further steps have been taken towards 
establishing regional advisory centres for cons umer protection which are to be devolved to 
non-governmental organisations. Tr aining activities for professiona l staff have continued. The 
administrative capacity of the consumer protecti on department within the ministry has been 
improved, but the level of human resources rema ins insufficient. Public awareness-raising 
activities have increase d. Consumer protection organisatio ns have started improving their 
coordination.  
The Law on Electronic Trade is in place. However, capacities for monitoring its 
implementation need to be further develope d. The role of the ministry’s Council for 
Consumer Protection remains limited. Consumer  organisations are still weak and lack 
adequate resources. This continues to hamper their overall effectiveness. Public awareness-
raising activities need to  be further developed. 
Overall , Serbia is moderately advanced on free movement of goods in meeting the 
requirements of the SAA in this area. A new le gal framework for market  surveillance still 
needs to be adopted. The administrative capacit y and cooperation between the Ministries and 
other State institutions need to be further stre ngthened. Further efforts are required to continue 
transposition of the product-specific acquis into Serbian legislation. 
4.1.2.  Movement of persons, services and right of establishement 
There has been li ttle progress on movement of persons . With regard to the coordination of 
social security schemes, agreements on social insura nce with Cyprus and Turkey were 
ratified. The Agreement on social security wi th Bosnia and Herzegovina was amended to 
further regulate the pension issu es between the two countries.  
Little progress was achieved in the provision of  services . Preparations for transposing the 
Services Directive are at an early stage.  
There has been little progress on financial services . Serbia prepared a roadmap for 
implementation of the Basel II framework . However, new legisla tion on banking, securities 
and insurance needs to be adopted . Serbia needs to further ali gn with the Financial Services 
Directives. Serbia has yet to sign memoranda  of understanding with all home supervisory 
authorities of foreign banks operating on its territory.  
The National Bank of Serbia is  responsible for s upervision of the ba nking, insurance and 
voluntary pension fund sectors and is actively using its supervisory powers. The Securities 
Commission, responsible for supervising the capita l market, is not sufficiently independent 
 
EN 32   EN and does not operate fully in line with international standards. The supervisory capacity, in 
particular regarding employment  and staff training, needs to be further strengthened to 
comply with the Capital Requirements Directive and requirements for risk-based supervision.  
There was progress in the area of postal services . The law on postal services was further 
brought into line with the acquis . The parliament appointed the members of the Agency for 
Postal Services Council. It became operational as an independent regulatory body for postal 
services and the government adopted its financ ial plan. However, the administrative capacity 
in this area needs to be strengthened.  
No progress has been made in the area of the right of establishment . As regards the 
recognition of professional qualifi cations and recognition of forei gn degrees further efforts are 
needed.  
Little progress has been made on company law . The One-Stop-Shop system is in its second 
phase and has shortened the time  to set up a business to two days. Companies can submit an 
application for registration el ectronically. However, the e-Re gistration system has yet to 
become fully operational. The Company Regist ration Law and Securities Law need to be 
amended.  
Some progress was made in the field of accounting and auditing . Amendments to the 
Accounting and Auditing Law, which are further aligned with the EU Accounting directives, 
were adopted. These amendments brought the stat utory register and re gister of financial 
reporting to a single institution, the Business Registry Agency. However, strategy and action 
plan on upgrading corporate financial reporti ng remain to be fully aligned with the acquis .  
Overall , preparations in the area of movement of persons, services and ri ght of establishment 
are moderately advanced. A number of legal acts still need to be adopted. 
4.1.3.  Free movement of capital 
Little progress was made on free movement of capital .  
Serbian legislation provides for the free m ovement of credit related to commercial 
transactions or to the provision  of services as well as to financial loans and credit with 
maturity longer than a year. While simplifying procedures for foreign payments, Serbia retains restrictions on short-term capital movements. Under the current law on foreign exchange, non-residents are free to make direct  investments with restrictions in the arms 
sector and in some other areas laid down by th e law. Under the law, foreigners may acquire 
real estate, subject to reciproc ity, with the exception of agricultu ral land. EU investors are still 
having problems, due to the unclear legal status  of the acquired real estate and incomplete 
process of property restitution, along with the very large numb er of permits required and the 
numerous granting agencies and authorities invo lved in the process. The implementation of 
the legislation on urban planning and construction remains slow.  
Overall , Serbia is still moderately advanced in the area of capital movements. With certain 
restrictions, non-residents are free to make direct investments. Serbia needs to continue its 
efforts to meet the gradual liberalisation requirements laid down in the SAA. 
 
EN 33   EN 4.1.4.  Customs and taxation 
Serbia has made good pr ogress in the area of customs . The new Customs Law has been 
adopted and is largely harmonised with the acquis . The amended customs tariff nomenclature 
is fully in line with the 2010 EU Combined Nomenclature.   
The Government adopted in September 2010 th e Amendments to the Decree on Harmonised 
Custom Tariff Nomenclature for 2010. The ame nded decree has allowed Serbia to catch up 
with the liberalisation schedule for processe d agricultural products (PAPs) and fishery 
products foreseen for 2010 in the Interim Agreement.  
The administrative capacity  of the Serbian customs administration has been further 
strengthened, notably by improved post-clearance controls a nd by the roll-out of an upgraded 
risk analysis system. Progress was also made through the conclusion of several agreements on 
international cooperation, where the customs al so improved information sharing with other 
national institutions. In terms of trade facil itation, the customs administration formalised 
procedures for exchange of pre-arrival information with neighbouring countries. 
Implementation of the integrated border ma nagement strategy and action plan continued. 
Serbia obtained the status of informal obs erver under the Customs Transit Convention. The 
country also participated in regular activ ities under the Customs 2013 Programme. Fight 
against corruption in customs was stepped u p, which resulted in a higher number of 
disciplinary procedures based on internal cont rols. Two new free zones and one new customs 
house were opened. However, the IT infrastructu re needs upgrading, in particular since the 
customs central IT system is reaching the lim its of its capacity. The strategic planning 
process, both with regard to busin ess and IT, should be reinforced.  
Overall , Serbia is already well on the way to meeting the EU acquis  and remains committed 
to reforms in the area of customs. The ob ligations stemming from the Interim Agreement 
were well respected. Further efforts are need ed as regards legislative alignment, and 
administrative capacity, including preparing for IT  interconnectivity and interoperability with 
EU IT systems.  
In the area of taxation , some progress has been regist ered. The parliament adopted 
amendments to the law on company profits tax and the law on income tax, in line with the EU acquis . In July, the Serbian Parlia ment adopted amendments to the Law on Tax Procedures 
and Tax Administration. Implementing legisla tion by which the Large Taxpayer Centre will 
cover larger number of tax payers was adopted in July which should re sult in higher collection 
of revenues. Implementing legisl ation on tax identification number of legal entities aimed at 
simplifying procedure and cutt ing unnecessary paperwork in line with the comprehensive 
regulatory reform was also adopted in July.  Laws on avoidance of double taxation were 
ratified for a number of EU Member States . However, discriminatory excise duties on 
imported spirits need to be br ought into line with the same duties on local production in order 
to comply with the relevant provision of the Interim Agreement.  
The administrative capacity of the Serbian tax administrati on continued to improve as a 
result of intensive training efforts. In Ap ril 2010 the administration opened a new Contact 
Centre as an integrated and centralised information point for taxpayers. Some new 
organisational units, such as groups for strate gy and coordination, for risk management and 
for internal audit, were created in Decem ber 2009. New management tools were developed 
and the overall business strategy was adopted  in June 2010. At the end of 2009 a single 
 
EN 34   EN taxpayers’ register was completed, as the basis for the future new information system. 
However, despite good results in enforcemen t by the tax police, the general collection 
capacity of the administration improved only s lightly. The share of the ‘grey’ economy 
remains high and cumbersome procedures for tax collection remain in place.  
Overall , in the area of taxation, Serbia is well on the way to meeting the EU standards. The 
enforcement capacity of the tax administra tion and tax collection has improved, although 
further progress is required in this respect. In addition, the problem of the informal economy 
remains yet to be tackled. Serbia needs to ta ke follow-up action to ensure that its tax 
legislation complies with the Code  of Conduct for business taxation. 
4.1.5.  Competition 
Some progress can be re ported in the area of anti-trust .  
Implementing legislation pursuant to the law on competition protection was adopted, further 
aligning Serbia with the Interim Agreement (IA ) requirements. This co vers notably market 
definition, merger notifications , individual and block exemptions  for restrictive agreements 
fines and leniency program. The Commission for the Protection of Competition (CPC) has 
continued its activity an d has adopted decisions on mergers and abuse of dominant positions 
further improving its track record. It has also adopted guidelines for implementing legislation. 
The services of the Commission for the Protecti on of Competition were restructured, notably 
by establishing separate divisions for economic an alysis and legal affairs. The CPC's capacity 
to carry out economic analysis  has been strengthened. A numb er of cooperation agreements 
were signed with sector-specific regulators as  well as with competitio n authorities of some 
EU Member States and neighbour ing countries. The president a nd members of the Council of 
the Commission for the Protecti on of Competition were elected by the Serbian Parliament in 
October 2010. 
However, the law on competition protection ha s been undermined by the adoption of some 
conflicting horizontal legislation notably on mandatory car insura nce. The financial plan of 
the CPC for 2010 has not yet been adopted by th e Government. The CPC's capacity to carry 
out economic analysis and to deal with procedur al matters remains to be  further strengthened 
in order to fully implement with  the IA requirements. Moreover , the CPC needs to improve its 
expertise and knowledge in proced ural matters. The capacity of the judiciary to deal with 
substantive issues of competition remains weak and significant efforts are needed in this respect. A solid enforcement record remains to be demonstrated.  
There has been some progress in the area of state aid . A State aid authority was established in 
December 2009, as required by the SAA, a nd became operational in April 2010. The 
Commission is supported by the Permanent Secr etariat of the State Aid Control as an 
independent department within the Finance Mi nistry. In July 2010 th e Commission for State 
Aid Control adopted the St ate aid inventory for 2009.  However, the administrative capacity of 
the State aid authority secretariat needs to be  substantially strengthe ned. Serbia needs to 
continue its efforts to establish a track record in enforcing State aid decisions. 
Overall , Serbia remains moderately advanced in meeting the Interim Agreement requirements 
in the area of competition. However, the capacity  and the expertise of the Commission for the 
Protection of Competition and of the judiciary have to be strengthened.  
 
EN 35   EN 4.1.6.  Public procurement 
Little progress has been made in the area of  public procurement. The Public Procurement 
Office (PPO) published a number of decisi on templates and models of tendering 
documentation, with the aim of assisting the c ontracting authorities. The PPO carried out 
training seminars for various stakeholders th roughout the country and further promoted and 
serviced the public procurement web portal. The members of the Commission for the Protection of Bidders' Rights were  appointed in October 2010.  
However, the substantial delays in the es tablishment of the new Commission for the 
Protection of Bidders’ Rights have undermined  the overall develo pment of the public 
procurement framework. In addition, shortcomi ngs in the existing le gislative framework, 
including the lack of an appropr iate regulatory framework on conc essions, still remain to be 
addressed. The weak administra tive capacity of public procurement bodies, in particular the 
public procurement unit in the Ministry of Finance, the PPO and the review body, has 
persisted. The financial resources of thes e bodies remain scarce. The coordination 
mechanisms among the main stakeholders in the public procurement system, especially with a 
view to reducing the scope for corruption,  remain weak. The certification of public 
procurement officials has not yet started. The strategy for upgrading the public procurement 
system in Serbia remains at early stage. As a result, inefficiencies in  the use of public money 
persist, as detected by the Supreme Audit Institution in its 2008 budget audit report.  
Overall , Serbia’s preparations for establishing an effective and fully independent public 
procurement system with streamlined award procedures are still moderately advanced. 
Significant efforts remain necessary to st rengthen the capacity to implement the EU acquis  in 
this field. 
4.1.7.  Intellectual property law 
Progress has been made in the area of intellectual property rights . The Intellectual Property 
Office (IPO), which plays the role of national co ordinator for intellectu al property rights, has 
set up an in-house education and information centre. However, th e financial sustainability of 
the IPO has been a source of c oncern. Discussions on the long term financial sustainability of 
the IPO have been ongoing but no solution ha s yet been found. The national intellectual 
property rights strategy needs to be finalised. 
A new law on copyright and related rights wa s adopted in December 2009 and was followed 
by implementing legislation. It establishes a Commission on Copyright and Related Rights 
empowered to decide on the tariffs if no agr eement is reached between the associations for 
collective management of copyrights. However,  the members of the Commission have not yet 
been appointed by the Government. The law on optical discs remains to be adopted. 
Progress was made in relation to industrial property rights . As of October 2010, Serbia has 
become member of the European Patent Orga nisation. In line with the Interim Agreement, 
some international conventions  including the European Patent  Convention as well as the 
International Union for the Prot ection of New Varietie s of Plants Convention were ratified. 
Legislation on industrial design, on topography of integrated ci rcuits and on indications of 
geographical origin has been adopted, in line with the Interim Agreement. The new law on 
trademarks introduces an administrative pro cedure for appealing against IPO decisions. A 
newly adopted Strategy for Scientific and T echnological Development fosters a number of 
 
EN 36   EN innovative activities, and provi des an indirect impetus to raise the number of patent 
applications. However, the law on patents has not yet been adopted. 
Some progress was made in the field of enfo rcement. Serbia has set up specialised units 
(high-tech crime prosecutor, po lice cyber unit, specialised cu stoms unit, tax unit and tax 
police) aimed at enforcing the legislation in th is area. The length of investigations has been 
shortened. The frequency of ch ecks by tax inspectors has risen, whereas the number of cases 
brought for prosecution has dropped, pointing to  better compliance overall with the law. 
Seizures by market inspect ors have further improved. Th e customs administration has 
continued to make progress in enforcing intell ectual property rights. It fully updated an 
electronic database of customs offences in the field of intellectua l property rights and 
introduced electronic handling of  requests for protection of In tellectual Property Rights. A 
Memorandum of Understanding has been signed between the Intellectual Property Office and 
the Judicial Academy to pr ovide specialised training. 
However, specialisation of judges and court pa nels in this area n eeds to be ensured. 
Inadequate storage space for c ounterfeited and pira ted goods that infringe copyright and 
related rights or other in dustrial property rights c ontinues to be a problem. 
Overall , Serbia’s preparations in the area of in tellectual property law remain moderately 
advanced. Further efforts are needed  in terms of alignment with the acquis . Concerning 
enforcement, better co-ordinati on among relevant agencies is re quired, as well as substantial 
investment in specialis ed judicial training.  
4.1.8.  Employment and social polic ies, public health policy 
Some progress has been made on employment policy. Implementing le gislation concerning 
the law on employment and unemployment insura nce and the law on vocational rehabilitation 
and employment of disabled persons was adopted. In September 2009 the action plan for implementation of the youth employment po licy for 2009-2011 entered into force. In 
February 2010, the government adopted the na tional action plan for employment for 2010, 
which defines priorities, goals, programmes and measures of employment policy. The plan is 
the main instrument of an active employment policy aimed at boosting investment in human 
resources, supporting social incl usion in the labour market a nd creating new jobs. In August 
2010, the national employment action plan for 2011 was adopted to provide continuity in 
implementation of the employment strategy. The general budget cuts in response to the 
economic crisis did not affect the budget allo cated to active labour market policies. The 
government also continued with start-up loans aimed at generating new jobs.  
The national employment service has reallocated its human resources to keep administrative 
capacity unchanged for its main functions. A centre for professional rehabilitation and 
employment of disabled persons has been esta blished, as well as a Fund for employment of 
young persons. From January until September 2010 the number of em ployed persons with 
disabilities increased. Coordina tion and cooperation between th e ministry and the national 
employment service has improved and regular m onthly meetings have been established. The 
Republican Health Insurance Fund has completed a database on all insure rs, and established a 
system for social security registration with th e national employment serv ice, thus simplifying 
the registration procedure.  
All these measures have been used to counter the impact of the economic crisis and maintain 
the level of employment but have not brought th e desired results. Only a limited share of 
 
EN 37   EN unemployed people could be addressed, whilst in  the aftermath of the global financial and 
economic crisis  unemployment continued to rise and the employment rate dropped to 50%. 
The situation of young jobseekers and of long-term unemployed is of particular concern. The 
economy continues to suffer from skills mismat ch. Serbia has to face considerable labour 
market challenges and the policy response is insufficient to deal  with the scale of the problem . 
Regarding social policies , there have been no changes to the Labour Law since the 
amendments made in July 2009.  
Some progress has been made in the area of health and safety at work . Activities related to 
implementation of integrated inspection contro l have intensified. Unde r this approach, one 
inspector will be competent to carry out inspection of workpl aces concerning compliance with 
both the labour law and occupational health and safety regulations. In the legislative area, several Rulebooks were adopted with the aim of  transposing EU Directives on health and 
safety at work into national law. A ru lebook on risk assessment was amended. The 
Occupational Safety and Health Strategy Acti on Plan was adopted. An action plan for 2010-
2014 for the labour inspectorate has been drawn up. However, despite an improvement, the number of accidents at work remains high.  
As regards social dialogue, amendments to the law on peaceful  settlement of work disputes 
were adopted. This enlarged the list of dis putes that can be treated under this law and 
prescribed conditions for appointing an arbitr ator. The amended law regulating the work of 
the Agency for Peaceful Settlement of Labour Disputes was passed by parliament. However, 
social dialogue is weakened by the unresolve d issue of representativeness of the social 
partners and a burden of mistrust among the soci al partners. Moreover, the input of social 
partners into the decision-making process and the drafting of legisla tion remains limited due 
to both the government's lack of strategic appr oach in the consultation process and to the 
limited capacities of the social partners. The functioning of the Economic and Social Council 
at central as well as at municipa l levels still needs to be impr oved. Bipartite social dialogue is 
still rather weak.  
Regarding social inclusion , after having established the team for social inclusion in 2009, the 
government continued with establishment in early 2010 of the working group on social 
inclusion, made up of representatives from all institutions in charge of defining, implementing 
and monitoring social inclusion. However, with  the economic crisis, poverty has risen: the 
rate of those living below the absolute povert y level rose from 6.1% in 2008 to 6.9% in 2009, 
while the rate of those living below the relative poverty level rose from 13.2% in 2008 to 13.6% in 2009. As the number of th ose living close to this relati ve poverty level is quite high, 
further deterioration of the ec onomic situation may increase thes e rates. Fighting poverty and 
social exclusion, not least of vulnerable categorie s of the population, with  particular reference 
to the Roma population, Roma refugees, IDPs an d some pensioners, rema ins a key challenge. 
The deepening disparity between regions is a matter of concern. 
Concerning discrimination , an important step forward was appointment of the Anti-
Discrimination Commissioner in early 2010. The Commissioner has a wide range of duties 
related to dissemination of information on di scrimination, providing legal support to the 
victims of discrimination and monitoring th e implementation of laws which may have 
discriminatory elements, including the right to initiate amendments or new laws related to this topic. However, further efforts are needed  to ensure that th e Commissioner becomes 
operational. A comprehensive approach in the fi eld of the anti-discrimination policies remains 
 
EN 38   EN to be ensured. Vulnerable groups, such as Ro ma, persons and children with disabilities and 
the LGBT population, remain the mo st exposed to discrimination.  
As regards gender equality , the law on gender equality was adopted and has been in force 
from December 2009. In August 2010, the Government adopted an action plan for implementation of the national strategy aimed at improving position of women and gender 
equality. Harmonisation with EU legislation has al so been carried out. Institutional structures 
have been established, and despite the general context of budget cuts and a staff freeze, the 
number of staff dealing with this policy was maintained. However, women and in particular 
disabled women, single mothers, older women and those living in rural areas still continue to 
face discrimination in the labour market. Women are under-represented in decision-making positions.  
In the area of social protection, the amendments to the law on financial support to families 
with children were adopted in December 2009. In May 2010, the rulebook on the work of centres for social care was adopted. However, th e pension system continues to record a high 
deficit despite pension reforms conducted in r ecent years. Many older people are exposed to 
poverty, including those not cove red by the pension system.  
There has been progress in the area of public health . The National Health Council of Serbia 
prepared the strategic ‘Health  Protection Development Plan’ for 2010-2015, which is pending 
adoption by the Parliament. In the fields of blood  and tissues and cells , the Directorate for 
Biomedicine was established within the Ministry  of Health, and a coordinator for organ, tissue 
and cell transplantation has been designated at th e Clinical Centre in Serbia. Furthermore, an 
awareness-raising campaign on transplantati on has been launched. The legislation on 
biomedicine and transfusion is being implemente d. Some progress can be reported in the field 
of tobacco . The law on protection from exposure to second-hand tobacc o smoke has been 
adopted. However, pictorial health warnings re main to be introduced on cigarette packages.  
The law on drugs and medical devices was a dopted in April 2010. Activities related to mental 
health , cancer  prevention, communicable diseases  and alcohol  continued. The Serbian 
Institute of Mental Health was designated as  a WHO Collaborating Cent re for mental health 
care and workforce development. Good cooperati on with the European Centre for Disease 
Prevention and Control continues. However, efforts towards de-institutionalisation and community-based institutions need to continue. The administrative capacity  of the Ministry of 
Health and of the Institute for Public Health needs to be strengthened. Further efforts are 
needed to implement adopted strategies.  
Overall , preparations are continuing towards mee ting European Standards in the areas of 
employment and social policy. However, d eclining employment rates and increasing 
unemployment are a source of concern, in particul ar with regard to young  people and the most 
vulnerable groups. 
4.1.9.  Education and research 
Some progress has been made in the field of education . Serbia has started reforms in primary 
and secondary levels of educ ation and is continuing Bologna  reforms in higher education. 
With the help of the European Training Fund, it is starting the pro cess of reforming its 
vocational education and training system. 
 
EN 39   EN Several laws in the field of education and tr aining were adopted in 2010. In April a new law 
on pre-school education aimed at improving th e quality and access to education was adopted. 
In May a Law on Pupils' and Students' Standard s has been adopted, base d on the principle of 
social inclusion. Amendments to the Law on Hi gher Education were adopted in June 2010 by 
the Parliament.  
Primary and secondary school curricula have  been revised and were implemented in 
September 2010 in the first year of secondary level. As regard  higher education, the European 
Credit Transfer and Accumulation System  (ECTS) has been fully implemented in all higher 
education institutions. The three-cycle system is in place and preparation of doctoral studies under Bologna guidelines is starting. In the voc ational education and training (VET) sector, 
the Council for Vocational Education and Adult Education has been es tablished; it is a 
tripartite body with key functions including links with  business, national qualification 
framework and curricula. 
Wide consultations with youth an d social partners have been  initiated with a view to 
developing a Youth Law. Anothe r 12 Youth Offices have been ope ned as part of the strategy 
for quality leisure time and personal development of young people.  
However, an overall strategy covering all leve ls of education, incl uding lifelong learning, 
needs to be developed. A national qualificat ion framework remains to be adopted. Adult 
education is weak and needs a reform of conten ts, methods and infrastructure. The process of 
accreditation of universities and programmes has not been completed. Adjusting the education 
system to the labour market needs further impr ovement. Planned investment in the education 
sector has been cut from  3.9% to 3.3% of GDP.  
Good progress has been made in the field of culture. Serbia’s participation in the EU’s 
Culture Programme has been increasing steadily. The UNESCO Convention for the Safeguarding of the Intangibl e Cultural Heritage and the Council of Europe Framework 
Convention on the Value of Cultural Herita ge for Society have been ratified.  
Good progress was registered in the area of science and  research . Serbian research entities 
have continued to su ccessfully bid for research proj ects under the 7th EU Research 
Framework Programme (FP7). Serbia has improve d its administrative capacity to implement 
the FP7 Memorandum of Understanding by a ppointing additional c ontact points and 
observers in the FP7 management committees . Interministerial cooperation has been 
strengthened in relation to Serbia’s participation in the Competitiveness and Innovation Programme (CIP). Negotiations to associate Serbia with the 7th Euratom Research Framework Programme (2007-2011) are ongoing. In  February 2010, Serbia and the Joint 
Research Centre (JRC) concluded a memora ndum of understandin g on scientific and 
technological cooperation which will provide additional research opportunities. 
With respect to future integration into the Eu ropean Research Area (ERA), Serbia adopted a 
national strategy for scientific and tec hnological development 2010-2015 in February 2010 
and has appointed observers in most ER A governance bodies. In  March 2010, further 
legislation was adopted, particularly with respec t to issues such as innovation, scientific and 
research activities and intellectual property righ ts. This addresses the brain drain and reforms 
the Serbian Academy of Sciences. In May 2010  a bill was adopted allocating €400 million to 
fund research at national level over the four coming years. However, both public and private 
investment in research remains low (less than  0.5% of GDP) and Serbia generally needs to 
reinforce its national research capacity.  
 
EN 40   EN Overall , Serbia is moderately advanced towards m eeting European standards in the area of 
education . However, an overall stra tegy involving all levels of education, incl uding lifelong 
learning, remains to be developed. The impl ementation of the recent reforms should be 
monitored closely. Further effort s are needed in the field of vocational e ducation and training. 
Further efforts are needed to facilitate Serbia’s integration into the European Research Area and to strengthen its national research capacity.  
4.1.10.  WTO issues 
Negotiations for Serbia’s accession to the Worl d Trade Organisation (WTO) are nearing their 
end, the bilateral track of negotiations being already completed with most WTO partners. 
Progress has also been made on the multilateral track. However, finalisation of the process 
will depend on the pace of remaining bilateral negotiations and internal reforms. Serbia is 
well placed to meet its objective of joining the WTO. 
4.2. Sectoral Policies 
4.2.1.  Industry and SMEs 
Little progress was made in the SME sector. 
Serbia continued previous efforts to move from the phase of policy formulation and the 
identification of strategic objectives to policy implemen tation in support of innovative 
companies, start-ups, provision of business services and information dissemination.  
The action plan for 2009 was su ccessfully implemented — w ith some activities however 
postponed due to lack of financial resources. The action plan for 2010 was adopted and is 
currently being implemented. The SME Business  Council, with 80 SME representatives, was 
established in March 2010 and steps to link it up with other private in itiatives have been 
taken. The transformation of the SME Agency  into the National Agency for Regional 
Development has been finalised. Financial support continued with start-up loans, investments 
in underdeveloped areas, programmes for innovation and clusters. 
Serbia continued its particip ation in the Entrep reneurship and Innovation Programme and 
joined the Information Communication Tec hnologies policy Support Programme in 2010, 
thus becoming a member of two out of th e three operational programmes under the EU’s 
Competitiveness and Innovation Programme. Serb ia also continued being active in the 
Enterprise Europe Network. 
In the reporting period Serbia continued impl ementing several measures to improve SME's 
access to finance and more specifically the suppor t of start-ups. However, developments in 
the area of SMEs were affected by the shift of the focus of the mi nistry in charge of SMEs to 
regional development and also by a significant cu t in human resources in its SME department. 
Reduced administrative capacity raises concern for the implementation of the national strategy for SME development 2008–2013 and for the implementation of the Small Business Act. The level of cooperation between the mini stry in charge of policy and the agency in 
charge of implementation needs to be improved.  
Serbia has made little progress in de veloping and implementing a modern industrial policy . 
The industrial strategy remains to be adopted. 
 
EN 41   EN Overall , Serbia’s preparations in the area of i ndustry and SMEs are well advanced. However, 
reduced administrative capacity may adversely affect the good level that the SME policy has 
attained.  
4.2.2.  Agriculture and fisheries 
Progress can be reported in the area of agriculture and rural development, food safety, 
veterinary and phytosanitary policy . 
In the area of agriculture and rural development , legislation on farm advisory systems has 
been adopted. The Directorate for Agrarian Paym ents, which is planned to serve as a future 
Instrument for Pre-Accession Assistance for Rural Development (IPARD) agency, has been established. An action plan for IPARD progr amming and the establishment of the operating 
structures has been develope d and a regular reporting mechanism on its implementation has 
been initiated. Two new re gional rural centres have been esta blished within the national rural 
development network, bringing thei r number to 16 country-wide. 
However, implementation of the law on agriculture and rural development remains to be 
completed. The national strategy for agriculture and rural development, the national programme for agriculture and the national pr ogramme for rural development have not yet 
been adopted. The managing authority remains to  be appointed. The Directorate for Agrarian 
Payments remains to be fully staffed. An interministerial mechanism for coordinating rural 
development policies has yet to be established.  
Progress has been made in the wine sector. Impl ementing legislation for the vineyard register 
has been adopted. The University of Belgrade , Faculty of Agriculture, Department for 
Viticulture, has been appointed as the contro l organisation responsible for the ‘System of 
Designation for Wine with Geogr aphical Indication’. However, th e vineyard register remains 
to be established. The procedure for the auth orisation of the oenology  laboratories has not 
started. Implementing legislation regulating import conditions and marketing and quality 
matters remains to be adopted.  
Some progress has taken place on quality policy.  The law on indications of geographical 
origin was adopted, furthe r aligning with the EU acquis  and reinforcing implementation of the 
requirements of the Interim Agreement on th e protection of geogr aphical indications 
registered in the Union.  
Some progress has been made on organi c farming. A National Action Plan for the 
development of organic farming has been adopted. A new law on organic farming was 
adopted with entry into force foreseen in 2011 . It establishes the Di rectorate for National 
Reference Laboratories as the competent au thority for organic farming. However, the 
Accreditation Body of Serbia need s to be internationa lly accredited in or der to allow for the 
new law to enter into force in January 2011.  
Little progress has taken place in the area of food safety . Implementing legislation relevant 
for allowing export to European Union was adopted. However, the implementation of the law on food safety needs to improve. Substantial impl ementing legislation need s to be enacted and 
enforced. The principle of risk analysis is not  yet applied and an adequate database system 
needs to be set up for this purpose. The Hazar d Analysis and Critical Control Points Plans 
need to be better implemented by operators and associated official controls. Inspections and 
 
EN 42   EN controls at the external borde r need to be further upgraded. The ministry needs to improve 
capacities to take on its new competences on food safety. 
Little progress can be reported as regards upgrading of agri-food establishments. The 
instruction on hygiene requirements and official controls of produc ts and establishments being 
approved for exports of milk and dairy products and exports of fish and fishery products to 
the EU was adopted following the Food and Veterinary Office mission’s recommendations. 
However, a national programme for upgrading th e establishments remains to be adopted.  
Progress has been made in the veterinary area . The amendments to the law on veterinary 
matters were adopted. They further align the legisla tion with the EU acquis  on border issues 
and simplify the current system of import licences. The law on medicine was adopted, 
establishing limits on residue levels. Implem enting legislation was adopted among other 
things on conducting border veterinary controls , eradication of a numb er of diseases and 
animal welfare. In the field of animal we lfare, two European c onventions on pets and 
protection of vertebrate animals were ratified.  
However, further amendments to the import licensing system will be necessary as the current 
system is not compatible with the acquis . The implementing legisla tion on border controls is 
not enforced and veterinary inspections and c ontrols at external borders have not been 
upgraded. Enforcement of legislation in relati on to registration and control of all cattle 
markets needs to be improved. Awareness of the legal framework for animal identification and registration needs to be raised and IT infr astructure needs to be upgraded. The Veterinary 
Directorate’s capacities for data base operation need to be st rengthened. The Veterinary 
Inspectors need continuous training on the new principles introdu ced by legislation.  
Progress has been made concerning official control laboratories . The Directorate for 
National Reference Laboratories has been established and is partly operational. The legal competence of the National Reference Laborator ies has been extended to animal health. 
However, the administrative capacity of the Di rectorate remains to be further improved. . The 
national reference labora tories are not operational. The admi nistrative competence with regard 
to seeds needs to be clarified. The funding an d charging policy for laboratory tests at the 
border is not unified. 
As regards genetically modified organisms  (GMOs), the law banning imports of genetically 
modified reproductive material needs to  be amended to be aligned with the acquis  and WTO 
requirements. 
Some progress has taken place in the phytosanitary area . The law on recognition of plant 
varieties was adopted. The Inte rnational Convention for the Pr otection of new Varieties of 
Plants was ratified. Implementing legislation ha s been adopted on control of potato bacterial 
diseases. Implementing legislation for the law on plant nutrition products and for the Law on 
Plant Health has been adopted. A rulebook on ma ximum residue levels of plant protection 
products in food has been published. Implementing legislation has been adopted in the area of 
plant breeders’ rights. However, further im plementing legislation needs to be adopted 
especially for the Law on Plant Protection Pro ducts. The procedure for registration of new 
plant protection products is not harmonised with the EU acquis . There is no official pesticide 
residues monitoring programme meeting the EU  requirements in place. The strategy and 
action plan for the introduction of a plant pa ssport scheme are not ye t adopted. Control at 
external borders ha s not been upgraded. 
 
EN 43   EN Progress has taken place in the area of fisheries . Implementation of the new legal framework 
has almost been completed. The distribution of competences between the ministries has been 
clarified. Serbia has been included in the list of  countries allowed to export fishery products to 
the EU.  
Overall , Serbia is advancing well in the areas of agriculture and rural development, food 
safety, veterinary and phytosanitary policy to wards meeting European Standards. The legal 
framework continues to improve. However,  implementation and enforcement of the 
legislation need to be upgraded, especially in th e food safety area. Administrative capacity is 
weak and needs to be more efficiently alloca ted. Inspection services need further training. 
Recruitment of qualified staff needs to ta ke place in the newly established bodies.  
4.2.3.  Environment 
Good progress can be reported in the area of the environment.  
As regards horizontal legislation the National Programme for Environmental Protection 
(NPEP) 2010–2019 was adopted. The financing proj ections outlined in the NPEP are based 
on a low-cost scenario and on increased user  charges, which will require considerable 
liberalisation of current tariff policies. Th e Serbian Environmental Protection Agency 
continues to maintain a good level of coopera tion with the European Environment Agency. 
In the area of air quality , progress can be reporte d. Implementing legislat ion to the law on air 
quality was adopted. However, implementing legislation on emission limit values and 
emission measurements at large point  sources remains to be adopted.  
Progress can be reported on waste management . A regulation on establishing the plan for the 
reduction of packaging waste for the period from 2010 until 2014 has been adopted, following the adoption of laws on waste management. In addition, the National Waste Management 
Strategy  (NWMS) was adopted. The NWMS provide s guidance on the implementation of 
waste legislation. It establishe s systems for the management of specific waste streams. 
However, the procedures for setting product charges,  as well as criteria and procedures for the 
Environmental Fund to finance wa ste recovery and recycling act ivities need to be further 
established. Waste management plans at regiona l and local levels have to be developed.  
There has been progress on water quality . A new law on water was adopted. Water 
management is to be financed by the national and the Vojvodina provincial budget, as well as 
by water fees, concession fees and other funds. Dissuasive water pollution fees are to be paid 
to the Environmental Protection Fund and to be used for the construction of waste water treatment plants. However, there is still no system to monitor nitrate concentrations in and contamination of groundwater. The wastewater  treatment infrastructure throughout the 
country needs upgrading. The Water Directorate w ithin the Ministry of Agriculture, Forestry 
and Water Management remains to be strengthe ned. The administrative capacity of the water 
directorate was reduced.  
Progress can be reported on nature protection . Serbia adopted the law on wild game and 
hunting in March 2010, aligning further with the acquis and international obligations under 
the Bonn Convention on Conservati on of Migratory Species of W ild Animals. Serbia adopted 
the new law on forests, which provides for a framework to protect the forest against 
atmospheric pollution and fire. However, the st rategy on biodiversity remains to be adopted. 
 
EN 44   EN On industrial pollution control and risk management there has been some progress. The 
process of implementing the In ternational Plant Protection C onvention has started with the 
first applications received from existing insta llations in the cement industry as well as from a 
new installation for pesticide production. The list of installations which will have to comply 
with the acquis  before 2015 is being revised.  
Good progress can be reported on chemicals . The Chemicals Agency, a regulatory and 
implementation body dealing with biocidal pr oducts and chemicals became operational.  
Concerning climate change , good progress can be reported ev en if a number of important 
implementation steps remain. The National Strategy for Incorporation of Se rbia into the Clean 
Development Mechanism under the Kyoto Protoc ol was adopted by the Government in 
February 2010 for agriculture, forestry and wa ste management sector s. The first National 
Communication under the UNFCCC and greenhouse gas inventory is under development and 
is expected to be finalised in 2010. Serbia also  associated itself with the Copenhagen Accord. 
A national ozone office was established within  the Ministry of Environment and Spatial 
Planning responsible for the phasing out of oz one depleting substances. There has been an 
improvement in human resources working on clim ate change but further increase in staff is 
still needed. 
As regards noise , there has been no progress in imp lementation of the legislation. 
As regards administrative capacity  there was little progress.  Further training was provided to 
the environmental protection inspectorates. The Environmental Prot ection Agency remains 
fully operational and its performance is im proving. The Environmen tal Protection Fund 
continues to be active. However, it still lacks the capacity to ensure proper implementation of 
the integrated monitoring stra tegy. Budgetary resources for e nvironmental protection remain 
low. The institutional capacity needs to be stre ngthened, especially at local level. Better 
coordination with the central level as well as further enforcement remain necessary.  
Overall,  Serbia is moderately advanced in th e area of environmental protection towards 
fulfilling the European standards. The capacity to implement and enforce legislation remains 
to be strengthened. 
4.2.4.  Transport policy 
Serbia has made some progress in the area of transport.  
In the area of trans-European transport networks , there has been some progress. Serbia 
participated in the update of the Multiannual Plan 2010-2014 of the South East Europe 
Transport Observatory (SEETO). A new road route was introduced in the Core Network 
within Serbia. A General Master Plan coveri ng infrastructure projec ts for all modes of 
transport up to 2027 was adopt ed. The action plan for 2010 fo r the implementation of the 
national transport strategy was adopted. Regard ing the implementation of the action plan for 
construction of Corridor X, works on some ro ad sections have continued. However, the 
implementation of the action plan is at an ea rly stage, with the company responsible for 
Corridor X being restructured. 
There has been some progress in the area of road transport . Serbia has allowed unrestricted 
transit traffic for EU carriers to comply with its obligation under the Interim Agreement. The 
European Agreement concerning the Internatio nal Carriage of Dangerous Goods by Road has 
 
EN 45   EN been ratified. The agreement with Monteneg ro on transport of passengers and goods in 
international road transport was ratified. The law on road safety entered into force in December 2009. The number of road accidents has been reduced ove r the reporting period. 
The amendments to the law on international road transport have further aligned national legislation with the acquis  by introducing the certificate of  professional competence for 
managers. Implementing legislation on driving and rest periods, dig ital tachographs and 
technical conditions of vehicles has been adopted. The Agency for Road Safety has been 
established and became operational in September 2010.  
However the legislation on transport of danger ous goods, on transport of passengers and on 
carriage of goods remains to be adopted. An in terministerial coordination body needs to be 
established for road safety and the implem enting legislation needs to be adopted. The 
implementation of digital tachogr aphs has been delayed due to  the lack of administrative 
capacity. 
In rail transport , there has been little progress. Regardi ng restructuring of the railway sector, 
the methodologies for determining the public se rvice obligation and fo r calculating access 
charges for railway infrastructure were a dopted. Implementing legi slation on the public 
service obligations and compensations has been  adopted. Serbia has ratified the Bilateral 
Agreement with Montenegro for border control in railway traffic.. However the conditions for 
full market opening are not in place to allow gradual market  opening. The law on railways has 
not yet been amended. No Network Statemen t has yet been published. The separation of 
accounts between infrastructure and services within the infra structure manager has not yet 
taken place. The Directorate for Railways is stil l not exercising its role as regulatory body.  
Little progress has taken place in combined transport . Serbia has ratified the Agreement 
with Hungary on combined transport and logisti cal services and the ag reement has started to 
be implemented.  
Good progress was made in inland waterways . Serbia has adopted six international 
conventions of the International Maritime Organi sation. Serbia has also ratified the bilateral 
agreement with Croatia on navigation on inland waterways and their technical maintenance. 
The Law on Navigation and Po rts on Inland Waterways has b een adopted. However, river 
information systems need to be set up. 
Good progress has taken place in air transport . The provisions of the European Common 
Aviation Area (ECAA) Agreement in relation to  market access have been applied and the 
market has been opened to new carriers. The law on civil aviation aimed at implementing the 
first transitional phase of the ECAA has been adopted, addressing a nu mber of previously 
outstanding issues in the fiel d of aviation safety, ground hand ling, and aviation security. On 
air traffic management, Serbia organised with  Montenegro their respective airspace into a 
functional airspace block. However, Serbia stil l needs to make further efforts to complete 
regulatory alignment with the single Europ ean sky within the Implementation of Single 
European Sky in South-East Europe  (ISIS) Programme. Legislati on of the single European 
sky, in particular the regulati ons on provision of ai r navigation services, organisation and use 
of airspace, interoperability of  the European Air Traffic Management network and the flexible 
use of airspace regulation need to be adopted. Separation of responsibilities for inspection and 
audits as well as establishment of an independent air accident investigation have  not yet been 
done. The security control system remains to be overseen by an independent body. The 
administrative capacity of the mini stry has not been reinforced.  
 
EN 46   EN Overall , Serbia is moderately advanced in the area of transport. It has continued to comply 
with the obligations of the Interim Agreement and SAA. Market access provisions of the ECAA Agreement are now applied. Framework legislation has been adopted for inland 
waterways and air transport. However, framew ork legislation remains to be adopted for 
railways. Reform of the railway sector needs to be stepped up. Admi nistrative capacity needs 
to be strengthened for the implemen tation of the adopted legislation.  
4.2.5.  Energy 
Some progress can be reported in the energy sector. The programme for implementing the 
current Energy Sector Development St rategy 2007-2012 was revised in April 2010. 
There has been little progress in  security of supply , with no developments as regards oil 
stocks. At an estimated 45 days, they remain fa r below European requirements (90 days), and 
oil stocks legislation remains to be adopted. There has been an increase in gas reserves. 
Construction of the underground gas storage faci lity in Banatski Dvor has been completed 
with a view to securing gas s upplies in the event of unexpected cuts from current sources. A 
joint venture or the storage facility was es tablished with Gazprom (51%) in October 2009. 
The contract for the establishmen t of a joint company for the c onstruction of the South Stream 
gas pipeline through Serbia was signed in October 2009. In Marc h 2010 a Joint Statement for 
the development of the Nis-Dimitrovgrad ga s interconnector with Bulgaria was signed. 
However, the financing of the project needs to be secured. Natural gas interconnections 
between Serbia and other countries in the re gion remain limited and there is no physical 
possibility for diversifica tion of gas supply sources. 
As regards electricity inte rconnections, the 400 KV overhead line between Nis and Leskovac 
has been completed. The section from Leskovac to the border with the former Yugoslav 
Republic of Macedonia is still unde r construction as well as the new line with Romania. As a 
result of the agreement on cooperation in the en ergy sector with Russia, a contract was signed 
for the sale of the Serbian oil company NIS to the Russian Gazprom Neft. However, following a complaint from the Kosovan Transmission System Operator , the Secretariat of the 
Energy Community launched a dispute settlement procedure taking the preliminary view that 
Serbia "failed to fulfil its obligation under the Energy Community Treaty".  
Serbia made little progress in the context of the internal energy market . In the electricity 
sector, transmission costs have been separated from other costs. The electricity transmission 
system operator has, to a larg e extent, become financially su stainable. Formal opening-up of 
the electricity and gas markets to non-house hold consumers has been completed. The Energy 
Regulatory Agency (AERS) has been working well, in line with Energy Community Treaty 
requirements.  
However, several competencies foreseen under the Energy Community Treaty have not been 
granted to the regulator. Tariffs are not yet co st-reflective. Amendments to the Energy Law, 
concerning the supply function in both the elect ricity and gas sectors and extension of the 
legal responsibilities of the AERS, remain to  be adopted. The separation of distribution and 
supply in the electricity sector still has to be completed. The deadlin es set by the Energy 
Treaty have not been met. Further efforts ar e needed to achieve unbundling and real market 
opening together with a pricing policy offering a sustainable tari ff reflecting costs. In the gas 
sector, the legal unbundling of Srbijagas re mains to be achieve d along with proper 
implementation of the Regulation on condition s for access to the natural gas transmission 
networks.  
 
EN 47   EN There has been little progress in energy efficiency and renewable energy . The national 
energy efficiency action plan was adopt ed in July 2010. The government adopted 
implementing legislation on renewable energy in November 2009, namely on  privileged 
producers of electricity, including incentive meas ures (feed-in tariffs) for electricity produced 
from renewable energy sources. However the main elements of the acquis on renewable 
energy remain to be transposed. Serbia does not have a legislative framework on energy 
efficiency in place. The law on rational use of energy remains to be adopted. 
Serbia has made some progress in the areas of nuclear safety and radiation protection 
especially concerning the decomm issioning programme of the "RA" research reactor at Vinca. 
Decommissioning of the Vin ča research reactor, preparation for the repatriation of spent 
nuclear fuel to the Russian Federation and ma nagement of radioactive waste on-site are 
progressing well although not fu lly in line with th e planned time schedule. The Serbian 
Radiation Protection and Nuclear Safety Agency (SRPNA) was established in December 2009 and became operational in the second half of 201 0. The Director of the Agency was appointed 
in July 2010. 
However, legislation and working procedures in the nuclear area need be revised in order to 
comply with the EU acquis . Working procedures, appropriate  staffing and technical means 
have to be established to en able the SRPNA to work properl y. Responsibility for inspection 
and the operating budget for the Agency need to be  clearly defined. Serbia still needs to ratify 
the Convention on Nuclear Safety and the Joint Convention on the Safety of Spent Fuel Management and on the Safety of Radioactive Waste Management.  
Overall , Serbia is moderately advanced in the implementation of the SAA and of the 
European standards in the energy sector. Furt her efforts are needed to achieve unbundling and 
real market opening together with  a pricing policy offering a sust ainable tariff reflecting costs. 
The implementation of the internal market requires transparency and non-discriminatory 
access rules. To this end, the current Energy La w needs to be amended and put in line with 
the electricity and gas acquis , and the role and independen ce of the AERS needs to be 
strengthened. Further efforts need to be ma de to strengthen the nuclear regulator.  
4.2.6.  Information society and media 
Some progress can be reported on electronic communications and information 
technologies . The law on electronic communications wa s adopted by the parliament in June 
2010. The law aims at approximating the Serbian legislation to the 2002 and partly the 2009 
EU regulatory framework on electronic communi cations. The new strategy for electronic 
communications was adopted in September 2010. The Regulatory Agency has adopted rules 
on costs for radio station licence issuance and on radio frequency usage fees. It has also 
adopted a decision on designation of universal se rvice operators and adopted rules on number 
portability in public mobile telecommunication networks which will enter into force in 2011. 
However, few competitive safeguards have yet b een introduced and tariffs are not rebalanced. 
Market competitivene ss is still limited.  
The process of privatising th e incumbent operator in the fi xed telephony market has been 
launched. In February 2010 a second national fixed telepho ny licence was awarded for an 
initial period of 10 years but with the agreem ent not to allow similar new licences until the 
end of 2011, thereby keeping comp etition in the sector limited despite the adoption of the 
primary law. 
 
EN 48   EN Concerning administrative capacity, both the Regulat ory Agency and the ministry need to be 
strengthened. In particul ar, the regulator needs expertise to ensure the implementation of the 
new law on electronic communica tions. The board members of the regulatory authority 
remain to be appointed. 
There has been some progress on information society services . A law regulating e-commerce 
and implementing legislation re garding the law on el ectronic documents have been adopted. 
Concerning electronic signatures, two more certification service providers were certified. The 
government adopted in October 2009 the stra tegy for e-government development and the 
action plan for its implementation from 2009 to 2013 as well as the national broadband 
strategy and action plan. A 10 year strategy for development of the information society in 
Serbia was adopted in July 2010. A number of pla nning decisions regard ing the transition 
from analogue to digital terr estrial broadcasting were adopt ed and several international 
agreements were ratified. 
However, implementing rules remain to be a dopted to ensure that the switchover process 
takes place as indicated in the 2009 digital switchover strategy.  
As regards audiovisual policy , implementation of the law on public information and its 
amendments has continued, producing some positive effects such as greater responsibility for 
distribution companies, founders of media outlets  and editors-in-chief as well as increased 
accountability for breaking the presumption of in nocence and violating th e rights of minors. 
However, some provisions of the law include ex cessive fines for the violation of professional 
standards and for non-registration of media outlets.  
Preparations for a comprehensive media strate gy are ongoing. Media legisl ation remains to be 
aligned with the Audiovisual Media Services Directive.  
Overall , preparations in the area of informa tion society and media have continued. The 
legislative framework has been strengthe ned, but implementation remains slow and 
inadequate market and regulatory developments  in the electronic comm unications sector are 
of particular concern. Preparations in the field of information society services are moderately 
advanced. In the audiovisual area, media le gislation needs to be aligned with the acquis,  and a 
number of provisions of the law on public information continue to raise concerns.  
4.2.7.  Financial control 
Progress has been made  in the area of public internal financial control (PIFC) . A Central 
Harmonisation Unit (CHU) was established in th e Ministry of Finance in March 2010.Budget 
inspection was fully separated from the CHU function. A certification scheme for internal 
auditors has been developed by the CHU,  and a committee for the examination and 
certification of internal audito rs in the public sector was es tablished by the Minister of 
Finance. The Budget System Law was amended to improve alignment with international 
standards.  
However, Serbia needs to cont inue with the establishment of  internal audit units in budget-
user organisations and auditors  require further training. Ma nagerial accountability and 
development of financial management and contro l are still at early st ages. Centralised budget 
inspection needs to be further developed. 
 
EN 49   EN With regard to external audit , in May 2010 the Law on the Stat e Audit Institution (SAI) was 
amended primarily to allow easier recruitment of  audit staff and better salary conditions. The 
SAI performed a partial audit of the 2008 st ate accounts and reporte d to parliament in 
November 2009. However, the SAI is not yet full y operational and further audit staff needs to 
be recruited.  
Overall , there has been progress in th is area, but Serbia is still at an early stage in the 
implementation of PIFC and external audit.  
4.2.8.  Statistics 
There has been some progress on statistical infrastructure . Cooperation and coordination 
between the Statistical Office and other producers of official  statistics have improved, in 
particular with the Ministry of Agriculture. A Statistical  Council, bringing together 
representatives from various ministries, has b een created. Legislation on statistics, on the 
agricultural census, th e population census and the classifica tion of economic activities, were 
adopted in December 2009. The St atistical Office was reorgani sed in April 2010 following a 
10% staff cut. However, further budgetary as well  as staff resources required for the statistical 
production remains to be ensured.  
Good progress was made on classifications and registers. A substantia l effort has been made 
to develop the statistical business register on which two regulations were adopted in July. 
There has been some progress towards ha rmonising the Serbian regional statistical 
classification with the EU NUTS4 Regulation, but a formal agreem ent still has to be reached 
with Eurostat.  
There has been good progress on sector statistics . Preparations for th e census on population 
and housing are well advanced. Special effort s have been made to involve the Roma 
population in the census. Preparations are bei ng made for an agricultural census. A pilot 
agricultural census was conducted in Decembe r 2009. National accounts have been further 
developed. A labour cost survey has been carr ied out for the first ti me. Business and Energy 
statistics have been further developed. Howe ver, the budget for the population census is not 
yet allocated. 
Overall , Serbia has made good progress in statistic s and is moderately advanced towards 
meeting the requirements of the European stan dards. Preparations for the population census 
are well advanced but its funding remains to be en sured. Further progress is needed in several 
statistical domains and notably concerning stre ngthening of the capacity  of the Statistical 
Office.  
4.3. Justice, freedom and security 
4.3.1.  Visa, border management, asylum and migration 
Serbia has made progress in the area of visa policy  and the wider framework of the visa 
liberalisation dialogue. 
Visa-free travel to th e Schengen area entered in to force in December 2009 for Serbian citizens 
holding biometric passports, after Serbia had fulfilled the requirements of the visa 
                                                 
4 Nomenclature of Territorial Units for Statistics 
 
EN 50   EN liberalisation roadmap. In the fi rst months of the visa-free tr avel regime with the Schengen 
countries, increased numbers of asylum seekers from Serbia ha d been registered in Belgium 
and Sweden. After the readmission of Serb ian citizens, who had filed unfounded asylum 
applications, and preventive action taken by the Serbian authorities, the numbers have 
declined. However, a new rise in asylum a pplications was registered in August and 
September. The authorities need to contin ue informing citizens about the rights and 
obligations stemming from visa-free travel. Al legations of bogus changes of residence of 
Kosovo residents to Serbia, facili tated by corrupt behaviour of offi cials, are bei ng investigated 
by the Serbian authorities. 
New visa stickers have been issued since June  2010. The visa-free regime  with several former 
Soviet republics was suspended in July 2010. Serbia maintained a visa-free regime for the 
citizens of all EU Member States  and citizens of Croatia, Bosn ia and Herzegovina, the former 
Yugoslav Republic of Macedonia and Montenegro.  
However, the current list of countries the citizens of which require visas to travel to Serbia is 
not fully in conformity with the EU acquis . Challenges persist for diplomatic missions and 
consular posts in issuing visas due to limited access to central databases as well as a lack of qualified staff. The validity of old passports has been extended until the end of 2010 due to 
the limited capacity for issuing new passports.  
Overall , Serbia is moderately advanced in aligning  its visa policy with European standards.  
There has been some progress in the area of border management . The coordination body for 
implementing the Integrated Border Management  strategy has been established in June 2010. 
Serbia has continued to improve the infrastruc ture and equipment at border crossing points 
and to strengthen security checks on pers ons, documents and goods. Installation of the 
TETRA system has progressed, but has not yet been completed. Border police cooperation 
has continued, with joint patrols with Bosnia  and Herzegovina, Hungary and Montenegro. 
Efforts to further increase the risk analysis capacity of the border police have continued. 
Serbia has been involved in joint operations an d has regular data exchange with Frontex and 
participates in Western Balkans Risk Analys is Network. The implementation of the working 
arrangement is satisfactory.  
However, border police, customs and phytosanita ry services are stil l lacking operational 
coordination and cooperation with regional counte rparts needs to be improved. Disparities in 
infrastructure between border crossing points pers ist, with control of the borders with the 
former Yugoslav Republic of Macedonia, Mont enegro, Bosnia and Herzegovina and Croatia 
still showing important weaknesses. Not all borde r crossings are fully connected to the central 
database of the Interior Ministry and to the Interpol system (I-24/7). Surveillance and control 
at the Administrative Boundary Line with Ko sovo need to be further strengthened and 
cooperation and exchange of information with EULEX/Kosovo police improved. Border 
police is not yet fully staffed and its risk anal ysis capacity needs to be further strengthened.  
Overall , Serbia started to address its priorities re garding border control. Further efforts are 
needed to eliminate the dispar ities between individual border cr ossing points and to improve 
control at the borders with the former Yugos lav Republic of Macedonia, Montenegro, Bosnia 
and Herzegovina and Croatia an d in particular at the Admi nistrative Boundary Line with 
Kosovo. 
Little progress has been achieved in the area of asylum . In the period from October 2009 to 
August 2010, 114 asylum claims have been filed. One final decision granting asylum has been 
 
EN 51   EN taken. The government adopted a list of safe countries for asylum seekers. Subsidiary 
protection status has been granted in some cases. Reception of asylum seekers, under the 
competence of the Commissariat for Refugees as a coordination body for integration of 
asylum seekers, is well or ganised and functioning.  
However, the Asylum Office, the first in stance body for asylum claims, has not been 
established. Claims continue to  be processed by the section for asylum in the Border police, 
which is understaffed. A high percentage of cases are closed before the decision is taken as 
the applicants leave Serbian territory or di sappear. Extension of reception capacities for 
asylum seekers is currently not planned. 
Overall , Serbia’s asylum system conti nues to be moderately advanced. 
Serbia has made some progress in migration  management. Implementation of the 
readmission agreement between Serbia and the European Union has continued without 
significant problems. Implementing protocols wi th Italy, Hungary, Norway and Switzerland 
have been ratified; a further two, with Austria and Malta, have been signed.  
However, effective implementation of the migr ation management strategy is lacking due to 
poor capacity and insufficient coordination of the responsible bodies. An action plan has not 
yet been adopted. Conditions in reception centres have not improve d due to a lack of funding. 
There are concerns in relation to the standard ised entry, exchange and protection of data 
collected in conformity with the law on foreigne rs. While a central data base on foreigners is 
still missing, most of the compet ent authorities are keeping indi vidual registers. Reintegration 
of returnees needs to be improved. 
Irregular migrants (the majority coming from Afghanistan and the Middle East) continue to 
transit through Serbia, following the main rout es from Turkey. They increasingly affect 
neighbouring EU Member States. From Oct ober 2009 to August 2010, charges were filed 
against some 3400 foreign citizen s for illegally entering Serbia . A significant number of 
persons indicating their intent to file an as ylum request at the bo rder never do so, but 
disappear after entering Serbia in  order to stay as irregular migrants or travel further. 
Overall , migration management in Serbia continues to be moderately advanced. 
4.3.2.  Money laundering 
Some progress has been made in the area of  anti-money laundering. An action plan for the 
implementation of the strategy has been a dopted in October 2009 an d a coordination body 
established. The Administration for Preventio n of Money Laundering, which acts as the 
financial intelligence unit, has held further training events for its staff and carried out 
awareness-raising activities for reporting en tities. Efforts to improve national and 
international cooperation in the i nvestigation and processing of offences continued. In June 
2010, Serbia acquired observer status in the Eurasian group on comb ating money laundering 
and financing of terrorism.  
However, practical results in the fight ag ainst money laundering have remained weak. 
Cooperation between competent authorities ha s continued to show shortcomings. The 
Administration for Prevention of Money Laundering lacks capacity to sy stematically identify 
suspicious cases. Guidelines for the identificatio n of suspicious transact ions have not yet been 
adopted. Reporting remains poor, in particular outsi de the banking sector, with the real estate 
 
EN 52   EN sector and currency exchange offices being of most concern. An effective system for 
monitoring and analysing cash tran sactions is not in place. The judiciary and law enforcement 
services lack expertise in handling money laun dering cases and financia l investigations. Final 
convictions in money laundering cases remain rare. 
Overall , Serbia has started to address its prio rities in fighting m oney laundering, which 
nevertheless continues to be a cause of concern. 
4.3.3.  Drugs 
Good progress can be reported in the area of fighting drugs. Serbian law enforcement 
agencies have continued investigations into illegal production, trade and smuggling of drugs 
and improved international cooperation. Th e Serbian intelligence agency (BIA) has 
contributed to the seizure of some 2.7 tonnes of cocaine co ming from South America by US 
and other authorities. Severa l drug-producing laboratories have  been dismantled in Serbia. 
Between October 2009 and August 2010, Serbian au thorities seized some 1,150 kg of drugs, 
out of which some 930 kg of marihuana a nd 155 kg of heroin. Operational cooperation 
between customs services at regional and international level has improved.  
The Ministry of Health has continued its awaren ess-raising activities. Efforts were taken to 
reduce drug consumption in prisons, including th e establishment of five ‘drug-free’ units, 
where special measures are taken to prevent drug abuse by inmates.  
However, Serbia remains on one of the main Balkan trafficking routes for heroin and 
synthetic drugs to the EU, and also became more  important as a transit country for cannabis. 
Criminal groups from Serbia are involved in  smuggling cocaine from South America to 
Europe.  
A new law on drugs has not yet been adopted. Li ttle progress can be re ported in implementing 
the national strategy and action plan to fight drugs. The National Commission for 
implementation of the drug strategy has not been established. This adversely affects 
cooperation and coordination on both the preventive and repressi ve sides. Serious weaknesses 
continue to exist in survei llance of the borders with the former Yugoslav Republic of 
Macedonia, Montenegro, Bosnia and Herzegovina and Croatia as well as the Administrative 
Boundary Line with Kosovo, which is of particular concern in view of the level of drug 
trafficking activity in Kosovo. Police and border police are not  yet fully connected to the 
central database on drugs.  
A large quantity of seized drugs has still not been destroyed due to alleged environmental 
concerns. Cooperation with the European Mon itoring Centre for Drugs and Drug Addiction 
needs to be improved.  
Overall , preparations in fighting drugs are moderate ly advanced. Serbia's contributions to the 
dismantling of international drug trafficking grou ps and the seizure of important amounts of 
illegal drugs show clear commitment and oper ational capacity. However, drug trafficking 
from and through Serbia remains of concern. 
4.3.4.  Police 
Serbia has made some progress in the area of police reform. Capacity building has continued 
primarily within specialised services of the crim inal police such as the services for combating 
organised crime, financial investigations and high-tech crime. Some measures have been 
 
EN 53   EN taken to improve the methodology and standards of police work, including an information 
booklet explaining the regulatory framework. Training and educa tion have continued on best 
practice in police work and on work in communities and with minorities.  
Cooperation between various police structures , as well as regional and international 
cooperation, have improved further, leading to good results in particular in combating drugs 
trafficking and organised crime. In June 2010, Serbia signed a non-binding roadmap with 
Europol on the preparations for th e conclusion of an operational  agreement. Enhanced efforts 
are necessary to meet the challenges of the roadmap, particularly in areas related to the 
protection of personal data and classified data.  
However, at the level of the Interior Minist ry, there is no effective strategic planning and 
human resource management remains weak. This adversely affects prioritising and budgeting. 
Intelligence-led policing and the criminal intelligence system need to be improved. The lack of openness and transparency of recruitment pr ocedures and career development within the 
police remains of concern.  
Understaffing and inadequate working conditions  for some police services need to be 
addressed. Further steps have been slow towa rds developing an efficient internal control 
system ensuring proactive investigations and m onitoring of the legality  and conformity with 
standards of police conduct.  Between October 2009 and August 2010, 316 criminal charges 
were filed against police officers. Security of police officers needs to be improved in the light 
of the increased number of incide nts and attacks on police officers. 
The work of the large number of private secur ity agencies remains unregulated, representing a 
serious security challenge. Illegal firearms a nd explosives continued to be widespread and 
subject to trafficking throughout the region.  
Overall , the police system remains moderately advanced. The Serbian police has shown 
investigative capacities, but furthe r sustained efforts are needed.  
4.3.5.  Fighting organised crime and terrorism 
Good progress has been made in fighting organised crime . The action plan to fight organised 
crime has been adopted in September 2009 a nd implementation has started. Investigative 
capacities and the use of special investigative techniques ha ve been further strengthened. 
Specialised training of the rele vant police services has conti nued. The work of the unit for 
financial investigations within the organised crime service has continued under the leadership 
of the Special Organised Crime Prosecutor. Confiscation of assets  started in a more 
systematic way and confiscations were  carried out in a number of cases. 
Cooperation between relevant ag encies has improved within the country, in the region and 
internationally, leading to good re sults in a number of high-pr ofile investiga tions against 
organised crime groups. In these cases, a number of  suspects have been arrested and illegally 
acquired assets confiscated. In October 2010, an agreement establishing a regional office in 
Belgrade for improving cooperation in the fi ght against organised crime was signed with 
Albania, Bosnia and Herzegovina , Croatia, Montenegro and the former Yugoslav Republic of 
Macedonia. 
Cooperation with Eurojust improved and Serbia  established additional contact points. A 
meeting with Eurojust representatives took plac e in May 2010 in order to prepare negotiations 
 
EN 54   EN for a cooperation agreement. Protection of persona l data and of classifi ed data is key for 
successful conclusion of such an agreement.  
However, a new and substantially revised Crimin al Procedure Code has still not been adopted. 
The Commission for Inter-ministerial Coordinati on in the field of Jus tice and Home Affairs 
has shown little activity. The capacity of the sp ecialised police services to conduct proactive 
investigations and engage in intelligence-led policing remains limited due to understaffing 
and lack of analytical expe rtise. The number of final convictions remains low.  
The lack of adequate control and surveilla nce of the administrative boundary line with 
Kosovo continues to be problematic in an area which is vulnerable to organised crime 
activities. Cooperation, implementation of the police protocol and exchange of relevant 
information with EULEX need to be furthe r improved. A uniform database on organised 
crime cases is still missing. Inter-servi ce cooperation, includi ng between the tax 
administration, customs and the Administra tion for the Prevention of Money Laundering, 
needs further improvement. Witness protecti on needs to be improved. The limited capacities 
of the agency for the management of seized assets  and the fast auctioning of seized assets in 
the absence of a conviction or any risk of immediate deterior ation raise some concerns.  
Overall , Serbia has started to address its priorities in fighting organised cr ime. Recent results 
in investigating organised crime activities at  national and international level and in the 
confiscation of illegally acquired assets are encouraging, but need to be followed up by 
transparent, impartial and effective proceedings in the judiciary. The capacities of the law enforcement agencies to use modern investiga tive techniques, in particular in the area of 
financial investigations, need to be further strengthened.  
Serbia has made some progress in fighting trafficking of human beings . Procedures to 
identify victims have been adopted and the number of identified victims has continued to increase, while the regional trend points towa rds a decrease in traffi cking of human beings. 
Law enforcement authorities remained active and regional and international cooperation improved further. From October 2009 to Augus t 2010, 94 victims of human trafficking have 
been identified, with women representing the ma jority. These victims, mostly of Serbian 
origin, had been trafficked for sexual a buse, begging, forced marriages, and labour 
exploitation. Awareness-raisi ng activities have continued. 
However, ratification of the European Conve ntion on Action against Trafficking in Human 
Beings has not been followed by further measur es to guarantee its effective implementation. 
The strategic framework, which includes the stra tegy and action plan fo r fighting trafficking 
in human beings, but also the migration ma nagement, the irregular migration and the 
organised crime strategies,  needs to be amended to allow a better policy response to emerging 
trends and improved cooperation between the police, prosecutio n and courts. As far as the 
protection of victims is concerned, more needs to be done to provide them with 
comprehensive assistance and reintegrati on. Although some emergency funds have been 
secured for two shelters run by NGOs, overall funding for NGOs active in the field of 
prevention and support to victims and for th e government’s protection agency remains 
unsatisfactory. NGOs continue to rely heavily on international donor funds.  
Overall , Serbia is moderately advanced in fighting trafficking in human beings.  
Serbia has made some progress in the fight against terrorism . The law regulating the 
military intelligence and military  security agencies was ad opted in October 2009, providing 
 
EN 55   EN for better cooperation between agencies in the fight against terrorism. Implementation of the 
amended law on the prevention of money launde ring and the financing of terrorism has 
started. Capacities of the law enforcement authorities in this area are generally good.  
However, following the ratifica tion of the relevant Council of Europe Conventions, no 
prevention policies or legislative and instituti onal changes were adopted for further alignment 
with these provisions. A specific list of terrori st suspects has not yet been established.  
Overall , Serbia is moderately adva nced in fighting terrorism. 
4.3.6.  Protection of personal data 
There has been little progress on protection of personal data. The Strategy for the Protection 
of Personal Data has been adopted in Augus t 2010. The office of the Commissioner for Free 
Access to Information of Public Importan ce and Personal Data Protection, which acts inter 
alia as supervisory authority for the protection of personal data, was allocated additional staff.  
However, the Law on the Protectio n of Personal Data is not fully in line with EU standards 
and not all necessary implementing legislatio n has yet been adopted. The office of the 
Commissioner for Information of Public Impor tance and Personal Data Protection continues 
to lack financial and human resources. This rais es concerns over its capacity to adequately 
carry out its supervisory tasks. 
Overall , the protection of personal data in Serbia remains moderately advanced. Personal data 
protection is a key precondition for Serbia to c onclude an agreement with Eurojust and an 
operational agreement with Europol. 
 
EN 56   EN Statistical annex  
STATISTICAL DATA (as of 14 October 2010)            
Serbia  
        
Basic data Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Population (thousand)  7 528 7 505 7 502 7 491 7 470 7 456 7 425 7 398 7 366 7 335 
Total area of the country (km²)  77 474 77 474 77 474 77 474 77 474 77 474 77 474 77 474 77 474 77 474 
            
National accounts Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Gross domestic product (GDP) (million national currency)  384 225 762 178 972 580 1 125 840 1 380 712 1 683 483 1 962 073 2 302 214 2 722 461 : 
GDP (million euro)  25 539 12 821 16 028 17 306 19 026 20 306 23 305 28 785 33 418 : 
GDP (euro per capita)  3 398 1 709 2 137 2 313 2 549 2 729 3 144 3 900 4 547 : 
GDP (in Purchasing Power Standards (PPS) per capita)  : : : : : 7 100.0 7 700.0 8 300.0 9 000.0 8 800.0 
GDP per capita in PPS (EU-27 = 100)  : : : : : 31.6 32.5 33.3 35.9 37.3e 
Real GDP growth rate (growth rate of GDP volume, national currency, % change on previous 
year)  5.3 5.6 3.9 2.4 8.3 5.6 5.2 6.9 5.5 : 
Employment growth (national accounts, % change on previ ous year)  : 2.0 -0.4 -4.4 1.1 -5.5 7.2 2.3 1.0 : 
Labour productivity growth: GDP growth per person employed (% change on previous year)  5.6 3.5 4.3 7.1 7.1 11.8 -1.8 4.5 4.5 :  
Real unit labour cost growth (national accounts,  % change on previous year)  : : : : : : : : : : 
Labour productivity per person employed (GDP in PPS per per son employed, EU-27 = 100)   : : : : : : : : : : 
Gross value added by main sectors (%)                      
Agriculture and fisheries  20.1 20.0 15.3 13.6 14.0 12.2 11.4 10.4 10.5 : 
Industry  26.4 24.7 24.3 23.1 24.0 23.7 23.5 22.7 22.2 : 
Construction  3.6 3.2 3.5 4.3 4.9 4.6 4.7 5.1 5.5 : 
Services  49.9 52.1 56.9 59.0 57.1 59.5 60.5 61.9 61.8 : 
Final consumption expenditure, as  a share of GDP (%)  97.2 104.0 107.0 103.0 97.1 95.9 96.0 95.8 94.9 : 
Gross fixed capital formation, as a share of GDP (%)  12.7 10.7 12.4 16.8 19.2 19.0 21.0 24.0 23.2 : 
Changes in inventories, as a share of GDP (%)  -4.6 1.0 -1.4 -2.3 9.0 4.7 3.1 4.2 5.4 : 
Exports of goods and services, relative to GDP (%)  11.3 25.6 23.8 25.9 25.5 28.3 31.4 30.3 30.7 : 
Imports of goods and services, relative to GDP (%)  16.7 41.3 41.8 43.4 50.8 47.9 51.5 54.3 54.2 : 
            
Industry Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Industrial production volume index (2000=100)  100.0 100.1 101.9 98.8 105.9 106.7 111.7 115.8 117.1 102.9 
            
Inflation rate Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Annual average inflation rate (CPI, % change on previous year)  79.6 93.3 16.6 9.9 11.4 16.2 11.7 7.0 13.5 8.6 
 
EN 57   EN             
Balance of payments Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Balance of payments: current account total (million euro)  -157 282 -671 -1 347 -2 620 -1 778 -2 356 -4 615 -6 089 -1 743 
Balance of payments current account: trade balance (million euro)  -1 720 -2 602 -3 398 -3 538 -5 201 -4 278 -4 981 -6 638 -7 549 -4 782 
Balance of payments current acco unt: net services (million euro)  154 272 136 179 133 -5 -41 -254 -173 23 
Balance of payments current account: net income (million euro)  : 7 -74 -119 -173 -259 -330 -599 -922 -502 
Balance of payments current account: net current transfers (million euro)  1 409 2 605 2 665 2 131 2 621 2 764 2 996 2 876 2 554 3 518 
of which government transfers (million euro)  293 652 519 432 381 268 185 172 128 136 
Net foreign direct investment (FDI) (million euro)  54 184 500 1 194 774 1 250 3 323 1 821 1 824 1 372 
Foreign direct investment (FDI) abroad (million eur o) 1) -2 -14 -21 -105 2 -18 -70 -692 -193 -38 
of which FDI of the reporting economy in EU-27 countries (million euro)  : : : 1 2 4 4 -53 -78 -28 
Foreign direct investment (FDI) in the reporting economy (million euro) 1) 56 198 521 1 300 772 1 268 3 392 2 513 2 018 1 410 
of which FDI of EU-27 countries in the reporti ng economy (million euro)  : : : 850 477 963 2 008 1 813 1 470 808 
            
Public finance Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
General government deficit/surplus, relative to GDP (%)  : : : : : 1.0 -1.6 -1.9 -2.4 -4.1 
General government debt relative to GDP (%)  : 104.8 71.9 63.3 50.7 50.5 39.8 30.0 25.3 31.3 
            
Financial indicators Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Gross foreign debt of the whole economy, relative to GDP (%)  : 98.3 67.2 62.3 54.3 64.2 63.3 60.2 64.7 : 
Gross foreign debt of the whole economy, relative to total exports (%)  : 464.2 343.6 281.6 231.7 245.9 213.5 204.8 214.7 : 
Money supply: M1 (banknotes, coins, overnight deposits, million euro)  544 974 1 546 1 526 1 533 1 748 2 378 3 141 2 717 2 695 
Money supply: M2 (M1 plus deposits with maturity up to two years, million euro)  662 1 139 1 828 1 920 2 015 2 318 3 315 4 928 4 459 4 555 
Money supply: M3 (M2 plus marketable instruments, mill ion euro)  1 313 2 098 3 156 3 762 4 449 5 535 7 539 11 407 11 198 12 573  
Total credit by monetary financial institutions to residents (consolidated) (million euro)  : : : : : : : 10 771 12 926 14 863 
Interest rates: day-to-day money rate, per annum (%)  : : : : : : : 8.3 18.4 9.5 
Lending interest rate (one year), per annum (%)  : : : : : : : 12.5 20.3 12.0 
Deposit interest rate (one year), per annum (%)  : : : : : : : 7.5 15.3 7.0 
euro exchange rates: average of period - 1 euro = … nat ional currency  49.670 59.770 60.680 65.060 72.570 82.910 84.160 79.964 81.441 93.950 
Effective exchange rate index (2000=100)  : : : : : : : 67.0 67.0 57.3 
Value of reserve assets (includi ng gold) (million euro)  958 2 050 2 937 3 548 3 780 5 525 9 593 9 660 8 190 10 602 
            
External trade Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Value of imports: all goods, all partners (million euro) 2)  3 606.4 4 757.9 5 918.6 6 589.3 8623.3b 7 854.2 10 462.6 13 500.9 15  031.3 6 690.9 
Value of exports: all goods, all partners (million euro) 2) 1 680.0 1 896.0 2 192.0 2 442.4 2831.6b 3 428.1 4 991.9 6 615.1 6 81 4.2 5 630.2 
Trade balance: all goods, all partners (million euro) 2) -1 926.4 -2 861.8 -3 726.6 -4 146.9 -5791.7b -4 426.0 -5 470.7 -6 885.8 -8 217.2 -1 060.8 
Terms of trade (export price index / import price inde x) 2) 100.2 103.1 98.0 101.6 108.4b 98.4 104.5 102.6 97.6 100.9 
Share of exports to EU-27 countries in value of total exports (%) 2) 54.3 58.2 59.5 53.9 56.6b 60.1 58.2 58.1 56.6 54.9 
Share of imports from EU-27 countries in value of total imports (%) 2) 61.6 57.6 59.6 58.3 58.0b 54.2 54.4 55.0 52.7 55.4 
 
EN 58   EN             
Demography Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Natural growth rate: natural change (births minus deaths) (per 1000 i nhabitants)  -4.0 -2.7 -3.3 -3.3 -3.5 -4.6 -4.3 -4.7 -4.6 : 
Infant mortality rate: deaths of children under one year of age per 1000 live births  10.6 10.2 10.1 9.0 8.1 8.0 7.4 7.1 6.7 7. 0 
Life expectancy at birth: male (years)  69.7 69.6 69.7 69.9 69.9 70.0 70.6 70.7 71.1 71.1 
Life expectancy at birth: female (years)  74.8 74.8 75.0 75.1 75.4 75.4 75.9 76.2 76.3 76.4 
            
Labour market Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Economic activity rate (15-64): share of  population aged 15-64 that is economically active (%)  68.2 68.9 68.4 68.9 66.4 65.2 6 3.6 63.4 62.7 60.6 
Employment rate (15-64): share of population aged 15-64 that is  in employment (%)  59.2 59.7 58.5 57.9 53.4 51.0 49.9 51.5 53.7  50.4 
Employment rate male (15-64) (%)  68.2 68.6 67.1 67.0 63.1 61.2 59.2 60.0 62.3 58.1 
Employment rate female (15-64) (%)  50.4 50.8 50.0 48.7 44.0 40.8 40.6 43.0 45.3 43.0 
Employment rate of older workers (55-64 ): share of population aged 55-64 that is in 
employment (%)  43.3 42.1 42.0 44.3 37.3 35.4 32.6 33.5 36.7 35.4 
Employment by main sectors (%)                      
Agriculture  : : : : 24.0 23.3 20.5 20.8 25.1 23.9 
Industry  : : : : 21.7 21.5 23.2 23.4 19.9 20.1 
Construction  : : : : 5.2 6.1 6.1 6.1 6.3 5.2 
Services  : : : : 49.1 49.1 50.2 49.7 48.6 50.8 
Unemployment rate: share of labour force that is unemployed (%)  13.3 13.3 14.5 16.0 18.7 21.1 21.0 18.3 13.6 16.1 
Share of male labour force that is unemployed (%)  11.1 11.5 12.9 15.1 15.3 17.0 18.1 16.0 11.9 14.8 
Share of female labour force that is unemployed (%)  15.9 15.7 16.5 17.2 23.1 26.5 24.9 21.2 15.8 17.8 
Unemployment rate of persons < 25 years: shar e of labour force aged <25 that is unemployed 
(%)  50.2 46.4 45.3 44.8 48.1 47.7 47.8 43.7 35.2 41.6 
Long-term unemployment rate: share of labour force that is unemployed for 12 months and 
more (%)  9.9 9.0 9.9 11.0 14.5 16.7 17.0 14.8 9.7 10.5 
            
Social cohesion Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Average nominal monthly wages and salari es (national currency)  3 799.0 8 691.0 13 260.0 16 612.0 20 555.0 25 514.0 31 745.0 38 7 44.0 45 674.0 44 147.0 
Index of real wages and salaries (index of nom inal wages and salaries divided by the CPI) 
(2000=100)  
100.0 118.4 154.9 176.5 196.1 209.5 233.3 266.1 275.7 245.4 
Early school leavers - Share of population aged 18 -24 with at most lower secondary education 
and not in further education or training (%)  : : : : 11.5 11.4 12.6 10.7 10.0 9.0 
            
Standard of living Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Number of passenger cars per 1000 population 3) 169.2 184.2 179.1 185.3 194.8 198.6 203.6 199.7 201.8 223.2 
Number of subscriptions to cellular mobile telephone se rvices per 1000 population  155.1 251.1 322.5 399.3 578.8 700.4 894.7 1 142.6 1 194.2 1 351.3 
 
EN 59   EN  
: = not available 
e = estimated value 
b = break in series 
1) The balance of payments sign conventions are used. For FDI abroad a minus sign means  investment abroad by the reporting econ omy exceeded its disinvestment in the period, while an entry without 
sign means disinvestment exceeded investment. For FDI in the repo rting economy an entry without sign means that investment into  the reporting economy exceeded di sinvestment, while a minus sign 
indicates that disinvestment exceeded investment. 
2) From 2004 onwards the data are not comparable with the prev ious years because since January 2004 Uniform Customs Document ha rmonized with EU regulations has been used. 
3) Ministery of Interior Affaires ex cluded the vehicles that were not regist ered before the given deadline (1 month). 
4) In million liters, includes cows and sheep milk. 
5) Without triticale, buckwheat and millet, which ar e minor; rice production does not exist in Serbia.              
Infrastructure Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Density of railway network (lines in operation, per 1000 km²)  49.2 49.2 49.2 49.2 49.2 49.2 49.2 49.2 49.2 49.2 
Length of motorways (thousand km)  0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.5 0.5 
            
Innovation and research Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Spending on human resources (public expenditure on education in  % of GDP)  2.4 2.4 3.0 3.7 3.4 3.1 3.3 3.4 3.5 : 
Gross domestic expenditure on R&D in % of GDP  : : : : : : : : : : 
Percentage of households who have Internet access at home (%)  : : : : : : 18.5 26.3 33.2 36.7 
            
Environment Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Greenhouse gas emissions, CO2 equivalent (tons, 1990=100)  : : : : : : : : : : 
Energy intensity of the economy (kg of oil equivalent per 1000 euro GDP)  : : : : : 413.1 413.6 660.7 594.3e : 
Electricity generated from renewable sources in % of gross el ectricity consumption  42.1 43.3 41.2 36.5 44.9 46.9 41.8 37.9 35. 1 : 
Road share of inland freight transport (% of tonne-km)   : : : : : : : : : : 
            
Energy Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Primary production of all energy products (thousand TOE)  : : : : : 7 729 7 925 8 797 9 441 : 
Primary production of crude oil (thousand TOE)  : : : : : : : 654 652 : 
Primary production of hard coal and lignite (thousand TOE)  : : : : : 6 696 6 966 7 073 7 369 : 
Primary production of natural gas (thousand TOE)  : : : : : : : 198 231 : 
Net imports of all energy products (thousand TOE)  : : : : : 1 431 1 686 7 260 7 477 : 
Gross inland energy consumption (thousand TOE)  : : : : : 8 322 8 765 14 996 15 620 : 
Electricity generation (thousand GWh)  32.0 31.0 31.0 32.0 34.0 36.0 36.0 37.0 37.0 : 
            
Agriculture Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Agricultural production volume index of goods  and services (produc er prices, previous 
year=100)  87.0 118.0 97.0 93.0 120.0 95.0 100.0 92.0e 108.0 101.0 
Total utilised agricultural area (thousand hectare)  5 074 5 077 5 071 5 079 5 075 5 075 5 066 5 053 5 055 5 097 
Livestock: cattle (thousand heads, end of period)  1 162 1 128 1 112 1 102 1 079 1 096 1 106 1 087 1 057 1 002 
Livestock: pigs (thousand heads, end of period)  3 615 3 587 3 634 3 439 3 165 3 212 3 999 3 832 3 594 3 631 
Livestock: sheep and goats (thousand heads, end of period)  1 670 1 612 1 685 1 741 1 728 1 748 1 718 1 756 1 760 1 647 
Production and utilisation of milk on the farm (total whol e milk, thousand tonnes) 4) 1 585 1 594 1 596 1 590 1 593 1 616 1 602  1 562 1 548 1 488 
Crop production: cereals (including ri ce) (thousand tonnes, harvested production) 5) 5 213 9 001 8 298 5 453 9 867 9 510 8 268 6 115 8 707 8 982 
Crop production: sugar beet (thousand tonnes, harvested produc tion)  1 070 1 806 2 098 1 738 2 814 3 101 3 189 3 206 2 300 2 79 8 
Crop production: vegetables (thousand t onnes, harvested production)  1 043 1 283 1 340 1 172 1 340 1 289 1 348 1 128 1 277 1 25 7