Commission staff working document – Serbia - 2008 progress report accompanying the Communication from the Commission to the European Parliament and the Council - Enlargement strategy and main challenges 2008-2009 {COM(2008) 674}
Date: 2008-11-05
Institutions: European Commission
Subjects: Serbia, accession to the European Union, enlargement of the Union, pre-accession strategy, report

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 5.11.2008 
SEC(2008) 2698 

COMMISSION STAFF WORKING DOCUMENT 

SERBIA 2008 PROGRESS REPORT 

accompanying the 

COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

Enlargement Strategy and Main Challenges 2008-2009 

{COM(2008) 674} 

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TABLE OF CONTENTS 

1. 

1.1. 

1.2. 

1.3. 

2. 

2.1. 

2.2. 

2.3. 

3. 

3.1. 

3.2. 

4. 

Introduction .................................................................................................................. 4 

Preface.......................................................................................................................... 4 

Context ......................................................................................................................... 4 

Relations between the EU and Serbia .......................................................................... 5 

Political criteria ............................................................................................................ 6 

Democracy and the rule of law .................................................................................... 6 

Human rights and the protection of minorities .......................................................... 13 

Regional issues and international obligations ............................................................ 20 

Economic criteria ....................................................................................................... 23 

The existence of a functioning market economy ....................................................... 23 

The capacity to cope with competitive pressure and market forces within the Union29 

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 establishment ....................................... 32 

4.1.3.  Free movement of capital........................................................................................... 33 

4.1.4.  Customs and taxation ................................................................................................. 33 

4.1.5.  Competition................................................................................................................ 35 

4.1.6.  Public procurement .................................................................................................... 36 

4.1.7. 

Intellectual property law ............................................................................................ 36 

4.1.8.  Employment and social policies ................................................................................ 37 

4.1.9.  Education and research .............................................................................................. 38 

4.1.10.  WTO issues ................................................................................................................ 39 

4.2. 

Sectoral policies ......................................................................................................... 39 

4.2.1. 

Industry and SMEs..................................................................................................... 39 

4.2.2.  Agriculture and fisheries ............................................................................................ 40 

4.2.3.  Environment............................................................................................................... 41 

4.2.6. 

Information society and media................................................................................... 45 

4.2.7.  Financial control ........................................................................................................ 47 

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4.2.8.  Statistics ..................................................................................................................... 47 

4.3. 

Justice, freedom and security ..................................................................................... 48 

4.3.1.  Visa, border, control, asylum and migration.............................................................. 48 

4.3.2.  Money laundering ...................................................................................................... 49 

4.3.3.  Drugs .......................................................................................................................... 50 

4.3.4.  Police.......................................................................................................................... 50 

4.3.5.  Fighting organised crime and terrorism ..................................................................... 51 

4.3.6.  Protection of personal data......................................................................................... 52 

STATISTICAL ANNEX 

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COMMISSION STAFF WORKING DOCUMENT 

Serbia 2008 Progress Report 

1. 

INTRODUCTION 

1.1. 

Preface 

Since March 2002, the Commission has reported regularly to the Council and the Parliament 
on progress made by the countries of the Western Balkans region. 

This progress report largely follows the same structure as in the previous years. The report: 

–  briefly describes the relations between Serbia and the Union; 

–  analyses the situation in Serbia in terms of the political criteria for membership; 

–  analyses the situation in Serbia on the basis of the economic criteria for membership; 

–  reviews  Serbia's  capacity  to  implement  European  standards,  that  is,  to  gradually 
approximate  its  legislation  and  policies  with  those  of  the  acquis,  in  line  with  the 
Stabilisation and Association Agreement and the European Partnership priorities. 

The period covered by this report is from 1 October 2007 to early October 2008. Kosovo1 is 
dealt with in a separate Progress Report. Progress is measured on the basis of decisions taken, 
legislation adopted and measures implemented. As a rule, legislation or measures which are 
under  preparation  or  await  parliamentary  approval  have  not  been  taken  into  account.  This 
approach ensures equal treatment across all reports and permits an objective assessment. 

The  report  is  based  on  information  gathered  and  analysed  by  the  Commission.  In  addition, 
many  sources  have  been  used,  including  contributions  from  the  government  of  Serbia,  the 
Member States, European Parliament reports2 and information from various international and 
non-governmental organisations. 

The Commission draws detailed conclusions regarding Serbia in its separate communication 
on enlargement3 based on the technical analysis contained in this report. 

1.2. 

Context 

Serbia  is  a  potential  candidate  for  EU  membership.  The  European  Council  of  14  December 
2007  stated  that  "it  considered  that  a  stable  and  prosperous  Serbia  fully  integrated  into  the 
family  of  European  nations  is  important  for  the  stability  of  the  region.  In  this  regard,  it 
encouraged Serbia to meet the necessary conditions to allow its Stabilisation and Association 
Agreement rapidly to be signed and, in the light of Serbia's considerable institutional capacity, 
and recalling its conclusions of December 2006, reiterated its confidence that progress on the 

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Under UNSCR 1244/1999. 
The rapporteur for Serbia is Mr J. Kacin. 
Enlargement Strategy and Main Challenges 2008-2009. 

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road towards the EU, including candidate status, can be accelerated." On 29 April 2008 Serbia 
signed a Stabilisation and Association Agreement and an Interim Agreement on trade related 
measures with the EU.  

1.3. 

Relations between the EU and Serbia 

Serbia is participating in the Stabilisation and Association Process (SAP). The Stabilisation 
and Association Agreement (SAA) provides a framework of mutual commitments on a wide 
range of political, trade and economic issues. The SAA was initialled on 7 November 2007 
and  signed,  along  with  the  Interim  Agreement,  on  29  April  2008.  Recalling  the  relevant 
provisions  of  the  SAA  and  the  Interim  Agreement,  the  Council  stated  that  full  cooperation 
with  the  International  Criminal  Tribunal  for  the  former  Yugoslavia  (ICTY),  including  all 
possible efforts to arrest and transfer indictees, is an essential element of these Agreements. 
EU  ministers  agreed  to  submit  the  SAA  to  their  parliaments  for  ratification  and  the 
Community agreed to implement the Interim Agreement as soon as the Council decides that 
Serbia  is  fully  cooperating  with  the  ICTY.  The  Serbian  parliament  ratified  the  SAA  on  9 
September 2008. The Serbian government took a decision in October 2008 to implement the 
Interim Agreement by 1 January 2009 as a tangible sign of its commitment to advance rapidly 
towards European integration. 

Visa facilitation and readmission agreements between the EU and Serbia entered into force in 
January  2008.  Dialogue  on  visa  liberalisation  started  in  January  2008.  In  May  2008  the 
Commission presented a roadmap on visa liberalisation to Serbia. In September 2008 Serbia 
presented the Commission with a detailed report of measures undertaken in the framework of 
visa liberalisation.  

Relations between the EU and Serbia have been affected by the declaration of independence 
of Kosovo. In February 2008 a demonstration against the declaration of independence ended 
in  violence  with  several  protestors  attacking  foreign  diplomatic  missions  in  Belgrade, 
including EU embassies. The EU condemned these attacks and urged the Serbian authorities 
to do all in their powers to prevent further violence.  

Serbia has vowed to use only peaceful means and has exercised restraint in its response to the 
declaration  of  independence  by  the  Kosovo  assembly.  The  Serbian  government  has 
undertaken  legal  and  diplomatic  measures  to  contest  the  legality  of  the  declaration  of 
independence.  Serbia  withdrew  serving  ambassadors  from  countries  that  recognised  the 
independence of Kosovo, including EU Member States. Following the formation of the new 
Serbian government in July 2008, ambassadors who had been withdrawn from EU Member 
States returned to their posts. Serbia has opposed reconfiguration of the international civilian 
presence  in  Kosovo,  including  EULEX  deployment,  unless  authorised  by  the  UN  Security 
Council. In October 2008, the UN General Assembly voted in favour of a resolution tabled by 
Serbia, seeking a non-binding advisory opinion from the International Court of Justice (ICJ) 
on the legality of the Kosovo declaration of independence.  

The  EU  is  providing  guidance  to  the  Serbian  authorities  on  reform  priorities  as  part  of  the 
European  Partnership.  The  Serbian  government  has  adopted  a  National  Programme  for 
European Integration that also covers the European Partnership priorities. Progress on reform 
priorities  is  encouraged  and  monitored  by  the  Enhanced  Permanent  Dialogue  (EPD) 
process.  Plenary  EPD  meetings  were  held  in  November  2007  and  April  2008.  Several  sub-
EPD  meetings  took  place  during  the  reporting  period,  covering  sectors  such  as  energy, 

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transport,  the  environment,  the  internal  market,  trade,  justice,  liberty  and  security  and 
agriculture. A political dialogue meeting at ministerial level took place in January 2008. 

Serbia  receives  pre-accession  financial  assistance  from  the  Instrument  for  Pre-Accession 
Assistance  (IPA).  IPA  assistance  is  being  implemented  by  the  Commission  Delegation  in 
Belgrade,  which  has  taken  over  responsibility  for  ongoing  CARDS  assistance  from  the 
European  Agency  for  Reconstruction.  Decentralised  management  of  aid  is  a  medium-term 
objective for Serbia and still requires much preparatory work by the Serbian authorities. 

The Serbian national IPA allocation for 2008 totals €190.9 million. The Serbian government 
actively  participated  in  preparation  of  the  2008  IPA  programme.  Financial  assistance  will 
focus  on  areas  such  as  strengthening  democratic  institutions,  public  administration  reform, 
strengthening  the  rule  of  law,  the  fight  against  corruption,  human  rights  and  protection  of 
minorities.  Serbia  benefits  from  regional  and  horizontal  programmes.  Serbia  will  also 
participate  in  cross-border  cooperation,  where  the  priorities  include  infrastructure,  flood 
prevention, environmental problems, cultural exchanges, research, job creation, security and 
crime  prevention.  A  number  of  civil  society  initiatives  are  being  supported  both  under  the 
national  IPA  programme  and  by  thematic  financing  instruments  such  as  the  European 
Initiative  for  Democratisation  and  Human  Rights.  Support  to  civil  society  under  2008 
programmes amounts to over €6 million. 

Concerning  participation 
in  community  programmes,  Serbia  signed  Memoranda  of 
Understanding  with  the  Community  for  the  PROGRESS  and  Culture  programmes  in 
November 2007 and February 2008 respectively.  

2. 

POLITICAL CRITERIA 

This  section  examines  progress  made  by  Serbia  towards  meeting  the  Copenhagen  criteria, 
which require stability of institutions guaranteeing democracy, the rule of law, human rights 
and  respect  for  and  protection  of  minorities.  It  also  monitors  regional  cooperation,  good 
neighbourly  relations  with  enlargement  countries  and  Member  States,  and  respect  for 
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 

Following the adoption of the new constitution in 2006, the Law on the Constitutional Court 
was  adopted  in  November  2007.  Ten  of  the  fifteen  judges  of  the  Constitutional  Court  were 
appointed  and  sworn  in,  and  the  President  of  the  Court  was  elected.  In  December  2007 
parliament  adopted  a  package  of  laws  necessary  for  calling  presidential,  provincial 
(Vojvodina)  and  municipal  elections,  as  required  by  the  Law  for  the  implementation  of  the 
Constitution  (Constitutional  Law).  The  province  of  Vojvodina  adopted  a  new  statute  in 
October 2008 in line with constitutional requirements. This new statute has to be approved by 
the national parliament. 

There  has,  however,  been  no  follow-up  to  the  opinion  of  the  Venice  Commission  of  the 
Council  of  Europe  concerning  the  constitutional  provisions  adjudged  not  to  be  fully  in  line 
with  European  standards.  The  major  causes  for  concern  are  political  party  control  over  the 
mandates  of  members  of  parliament  and  the  role  of  parliament  in  judicial  appointments. 

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Specific laws establishing clear and objective criteria for the re-election of judges have not yet 
been  adopted  and  the  provisions  in  the  Constitutional  Law  lack  clarity  and  transparency. 
There  was  insufficient  consultation  prior  to  the  adoption  of  the  laws  necessary  for  holding 
provincial and municipal elections. 

Overall, there has been progress on adopting legislation to implement the new constitutional 
framework. However, further reforms are needed to ensure that the constitutional provisions, 
notably on the judiciary, are implemented in line with European standards. This is one of the 
key priorities of the European Partnership. 

Parliament 

Parliamentary  activities  were  affected  by  deep  divisions  between  political  parties  on  key 
policy issues which led to early elections in the country.  

Presidential elections were held over two rounds in January and February 2008 during which 
relations  with  the  EU  and  Kosovo  dominated  the  electoral  campaign.  The  presidential 
elections  were  assessed  by  international  observers  as  being  in  line  with  international 
standards. The incumbent President Boris Tadic was re-elected on a pro-European platform. 

Parliamentary elections were held in May 2008 following the split in the ruling coalition and 
the  Prime  Minister's  decision  to  propose  dissolution  of  parliament.  The  campaign  was  once 
again dominated by the status of Kosovo, relations with the European Union and the possible 
signing of the SAA. International observation bodies qualified the elections as largely in line 
with  international  standards,  but  noted  that  they  were  partly  overshadowed  by  negative 
aspects of the campaign. The 'For a European Serbia' bloc, led by the Democratic Party (DS) 
emerged  as  the  largest  group  in  the  250  seat  parliament,  followed  by  the  Serbian  Radical 
Party (SRS).  

The new parliament was constituted in June 2008, ahead of the legal deadline, and a speaker 
and  six  deputy  speakers  were  elected.  Standing  committees  were  constituted,  including  the 
Committee  on  European  Integration.  Several  committees  are  chaired  by  members  of 
opposition parties. Ethnic minority lists continue to be represented in the parliament.  

The new parliament ratified the SAA in September 2008 and has begun work on a legislative 
package  intended  to  address  key  political  priorities.  In  October  2008,  the  parliament 
appointed four deputy ombudsmen.  

However,  legislative  activity  during  the  reporting  period  has  been  limited.  Legislation  on  a 
single voter register, the Law on the assembly and new rules of procedure have not yet been 
adopted.  The  existing  rules  of  procedure  are  inadequate  for  efficient,  streamlined 
parliamentary debates. Plenary sessions, which are broadcast live on the public broadcasting 
service,  have  often  been  dominated  by  political  posturing  and  lengthy  debates  on  unrelated 
issues slowing up the adoption of legislation. Parliament failed to abide by legal deadlines for 
several  appointments.  Parliament  and  its  committees  still  lack  sufficient  numbers  of  expert 
support staff. Committees remain largely reactive, with the majority of bills debated directly 
in  plenary.  The  practice  of  law-making  by  urgent  procedure  and  without  sufficient  public 
debate  has  continued.  Offensive  and  inflammatory  language  against  political  opponents  and 
human  rights  defenders  recurred  in  parliament.  The  current  parliamentary  rules  have  been 
insufficient to prevent such behaviour. 

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Constitutional  provisions  giving  parties  control  of  the  mandates  of  members  of  parliament 
remain an obstacle to reform of parliament and to its role as a genuine political forum. The 
electoral framework has not been revised and is not in line with European standards. Existing 
legislation continues to allow parties to appoint members of parliament arbitrarily from their 
electoral  lists  after  the  elections  instead  of  determining  the  order  beforehand.  This  system 
lacks transparency and gives political parties full control over the candidates. Moreover, most 
parliamentary parties have concluded individual agreements with their members of parliament 
on  blank  resignations,  which  can  be  activated  at  any  moment  by  the  party  leadership.  This 
practice builds on the constitutional provisions giving parties control of individual mandates 
of members of parliament.  

Overall, the work of parliament was affected by the prevailing political climate in the country, 
ongoing  disputes  between  political  parties,  and  the  disruption  caused  by  elections. The  new 
parliament  has  begun  work  on  an  ambitious  legislative  agenda  and  has  adopted  some  legal 
acts.  However  there  was  little  legislative  output  during  the  reporting  period.  Parliamentary 
reform has been delayed and concerns regarding political party over the mandates of members 
of parliament have not been addressed. The capacity of the parliamentary committees remains 
limited and election legislation has not yet been revised. 

Government 

Government activities  have been dominated  by issues relating to Kosovo and relations with 
the EU.  

In  January  2008,  the  former  government  adopted  an  action  plan  setting  out  measures  to  be 
taken in response to the expected declaration of independence by the Kosovo Assembly. The 
Serbian government condemned attacks by protestors against foreign diplomatic missions in 
Belgrade  in  February  2008.  However,  some  members  of  the  former  government  condoned 
incidents that occurred immediately after the declaration of independence of Kosovo. 

The  former  government  was  unable  to  overcome  deep  divisions  between  coalition  partners, 
the DS and the DSS over contractual relations with the EU. This culminated in the refusal by 
Prime Minister Vojislav Koštunica to convene a government session to authorise the signing 
of  an  interim  political  agreement  that  had  been  proposed  by  the  EU.  In  March  2008, 
disagreements regarding links between Kosovo and EU integration, particularly in the context 
of the SAA, finally led to the fall of the government. These disputes and challenges continued 
after the SAA was signed in April 2008. 

Following  parliamentary  elections,  a  new  coalition  government  took  office  in  July  2008, 
composed of the 'For a European Serbia' bloc, led by the DS and a bloc led by the Socialist 
party of Serbia (SPS). The coalition also includes several minority representatives. On 7 July 
2008,  the  incoming  Prime  Minister  Cvetković  set  out  the  key  priorities  for  the  new 
government's  term  of  office  namely:  European  integration,  a  commitment  "to  undertake  all 
legal and diplomatic measures so as to preserve Kosovo and Metohija as an integral part of 
Serbia",  the  economy,  social  accountability,  the  fight  against  crime  and  corruption  and 
observance  of  international  law.  The  government  also  prepared  an  ambitious  legislative 
agenda covering key political priorities related to EU integration. 

The new government has 27 members, including three deputies, one of whom is in charge of 
European integration. There is a new post of Vice Prime Minister, held by the leader of the 
SPS, Ivica Dacić, who will take over the functions of the Prime Minister in his absence, with 

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the exception of the right to propose the election or dismissal of other government members. 
A new Ministry for Human and Minority Rights, replacing the previous government agency, 
has also been established. 

On  the  institutional  level,  European  integration  structures  were  strengthened  through  the 
formation of coordination bodies, including a policy coordination body chaired by the Deputy 
Prime Minister and an expert working party comprising 35 working groups covering all areas 
of the acquis. The Serbian European Integration Office was also reinforced. Most ministries 
and agencies continued their efforts to draft legislation in the area of European integration and 
implementing existing legislation. Under the coordination of the Serbian European Integration 
Office,  the  Serbian  administration  actively  worked  on  drafting  the  National  Programme  for 
EU Integration which was adopted by the government in October 2008. A public consultation 
was  launched  in  June  2008.  The  European  Commission  was  also  consulted  and  provided 
comments on the draft NPI in July 2008.  

In November 2007 members of the Council for European Integration were appointed. This is 
an expert advisory body to be presided over by the Prime Minister. The Council has, however, 
never been convened.  

The  Law  on  Government  was  amended  in  November  2007,  in  accordance  with  the 
Constitution. The new provisions regulate issues such as the incompatibility of functions and 
conflicts of interest. 

Legislation on local self-government, territorial reorganisation, local elections and the city of 
Belgrade was adopted in December 2007. New programmes were developed to enhance the 
performance  and  efficiency  of  local  government,  in  particular  in  dealing  with  citizens' 
requests. The new legislation allows local government units to possess and manage their own 
property. The new Law on local elections exempts minority parties from the legal threshold of 
5%  normally  required  for  political  parties  to  enter  local  assemblies.  These  provisions  were 
applied in the May 2008 local elections. 

These  changes  are  generally  in  accordance  with  the  European  Charter  of  Local  Self-
Government. However, some shortcomings remain. A specific law regulating the transfer of 
property to municipalities, in line with the Constitution, has not yet been adopted. 

The elections for the Provincial Assembly of Vojvodina and municipal elections were held on 
in May 2008 in line with international standards. 

Overall, government activities during the reporting period were dominated by issues relating 
to  Kosovo  and  relations  with  the  EU.  The  previous  governing  coalition  was  deeply  divided 
over major policy issues and suffered from in-fighting and lack of policy coordination. As a 
result  little  progress  was  made.  Following  the  legislative  elections  there  has  been  increased 
stability in government and greater consensus on European integration. The new government 
has  declared  its  intention  to  deepen  EU-Serbia  relations,  to  improve  overall  efficiency  and 
effectiveness, to advance the reform agenda, and to achieve full cooperation with the ICTY.  

Public administration 

In November 2007 the Law on public administration was revised in line with the Constitution. 
The  changes  introduced  more  precise  provisions  on  the  role  of  the  central  administration  in 
monitoring the legality of acts adopted by local governments. The Code of Conduct of Public 

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Servants  was  adopted  in  February  2008.  The  Human  Resources  Management  Agency 
continued to train civil servants. 

The  legal  deadline  for  completion  of  open  competitions  for  recruitment  of  civil  servants 
expired  in  May  2008  however,  this  process  was  not  completed.  Serbia  has  still  to  adopt 
legislation on salaries of political appointees. 

The newly established Office of the State Ombudsman was very active. Between January and 
July  2008  the  ombudsman  received  over  2 600  requests  for  assistance.  The  ombudsman 
proposed  numerous  amendments  to  draft  legislation,  including  laws  on  the  army,  the 
Constitutional  Court,  security  services,  children's  rights  and  the  draft  rules  of  procedure  for 
the Serbian parliament. Good cooperation was established between the State ombudsman, the 
ombudsman in Vojvodina and municipal ombudsmen. The ombudsman in Vojvodina reported 
that out of 382 eligible cases in 2007, a total of 322 were resolved and 60 were ongoing. In 
October  2008,  following  a  long  delay,  the  four  deputy  Ombudsmen  were  appointed  by 
parliament. 

However,  the  Serbian  authorities  have  not  created  the  technical  conditions  necessary  for 
proper functioning of the Office of the State Ombudsman. Temporary premises are inadequate 
and  only  33  out  of  64  posts  have  been  filled.  The  Serbian  administration  lacks  sufficient 
knowledge of the ombudsman institution and its role and has not paid sufficient attention to 
its recommendations. 

The  commissioner  for  free  access  to  information  of  public  interest  intensified  his  activities 
during the reporting period. The work and activities of the commissioner are made available 
to  the  public.  A  guidebook  on  the  Law  on  free  access  to  information  was  published  in  a 
number  of  minority  languages.  The  government  has,  however,  not  created  the  conditions 
necessary  to  enable  the  office  of  the  commissioner  to  function  fully,  including  provision  of 
adequate premises. Insufficient enforcement capacity and the failure of the Serbian authorities 
to ensure implementation of the commissioner's recommendations in several cases continued 
to hamper the work of the office of the commissioner. 

In May 2008 six independent State bodies (the Ombudsman, the State Audit Institution, the 
Commissioner for Free Access to Public Information, the Committee for the Suppression of 
Conflicts  of  Interest,  the  Public  Procurement  Commission  and  the  Commission  for  the 
Protection of Bidders' Rights) expressed concerns about the difficulties they face in carrying 
out their duties. In particular, they complained about working conditions that undermine their 
independence and about insufficient follow-up to their recommendations. 

Capacity-building  in  the  police  forces  continued.  A  new  police  training  centre  came  into 
operation  in  November  2007.  Action  was  taken  in  the  area  of  regional  police  cooperation, 
following  ratification  of  the  Convention  on  South-East  Europe  Police  Cooperation.  Serbia 
signed  an  agreement  on  strategic  cooperation  with  Europol  in  September  2008.  Work  at 
operational  level  has  continued,  but  key  strategies  –  for  fighting  organised  crime,  terrorism 
and drug abuse and on community policing – have yet to be adopted. There continues to be 
insufficient  coordination  between  the  Ministry  of  Interior  and  other  ministries  and 
government agencies. 

Overall,  Serbia  continues  to  have  good  capacity  in  the  area  of  public  administration. 
However, there was a slowdown in public administration reform during the reporting period. 
Further  efforts  need  to  be  made  to  fully  implement  the  2005  Law  on  Civil  Servants  to 

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improve the recruitment system and strengthen professionalism and accountability throughout 
the civil service. Independent and regulatory bodies performed well under difficult conditions. 
Greater  determination  needs  to  be  shown  by  the  Serbian  authorities  to  empower  regulatory 
and independent bodies and to ensure that they operate effectively. 

Civilian oversight of the security forces 

The laws on defence, on the army and on basic organisation of security services were adopted 
in December 2007, in line with the Constitution, and entered into force in January 2008. The 
Ministry of Defence actively ensured prior consultation of the ombudsman on human rights 
aspects of the new legislation. Statutory provisions on democratic oversight of the army and 
the  security  services  are  comprehensive  and  assign  a  primary  role  to  parliament.  The  new 
Framework Law on security services replaced the earlier government decision regulating the 
National Security Council. Under the new law, the National Security Council is responsible 
for coordination and control of security agencies and the parliamentary board for security and 
defence  has  been  given  enhanced  powers.  Measures  were  taken  to  improve  the  financial 
situation of military personnel, including army pensioners.  

The legislative framework has not been completed, however. A national security strategy, a 
defence  strategy,  a  military  doctrine,  new  legislation  on  conscientious  objectors  and 
implementing  laws  on  security  agencies  still  need  to  be  adopted.  The  Parliamentary 
Committee for Security and Defence was not active during the reporting period. In February 
2008  parliament  adopted  a  resolution  in  connection  with  Kosovo  calling  for  military 
neutrality.  Military  reservists  wearing  uniforms  and  insignia  were  however  involved  in  a 
number of violent incidents in the aftermath of the Kosovo declaration of independence. 

Overall,  there  has  been  some  progress  on  civilian  oversight  of  the  security  forces,  with  the 
adoption  of  a  number  of  laws.  Reform  in  this  sector  still  has  to  be  completed  and  the  new 
parliament needs to ensure effective democratic oversight. 

Judicial system  

Progress  in  the  judicial  sector  has  been  slow  and  largely  confined  to  administrative 
improvements.  

The Constitutional Court, which had not been operational since October 2006, resumed duties 
in December 2007, although only 10 of the 15 judges have been appointed. The Constitutional 
Court  faces  a  heavy  backlog  of  cases.  Premises  for  the  new  appellate  and  administrative 
courts have been provided. However, these courts are not yet in operation. 

The overall professionalism of judges and prosecutors is relatively high and has been further 
improved  by  training  provided  by  the  judicial  academy.  Remuneration  of  judges  and 
prosecutors has also improved. 

However,  key  legislation  necessary  for  implementation  of  the  Constitution  and  the  judicial 
reform strategy has not yet been adopted. This includes the laws on courts and on prosecutors. 
In  the  absence  of  new  legislation,  no  new  judges  or  prosecutors  are  being  appointed  and 
vacant positions are not being filled. At the same time, some 200 judges who fulfil the criteria 
for  retirement  are  still  in  office,  as  parliament  has  not  yet  taken  the  decision  necessary  to 
relieve  them  from  active  service.  These  factors  severely  undermine  the  efficiency  of  the 
judiciary. 

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To  counterbalance  the  influence  of  parliament  over  appointing  judges  and  prosecutors, 
objective  selection  criteria  have  been  developed  including  a  plan  to  introduce  two  years  of 
initial training for all judges plus a final exam. However, in the absence of the new law on the 
judicial  academy,  these  criteria  have  not  been  applied.  Furthermore,  objective  criteria  have 
not  yet  been  established  for  appointments  to  be  made  during  the  interim  period  between 
adoption and full implementation of the new law. No decision has been taken on proposals to 
re-appoint all practising judges and prosecutors. Concerns remain that such a re-appointment 
exercise  could  be  affected  by  undue  political  influence  and  disrupt  the  functioning  of  the 
judiciary. 

There are continuing concerns that the prosecution service is not being adequately prepared 
for  its  enhanced  role  in  criminal  investigations,  as  provided  for  by  the  new  Criminal 
Procedure Code, the entry into force of which has been postponed until the first half of 2009. 
Insufficient financial resources, training and staff have been allocated for this purpose. 

As regards juvenile justice, the national data collection and monitoring mechanism have not 
yet  been  updated  to  reflect  the  provisions  of  the  new  Juvenile  Justice  Law  and  related 
implementing laws. 

The  significant  backlog  in  civil,  criminal  and  commercial  cases  remains  a  serious  cause  for 
concern, as are the delays in enforcement of court decisions. In the absence of efficient court 
management  systems  and  of  legislation  streamlining  procedures,  the  Serbian  judiciary  has 
been  unable  to  reduce  the  number  of  pending  cases  or  average  length  of  proceedings.  The 
efficiency of the court system is, moreover, hampered by the uneven workload of courts and 
judges. 

There  has  been  some  progress  on  domestic  war  crime  cases.  The  war  crimes  prosecution 
service filed several indictments during the reporting period and some judgements have been 
passed. However a number of cases are still pending. There is also a number of pending high-
profile cases in the area of organised crime.  

Overall, there has been little progress with the judicial reform process, which is a key priority 
of  the  European  Partnership.  The  legislative  framework  to  implement  judicial  reform,  as 
provided for by the new Constitution, is still not in place. Considerable efforts still need to be 
made  by  Serbia  to  ensure  the  independence,  accountability  and  efficiency  of  the  judicial 
system.  

Anti-corruption policy 

There was some progress during the reporting period on fighting corruption and developing a 
fully  comprehensive  anti-corruption  policy,  which  is  a  key  priority  of  the  European 
Partnership. 

Amendments  to  the  law  on  financing  political  parties,  and  the  law  establishing  an  anti-
corruption  agency,  which  also  contains  new  rules  on  conflict  of  interest,  were  adopted  in 
October  2008.  The  Civil  Law  Convention  on  Corruption  and  the  Additional  Protocol  to  the 
Criminal  Law  Convention  on  Corruption  were  ratified  in  November  2007.  The  compliance 
report was submitted to the Council of Europe's Group of States against Corruption (GRECO) 
in December 2007. 

Specialised  departments  within  the  prosecution  offices  have  been  set  up  at  district  level  to 
investigate  corruption  cases.  A  deputy  prosecutor  at  national  level  has  been  given  a 

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coordination role on anti-corruption cases. The police directorate has specialised units dealing 
with corruption and financial investigations. Several high-profile corruption investigations are 
ongoing. Joint investigation teams of prosecutors and police have been set up. 

However, practical results in fighting corruption have been limited. Under the previous law on 
financing political parties, enforcement procedures were weak. This resulted in most political 
parties not disclosing full details of their finances. Furthermore, the supervisory authority did 
not have sufficient capacity and expertise to assess the accuracy of the declarations provided. 

More than one third of State officials did not declare their assets in 2008. The former law on 
conflict of interest did not provide for sufficient enforcement procedures and did not ensure 
an  independent  audit  of  the  declarations  submitted.  Officials  in  certain  areas,  such  as  the 
judiciary,  were  not  required  to  provide  asset  declarations.  The  Board  for  Resolution  of 
Conflict of Interest has insufficient qualified staff and resources and does not have the powers 
to assess the validity of the information provided in the declarations. 

The anti-corruption agency has not yet been established. This is of particular concern in view 
of  the  new  role  assigned  to  it  under  new  legislation  in  the  areas  of  conflict  of  interest  and 
financing of political parties. Serbia has to ensure that the new agency will have a sufficient 
level of independence, capacities and competencies in order to effectively fulfil its tasks. The 
current role of the Anti-Corruption Council is limited to advising the government. The Law 
on  free  access  to  information  contains  loopholes,  such  as  criteria  for  the  classification  of 
information, which  hamper implementation. The action plan for the  fight  against  corruption 
lacks  clear  deadlines,  specific  action  and  the  necessary  resources  for  implementation  and 
therefore needs to be revised. 

Public procurement and privatisation procedures along with major budgetary expenditure are 
not  efficiently  monitored  by  independent  bodies.  The  State  Audit  Institution  is  not  fully 
operational with only two auditors' posts filled, and currently cannot provide efficient auditing 
services.  Other  control  bodies,  such  as  the  Commission  for  the Protection  of  Bidders  in  the 
area  of  public  procurement,  act  only  upon  specific  requests  and  conduct  no  general 
monitoring of the procedures for lack of appropriate powers and financial resources. 

The capacities of the law enforcement bodies to investigate corruption cases are limited. At 
the  same  time,  courts  are  bound  by  highly  complex  procedural  rules  imposing  strict 
conditions on the prosecution service. This results in a low rate of convictions in corruption 
cases. 

Overall,  corruption  continues  to  be  widespread  and  to  pose  a  serious  problem  in  Serbia. 
Despite greater public awareness of the issue and newly adopted legislation, major problems 
remain.  These  include  the  lack  of  sufficiently  independent  and  efficient  oversight  bodies  in 
core areas such as party financing, conflict of interest, public procurement and privatisation. 
These  problems  will  have  to  be  addressed  in  the  context  of  implementation  of  the  newly 
adopted legislation. 

2.2. 

Human rights and the protection of minorities 

Observance of international human rights law 

As  regards  ratification  of  human  rights  instruments  Serbia  has  ratified  all  major  human 
rights instruments. 

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Serbia  has  largely  met  its  obligations  to  report  to  UN  bodies.  Serbia  submitted  the  second 
periodic  report  on  implementation  of  the  Council  of  Europe  Framework  Convention  for  the 
Protection  of  National  Minorities  in  March  2008.  However,  the  revised  European  Social 
Charter has not been ratified.  

The  European  Court  of  Human  Rights  (ECtHR)  delivered  13  judgments  during  the 
reporting period finding that Serbia had violated the European Convention for the Protection 
of  Human  Rights  and  Fundamental  Freedoms  (ECHR).  The  largest  number  refers  to 
violations of the right to fair trial. A total of 1,131 new applications to the ECtHR were made 
during the reporting period and 14 judgements were delivered. There are approximately 1,800 
pending cases against Serbia. 

As regards promotion and enforcement of human rights  the Judicial Training Centre has 
provided training on implementation of the ECHR. However, in practice, the Serbian courts 
still  show  reluctance  to  directly  implement  ratified  international  treaties  that  guarantee 
protection  of  human  rights.  Lawyers  rarely  invoke  these  standards.  Constitutional  appeals 
against human rights violations are legally possible. However, there have been no judgments 
since the Constitutional Court was established in 2007. 

The  Serbian  authorities  finally  implemented  the  2005  decision  of  the  UN  Human  Rights 
Committee  concerning violation of  freedom  of  expression  in  the  case  against  a  journalist 
sentenced for slander. 

Following the formation of the new government in July 2008, the former government human 
rights agency was replaced by a Ministry for Human and Minority Rights.  

Overall, the legal and institutional framework for the observance of human rights is in place. 
However  there  has  been  insufficient  progress  on  implementing  international  human  rights 
law. Institutional structures for the implementation of human and minority rights have to be 
further reinforced. 

Civil and political rights  

With  regard  to  prevention  of  torture  and  ill-treatment  and  the  fight  against  impunity, 
judicial  control  over  respect  for  human  rights  in  prisons  has  improved.  Final  judgments  are 
made  by  the  Supreme  Court  in  the  administrative  disputes  procedure.  However,  there  has 
been no progress on investigating alleged serious violations of human rights relating to prison 
riots in 2006. Legal grounds for police intervention and cooperation with prison authorities at 
the time have not been clarified. 

In a number of cases, alleged use of excessive force by police in pre-trial proceedings has not 
been  fully  investigated.  There  are  frequent  allegations  of  ill-treatment  of  suspects  by  police 
during  questioning.  The  Serbian  authorities  should  ensure  that  thorough  investigations  are 
conducted into all allegations of torture and ill-treatment.  

The  latest  monitoring  exercise  by  the  Council  of  Europe  Committee  for  the  Prevention  of 
Torture  took  place  in  November  2007.  However,  the  resultant  recommendations  were  not 
made public by the Serbian authorities. 

As  regards  the  fight  against  impunity,  the  capacity  of  the  Serbian  war  crime  prosecution 
service needs to be further strengthened. There are still obstacles to the transfer of cases and 

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extradition  of  suspects  in  cases  of  war  crimes  and  crimes  against  humanity  between  Bosnia 
and Herzegovina, Croatia, Montenegro and Serbia.  

As regards access to justice, Serbia has not yet put in place a comprehensive legal system for 
free  aid.  The  right  to  mandatory  defence  in  most  serious  criminal  cases  is  enshrined  in  the 
new Criminal Procedure Code but there are still no specific provisions on mandatory defence 
in cases of pre-trial detention. 

Reforms  of  the  prison  system  continued,  with  the  reconstruction  of  three  of  the  largest 
prisons in Serbia. Training also continued, with efforts to include broader categories of staff, 
such as court guards. Action was taken to address the serious problem of drug abuse which 
affects  almost  half  of  the  prison  population.  A  new  model  for  prisoners  serving  juvenile 
sentences, based on modern standards, is being implemented. In addition, community based 
alternative  services  such  as  day  care  centres  should  be  developed  to  enable  alternative 
sentencing for children. 

The prison administration is acting on complaints by prisoners in a more professional manner. 
The department for the protection of prisoners' rights in the Ministry of Justice has also put in 
place a more effective system to deal with complaints from prisoners. 

A system of alternative sanctions, applicable to all conditional sentences and accounting for 
over  50%  of  all  judgments,  is  at  an  early  stage  of  implementation  and  lacks  proper 
monitoring. At present, 4 800 prisoners are serving terms of up to one year. A sharp increase 
in  the  number  of  prisoners  (from  8 900  in  December  2007  to  9 500  in  May  2008)  has  put 
serious  strains  on  the  capacity  of  prison  infrastructure.  This  remains  the  biggest  challenge 
facing  the  prison  service.  Some  6 500  offenders  are  still  in  detention  and  awaiting  final 
sentencing  and  transfer  to  prison  to  serve  their  sentences.  The  latest  statistics  on  criminal 
offences indicate an increase in serious crime, repeat offences and juvenile offenders. 

Prison  security  has  improved  slightly  and  the  level  of  violence  has  decreased.  However, 
overcrowding, violence among prisoners and drug abuse remain serious problems in prisons 
in Serbia. 

The  Constitution  contains  guarantees  for  freedom  of  expression  which  are  generally 
protected. However the conditions for freedom of expression in Serbia were affected during 
the  period  immediately  following  the  Kosovo  declaration  of  independence.  There  were 
numerous reports of incidents involving offensive language, hate speech and violence against 
organisations and individuals, mainly journalists and human rights defenders. In March 2008, 
a number of media outlets and journalists' associations addressed a series of concerns to the 
Serbian authorities. They complained, in particular, of repeated verbal and physical abuse and 
of  being  accused  of  unpatriotic  reporting.  The  law  enforcement  authorities  arrested  the 
suspected  perpetrator  of  a  violent  attack  on  a  journalist  in  July  2008.  Authorities  also  took 
actions against extremist groups in October 2008. 

There were also cases of threats to journalists from local officials and businessmen where, in 
some  instances,  recorded  material  was  confiscated  from  journalists  in  an  attempt  to  prevent 
them  from  providing  reporting  on  a  range  of  issues.  There  was  no  progress  in  the 
investigations on murders of journalists dating back to the 1990s and of an attempted murder 
of a journalist in April 2007. 

The  law  on  media  concentration  and  new  legislation  on  advertising  have  not  yet  been 
adopted.  Legislation  on  local  self-government,  adopted  in  December  2007,  contains 

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provisions  in  contradiction  with  the  laws  on  broadcasting  and  public  information  and  is 
undermining the privatisation of municipally owned media. Allocation of regional frequencies 
has been completed, but the process lacked transparency in a number of cases. Distribution of 
municipal frequencies has not been completed. There were breaches of the legislation on the 
protection  of  privacy  and  professional  standards  and  ethics  by  some  sections  of  the  media, 
notably in cases of sensationalist reporting. 

The Constitution guarantees freedom of assembly and these rights are generally protected. A 
number of peaceful rallies and demonstrations took place following the Kosovo declaration of 
independence. However, there were violent incidents when foreign diplomatic missions were 
targeted  and  attacked  by  demonstrators  in  Belgrade  in  February  2008.  These  acts  were 
condoned in some political quarters and sections of the media, while the immediate response 
from the law enforcement authorities was inadequate. 

There  were  reports  of  attacks  against  organisations  and  individuals  defending  civil  and 
political  rights,  fighting  against  impunity  and  defending  the  right  to  different  sexual 
orientation.  Some  efforts  were  made  by  the  law  enforcement  authorities  to  follow  up  such 
incidents, however, in most instances the perpetrators have not been brought to trial. 

The  Constitution  guarantees  freedom  of  association,  including  political  and  trade  union 
associations. Restrictions to this right, including grounds and procedures for a possible ban on 
associations, assign a primary decision-making role to the Constitutional Court. Constitutional 
grounds  for  prohibition  include  violent  breaches  of  constitutional  order,  violation  of 
guaranteed  human  and  minority  rights  and  incitement  to  racial,  national  or  religious  hatred. 
Under the new Law on ministries adopted in July 2008, registration of political and citizens' 
associations remains under the authority of the Ministry for Public Administration and Local 
Government, which set up a department for this purpose in 2007. Trade unions are under the 
authority  of  the  Ministry  of  Labour  and  Social  Policy.  Registration  of  minority  national 
councils falls under the new Ministry for Human and Minority Rights. 

Laws  implementing  the  new  Constitution  in  this  area  have,  however,  not  yet  been  adopted. 
New  legislation  on  associations  and  on  political  organisations  has  yet  to  be  adopted.  The 
existing legislation imposes restrictions which go beyond the constitutional provisions. 

Civil society organisations continue to play a major role in social, economic and political life 
in Serbia. However, longstanding legislative deficiencies have not been adequately addressed. 
These  concern  the  legal  status  of  NGOs  and  their  financing,  including  restrictive  and 
unfavourable fiscal conditions applied on an ad hoc and arbitrary basis. A number of NGOs, 
in particular human rights defenders, were subjected to threats and verbal abuse for holding 
diverging views on issues such as the situation in Kosovo. Such incidents have not been fully 
investigated.  

Freedom of religion is guaranteed by the Constitution and law in Serbia. However there are 
shortcomings  resulting  from  the  implementation  of  legislation  from  2006  on  churches  and 
religious  organisations.  These  concern  registration  of  so-called  "non-traditional"  religious 
communities.  There  have  been  repeated  reports  of  arbitrary  decisions  in  connection  with 
registration of "non-traditional" religious communities, affecting their legal status and rights. 
There were several religiously motivated incidents, including attacks, hate speech, vandalism 
and  offensive  graffiti  against  a  number  of  religious  communities.  These  incidents  were  not 
followed  up  sufficiently  by  the  law  enforcement  authorities,  and  investigations  have  been 
inconclusive. 

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Overall,  civil  and  political  in  Serbia  are  generally  respected.  However,  these  rights  were 
affected by the political developments that led to early elections and by the unstable political 
climate  prevailing  during  the  reporting  period.  Legislation  needs  to  be  further  adjusted  to 
European standards. Existing constitutional and legal guarantees need to be fully enforced and 
violations properly investigated. 

Economic and social rights 

There are several legal and constitutional provisions in place guaranteeing women's rights in 
Serbia. However, a specific law on gender equality and the national strategy for improvement 
of  women's  position  and  enhancement  of  gender  equality  have  not  yet  been  adopted.  The 
Directorate  for  Gender  Equality  in  the  Ministry  for  Labour  and  Social  Affairs  was  active 
during the reporting period in furthering women's rights. Following the May 2008 legislative 
elections there are 53 women members in the 250-seat parliament and five women in the 27-
member  government.  However,  violation  of  women's  rights  is  frequent  and  often  goes 
unreported.  Domestic  violence  continues  to  be  a  serious  problem.  Criminal  penalties  are 
insufficient. The State ombudsman and the provincial ombudsman in Vojvodina highlighted 
continuing  discrimination  against  women  on  the  labour  market.  Women  remain  under-
represented in managerial positions. Discrimination particularly affects Roma women, women 
from national minorities and women with disabilities.  

The State ombudsman has been active in the area of children's rights and has followed up a 
number of complaints. A reform of the child welfare system is in progress, with the aim of 
replacing  several  residential  institutions  with  specialist  fostering.  The  number  of  children 
without parental care placed in institutions has decreased from around 2,200 in 2005 to 1,700 
in 2007.  Approximately one  third of children without  parental care  are placed in residential 
institutions  while  the  other  two  thirds  are  placed  in  foster  families.  In  May  2008  the 
government  adopted  a  national  youth  strategy  which  was  the  result  of  an  extensive  and 
transparent consultation process. 

However,  the  conditions  for  many  children  in  Serbia  remain  poor.  Children  from  socially 
vulnerable  groups,  in  particular  from  minority  groups  such  as  Roma,  and  children  with 
disabilities,  continue  to  suffer  from  widespread  discrimination  and  exclusion  from  health, 
education  and  social  welfare  services.  There  are  serious  levels  of  violence  against  children, 
with  only  a  limited  number  of  cases  reported  and  prosecuted.  There  is  insufficient  reliable 
data on child trafficking, child labour and on sexual exploitation of adolescents.  

In the case  of socially vulnerable persons and/or  persons  with disabilities, Serbia signed 
the Convention on Rights of Persons with Disabilities and the Optional Protocol in December 
2007.  This  Convention  has  still  to  be  ratified.  The  government  also  adopted  a  strategy  on 
improving the situation of disabled persons in Serbia in December 2007. This strategy defines 
a  package  of  activities  for  the  period  2007-2015,  including  adoption  of  the  two-year 
operational action plans. In October 2007, the government established a Council for Disabled 
Persons,  a  20-member  advisory  body  with  the  task  of  coordinating  activities  in  this  sector. 
However,  the  strategy  for  improving  the  conditions  of  persons  with  disabilities  contains  no 
plan  or  proposals  to  improve  the  conditions  for  people  placed  in  long-term  residential 
institutions.  The  law  on  professional  rehabilitation  and  employment  of  persons  with 
disabilities has not yet been adopted. 

Serbia's  preparations  in  the  field  of  mental  health  are  at  an  early  stage.  The  government 
adopted  a  report  in  November  2007  on  residential  institutions  for  mentally  handicapped 

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children,  adults  and  elderly.  The  report  acknowledged  that  there  had  been  insufficient 
investment  in  several  mental  health  institutions.  It  also  highlighted  the  unsatisfactory 
implementation  of  the  Law  on  the  family,  which  requires  that  children  be  protected  in  a 
family  environment  whenever  possible.  The  government  has  started  to  implement  some 
measures  to  improve  the  existing  institutions  and  to  facilitate  de-institutionalisation.  They 
include a ban on use of premises which do not comply with minimum standards, transfers of 
young children to foster families, development of community-based services and training for 
staff. Moreover, further anti-stigma campaigns and educational activities were organised. 

However,  amendments  to  the  Law  on  social  protection,  which  would  better  regulate  the 
mental health sector, have not yet been adopted. Some institutions are still overcrowded. The 
de-institutionalisation  process  is  not  adequately  developed.  There  is  insufficient  support  for 
foster  families  and  much  remains  to  be  done  to  develop  community-based  services.  Inter-
ministerial  cooperation  needs  to  be  strengthened.  Local  services  and  the  inspectorate  of  the 
Ministry  of  Labour,  Employment  and  Social  Policy  do  not  have  sufficient  qualified  human 
resources.  

As  regards  labour  rights  and  trade  unions,  in  April  2008  a  new  general  collective 
agreement  was  signed  by  the  two  representative  trade  unions  and  employers'  associations. 
This  is  a  big  step  forward  towards  promoting  social  dialogue,  as  the  previous  general 
collective agreement had expired in September 2005. The agreement contains provisions on 
various  rights  of  employees,  such  as  remuneration,  fringe  benefits,  safety  at  work,  absence 
and the right to establish trade unions. However,  social  dialogue  is  still  weak.  The  role  and 
capacity  of  the  Socio-Economic  Council  still  need  to  be  fully  developed.  Councils  at  local 
level have been established in only a limited number of municipalities. 

The  constitution  prohibits  direct  and 
indirect  discrimination  on  any  grounds.  A 
comprehensive  anti-discrimination  law  has  not  yet  been  adopted.  In  practice,  there  is  still 
widespread discrimination, primarily against national minorities, Roma or women as well as 
lesbian, gay, bisexual and transgender (LGBT) people. The State ombudsman’s 2007 annual 
report found that a number of people were exposed to hate speech and discrimination on the 
grounds of their sexual orientation and gender identity  and that the authorities had failed to 
provide adequate protection against such treatment. 

With  regard  to  property  rights,  legislation  on  restitution  has  not  yet  been  adopted.  This 
prevents proper launching of the restitution process. In the meantime, privatisation of some of 
the properties in question has continued. However, this has been contested by the association 
of former owners which is concerned that this will de facto prejudge future decisions on the 
return of property. 

Overall,  the  legal  provisions  for  the  protection  of  economic  and  social  rights  are  largely  in 
place  in  Serbia.  The  legal  framework  however  needs  to  be  developed  and  practical 
enforcement  of  the  existing  legislation  improved.  Further  efforts  are  needed  to  improve  the 
social  inclusion  of  children,  persons  with  disabilities  and  vulnerable  groups,  in  particular 
access to health, including mental health, and a proper education.  

Minority rights, cultural rights and protection of minorities 

The European Commission against Racism and Intolerance of the Council of Europe issued 
its first report on Serbia in April 2008. It noted that various measures to combat racism and 
intolerance towards minorities had been taken, but that a number of steps were still pending. 

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Affirmative  action  was  applied  in  the  2008  legislative,  provincial  and  municipal  elections 
exempting minority parties from a threshold to enter parliament. New legislation extends the 
requirement for local administrations to use official seals in minority languages, where those 
languages are in use. The budgetary allocation for minority national councils was increased in 
2008. The new Law on local self-government introduced more detailed provisions concerning 
the obligations of municipalities with an ethnically mixed population to establish inter-ethnic 
councils. 

However,  the  legislation  on  minority  national  councils  has  not  yet  been  adopted.  The 
Republican Council for Minorities has not met. Bilateral agreements on protection of national 
minorities with Hungary, Croatia, Romania and the former Yugoslav Republic of Macedonia 
are  not  being  fully  implemented.  The  joint  commissions  required  by  the  agreements  have 
either not been established or are not fully operational. In April 2008, the Constitutional Court 
overruled  an  earlier  decision  by  the  central  election  commission  reducing  the  number  of 
signatures required by law for the submission of electoral lists for minorities from 10 000 to 
3 000.  Coming  just  before  the  elections,  the  court  ruling,  while  in  line  with  existing 
legislation, raised concerns about the effects of such a high threshold on the position of small 
ethnic groups. The 2007 annual report by the State ombudsman found considerable regional 
discrepancies,  notably  regarding  the  capacity  of  the  administration  to  ensure  respect  of 
minority  rights.  One  particular  cause  for  concern  was  the  situation  of  Roma  and  Bosniak 
minorities. There is a disproportionately high level of unemployment among minorities.  

The political climate deteriorated in the period immediately following the Kosovo declaration 
of  independence,  resulting  in  a  number  of  incidents  in  towns  in  Vojvodina,  in  particular 
against  the  Albanian  national  minority.  Incidents  involving  extremist  groups  were  also 
reported. The State and provincial ombudsmen condemned the events and urged the relevant 
institutions to act. The 2007 annual report by the provincial ombudsman noted that 25 out of 
the 605 complaints were in connection with minority rights. 

The situation in Southern Serbia has remained stable but tense. The decision by the Serbian 
government  to  refuse  to recognise diplomas from educational establishments  in Kosovo has 
been  criticised  by  the  Albanian  community  in  Southern  Serbia.  The  Albanian  community 
expressed concern at the impact of this decision on the employment prospects of holders of 
Kosovo  diplomas  in  Southern  Serbia.  Ethnic  Albanian  parties  remained  divided  over 
participation in the general legislative elections. In the end a coalition of Albanian parties took 
part  and  one  Albanian  member  of  parliament  was  elected.  The  regional  office  of  the 
Coordinating  Body  for  Southern  Serbia  was  strengthened,  increasing  representation  of 
persons of Albanian origin. This body was instrumental in enhancing communication between 
the municipal authorities and central government. The government allocated €3.8 million to 
co-finance  infrastructure  projects  in  2008.  However,  the  Albanian  minority  continued  to 
express concern at under-representation in public administration and the lack of political will 
by the central government actively to develop the region. 

The  situation  in  Sandžak  has  continued  to  deteriorate.  Divisions  within  the  Muslim 
community  have  deepened  and  there  have  been  several  outbreaks  of  violence.  Municipal 
structures lack the capacity fully to enforce minority rights in Sandžak. 

The  number  of  refugees  from  Croatia  and  Bosnia  and  Herzegovina  has  decreased  in  recent 
years,  mainly  due  to  naturalisation.  According  to  the  UNHCR,  there  are  around  97  000 
refugees and 206 000 internally displaced persons (IDPs) in Serbia. The number of centres 
has been reduced. However, some 2 100 refugees and 5 500 IDPs are still accommodated in 

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60 centres and 99 specialised institutions. The conditions in those centres are very poor. The 
amendments to the Law on refugees and a national strategy on refugees and IDPs have not yet 
been  adopted.  IDP  groups,  in  particular  the  Roma,  continue  to  face  serious  difficulties 
obtaining identification papers and thus access to basic social services, including health care.  

In January 2008, the Re-admission Agreement between Serbia and the EU entered into force. 
The agency for human and minority rights published a handbook for returnees. However, the 
national strategy on returnees and re-integration has not yet been adopted.  

In  June  2008,  Serbia  took  over  the  annual  presidency  of  the  2005-2015  Decade  of  Roma 
Inclusion. The key priorities of the Serbian chairmanship are housing and anti-discrimination 
measures  in  the  field  of  education.  In  March  2008,  the  Council  for  Implementation  of  the 
Roma  Decade  was  established  under  the  chairmanship  of  the  Deputy  Prime  Minister  and 
involving  representatives  of  civil  society.  However,  it  has  met  only  once.  Roma  health 
mediators have been employed in 15 primary healthcare centres. Funds have been earmarked 
in  the  national  budget  for  the  work  of  coordinators  for  Roma  issues  in  40  municipal  social 
work  centres  by  2008.  Awareness-raising  activities  in  cooperation  with  the  international 
partners have continued. Media training on Roma issues was organised for government press 
officers and journalists. There have been some improvements in the number of Roma children 
attending secondary schools due to the affirmative measures taken by Ministry of Education 
and  the  Ministry  of  Human  and  Minority  Rights.  However  the,  generally,  low  school 
attendance by Roma children remains a serious problem, in particular among Roma girls. 

In  practice  the  Roma  population  continues  to  face  extremely  difficult  living  conditions, 
exclusion  and  discrimination.  One  of  the  major  persistent  problems  facing  the  Roma 
community is access to personal documents. This has had grave consequences for the ability 
of large sections of the Roma population to gain access to basic social and economic rights. A 
significant  proportion  of  the  Roma  population  still  lives  in  extreme  poverty  and  illegal 
settlements.  The  Roma  population,  especially  women,  are  subject 
to  widespread 
discrimination when it comes to access to the labour market. There are a disproportionately 
high  number  of  Roma  children  in  special  schools  for  children  with  learning  difficulties.  A 
climate of intolerance towards the Roma population continues to prevail in Serbia. 

Overall, the framework for the protection of minority rights in Serbia is in place and minority 
rights  are  broadly  respected.  However  there  were  some  negative  developments  during  the 
reporting period due, in large part, to the unstable political climate following the declaration 
of  independence  of  Kosovo.  On  the  legal  front,  legislation  on  national  councils  needs  to  be 
adopted  and  the  electoral  framework  revised  in  order  to  fully  ensure  affirmative  action. 
Insufficient  attention  has  been  paid  to  resolving  the  status  of  refugees  and  IDPs.  The 
conditions of the Roma population remain very difficult. 

2.3. 

Regional issues and international obligations 

There  are  no  major  outstanding  issues  in  connection  with  Serbia's  compliance  with  the 
Dayton/Paris peace agreement. 

Serbia continues to be covered by the monitoring procedure of the Parliamentary Assembly of 
the  Council  of  Europe  on  fulfilment  of  obligations  and  commitments  arising  from  its 
membership of the Council of Europe. 

Serbia  has  made  significant  progress  on  improving  cooperation  with  the  International 
Criminal Tribunal for the former Yugoslavia (ICTY). Full cooperation with the ICTY is 

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an international obligation and one of the key priorities of the European Partnership. In June 
2008 Stojan Župljanin was arrested near Belgrade and transferred to The Hague. In July 2008, 
following the formation of a new government and staff changes in the intelligence services, 
ICTY fugitive Radovan Karadžić was arrested in Belgrade and also transferred to The Hague. 

Serbia needs to build on these achievements and do all in its powers to arrest and transfer of 
the two remaining fugitives, Ratko Mladić and Goran Hadzić. 

The status of the former State Union law on the freezing of assets of ICTY fugitives has not 
been clarified. Assets are being frozen, but the procedures are highly complex and the current 
legal framework leaves potential loopholes and shortcomings in enforcement. Amendments to 
the  current  legislation  included  special  investigative  measures  against  support  networks  for 
war crime fugitives and a more efficient system for investigating and processing cases. 

To  date,  the  War  Crimes  Chamber  of  the  Belgrade  District  Court  has  tried  123  individuals 
suspected  of  involvement  in  war  crimes  on  the  territory  of  the  former  Yugoslavia.  The 
prosecution service has conducted proceedings against 111 persons, since it was established in 
2003  and  has  filed  indictments  against  57  persons,  representing  over  2,000  victims  of  war 
crimes. 

Several cases were opened and judgments handed down in the different instances during the 
reporting  period.  Good  regional  cooperation  continued,  allowing  direct  exchanges  of 
evidence, documents and data relevant to investigations of war crimes cases. A memorandum 
of understanding was signed in October 2007 between the Serbian special prosecutors and the 
supreme State prosecutor of Montenegro. 

However, the work of specialised institutions is affected by the limited capacity to investigate 
and process a higher number of cases. There were continuing threats against the war crimes 
prosecutor and the president of the war crimes chamber.  

Serbia's  policy  regarding  the  International  Criminal  Court  (ICC)  is  aligned  with  the  EU 
guiding principles and the EU common positions on the integrity of the Rome Statute. Serbia 
has concluded no bilateral agreements granting exceptions from ICC jurisdiction. 

Serbia  opposed  reconfiguration  of  the  international  civilian  presence  in  Kosovo,  including 
EULEX  deployment,  unless  authorised  by  the  UN  Security  Council.  Serbia  organised 
municipal elections in Kosovo in May 2008 in spite of UNMIK opposition and strengthened 
its  parallel  institutions  in  Kosovo  including  the  establishment  of  an  assembly  of 
municipalities.  In  July  2008,  the  Serbian  government  adopted  a  conclusion  endorsing  the 
establishment  of  the  assembly  of  municipalities  as  necessary  to  safeguard  the  interests  of 
Serbs in Kosovo 

The  Serbian  government  has  used  legal,  diplomatic  and  peaceful  means  to  contest  the 
declaration  of  independence  by  the  Kosovo  assembly.  In  January  2008,  the  government 
adopted  action  plans  providing  measures  in  response  to  the  expected  declaration  of 
independence.  In  February  2008,  the  Serbian  government  adopted  a  decision,  which  was 
subsequently endorsed by parliament, on the annulment of the declaration of independence.  

The  Serbian  authorities  issued  protest  notes  to  and  recalled  serving  ambassadors  from 
countries  that  recognised  Kosovo's  declaration  of  independence,  including  EU  Member 
States.  Following  a  decision  by  the  new  Serbian  government  in  July  2008,  Serbian 
ambassadors who had been withdrawn from EU Member States subsequently returned to their 

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posts.  Ambassadors  from  Montenegro  and  the  former  Yugoslav  Republic  of  Macedonia  to 
Serbia were in October 2008 declared persona non grata following the recognition of Kosovo 
by Montenegro and the former Yugoslav Republic of Macedonia.  

In August 2008 Serbia submitted a draft resolution to the UN General Assembly, seeking an 
advisory opinion from the International Court of Justice on the legality of the declaration of 
independence of Kosovo. In October 2008 the UN General Assembly voted, on the basis of 
the Serbian resolution, in favour of asking the International Court of Justice (ICJ) for a non-
binding advisory opinion. 

There have been no significant developments regarding the implementation of the Sarajevo 
Declaration which aimed at completing the refugee return process.  

Regional cooperation and good neighbourly relations form an essential part of the process of 
Serbia's moving towards the European Union. 

Serbia actively participated in regional initiatives, including the transition from the Stability 
Pact  to  a  more  regionally  owned  framework  with  the  South  East  European  Cooperation 
Process (SEECP) and the Regional Cooperation Council (RCC). Serbia has also contributed 
to  ensuring  effective  implementation  of  the  Central  European  Free  Trade  Agreement 
(CEFTA).  Serbia  also  actively  participated  in  the  Energy  Community  Treaty.  Serbia's 
participation in regional cooperation has been affected by its approach towards participation 
of Kosovo in the regional initiatives and other fora. It is important that Serbia demonstrates a 
constructive attitude towards Kosovo's participation in regional initiatives. 

Relations  with  enlargement  countries  and  neighbouring  EU  Member  States  have  been 
intense, with frequent bilateral contacts and visits. 

Economic  agreements  continue  to  be  implemented  between  Serbia  and  Albania.  However 
relations  between  the  two  countries  have  been  affected  by  Albania's  recognition  of  the 
independence of Kosovo.  

Relations  with  Bosnia  and  Herzegovina  remain  stable.  By  arresting  an  ICTY  fugitive 
Radovan  Karadžić  in  July  2008,  Serbia  took  an  important  step  towards  complying  with  the 
February  2007  ruling  of  the  International  Court  of  Justice  concerning  application  of  the 
Convention on the Prevention and Punishment of the Crime of Genocide. In January 2008, the 
Serbian parliament and the parliament of Republika Srpska signed a Protocol on Cooperation. 
A  number  of  Serbian  politicians  considered  decisions  of  the  High  Representative  in  Bosnia 
and  Herzegovina  concerning  changes  in  the  decision-making  procedures  in  the  Bosnia  and 
Herzegovina  Council  of  Ministers  and  in  the  Parliamentary  Assembly,  a  violation  of  the 
Dayton  Agreement.  This  led  to  exchange  of  sharp  statements  between  the  Belgrade  and 
Sarajevo  authorities.  A  border  agreement  with  Bosnia  and  Herzegovina  has  not  yet  been 
signed. 

Relations  with  Croatia  are  stable  but  have  been  affected  by  Croatia's  decision  to  recognise 
Kosovo. The provisional visa-free regime remains in force. There has been some progress in 
cooperation on missing persons and on war crimes prosecutions. There has been no progress 
in  delimiting  the  border.  Other  open  matters  include  property  related  issues,  in  particular 
claims for compensation for lost occupancy and tenancy rights, refugee return, and Croatia’s 
genocide lawsuit before the International Court of Justice, on which hearings began in May 
2008. 

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Serbia's  relations  with  the  former  Yugoslav  Republic  of  Macedonia  with  were  stable 
throughout  much  of  the  reporting  period.  However  relations  were  adversely  affected  by  the 
decision of the former Yugoslav Republic of Macedonia to recognise Kosovo's independence 
in October 2008. Serbia has also protested against border demarcation activities by the former 
Yugoslav Republic of Macedonia which involved the Kosovo authorities. Unresolved issues 
concerning relations between the Orthodox Church in the two countries persist. 

Relations with Montenegro advanced smoothly during much of the reporting period, but were 
adversely  affected  by  the  decision  of  Montenegro  in  October  2008  to  recognise  the 
independence  of  Kosovo.  There  has  been  progress  on  a  number  of  bilateral  issues.  An 
agreement  on  defence  cooperation  was  signed  in  November  2007.  An  Agreement  with 
Montenegro on social security entered into force in January 2008. On the basis of a bilateral 
agreement,  Serbia  continues  to  represent  certain  Montenegrin  interests  abroad,  including 
issuing of visas. The issues regarding dual citizenship for members of the Serb community in 
Montenegro  remained  unresolved.  Tensions  between  the  two  orthodox  churches  have 
continued.  

Relations  with  Turkey  are  generally  good.  There  is  a  high  level  of  support  for  intensifying 
bilateral  cooperation.  However,  political  relations  were  affected  by  Turkey's  recognition  of 
Kosovo independence. Serbia is currently negotiating a free trade agreement with Turkey. 

Serbia  continues  to  maintain  good  relations  with  Romania.  Relations  with  Bulgaria  and 
Hungary were affected after both of these countries recognised the independence of Kosovo.  

Overall, Serbia has been active in regional cooperation initiatives. However,  regional  issues 
have  been  affected  by  Kosovo-related  developments.  Serbia  has  made  significant  progress 
towards fully cooperating with the ICTY. 

3. 

ECONOMIC CRITERIA 

In examining the 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  existence  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 December 2007, the government submitted to the European Commission an Economic and 
Fiscal Programme (EFP), covering the years 2007-2010. It builds on the budget memorandum 
of April and the October 2007 update thereof and presents a generally coherent and ambitious 
macroeconomic  and  fiscal  framework  together  with  an  ambitious  agenda  for  structural 
reforms. The 2009 budget memorandum was adopted in May 2008 and was followed by an 
update  on  2  October  2008.  In  early  October,  the  government  approached  the  International 
Monetary  Fund  (IMF)  on  starting  negotiating  a  new  Stand-by  Agreement,  in  an  attempt  to 
establish an external policy anchor. The government has cited the need for greater ownership 
of, and autonomy for, economic policy planning and implementation. Overall, consensus on 
the fundamentals of a market economy has been maintained.  

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Macroeconomic stability 

In  2007,  GDP  growth  accelerated  to  7.5%,  from  5.7%  in  2006.  Following  a  strong 
performance in the first half of 2007, the Serbian economy slowed down somewhat during the 
second half of the year. Higher private consumption as a consequence of strongly rising real 
salaries  slowed  in  the  course  of  the  year.  Furthermore,  the  severe  drought  resulted  in  a 
significant  drop  in  agricultural  production.  Industrial  output  slowed  to  about  2.5%  year-on-
year  during  the  second  half  of  the  year,  partly  due  to  an  overhaul  of  the  US  Steel  plant. 
During  the  second  quarter  of  2008,  GDP  growth  slowed  to  6.2%  year-on-year,  from  8.2% 
year-on-year during the first quarter. For the whole first half  of 2008,  GDP  growth  reached 
7.3% year-on-year. Growth of industrial production accelerated to 6.0% year-on-year during 
the first quarter of 2008 compared with 0.7% during the fourth quarter of 2007, driven by the 
resumption of production at US Steel. However industrial output slowed to 2.3% year-on-year 
during the second quarter of 2008. Average per capita income increased to 35% of the EU-27 
average  in  purchasing  power  standards,  from  33%  a  year  earlier.  Overall,  economic  growth 
continued to be driven by the services sector, in particular wholesale and retail trade, transport 
and telecommunications, along with financial intermediation.  

In 2007, the current account deficit widened to 12.4% of GDP compared with 9.4%4 a year 
earlier,  driven  by  a  growing  deficit  in  the  trade  balance  and  a  decline  in  current  transfers. 
Strong  domestic  demand  fuelled  by  a  significant  relaxation  of  fiscal  and  wage  policies, 
coupled with a drought-related export ban on some agricultural products and a drop in steel 
output,  contributed  to  a  deterioration  in  external  accounts.  On  the  financing  side,  capital 
inflows remained strong, but slowed during 2007 to 21% of GDP, from 30% in 2006. Foreign 
direct investment fell to 5.1% of GDP from 13.8% a year earlier when the sale of the second 
mobile telephone operator yielded substantial revenue. By contrast, financing by medium- and 
long-term foreign borrowing grew to 10% of GDP, from 9% in 2006. During the first half of 
2008, the current account deficit widened to close to 20% of GDP and FDI rebounded below 
9% of GDP. At the end of 2007, the stock of foreign exchange reserves of the National Bank 
of  Serbia  (NBS)  stood  at  EUR  9.6  billion  or  8.3  months  worth  of  imports  of  goods  and 
services. As a result of the growing debt financing of the external deficit, foreign debt rose to 
about EUR 18.9 billion at the end of 2007, equivalent to 65% of GDP, compared with 63% a 
year  earlier.  Private-  and  public-sector  foreign  debt  stood  at  43%  and  22%  of  GDP 
respectively. Debt service has increased to 8.5% of GDP and is projected to continue rising 
significantly  in  years  ahead.  Overall,  external  imbalances  have  widened,  the  quality  of 
financing  has  deteriorated,  foreign  indebtedness  has  grown  and  the  degree  of  macro-
vulnerability of the economy has increased.  

By October 2008, the international financial crisis has had only a limited direct impact on the 
Serbian economy and its financial sector. However, a widening current account deficit and a 
growing level of external debt create important external financing needs requiring significant 
capital  inflows.  To  that  extent,  the  external  imbalances  render  the  Serbian  economy 
vulnerable to possible disruptions in capital flows. The risks of a sudden stop or reversal of 
capital flows have recently grown and/ higher risk premiums and refinancing costs could put 
further  pressure  on  the  external  side.  In  particular,  a  decline  in  cross-border  lending,  which 
has  become  an  important  financing  source  for  the  domestic  corporate  sector,  could  be 
affected. . The Serbian authorities have recently increased the amount of guaranteed deposits, 

4 

This  is  revised  downwards  from  17.7%  of  GDP  in  2007  and  13.8%  in  2006,  following  a  change  of 
method by the National Bank of Serbia in early 2008. 

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lifted  reserve  requirement  for  banks'  foreign  borrowings  and  eliminated  the  tax  on  savings 
income.  In  2007,  labour  market  conditions  improved  slightly.  The  employment  rate  rose  to 
51.5% of the working-age  population  in October 2007, while the unemployment rate fell to 
18.8%  compared  with  21.6%  a  year  earlier.  However,  the  transfer  of  about  90,000 
unemployed persons from the employment register to the health insurance register, following 
an  amendment  to  the  legislation,  contributed  to  this  apparent  improvement  in  the  labour 
market statistics. Nominal wages grew by 22.1% year-on-year on average in 2007, compared 
with 24.4% a year earlier. Due to a decline in inflation during the first half of 2007, real wage 
growth accelerated to about 20% year-on-year - substantially stronger than in 2006. However, 
a  renewed  rise  in  inflation  starting  in  the  second  half  of  2007  resulted  in  a  slowing  of  real 
wage  growth.  This  trend  continued  in  2008.  During  the  first  half  of  2008,  nominal  wage 
growth slowed to 19% year-on-years and, due to a higher inflation rate, real wages slowed to 
in  recent  years 
7.8%  year-on-year.  Overall,  despite  high  economic  growth  rates 
unemployment is still a major challenge.  

The  new  monetary  policy  framework,  introduced  in  September  2006,  aims  at  a  gradual 
transition towards inflation targeting with explicit targets for annual core inflation rates. Core 
inflation  declined  slightly  to  5.5%  year-on-year  in  December  2007,  compared  with  5.9%  a 
year  earlier.  For  the  whole  of  2007  core  inflation  remained  within  the  4-8%  target  range, 
despite  re-emerging  inflationary  pressures  stemming  from  rising  aggregate  demand,  the 
drought-related increase in food prices and rising prices for crude oil and derivatives on world 
markets.  However,  core  inflation  re-accelerated  during  the  second  half  of  2007  and  in  the 
course of 2008, reaching 10.3% year-on-year in July against a core inflation target range of 3-
6% for the whole of 2008. By comparison, the headline rate of retail price inflation, followed 
more  closely  by  the  public,  slowed  to  an  annual  average  of  6.8%  in  2007,  compared  with 
12.7% a year earlier. Retail  price inflation bottomed out at 4.5% year-on-year in May 2007 
and then began to rise, ending on 10.1% year-on-year in December 2007. This upward trend 
continued in 2008 and retail price inflation reached 10.5% year-on-year in August 2008. To 
stem the rising inflationary pressures but also to help support the local currency, which had 
come under pressure on the foreign exchange market in early 2008 due to growing political 
uncertainty, the NBS increased the repo rate by 625 base points to 15.75% between December 
2007 and May 2008. However, the expansion of monetary aggregates remained strong during 
2007.  The  annual  M3  growth  rate,  covering  currency  in  circulation  plus  demand,  time  and 
savings  deposits,  accelerated  during  the  second  half  of  2007,  reaching  43%  year-on-year  in 
December. This trend reversed in 2008 when M3 growth slowed to 34% year-on-year in June. 
Credit growth also decelerated during the same period and stood at 32% year-on-year in June 
2008,  partially  due  to  higher  interest  rates,  also  affected  by  global  financial  crises.  Overall, 
while  the  new  monetary  policy  framework  of  inflation  targeting  managed  to  tackle 
inflationary  pressures,  the  real  test  of  whether  the  set  target  can  be  achieved  will  come  in 
2008,  as  inflationary  pressures  have  resurfaced  and  are  contributing  to  a  less  stable 
environment for economic operators. 

As  far  as  foreign  exchange  rate  policy  is  concerned,  the  NBS  tightened  administrative 
measures  aimed  at  discouraging  use  of  the  euro  within  the  economy  and,  at  the  same  time, 
making  the  dinar  more  attractive.  The  NBS  has,  in  principle,  limited  its  intervention  in  the 
inter-bank  foreign  exchange  market  to  situations  of  excessive  daily  fluctuations.  However, 
during  the  second  half  of  2007  the  NBS  was  prompted  to  intervene  in  support  of  the  dinar 
which  repeatedly  came  under  depreciation  pressure.  This  continued  in  early  2008  and  the 
NBS sold EUR 393 million to support the dinar during the first four and a half months of the 
year.  Following  the  formation  of  a  pro-European  government,  the  Serbian  dinar  (RSD) 
significantly regained strength. The EUR/RSD exchange rate fluctuated between RSD 75 and 

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RSD  85  in  2007  and  2008.  Overall,  the  volatility  of  the  exchange  rate  increased,  mainly 
because of political developments. 

Fiscal  policy  remained  expansionary  in  2007  and  2008  ahead  of  presidential  and 
parliamentary elections. Following the inflow of substantial privatisation proceeds in 2006, an 
increase  in  expenditure  was  achieved  without  significant  new  borrowing.  According  to  the 
Government Finance Statistics (GFS) standard of accounting, the general government balance 
declined  to  1.9%  of  GDP  in  2007,  from  1.5%  of  GDP  a  year  earlier.  Total  expenditure 
remained  high  at  44%  of  GDP  in  2007,  compared  with  43.9%  a  year  earlier.  Capital 
expenditure related to implementation of the National Investment Plan increased to 4.8% of 
GDP  in  2007  from  3.9%  in  2006.  During  the  same  period,  current  expenditure  declined  to 
38.5% of GDP, from 39.5%, indicating some success on the part of fiscal policy in curbing 
constant pressures for higher current spending. However, labour costs and transfers continued 
to account for more than 60% of total public spending. Following the reform of the tax system 
in  previous  years,  total  revenue  has  stabilised  at  around  42%  of  GDP.  2007  saw  a  slight 
decline  of  revenue  to  42.1%  of  GDP,  from  42.4%  in  2006.  During  the  same  period,  public 
debt  declined  to  29.4%  of  GDP,  from  36.2%,  while  net  lending  remained  low,  increasing 
marginally  to  0.6%,  from  0.5%.  For  2008,  a  revised  budget,  which  was  adopted  by  the 
government  in  early  October,  foresees  a  deficit  of  the  consolidated  government  budget  to 
increase  to  2.7%  of  GDP,  compared  to  an  initially  planned  deficit  of  1.7%.  This  boosts 
expenditure to 45.4% of GDP, adding additional demand pressures on an economy showing 
already signs of overheating and growing macroeconomic imbalances. Overall, fiscal policy 
remained expansionary, ahead and after several rounds of elections, contributing to weakened 
macro-economic  stability.  The  fiscal  position  remains  vulnerable  and  fiscal  policy  would 
benefit  from  strong  external  anchors  in  the  face  of  growing  expenditures  pressures  and  the 
ongoing financial crisis. 

Overall, the macroeconomic policy mix was unbalanced, with insufficient fiscal restraint. The 
growing macroeconomic imbalances and external and financial vulnerabilities require a more 
restrictive  policy  response.  Monetary  policy  would  normally  be  expected  to  deliver 
adjustments  which  are  unlikely  to  be  attained  with  the  announced  fiscal  policy.  However, 
largely due to the high degree of euroisation, Serbia lacks an effective monetary transmission 
mechanism.  This  situation,  coupled  with  the  untested  record  of  the  central  bank  on  its 
inflation targeting policy, may actually imply that the government will not be able to match 
fiscal policy adequately to containing rising external imbalances. The onus within the policy 
mix  is  therefore  expected  to  remain  on  fiscal policy to address these imbalances. Overall, a 
too lax fiscal policy ahead of and after various elections has contributed to growing external 
imbalances and to inflationary pressures induced by domestic demand. 

Interplay of market forces 

Finalising the process of privatisation or, when appropriate, liquidation of socially- and State-
owned enterprises is one of the key priorities of the European Partnership.  

Privatisation of socially-owned companies continued in late 2007 and early 2008, in the form 
of  both  tenders  and  auctions.  About  400  socially-owned  companies  were  sold  in  2007  (16 
tenders, 283 auctions and over 100 companies sold through the sale of State-owned stakes on 
the capital market). This was followed by about 40 privatisations in the first two months of 
2008, but the process slowed in March. The total number of companies privatised since the 
process started in 2002 had risen to over 2,200 by the end of February 2008. The number of 
firms  that  still  need  to  be  sold  has  consequently  declined  to  about  700.  The  deadline  for 

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completing this process has been extended by one year until the end of 2008. A commission 
for the privatisation of public utilities has been set up and the government plans to privatise 
two State-owned companies by the end of the year.  

Four large State-owned companies (the electricity company EPS, Telekom, Belgrade airport 
and the pharmaceutical company Galenika) are due to be put up for sale in the form of initial 
public offerings. Selection of a privatisation advisor has started. The first few companies are 
expected to be sold in 2008 and the whole process to be completed by 2010. A tender for sale 
of national flag carrier JAT Airways failed due to lack of interest. The oil conglomerate NIS 
has been sold as part of a framework agreement for supply of gas and oil with Russia. Serbia 
has entered with Fiat into a joint venture to restructure local car manufacturer Zastava into a 
modern production unit of the Fiat group. The question of privatisation of about 500 utilities 
at  the  level  of  local  communities  also  remains  open.  Their  restructuring  and  reorganisation 
have not yet begun and the plan for their privatisation remains undefined. 

In December 2007, the law on the free distribution of shares in six State-owned companies to 
all  adult  citizens  who  did  not  benefit  from  earlier  privatisations  (15%  of  capital)  and  to  ex-
employees  of  these  companies  (2-5%  of  capital)  was  adopted.  Under  this  law  about  4  to 
4.5 million citizens are expected to receive free shares in these large companies. 

The share of the private sector remains at between 55% and 60% of total output. The private 
sector employs over 60% of the total number of employees. However, socially-owned, and in 
particular only partly restructured and non-privatised State-owned, companies still generate a 
large  part  of  Serbia's  output.  Private  companies  remain  relatively  weak  and  have  a  major 
share in trade, but less so in production. This prevents development of competitive domestic 
products and burdens public finances. Overall, while there has been some progress with the 
privatisation of socially-owned companies, this is not the case with State-owned companies. 
As a result, a competitive and dynamic private sector has not yet been fully established. 

Market entry and exit 

As  regards  market  entry  and  exit,  some  progress  was  made  during  the  reporting  period.  In 
2007,  around  12,100  new  companies  and  48,700  new  entrepreneurs  were  registered.  In  the 
first three months of 2008, an additional 3,100 new enterprises and 10,100 entrepreneurs were 
registered. However, the business environment has not improved substantially. With regard to 
market exit, implementation of the 2005 Bankruptcy Law has continued. About 25% of cases 
were  closed  within  one  year  and  another  20%  within  two  years.  However,  the  number  of 
pending cases was still very high on 651 at the end of 2007. In addition, the bankruptcy unit 
of  the  Privatisation  Agency  has  more  than  360  socially-owned  enterprises  in  its  portfolio. 
Most  of  the  cases  have  now  been  pending  for  three  years  or  more  and  some  for  even  more 
than  a  decade  (mainly  related  to  bankrupt  socially-owned  enterprises).  The  business 
environment has deteriorated, particularly in the areas of starting a business and construction 
permits.  On  the  other  hand,  registering  property  has  been  facilitated.  Overall,  amid  some 
progress, excessive bureaucratic requirements and complex legislation continue to hamper the 
business environment. 

Legal system 

As  regards  the  legal  system,  no  significant  progress  can  be  reported.  Several  reform-related 
laws  have  been  held  up  and  implementation  of  the  existing  laws  is  sometimes  weak.  The 
courts  and  administrative  bodies  lack  the  technical  capacity  and  personnel  to  perform  their 

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activities properly and promptly. This has led to inconsistent implementation and very lengthy 
procedures, which frequently exceed the deadlines set by law. Widespread corruption as well 
as criminal activities affect the business climate and impact  negatively the quality of public 
services.  Overall,  the  weaknesses  of  the  judiciary  reduce  legal  predictability  and  undermine 
trust in the legal system among economic operators, in particular in effective enforcement of 
property rights.  

Financial sector development 

Lending activity of banks increased by 39%. Loans increased to 35% of GDP and 53% of the 
banking  sector's  total  balance  sheet.  The  share  of  total  loans  granted  to  the  enterprise  and 
household sectors stood at 58% and 40% respectively. Of the latter, 13% were used for house-
building. Deposit activity of banks grew by 44%. The largest share of deposits was accounted 
for by the household sector (46%), followed by the enterprise sector (33%) and bank deposits 
(12%). Foreign currency deposits made up 67.7% of total deposits. Short-term time deposits 
(52%)  predominated,  followed  by  demand  deposits  (40%).  Overall,  financial  intermediation 
continued  to  grow,  but  from  a  still  relatively  low  level.  However,  the  high  degree  of 
euroisation of assets and liabilities, combined with potential currency mismatches, could give 
rise to substantial balance-sheet risks for banks, households and corporations. 

The number of majority State-owned banks remained unchanged at eight (out of a total of 34), 
while  20  banks  are  now  majority-owned  by  foreign  shareholders.  Six  banks  were  under 
majority  ownership  of  domestic  natural  persons  or  legal  entities.  The  five  largest  banks  in 
terms of assets accounted for 46.5% of the total banking sector. In May 2008, the NBS issued 
a  new  licence  to  a  non-EU  bank  for  a  green-field  investment.  Overall,  while  competition 
between banks is well established, privatisation of the State-owned banks has not advanced. 

At the end of March 2008, 28.3% of the banking sector's total assets were classified as risky. 
The share of total credits in default in total outstanding debt stood at 4.4%, while the foreign 
exchange  risk  ratio  of  banks  stood  at  13.8%.  The  average  capital  adequacy  ratio  of  the 
banking  system  stood  at  27.7%  and,  consequently,  remained  well  above  the  required 
minimum  of  12%  of  risk-weighted  assets  for  each  bank.  The  profitability  of  the  banking 
sector improved and  the  return on equity increased to 12.7%. Overall, the banking sector is 
profitable and remains generally sound. However, the high share of risky assets may indicate 
substantial financial vulnerabilities. 

Following strong gains by both indexes at the Belgrade Stock Exchange during the first few 
months of 2007 (up by 88%), equity markets began to retreat and had lost all their early-2007 
gains by August 2008.  

At  the  end  of  May  2008,  21  insurance  companies  were  operating  in  Serbia  (including  four 
green-field companies that received operating licences in 2007 and early 2008). The structure 
of  the  insurance  sector  is  continuing  to  change  with  the  privatisation  of  the  socially-owned 
insurance  companies  and  the  arrival  of  new  foreign  investments.  In  addition,  the  second-
biggest insurance company (DDOR of Novi Sad) was successfully privatised in 2007, when it 
was sold to an EU-based insurance company. As a result, foreign ownership of the insurance 
sector  has  increased  strongly  to  62.8%  of  total  premium  income  in  2007  compared  with 
26.4%  a  year  earlier.  In  the  four  years  from  2004  to  2007,  the  premium  income  of  non-life 
insurance almost doubled. In the case of life insurance it nearly tripled. At the same time, the 
insurance sector's share of capital in the total financial sector has increased to 6.9%. Overall, 
significant progress has been made with development of the non-banking financial sector.  

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3.2. 

The  capacity  to  cope  with  competitive  pressure  and  market  forces  within  the 
Union 

Existence of a functioning market economy 

Deteriorating macroeconomic stability, together with greater political uncertainty, contributed 
to  creating  a  less  stable  and  less  predictable  climate  for  decision-making  by  economic 
operators. The functioning of market mechanisms, which is required for efficient allocation of 
resources,  was  hampered  by  distortions,  heavy  State  involvement  in  production  of  private 
goods and lack of competition. 

Human and physical capital  

to 

the  growing  shortages  by  becoming  more  proactive 

Little progress can be reported on reform of the education system. The growing gap between 
demand for and supply of skilled employees is one of the main obstacles to increasing direct 
foreign  investment  and  developing  new  branches  of  the  economy.  However,  companies  are 
in  offering 
responding 
personal/professional  development  and  training  incentives  to  new  recruits.  In  addition,  the 
number  of  human  resource  consultants  and  recruitment  firms  has  increased.  These  not  only 
provide  support  in  locating  people  with  the  right  skills,  but  also  offer  services  like 
organisational  and  personnel  development.  Public  universities  continue  to  be  overburdened 
with  bureaucracy  and  curricula  are  often  outdated.  A  number  of  private  universities  have 
emerged.  Attitudes  towards  lifelong  learning  and  mobility  started  to  change  only  recently. 
Public  education  expenditure  accounts  for  a  relatively  small  3.7%  of  GDP,  well  below  EU 
levels.  Overall,  the  economy  has  increasingly  been  suffering  from  a  shortage  of  skilled 
employees, while supply has only gradually been building up in response. 

In  2007,  the  investment  ratio  fell  to  18%  of  GDP  from  19.7%  in  2006.  Foreign  direct 
investment fell sharply to EUR 1.6 billion or 5.1% of GDP from EUR 3.4 billion or 13.8% a 
year earlier. The sectors benefiting most from FDI were banking and the real estate business, 
followed  by  processing  industry  and  wholesale  and  retail  trade.  Funds  from  the  National 
Investment Plan (NIP) have been used for various infrastructure projects (Belgrade ring road 
and motorways in Southern Serbia), but also to stimulate foreign investment and job creation. 
The total budget for expenditure under the NIP stands at EUR 600 million for 2008. Overall, 
investment activity from domestic sources has been holding up well, while foreign investors 
have become more hesitant, primarily due to growing political uncertainty. 

Sectoral and enterprise structure 

Progress in selling State-owned companies was hampered by the election cycle and political 
developments. Restructuring and privatisation have been slow. The shift of economic activity 
towards  the  services  sector  is  continuing,  with  services  currently  accounting  for  54.7%  of 
GDP. Manufacturing and construction account for 16.3% of GDP, while agriculture's share of 
GDP declined to 9.2%. About 50% of all employees are still working in State- and socially-
owned  enterprises.  The  informal  sector  remains  large.  Overall,  the  pace  of  structural 
adjustment of the economy is being held back by slow reforms. 

State influence on competitiveness 

Subsidies from the consolidated State budget accounted for 1.5% of GDP in 2007, down from 
2.4% a year earlier. Relevant legislation on State aid control and the appropriate monitoring 
mechanism and authority are still missing. State-controlled monopolistic structures remain in 

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place, such as the import ban on refined petroleum products to protect the domestic refinery 
industry from foreign competition. Overall, State influence on competitiveness has declined, 
but remains substantial. 

Economic integration with the EU 

Exports  and  imports  of  goods  and  services  grew  to  28%  and  50%  of  GDP  respectively  in 
2007,  compared  with  27%  and  47%  a  year  earlier.  As  a  result,  trade  openness  increased  to 
78%  of  GDP  in  2007  from  74%  in  2006.  The  EU  remained  Serbia's  main  trading  partner. 
Exports and imports of goods and services to and from the EU increased to 56% and 54% of 
total exports and imports respectively, compared with 53% and 49% in 2006. Serbia's other 
main trading partners were Montenegro, Bosnia and Herzegovina, Russia and China. Overall, 
foreign trade has continued to grow and trade integration with the EU remains at a high level. 

Net  foreign  direct  investment  from  EU  countries  in  Serbia  remains  unchanged  at  about 
EUR 2.3  billion.  However,  the  EU's  share  of  total  net  foreign  direct  investment  in  Serbia 
almost doubled to 116% in 2007 from 61% a year earlier. This large swing was caused by a 
strong inflow to Serbia from Norway in 2006, combined with a strong outflow from Serbia to 
Bosnia  and  Herzegovina  in  2007,  both  of  which  distorted  the  figures  for  total  net  foreign 
direct investment in Serbia.  

Standard  indicators  suggest  a  continuing  deterioration  in  export  price  competitiveness.  Real 
wages  grew  by  14.1%,  i.e.  by  more  than  average  labour  productivity  (estimated  at  8.6%), 
implying a 5.4% increase in real unit labour costs. The nominal effective exchange rate of the 
dinar  appreciated  by  3.3%.  In  real  effective  terms,  the  dinar  appreciated  by  10.1%,  as 
consumer prices grew faster on the domestic market than abroad.  

4. 

EUROPEAN STANDARDS 

This section examines Serbia’s capacity gradually to approximate its legislation and policies 
to the acquis related to the internal market, sectoral policies and justice, freedom and security, 
in  line  with  a  Stabilisation  and  Association  Agreement  and  the  European  Partnership 
priorities.  It  also  analyses  Serbia’s  administrative  capacity.  In  each  sector,  Commission's 
assessment  covers  progress  achieved  during  the  reporting  period,  and  summarises  the 
country's overall level of preparations.  

4.1. 

Internal market 

This section examines Serbia’s capacity gradually to approximate its legislation and policies 
to the acquis related to the internal market, sectoral policies and justice, freedom and security, 
in  line  with  a  Stabilisation  and  Association  Agreement  and  the  European  Partnership 
priorities.  It  also  analyses  Serbia’s  administrative  capacity.  In  each  sector,  Commission's 
assessment  covers  progress  achieved  during  the  reporting  period,  and  summarises  the 
country's overall level of preparations.  

4.1.1.  Free movement of goods 

There  has  been  some  progress  in  the  area  of  free  movement  of  goods.  In  the  field  of 
standardisation,  progress  can  be  reported  following  the  approval  of  the  statute  of  the 
Standardisation  Institute.  The  appointment  of  the  managing  board  of  the  Standardisation 
Institute  in  December  2007  has  allowed  for  the  development  of  activities,  including  the 

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adoption  of  annual  financial  plans  and  an  annual  programme.  In  January  2008,  the 
Standardisation  Institute  became  an  affiliate  member  of  the  European  Committee  for 
Standardisation  (CEN).  The  Institute  has  been  able  to  significantly  increase  the  number  of 
European  standards  (ENs)  adopted  annually.  By  September,  2,805  European  Standards  had 
been  adopted  as  Serbian  standards.  However,  the  new  law  on  standardisation  has  not  been 
adopted.  Serbia  still  needs  to  intensify  its  efforts  to  repeal  mandatory  standards  and  adopt 
European  standards  in  order  to  achieve  full  membership  of  the  European  standards 
organisations.  The  Ministry  of  Economy  and  Regional  Development  was  appointed  in 
December 2007 as the enquiry point for technical regulations in Serbia. At the same time, the 
Standardisation Institute of Serbia was appointed as the enquiry point for adopted or proposed 
standards  in  Serbia.  The  Standardisation  Institute  also  needs  to  strengthen  human  resources 
and improve training facilities.  

Progress  can  be  reported  in  the  area  of  conformity  assessment.  The  number  of  accredited 
conformity  assessment  bodies  has  increased  by  61  and  currently  stands  at  the  level  of  325. 
However, the law on technical requirements for products and conformity assessment has still 
to be adopted and a new designation procedure for conformity assessment bodies has not yet 
been established.  

Some progress can be reported in the area of accreditation. Institutional capacities have been 
improved through the establishment of the accreditation council of the Accreditation Body of 
Serbia  in  March  2008.  The  Accreditation  Body  has  improved  its  IT  capacity  and  the 
collection  of  fees.  However,  its  human  resources  and  training  facilities  are  limited. 
Furthermore,  the  new  law  on  accreditation  has  not  been  adopted.  There  is  also  a  need  to 
develop new accreditation schemes.  

Progress  can  be  reported  in  the  area  of  metrology,  mainly  on  the  upgrading  of  calibration 
laboratories. Serbia has also attained associated membership in the European Cooperation in 
Legal Metrology. However, further efforts in the area of legal metrology are still needed. The 
new law on metrology has not yet been adopted. The institutional setup of the Directorate of 
Measures  and  Precious  Metals  has  to  be  clarified  and  the  limited  administrative  capacities 
upgraded. 

There  has  been  no  progress  in  the  area  of  market  surveillance.  Preparations  for  the 
establishment  of  an  appropriate  market  surveillance  structure  in  line  with  Community 
legislation have not yet started. Coordination among the market surveillance authorities is still 
lacking.  

Serbia  continued  to  experience  delays  in  the  transposition  of  sector  specific  Community 
legislation.  

Progress has been made in the area of consumer protection. The establishment of advisory 
centres for consumer protection has begun, and training activities for professional staff within 
the  area  of  consumer  protection  have  started.  The  National  Bank  of  Serbia  has  worked  to 
increase awareness of financial literacy and to create consumer confidence in using financial 
services.  The  budget  of  the  Ministry  of  Trade  and  Services  within  the  consumer  protection 
area  has  increased  substantially.  Also  efforts  to  improve  public  awareness  have  been 
intensified.  However,  a  new  law  on  general  product  safety  has  not  yet  been  adopted.  The 
work  of  the  national  council  of  consumer  protection  is  not  efficient  enough.  A  new  law  on 
consumer protection, upon which the further development of advisory centres is contingent, 
has still to be adopted. The implementation of the national consumer protection programme is 

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weak,  and  no  annual  programme  has  been  adopted.  The  administrative  capacity  of  the 
Ministry of Trade and Services remains weak, and there are no out-of-court dispute resolution 
bodies.  Public  awareness-raising  activities  are  not  sufficient,  and  the  capacity  of  consumer 
organisations  to  contribute  effectively  in  this  respect  is  limited,  especially  when  the  61 
consumer organisations in Serbia are fragmented and lacking financial resources.  

Overall,  preparations  in  the  area  of  free  movement  of  goods  are  moderately  advanced. 
However,  the  legal  framework,  such  as  the  law  on  technical  requirements  for  products  and 
conformity assessment or the legal framework for metrology, needs to be further developed. 
Serbia has not yet aligned national legislation with the product-specific acquis, to clarify the 
institutional  set-up  and  to  strengthen  the  administrative  capacity.  Nor  has  Serbia  aligned 
national legislation with the acquis for non-product related issues such as consumer contracts 
and marketing law. Cooperation between state institutions within the area is not sufficiently 
developed. Serbia needs to raise general awareness of the importance of quality infrastructure 
among  ministries  as  well  as  economic  operators  and  needs  to  speed  up  implementation  and 
the enforcement of legislation on consumer protection.  

4.1.2.  Movement of persons, services and right of establish ment 

Some progress was made in the area of movement of persons. The new law on foreigners has 
been adopted. . The administrative capacity of the Ministry of Economy, which is in charge of 
movement  of  workers,  is  limited.  There  have  been  no  developments  in  the  area  of  co-
ordination of social security.  

With  regard  to  the  right  of  establishment  the  Agency  for  Business  Registers  improved  its 
procedural  management  by  issuing  the  registration  certificate  for  business  entities  within  a 
maximum of 5 days. 

An  electronic  database  on  business  entities  and  entrepreneurs  is  now  fully  operational.  The 
Business Registry has still to be transformed into a one-stop shop for all procedures related to 
business start-ups, including issuance of a tax number, which is currently provided by the Tax 
Administration.  There  are  still  delays  due  to  certain  requirements  to  issue  accompanying 
licences at the municipal level. 

No  progress  was  made  on  company  law,  and  amendments  to  the  Company  Act  and  the 
Company Registration Act are still pending. The Law on accounting and auditing from June 
2006 is only partly harmonised with the acquis, while the adoption of the new law that should 
be  fully  harmonised  is  still  pending.  The  application  of  the  international  financial  reporting 
standards is obligatory. National Accounting Council, established by the Ministry of Finance 
and  Association  of  the  Certified  Auditors  are  both  operational.  However,  the  preparation  of 
the Strategy and Action Plan on corporate financial reporting by the former is still pending.  

As  far  as  provision  of  services  is  concerned,  in  the  area  of  financial  services  the  National 
Bank  of  Serbia  is  entrusted  with  the  supervision  of  the  banking,  insurance  and  voluntary 
pension  funds  sectors  and  is  active  in  using  its  supervisory  powers  (on-site  inspections, 
reporting,  regulatory  powers).  The  Securities  Commission  is  in  charge  of  supervising  the 
capital market. The Securities Commission has recently been strengthened, but it is still not 
sufficiently independent and lacks competencies as defined by international standards.  

Serbia  needs  to  make  efforts  to  align  its  banking  regulation  with  the  acquis,  especially 
focusing on the Capital Requirement Directive which implements the Basel II framework in 
EU legislation. The supervisory capacity needs to be further strengthened in order to be able 

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to cope with the requirements put in place with the Capital Requirements Directive and risk-
based supervision. 

Overall,  the  preparations  in  the  areas  of  movement  of  persons,  services  and  the  right  of 
establishment and company law are moderately advanced towards meeting SAA obligations.  

4.1.3.  Free movement of capital 

In  the  area  of  free  movement  of  capital there  has  been  some  progress  during  the  reporting 
period.  

The National Bank of Serbia has adopted additional implementing legislation with the aim of 
further  liberalising  capital  flows.  Furthermore,  the  National  Bank  of  Serbia  amended  the 
regulation on personal transfers of foreign cash to and from Serbia, raising the ceiling from 
€5,000  to  €10,000  as  of  June  2008.  This  measure,  which  is  in  line  with  the  acquis,  should 
simplify  customs  procedures  and  significantly  liberalise  cross-border  transfers  of  cash.  In 
February  2008,  the  National  Bank  of  Serbia  and  the  National  Bank  of  Bosnia  and 
Herzegovina  began  to  implement  the  clearing  arrangement  that  will  include  a  number  of 
banks  from  the  two  states.  The  National  Bank  of  Serbia  also  signed  the  Memorandum  on 
cooperation with the National Bank of former Yugoslav Republic of Macedonia in the area of 
banking supervision.  

However, outward payment and current account transactions are not yet fully liberalised and 
restrictions on short-term credit and portfolio investments are still in place. 

According to the Law on Foreign Exchange Operations, non-residents are free to make direct 
investments. There are restrictions in the arms sector and in areas defined as restricted zones 
by law, where foreign investors may only participate in joint ventures with domestic entities 
subject to the consent of the Ministry of Defence and without acquiring the majority rights to 
manage the enterprise.  

Foreign natural and legal persons can acquire property in Serbia only if there is a reciprocal 
agreement with their country of origin and if they can demonstrate that they are conducting 
business  activities  in  Serbia  Legal  entities  wanting  to  purchase  property  are  required  to  be 
established in Serbia. During the reporting period, there was significant foreign investment in 
the banking and the trade sectors. 

Overall,  preparations  in  the  area  of  capital  movements  are  moderately  advanced.  However, 
Serbia needs to further progress to timely respond to the gradual liberalisation laid down in 
the SAA.  

4.1.4.  Customs and taxation 

Serbia  has  made  good  progress  in  the  area  of  customs.  In  terms  of  legislative  activities,  an 
implementing  regulation  was  adopted  which  allows  full  alignment  of  the  customs  tariff 
nomenclature  with  the  EU  2008  Combined  Nomenclature  and  the  Harmonised  System 
classification.  However,  further  alignment  with  the  EU  Customs  Code  is  still  required,  in 
particular  with  regard  to  transit  and  security  provisions.  Moreover,  in  order  to  fully  comply 
with the provisions of the SAA, Serbia needs to abolish fees related to the normal application 
of customs procedures. 

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The  customs  administration  was  reorganised  and  administrative  capacities  of  the  customs 
administration  have  been  further  strengthened.  A  new  Tariff  Division  was  established  and 
revenue  collection  increased,  despite  a  reduction  in  the  average  level  of  the  duties.  The 
customs administration also established a Post-Clearance Department, with 20 staff members 
at national level and about 30 staff at regional level. Furthermore, the customs administration 
intensified  its  anti-smuggling  activities  in  joint  actions  with  the  other  state  bodies  and 
international  partners.  A  Risk  Management  Strategy  has  been  adopted.  By  using  risk 
analysis,  the  customs  administration  achieved  good  results,  especially  in  the  seizure  of 
narcotics and counterfeited goods. The new Code of Conduct has been implemented and as 
many as 70 employees have been dismissed. These changes helped the disclosure of cases of 
abuse of office and the prosecution of these individuals before the court..  

The  activities  relating  to  the  implementation  of  the  integrated  border  management  strategy 
and action plan have been pursued further. Nonetheless, additional efforts are needed in order 
to achieve a more uniform and less discretionary application of customs procedures at various 
customs posts.  

Overall,  Serbia  is  already  well  advanced  in  terms  of  meeting  the  SAA  requirements  and 
remains committed to reforms in the area of customs. There has been improved IT support for 
audit and risk analysis. The enforcement capacity of the Serbian customs administration has 
improved.  However,  Serbia's  customs  infrastructure,  customs  procedures  and  human  capital 
need to be further strengthened. Audits, post clearance controls and general management need 
to be based more on mid-term strategies and annual plans, in order to enhance performance 
and to ensure consistency in their application. 

In the area of taxation, some progress has been recorded. New ad valorem and specific duties 
on  cigarettes  became  applicable.  This  has  brought  the  structure  of  the  excise  duties  on 
cigarettes in line with the acquis.  

The Serbian tax administration intensified its efforts to improve tax collection. Tax revenues 
have  been  rising  constantly  since  2003,  and  this  trend  continued  in  2008.  Both  regular  and 
enforced  collections  have  improved.  The  tax  administration  also  initiated  a  number  of 
bankruptcy procedures against tax debtors aiming at collecting unpaid taxes. Field audit has 
improved  as  the  result  of  improved  procedures.  As  of  March  2008,  mandatory  electronic 
filing of tax returns for the large tax payers has been introduced. 

The  tax  administration  has  also  identified  a  large  number  of  "phantom  companies"  thus 
stepping up the fight against tax fraud. The number  of criminal charges for  tax evasion has 
been  constantly  increasing,  in  particular  on  withholding  tax  and  social  contributions  on 
salaries. The tax administration continued to actively cooperate with the special prosecutor on 
organised  crime.  The  audit  department  was  restructured  and  strengthened,  and  was  also 
supported by an IT system developed using own resources in the tax administration. Due to 
this new approach, field audits became more successful. 

In  the  area  of  training  and  education,  the  Serbian  tax  administration  intensified  efforts  to 
improve  employee  skills  and  administrative  capacity.  Training  has  been  provided  for  new 
recruits as well as the majority of current employees.  

tax  administration 

The  Serbian 
tax 
administrations  in  the  implementation  of  ratified  bilateral  agreements  in  particular  on 
avoidance of double taxation, cooperation and mutual assistance. 

international  cooperation  with  other 

improved 

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There was little progress on approximation of tax legislation to the acquis, particularly with 
regard  to  direct  taxation.  New  business  taxation  based  on  the  principles  of  the  Code  of 
Conduct  has  still  to  be  adopted.  Certain  new  tax  arrangements  are  not  compatible  with  the 
acquis,  such  as  the  reduced  rate  of  VAT  on  computers  or  on  the  acquisition  of  a  first 
apartment for residential purposes. 

Overall,  Serbia  is  well  advanced  in  meeting  the  requirements  of  the  SAA  in  the  area  of 
taxation. In particular the new ad valorem and specific duties on cigarettes became applicable 
in line with the SAA. Enforcement capacities of the tax administration and tax collection have 
been strengthened, but there is still a sizeable informal sector, and the collection of registered 
tax  debts  has  to  be  reinforced.  Serbia's  tax  legislation  remains  partially  aligned  with  the 
acquis  and  certain  provisions,  most  notably  on  excise  duties  and  VAT,  need  further 
alignment. Serbia needs to follow up to ensure compliance of its tax legislation with the Code 
of Conduct for business taxation. In the area of direct taxation, alignment with the acquis is 
still at an early stage.  

4.1.5.  Competition 

There has been some progress in the area of implementation of anti-trust legislation.  

The efficiency of the Commission for the Protection of Competition has been improved by the 
allocation of new premises and the employment of new staff. In 2007, the Commission for the 
Protection of Competition dealt with twice as many cases as in 2006, including some highly 
sensitive cases affecting the general public. In particular the number of cases related to merger 
control increased. .  

The majority of the competition cases in 2007 (around 85%) related therefore to the control of 
mergers,  while  this  trend  continued  during  2008  There  is  a  need  for  a  more  adequate 
notification threshold for mergers, ensuring that the obligation to notify is restricted to those 
mergers that are liable to affect competition in Serbia.  

The  existing  anti-trust  legislation  is  not  yet  fully  aligned  with  the  requirements  of  the  SAA 
and  Interim  Agreement.  The  merger  control  procedures  are  not  yet  adequate  to  ensure  the 
efficiency  of  the  Competition  Commission.  The  enforcement  capacities  of  the  Commission 
for the Protection of Competition are still weak, notably due to its inability to impose fines. It 
is  essential  that  the  operational  independence  of  the  competition  authority  is  assured.  The 
enforcement capacity of the judiciary is weak due to lack of specialised knowledge. Work has 
just begun on competition advocacy among government officials, regulators, judges, business 
community, and the general public. 

No  progress  has  been  made  in  the  area  of  state  aid.  In  September  2008,  the  Serbian 
government  adopted  the  report  on  the  state  aid  inventory  for  2006.  However,  Serbia  has 
neither  yet  adopted  a  legislative  framework  for  state  aid  nor  established  an  operationally 
independent state aid authority or a system of ex-ante control of state aid measures which are 
required  by  the  SAA.  Monitoring  of  state  aid  continues  to  be  weak  and  administrative 
capacity is insufficient. 

Overall,  Serbia  is  moderately  advanced  in  the  area  of  anti-trust,  including  mergers,  but  its 
legislative  framework  and  enforcement  capacities  have  still  to  be  improved.  In  the  area  of 
state  aid,  preparations  are  still  at  an  early  stage.  Efforts  are  needed  to  meet  the  SAA 
requirements in competition. 

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4.1.6.  Public procurement 

Some  progress  has  been  made  in  the  area  of  public  procurement.  Transparency  of  award 
procedures was improved by the establishment of a web-based portal, which has also brought 
a reduction in expenses, increased competition and control, better communication among the 
stakeholders,  more  reliable  statistics,  greater  awareness  and  a  better  public  procurement 
environment overall. 

However,  gaps  in  the  existing  legal  framework  and  amendments  to  public  procurement 
legislation are still outstanding.  

The  public  procurement  institutions,  including  the  Public  Procurement  Office  and  the 
Commission  for  the  protection  of  bidders'  rights  have  insufficient  physical  and  human 
resources.  Their  operational  independence  has  not  improved.  Further  efforts  are  needed  on 
training and the development of the public procurement system. The Strategy for upgrading 
the  public  procurement  system  in  Serbia,  adopted  in  June  2006,  has  not  yet  been 
implemented.  

The implementation of a non-discriminatory and well functioning public procurement system 
in Serbia continues to be adversely affected by the weaknesses in the public administration's 
internal audit system, by the absence of a fully functioning supreme audit institution and by 
corruption.  

Overall,  Serbia  still  lacks  a  consistent,  effective  and  fully  independent  public  procurement 
system  with  streamlined  award  procedures.  Additional  efforts  are  needed  in  terms  of 
amending  the  legislative  alignment,  implementation  of  the  public  procurement  strategy  and 
strengthening the capacity to implement the requirements of the SAA 

4.1.7. 

Intellectual property law 

Some  progress  has  been  made  in  the  area  of  intellectual  property  rights.  The  Intellectual 
Property  Office  was  appointed  coordinator  for  intellectual  property  rights  within  the 
government  in  October  2007.  This  has  improved  the  cooperation  between  various  state 
institutions. The IT capacity of the office has been strengthened. The IT capacity of the office 
has  been  strengthened  and  some  additional  staff  has  been  recruited  as  well.  However,  the 
administrative capacity of the Intellectual Property Office is not sufficiently developed. The 
Office needs additional qualified staff and continued training activities. The government has 
not  yet  appointed  its  Director.  The  financing  of  Intellectual  Property  Office  from  the  state 
budget (currently under the responsibility of the Ministry of Finance) needs to be determined, 
in  order  for  it  to  be  transformed  into  a  financially  autonomous  agency,  thus  increasing  its 
organisational efficiency.  

In  relation  to  industrial  property  rights,  the  Intellectual  Property  Office  has  continued  to 
strengthen  its  IT  capacity,  in  particular  by  starting  to  develop  a  national  industrial  design 
database, in order to improve cooperation with economic operators. In June 2008, Serbia was 
invited  to  accede  to  the  European  Patent  Organisation.  The  process  of  granting  patents  has 
been streamlined in accordance with European standards. The law on optical discs has not yet 
been adopted.  

Some progress has been made in the field of enforcement. The tax authorities have started to 
take  specific  measures  in  order  to  protect  intellectual  property  rights.  Seizures  by  market 
inspection officers have improved slightly. The customs administration has continued to make 

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progress  in  enforcing  intellectual  property  rights.  There  is  still  inadequate  storage  space  for 
counterfeited goods that infringe copyright and related rights. The market inspectorate has 
not made sufficient efforts to combat infringements. There is a shortage of judges specialized 
in  this  area.  There  have  been  some  campaigns  to  raise  public  awareness  on  intellectual 
property rights, both for relevant state institutions and the general public. 

Overall,  Serbia's  preparations  in  the  area  of  intellectual  property  rights  are  moderately 
advanced. Efforts need to be strengthened in order to improve alignment with the acquis and 
administrative capacity and enforcement. Public  awareness raising activities also need to  be 
sustained in the fight against piracy and counterfeiting.  

4.1.8.  Employment and social policies 

Little progress has been made in the area of employment policy. The employment strategy is 
in line with EU requirements, but its application remains weak. Active policy measures aimed 
at  boosting  employment,  in  particular  in  the  SME  sector,  have  been  prepared  and 
implemented.  

Work  continued  on  the  development  of  regional  training  centres  under  the  national 
employment service. This has contributed to a limited reduction in the number of unemployed 
but the rate remains high with a large percentage of unemployed women (53.8%). The reform 
of  the  education  system,  including  vocational  training,  is  lagging  behind.  Reforms  in  the 
employment services have also been delayed and although some progress has been registered, 
the effectiveness and administrative capacity of the National Employment Service is not yet 
sufficient. 

In general, the record of implementing of employment measures and policies has improved, 
but  coordination  and  harmonization  with  other  policies  is  not  sufficient  in  order  to  reduce 
unemployment. 

In  the  field  of  social  policies,  the  labour  law  of  March  2005  remains  unchanged,  although 
certain implementing rules have been adopted.  

There has been no progress in the area of health and safety at work.  

A  general  Collective  Agreement  was  signed  in  April  2008  between  the  association  of 
employers  and  two  representative  trade  unions,  for  the  first  time  without  state  mediation. 
However,  social  dialogue  continues  to  be  weak.  The  functioning  of  the  Socio-Economic 
Council needs to be improved.  

Concerning  social  inclusion,  the  Serbian  poverty  reduction  strategy  has  contributed  to 
reducing  the  number  of  people  living  in  absolute  poverty.  This  number  was  reduced  from 
about one million in 2002 (14.4% of the population) to under 500,000 in 2007 (about 6.6% of 
the  population).  However,  fighting  poverty  and  social  exclusion  in  particular  of  Roma  and 
IDP  remains  a  key  challenge.  Serbia  signed  the  Convention  on  the  Rights  of  Persons  with 
Disabilities  in  December  2007,  but  it  has  not  yet  been  ratified.  The  2007-2015  Disability 
Strategy  has  to  be  fully  implemented.  The  implementation  of  the  Law  against  the 
discrimination of people with disabilities is weak. 

There is no comprehensive anti-discrimination law. Widespread discrimination, in particular 
against  the  Roma  community,  people  with  disabilities,  ethnic  minorities  and  people  of 

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different sexual orientation, prevails. Protection against discrimination on the labour market is 
weak. 

Serbia  has  begun  the  process  of  decentralising  the  system  of  social  protection,  although 
financial  assistance  remains  highly  centralized.  Strategic  plans  for  the  development  of  a 
network of social institutions at local level have been adopted. The process has begun with the 
adoption  of  simplified  procedures  for  local  social  assistance  institutions.  Due  to  a  lack  of 
resources,  the  implementation  of  strategies  at  local  level  remains  weak.  The  process  of  de-
institutionalisation has begun and needs to be further developed. As of 1 January 2008, three 
pension  systems  (for  employed  persons,  the  self-employed  and  farmers)  have  been 
consolidated  into  a  single  system.  However,  this  consolidation  has  not  closed  the  financial 
gap in the pensions system, primarily because of the extremely low ratio of employed persons 
to pensioners.  

In  the  area  of  equal  opportunities,  the  National  Strategy  for  the  improvement  of  women's 
status  and  advancement  of  gender  equality  (2008–2014)  was  launched  in  January 2008.  A 
Gender Equality Department has also been established in the Ministry of Labour and Social 
Policy. However, the Law on Gender equality is still pending. Women continue to be over-
represented among the unemployed. 

Progress  can  be  reported  in  the  area  of  public  health.  The  reform  of  the  health  insurance 
system is ongoing. The IT capacity of the health insurance fund has been strengthened. The 
implementation of the law on health insurance has continued, in particular with regard to the 
inclusion  into  the  compulsory  health  insurance  scheme  of  people  who  were  not  previously 
covered  by  this  scheme.  Awareness  raising  campaigns  have  been  launched  directed  at  the 
general  public  and  aimed  at  improving  communication  between  health  professionals  and 
patients. However, the administrative capacity and managerial skills as well as funding in the 
public  health  sector  are  not  sufficiently  developed.  The  administrative  capacity  within  the 
Public  Health  Institute  is  also  limited.  Moreover,  a  strategy  on  public  health  and  a  law  on 
public  health  are  outstanding.  As  regards  mental  health,  the  government  has  taken  some 
measures  to  improve  existing  institutions  and  facilitate  de-institutionalisation.  However, 
community-based 
to 
institutionalisation. 

sufficiently  developed  as  an  alternative 

services  are  not 

Overall,  Serbia  has  started  to  address  its  priorities  in  the  area  of  employment  and  social 
policies. The country's capacity to effectively implement employment policies has improved, 
but is still inadequate. With regard to social policies, legislation still has to be adopted and the 
overall implementation needs to be further developed. Further efforts are needed in the area of 
public health in order to strengthen the administrative capacity and to develop a more patient-
oriented system.  

4.1.9.  Education and research 

Concerning European standards on education, there is little progress to report.  

Changes to the curriculum have been introduced in primary and secondary schools. Reforms, 
to  adapt  the  higher  education  system  to  the  Bologna  requirements,  have  continued.  A  law 
amending  the  Law  on  Higher  Education  was  adopted  in  October  2008.  The  process  of 
accreditation of higher education institutions has begun.  

However, sustained efforts are needed in order to ensure quality, mobility and links with the 
labour  market.  Links  between  university,  vocational  education  and  training  and  other 

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education  sectors  are  still  weak,  and  mechanisms  to  ensure  inter-sector  mobility  and  to 
facilitate  the  enrolment  in  higher  education  institutions  and  to  improve  recognition  of  prior 
learning are not in place. The development and adoption of a national qualification framework 
has not advanced. The vocational education training system needs to be reorganised and adult 
training  developed  in  order  to  ensure  a  broader  range  of  profiles  and  better  adaptability  to 
economic  needs.  Limited  administrative  capacities  and  a  lack  of  coordination  among 
responsible  institutions  remain  issues  of  concern.  Financing  for  the  education  sector  is  still 
inadequate.  It  represents  3.7%  of  GDP  and  is  affected  by  rigid  allocation  mechanisms, 
insufficient funding from local governments and a lack of involvement of the business sector. 
In  the  area  of  culture,  Serbia  signed  a  Memorandum  of  Understanding  in  2008  with  the 
European  Commission  and  began  participating  in  the  Culture  programme.  The  UNESCO 
Convention on cultural diversity has not yet been ratified.  

Concerning  science  and  research,  Serbia's  association  to  the  Seventh  EC  Research 
Framework Programme has provided a high rate of return in terms of successful projects. A 
consultative  bureau  for  international  projects  has  been  established  within  the  Ministry  of 
Science,  which  assists  and  encourages  researchers  to  participate  in  the  Seventh  Research 
Framework Programme. Serbia has expressed interest in becoming associated to the Seventh 
Euratom Research Framework Programme (2007-2011). With respect to the integration into 
the European Research Area, Serbia has still to adopt a national strategy aimed at increasing 
public  and  private  investment  in  research  and  promoting  scientific  careers  and  mobility  of 
researchers. Moreover, Serbia has not yet developed an integrated research policy. 

Overall,  Serbia  needs  to  continue  its  efforts  to  develop  and  adopt  actions  to  facilitate  its 
integration into the European Research Area. 

4.1.10.  WTO issues 

Serbian  preparations  to  join  the  WTO  are  relatively  advanced  although  the  process  slowed 
down  in  the  first  half  of  2008.  However,  if  progress  continues  as  planned,  Serbia  could  be 
well placed to meet its objective of joining the WTO in the near future. 

4.2. 

Sectoral Policies 

4.2.1. 

Industry and SMEs 

Serbia has made some progress in the SME sector.  

A  good  institutional  framework  for  SMEs  had  been  put  in  place,  and  its  performance  has 
improved during the reporting period. In particular, there has been a substantial improvement 
in  cooperation  and  coordination  between  the  various  actors  –  the  Ministry  of  Economic 
Affairs,  the  SME  agency,  and  other  stakeholders.  The  SME  Council,  which  comprises 
representatives  of  various  ministries  and  entrepreneurs,  meets  regularly  and  is  functioning 
well. However, not all ministries have yet fully taken the SME Council into account in their 
preparation of strategies and documents. Further strengthening of business advocacy is taking 
place through the reform of the Chambers of Commerce. The Agency for SME development 
has  developed  a  network  of  regional  agencies  and  local  offices  aimed  at  providing  non-
financial support.  

Regarding  the  regulatory  burden  on  the  business  environment,  the  Council  for  Regulatory 
Reform has elaborated a Strategy for Regulatory Reform in the Republic of Serbia for 2008-

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2011 together with an action plan with the aim of carrying out regulatory reform and reducing 
the administrative burden for SMEs 

Serbia continues to be fully committed to the process of the European Charter for Small and 
Medium-sized  Enterprises,  to  which  it  provided  high  quality  input.  Internal  coordination  is 
working well and there is active participation by all relevant bodies in the process.  

Based  on  the  programme  for  the  development  of business  incubators  and  clusters,  five  new 
incubators  started  operating  in  2007  and  one  in  2008,  bringing  the  total  number  to  17.  20 
clusters are operating and 14 projects are financially supported by the Ministry of Economy 
and Regional Development in the manufacturing, food production, tourism and IT sectors. 

However, the 2009-2013 Strategy for Competitive and Innovative SMEs, and its Action Plan, 
drawn  up  after  wide  consultations  with  representatives  of  the  SME  sector,  has  not  yet  been 
adopted. Serbia has not made progress in developing and implementing a modern industrial 
policy.  

Overall,  preparations  in  the  area  of  industry  and  SMEs  are  advanced  and  fulfil  the  relevant 
SAA requirements  

4.2.2.  Agriculture and fisheries 

Some  progress  has  been  made  in  the  area  of  agriculture  and  there  have  been  some 
improvements to the administrative capacity  

In  the  area  of  rural  development  the  government  adopted  three  regulations  defining  the 
distribution  and  use  of  subsidies  in  2008  in  the  areas  of  rural  tourism,  support  to  internally 
displaced persons, and  support  to the Roma community. However, a strategic plan for  rural 
development  and  a  multi-annual  rural  development  programme  have  not  been  adopted.  An 
inter-ministerial mechanism for coordination of policies related to rural development has not 
been  established.  The  rural  development  sector  is  in  need  of  qualified  staff,  and  the 
framework  legislation  on  rural  development,  which  is  intended  to  serve  as  a  basis  for  the 
establishment of a national agency for rural payments, has not yet been adopted.  

Concerning  the  wine  sector,  Serbia  has  strengthened  its  administrative  capacity  in  order  to 
prepare  for  the  establishment  of  a  vineyard  cadastre.  However,  a  sustainable  system  for 
vineyard and wine inspections has still to be established. A new law on wine has not yet been 
adopted. A national system of oenology laboratories has not yet been established. 

The  government  has  adopted  four  regulations  on  organic  production.  These  regulations 
support the development of the sector and accredit the first certification organisations. They 
represent important progress in terms of alignment with the acquis. 

In the area of food safety, Serbia has still to adopt framework legislation which complies with 
the  acquis.  Some  progress  has  been  made  in  clarifying  the  allocation  of  responsibilities 
between  the  relevant  inspectorates.  The  full  implementation  of  the  new  division  of 
responsibilities  and  in  particular  cooperation  between  the  Ministry  of  Agriculture  and  the 
Ministry of Health is subject to the adoption of this new framework legislation.  

No progress has been made with regard to the upgrading of food establishments. Serbia has 
been  listed  as  an  "approved  third  country"  in  the  milk  sector  for  treated  milk  products 
however, no establishment has yet been approved for export to the EU. 

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Serbia  has  made  some  progress  in  the  continued  development  of  a  veterinary  information 
management  system.  Progress  has  been  made  in  extending  animal  identification  and 
registration of their movements to a larger number of animal species. Following the entry into 
force  of  the  veterinary  law,  implementing  legislation  has  been  adopted.  However,  the 
Veterinary Directorate is in need of ongoing training activities and its management capacity 
remains limited. Decentralisation measures and training activities aimed at strengthening the 
field  veterinary  service  have  proved  insufficient.  Furthermore,  Serbia  needs  to  amend  the 
framework veterinary law to bring it into line with the acquis, and also to adopt a new law on 
animal welfare.  

Progress  has  continued  in  the  upgrading  of  laboratories,  notably  in  the  food  chain  area. 
However,  an  administrative  structure  for  the  management  of  reference  laboratories  for  food 
chain  control  has  still  to  be  established.  A  laboratory  information  management  system  for 
veterinary laboratories has not yet been integrated with the veterinary information system. 

There  is  little  progress  to  report  in  the  phytosanitary  area.  The  main  development  was  the 
adoption by the Ministry of Agriculture of an annual programme on plant health for 2008. A 
plant  health  law  and  a  law  on  plant  protection  products  have  not  yet  been  adopted.  A 
phytosanitary laboratory information management system has not yet been developed. 

In  the  fisheries  sector  there  has  been  no  progress  in  the  areas  of  marketing  standards  for 
fisheries products or with regard to structural policy. 

Overall,  Serbia  is  in  a  relatively  advanced  stage  of  preparation  in  the  area  of  agriculture  to 
fulfil SAA obligations. However, further efforts are needed in order to allow Serbia to better 
manage  agricultural  policy  and  to  continue  reforms  in  the  sector.  An  appropriate  legislative 
framework  needs  to  be  adopted  and  further  efforts  are  necessary  in  order  to  strengthen  the 
administrative  capacity  in  the  field  of  food  safety,  veterinary  and  phytosanitary  policy. 
Further efforts are needed in the fisheries area in order to comply with the relevant parts of the 
acquis and prepare for the implementation of structural assistance.  

4.2.3.  Environment 

There has been little progress in the area of environment. 

As regards horizontal legislation, there is a growing awareness of the importance and role of 
Environmental Impact Assessment (EIA) and Strategic Environmental Assessment (SEA). 

However, enforcement of EIA and SEA is not fully ensured and the level of non-compliance 
remains high. Inter-ministerial coordination on project assessment and the issuing of permits 
needs to be improved. Some training has been provided by the Ministry of Environment, but 
responsible  institutions  at  the  local  level  still  lack  the  necessary  capacities,  sufficient 
awareness and specific knowledge.  

The National Environmental Protection Strategy has not been adopted yet. The administrative 
structures  to  implement  the  Kyoto  Protocol  are  not  yet  in  place.  Serbia  has  acceded  to  the 
Espoo Convention whereas the Aarhus Convention has still to be ratified.  

There has been no progress in the area of air quality. 

No progress can be reported as regards waste management. The law on waste and the law on 
packaging and packaging waste have not yet been adopted. Waste management plans at both 

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national  and  local  levels  are  still  not  developed.  There  has  been  no  progress  regarding 
hazardous waste management.  

There  has  been  no  progress  in  the  field  of  water  quality.  A  new  law  on  water  has  not  yet 
been adopted. The issues of financial sustainability of the necessary investments and a reform 
of tariffs have still to be addressed.  

There has been no progress in the area of nature protection.  

On industrial pollution control and risk management, a rulebook on a register of polluters 
has  been  issued  and  is  maintained  by  the  Environmental  Protection  Agency.  The  Ministry 
compiled  a  list  of  around  220  installations  which will  have  to  comply  with  requirements  of 
the Industrial Pollution and Prevention Control (IPPC) Directive before the deadline of 2015, 
as set out in the relevant national law. Little progress has been made in enforcing legislation 
and in developing plans for the compliance of existing installations.  

No  progress  can  be  reported  on  genetically  modified  organisms  (GMOs),  chemicals  and 
noise. 

Administrative  capacity  has  improved  following  the  creation  of  a  separate  Ministry  for 
Environment Protection. The number of employees at the ministry has increased, in particular 
in  the  departments  dealing  with  European  integration  and  horizontal  legislation.  Local 
environment  development  plans  have  been  prepared  in  a  number  of  municipalities. 
Environment  protection  inspectorates  have  been  re-organised,  allocated  more  resources  and 
provided with specific training. Training activities on environmental law have been provided 
for judges and prosecutors. 

However, institutional capacity and technical and human resources at the local level are still 
insufficient,  as  is  coordination  with  the  central  level.  Judicial  enforcement  of  environment 
legislation still needs to be strengthened.  

The Water Directorate within the Ministry of Agriculture, Forests and Water continues to be 
understaffed  and  its  institutional  capacity  is  inadequate.  Coordination  between  the 
Environment and Agriculture ministries needs to be improved. 

The Environmental Protection Agency is fulfilling its tasks in the areas of data collection and 
cooperation  with  the  European  Environment  Agency.  Its  performance  is  improving,  but  the 
Agency still lacks the capacity to ensure proper implementation of the integrated monitoring 
strategy.  

Resources  allocated  to  environmental  protection  from  the  budget  have  been  increased,  but 
they still remain low. The Fund for Environmental Protection is active in the co-financing of 
projects, especially in the field of waste management, sanitation and air quality monitoring. 

A  National  Sustainable  Development  Strategy  was  adopted,  following  a  wide  consultation 
process. It is structured around three pillars: knowledge-based sustainability, socio-economic 
conditions and environment and natural resources. It identifies priority actions and includes a 
preliminary estimate of financial needs and priorities. 

Overall, Serbia is moderately advanced in the area of environment, including in some areas of 
horizontal  legislation.  However,  some  sectors  are  not  sufficiently  regulated.  Legislation 

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enforcement  at  all  levels  has  still  to  be  ensured.  There  is  still  no  legal  or  institutional 
framework for water quality.  

4.2.4.  Transport policy 

Serbia has made some progress in the area of transport. 

A  Strategy  for  the  development  of  rail,  road,  water,  air  and  inter-modal  transport  for  the 
period  2008  to  2015  was  adopted  in  December  2007,  providing  for  the  development  of 
Corridors VII and X and of the core network. The Strategy also includes general principles of 
the  acquis,  in  particular  the  concepts  of  sustainable  transport,  inter-modality,  and 
prioritisation  of  railways  and  waterways  as  alternatives  to  road  transport.  However,  the 
strategy does not adequately address institutional re-organisation and financial sustainability, 
and needs to be followed by more detailed action plans. 

There has been some progress in the area of trans-European transport networks. Serbia has 
continued  to  actively  participate  in  the  implementation  of  the  2004  Memorandum  of 
Understanding for the development of the Core Regional Transport Network and in the South 
East Europe Transport Observatory (SEETO).It has approved a multi annual plan 2008-2012  

As  regards  road  transport,  the  Serbian  Road  Company  has  good  human  and  technical 
capacities. However, a number of laws amending existing legislation, namely the Law on road 
haulage, the Law on transport of passengers, the Law on transport of dangerous goods and the 
Law on road safety, have still to be adopted. Once the Interim Agreement on trade and trade 
related  matters  enters  into  force,  Serbia  will  be  required  to  grant  unrestricted  Community 
transit traffic through Serbia.  

There has been little progress in the field of rail transport. In December 2007, Serbia signed 
the "Addendum to the Memorandum of Understanding on the Development of the South East 
Europe  Core  Regional  Transport  Network  for  a  South  East  European  Railway  Transport 
Area", aiming at the gradual market opening of the rail transport market. Amendments to the 
railways  law  have  not  been  adopted,  delaying  a  number  of  reforms,  in  particular  the 
establishment  of  a  regulatory  agency,  the  definition  of  public  service  obligations  and  the 
conditions  for  market  opening.  Separation  of  infrastructure  management  and  provisions  of 
transport  services  has  not  yet  developed  beyond  the  separation  of  accounts  and  a  system  of 
access charges has only recently been launched. The sector remains in need of operational and 
financial rationalisation and substantial restructuring  

In  the  field  of  inland  waterways,  there  is  moderate  progress  to  report.  The  Law  on  inland 
waterway transport has not yet been adopted and Serbia still needs to ratify relevant European 
Agreements in this field. The development of infrastructure, namely the Danube and the Sava 
River,  as  well  as  the  development  of  inland  ports  as  intermodal  terminals,  requires  specific 
focus and earmarked resources.  

There  is  little  progress  to  report  on  combined  transport  and  inter-modality.  A  limited 
liability company for combined transport has been created within the Railways Company. 

Some progress can be reported in the sector of air transport. The implementation of the first 
transitional  phase  of  the  Agreement  on  a  European  Common  Aviation  Area  (ECAA)  has 
continued and progress can be reported in security, safety and air traffic control. Nevertheless, 
the sector lacks the necessary legal framework, as the ECAA agreement is not ratified and the 

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Law  on  civil  aviation  has  not  been  adopted.  Preparations  for  restructuring  of  the  national 
carrier JAT are continuing.  

In terms of administrative capacity, the Ministry for Infrastructure needs to further reinforce 
its  capacities  and  to  strengthen  the  expertise  of  its  personnel,  especially  as  regards  the 
alignment of the national legislation with the acquis. The operational structures need to be re-
organised. The Civil Aviation Directorate is operational and has the necessary expertise but 
the  distribution  of  responsibilities  between  the  Ministry  and  the  Civil  Aviation  Directorate 
needs to be clarified. 

Overall, Serbia is relatively advanced in the area of transport, but needs to update and align its 
legislation to the acquis. The transport strategy needs to be followed up by a master plan and 
sectoral  measures.  Furthermore,  the  relevant  services  are  still  to  be  reorganised  and 
strengthened. 

4.2.5.  Energy 

There has been some progress in the overall energy field during the reporting period.  

There has been no progress regarding oil stocks. The level of available stocks remains below 
European minimum quantities.  

As  regards  security  of  supply,  some  progress  has  been  made  in  increasing  gas  reserves. 
Energy  interconnection  between  Serbia  and  other  countries  of  the  region  is  progressing. 
However,  the  implementation  of  the  Energy  Sector  Development  Strategy  remains  limited, 
especially at local level. The sustainability of the sector and necessary investments are still to 
be ensured.  

Good  progress  has  been  made  in  the  internal  energy  market.  A  grid  code  for  electricity 
transmission  was  adopted  in  April  2008.  A  tariff  system  for  electricity  transmission  was 
adopted  in  December  2007  and  has  been  in  force  since  January  2008.  A  tariff  system  for 
electricity settlements for tariff buyers was adopted in February 2008. The sector is moving 
towards  separation  and  identification  of  transmission  costs.  Transmission  system  operators 
have to a large extent become financially sustainable. The formal opening-up of the electricity 
and  gas  markets  to  non-household  consumers  has  been  achieved.  In  February  2008,  the 
Energy Agency lowered the eligibility threshold to all non-household consumers – a measure 
which  applied  to  47%  of  the  electricity  market  and  90%  of  the  gas  market.  The  Energy 
Agency is endowed with the necessary capacities and expertise, and has continued to fulfil its 
tasks in an independent manner, in line with the Energy Community Treaty requirements.  

However,  amendments  to  the  energy  law,  concerning  electricity  distribution  grid  codes  and 
electricity market rules, have not yet been adopted. The separation between distribution and 
supply  of  electricity  has  still  to  be  implemented,  and  the  related  deadlines  of  the  Energy 
Treaty  have  not  been  respected.  Unbundling  and  real  market  opening  requires  further 
substantial  measures.  The  adoption  of  a  sustainable  tariff  system  that  reflects  costs  remains 
has still to be adequately addressed.  

Serbia has signed a Memorandum of Understanding with Russia on energy which was ratified 
by  the  Serbian  parliament  in  September  2008.  This  is  a  framework  document  for  signing 
several deals in the energy field for which the terms are still to be negotiated. The agreement 
includes privatisation and modernisation of the Serbian Oil Company (NIS - Naftna Industrija 
Srbije), completion of the construction of an underground gas storage facility and the passing 

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of the Northern branch of the South Stream pipeline through Serbia. In the implementation of 
Memorandum  of  Understanding,  Serbia  needs  to  ensure  that  the  obligations  of  the  Energy 
Community Treaty are respected.  

Little  progress  can  be  reported  on  energy  efficiency  and  renewable  energy.  Serbia  is 
participating  in  the  energy  efficiency task force created within the Energy Community. The 
Energy  Efficiency  Agency  has  still  to  ensure  its  sufficient  capacity  and  financial 
sustainability.  

In the area of nuclear safety and radiation protection, Serbia has made some improvements. 
The dismantlement and removal of spent fuel from the Vinča research reactor is progressing. 
Practical work has started on the characterisation of spent nuclear fuel elements from the RA 
nuclear research reactor. The construction of a modern and safe storage facility for radioactive 
waste  is  well  underway.  However,  further  improvements  are  still  needed  to  fully  remediate 
the nuclear legacy of the past and to implement the Vinča Institute Nuclear Decommissioning 
(VIND)  programme  adopted  by  the  Serbian  government  in  2002.  The  technical  capacity  of 
the different Serbian organisations involved in nuclear issues also needs to be enhanced.  

From the legislative and regulatory point of view, Serbia has still to adopt a law on ionising 
radiation protection and nuclear safety and to set up the appropriate regulatory agency. Serbia 
has  still  to  accede  to  two  additional  international  Conventions,  namely,  the  Convention  on 
Nuclear Safety, and the Joint Convention on the Safety of Spent Fuel Management and on the 
Safety of Radioactive Waste Management. 

In  terms  of  administrative  capacity,  the  Ministry  for  Energy  and  Mining  has  increased  its 
personnel  by  about  10%,  adding  a  specific  unit  on  renewable  energy.  Municipalities  have 
been provided with assistance. However, capacity needs to be further strengthened. Plans on 
management of sealed radioactive sources, environmental monitoring and radiation protection 
in  the  context  of  medical  and  industrial  applications  have  to  be  further  developed.  An 
appropriate regulatory authority has still to be established.  

Serbia has not yet acceded to the Convention on Nuclear Safety and to the Joint Convention 
on  the  Safety  of  Spent  Fuel  Management  and  on  the  Safety  of  Radioactive  Waste 
Management 

Overall, Serbia is moderately advanced regarding the energy sector, but progress is uneven. 
Substantial  efforts  are  needed  to  comply  with  the  Energy  Community  Treaty  requirements 
and to address outstanding issues in relation to nuclear safety and radiation protection.  

4.2.6. 

Information society and media 

There  has  been  little  progress  in  the  area  of  electronic  communications  and  information 
technologies. The strategy for the development of telecommunications in Serbia from 2006 to 
2010 still lacks timelines for achievement of the defined objectives and for the introduction of 
liberalisation measures. 

Little  progress  can  be  reported  on  the  harmonisation  of  the  legislative  framework  with  the 
acquis, in particular due to insufficient coordination among responsible bodies. Coordination 
between  the  Ministry  for  Telecommunications  and  Information  Society  and  the  regulatory 
authority  (RATEL)  has  been  affected  by  major  disagreements,  preventing  the  proper 
functioning of regulatory and legislative mechanisms. The Ministry, in June 2008, decided to 
temporarily  take  over  RATEL's  responsibilities.  The  government  subsequently  repealed  this 

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decision indicating that it was not in line with the Law on Public Administration. Relations 
between  the  Ministry  and  RATEL  have  since  started  to  improve  and  a  set  of  decisions  on 
Voice  over  Internet  Protocol  (VoIP),  international  connectivity,  licensing  and  operators  and 
tariff rebalancing have been adopted. 

In July 2008, RATEL issued a decision granting State access to all internet communications 
even  without  a  specific  police  order.  This  decision,  aimed  at  combating  cyber  crime  and 
terrorism,  was  withdrawn  by  RATEL  at  the  request  of  the  Ombudsman  and  following 
criticism  from  the  Commissioner  for  public  information.  Internet  service  providers,  NGOs 
and  citizens  also  expressed  concern  that  the  measure  could  be  misused  and  constitute 
excessive control of and intrusion into citizens' privacy. 

The mobile telephony sector is formally liberalised and consists of three operators. As regards 
the fixed telephony sector, the legislative and regulatory framework remains to a large extent 
inadequate  for  the  entrance  of  new  operators  in  the  market.  Further  regulation  is  needed  in 
terms of competition safeguards, network access and infrastructure development. International 
connectivity  poses  a  major  problem  for  many  operators.  The  regulation  of  internet  service 
remains inadequate and makes the entry of new providers difficult. Internet penetration rates 
are  rising,  but  remain  low,  at  about  16%.  Tariff  rebalancing  and  the  development  of  cost 
models are outstanding issues. A universal service policy has still to be adopted. 

In  the  area  of  information  society  services,  the  authorities  have  identified  a  number  of 
priorities.  A  working  group  on  coordination  of  IT  activities  has  been  established  within  the 
Ministry  of  Telecommunications.  Three  technical  regulations  on  electronic  signature  have 
been  adopted.  However,  legislation  is  still  lacking  and  the  Strategy  on  Information  Society 
has  not  been  followed  up  by  action  plans  and  a  full  assessment  of  investment  needs. 
Currently, the role of IT in the government's communication with and services to citizens (e-
government)  is  limited.  Capacity  in  this  area  needs  to  be  strengthened,  especially  at  local 
level.  

Serbia  has  not  yet  adopted  the  necessary  legislation,  in  line  with  European  standards,  on  e-
commerce and conditional access services. 

In terms of administrative capacity, the Ministry, established in 2007, has not been provided 
with  an  updated  organisational  structure  and  sufficient  human  resources,  in  particular  in 
relation  to  the  European  integration  process.  RATEL  is  operational  and  financially 
autonomous. However, this authority does not have enough specific expertise to regulate an 
open telecommunications market. Its independence needs to be strengthened. 

Little  progress  has  been  made  in  the  area  of  audiovisual  policy.  Progress  was  made  in 
negotiations  with  the  WTO  on  audiovisual  services,  especially  through  the  negotiation  of 
exceptions  to  Most  Favoured  Nation  rules.  The  Broadcasting  Agency  changed  its  binding 
directive  to  the  Public  Service  Broadcaster  RTS  on  the  broadcast  of  live  parliamentary 
debates  into  a  recommendation.  Serbia  has  not  yet  signed  the  European  Convention  on 
Transfrontier  Television.  The  Law  on  Media  Concentration  has  not  yet  been  adopted  and 
amendments to the Broadcasting law are awaited. 

Transparency in the allocation of regional and municipal frequencies remains insufficient. 

No progress can be reported with regard to the institutional framework. The transparency and 
accountability  of  the  Broadcasting  Agency  still  have  to  be  strengthened  through  proper 
regulations. The enforcement of judicial decisions needs to be ensured. 

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Preparations in the area of information society and media are at an early stage. The sector is 
adversely affected by the legal vacuum and inadequate institutional and regulatory capacity. 

4.2.7.  Financial control 

There has been little progress in the area of financial control. There is still no comprehensive 
policy  on  Public  Internal  Financial  Control  (PIFC).  An  adequate  co-ordination  and 
harmonisation function for PIFC implementation is also lacking. The Central Harmonisation 
Unit has not been established. In its absence, its role is partly covered by the Internal Audit 
Unit in the Ministry of Finance. Internal Audit units have not been set up in all ministries. 

The State Audit Institution is not yet fully operational. Although it has produced a rule book 
regulating  its  internal  functioning,  there  have  been  delays  in  assigning  appropriate  premises 
for the office, which has delayed the recruitment of staff. So far only two auditors have been 
recruited.  

Overall,  Serbia  is  at  a  very  early  stage  of  preparations  for  introducing  PIFC  and  a  modern 
system  of  external  audit.  It  has  not  met  the  requirements  of  the  SAA  and  the  European 
Partnership priorities.  

4.2.8. 

Statistics 

Serbia has made some progress in the area of statistics during the reporting period. 

As  regards  statistical  infrastructure,  some  progress  can  be  reported  in  cooperation  and 
coordination  of  the  statistical  system  between  public  statistical  producers  in  Serbia.  The 
Serbian  Statistical  Office  signed  memoranda  of  understanding  with  the  Ministry  of 
Agriculture  covering  the  planned  agricultural  census  and  with  the  Ministry  of  Finance 
covering  data  delivery  to  the  statistical  office.  The  resource  situation  improved  slightly  and 
the  2008  budget  for  the  Serbian  Statistical  Office  has  increased.  However,  the  available 
funding is not yet sufficient to cover all planned activities. The new law on statistics has not 
been adopted. 

There was some progress as regards classifications and the business register. The process of 
harmonisation  with  EU  classifications  for  statistical  regions,  occupations  and  economic 
activities  and  products  has  started.  The  2008  Combined  Nomenclature  was  implemented  in 
external  trade  statistics.  Development  of  the  statistical  business  register  is  progressing. 
However, there are no operational statistical registers at the Serbian Statistical Office. 

As regards sectoral statistics, preparatory work has continued in a range of areas. Several pilot 
surveys  were  carried  out  and  some  results  were  published.  For  demographic  and  social 
statistics a labour cost pilot survey was conducted. The labour force survey methodology was 
revised. A pilot survey on innovation was conducted. For business statistics the results of the 
surveys on structural business statistics were published. These results are an important source 
for the national accounts. As regards transport statistics, a pilot survey on transport of goods 
was conducted.  

Overall,  Serbia  is  moderately  advanced  in  fulfilling  the  requirements  of  the  SAA  and  the 
European  Partnership  in  the  area  of  statistics.  Increased  efforts  are  needed  as  regards 
administrative capacity and priority setting. 

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4.3. 

Justice, freedom and security 

4.3.1.  Visa, border, control, asylum and migration 

Some progress has been achieved during the reporting period in the area of visa policy. The 
visa facilitation agreement between Serbia and the European Community entered into force in 
January  2008.  A  visa  liberalisation  dialogue  was  initiated  between  the  Commission  and 
Serbia. The Commission handed over a roadmap on  visa liberalisation in May 2008. Serbia 
provided  a  first  report  on  its  alignment  with  the  roadmap  benchmarks  in  September  2008. 
Serbia's diplomatic and consular representations continue to provide visas for Montenegro by 
mutual agreement.  

However,  the  current  visa  regime  is  still  not  fully  in  line  with  European  standards. 
Amendments  to  the  Law  on  citizenship  introduced  a  broad  concept  of  dual  citizenship  for 
applicants of Serbian origin. One of the most important criteria is registration in Serbia, which 
causes problems due to destroyed or missing registry books. 

The replacement of old and unsafe travel documents has been further delayed. The issuing of 
new ID cards started in April 2008; new biometric passports have only started to be issued as 
from  August  2008.  The  full  replacement  of  all  old  passports,  originally  planned  for  end  of 
December 2008, has been deferred to end 2009. 

The technical capacities of agencies involved in the issuing of visas, including equipment and 
training  to  detect  forged  and  falsified  documents,  have  not  improved  significantly.  Some 
border crossing points continue to be better equipped than consular representations, but their 
powers  to  issue  visas  are  limited.  Access  to  the  central  visa  database  in  the  Ministry  of 
Interior is still not provided. 

Overall, Serbia is moderately advanced in the area of visa policy. 

There has been some progress in the area of border control. A new Law on protection of the 
state  borders  was  adopted  in  October  2008.  Bilateral  protocols  on  regular  meetings  of  the 
heads  of  border  services  have  been  concluded  with  Montenegro  and  the  former  Yugoslav 
Republic of Macedonia. Staffing, initial training and provision of equipment for border police 
continued. Currently the border police comprise 3,120 staff.  

However,  implementation  of  the  national  integrated  border  management  strategy  and  the 
action plan has been slow.  

Inter-agency  cooperation  is  based  on  informal  arrangements,  as  multi-  and  bilateral 
agreements  to  cover  the  details  of  joint  actions  are  not  in  place.  There  are  considerable 
differences between the various border crossing points in terms of infrastructure and human 
and  technical  resources.  Not  all  border  crossing  points  have  IT  connections  and  some  lack 
even basic equipment, in particular on the border with Montenegro. 

Progress  can  be  reported  in  the  area  of  asylum.  The  new  Law  on  asylum  was  adopted  in 
November  2007  and  implementation  started  in  April  2008.  As  from  that  date,  the  Serbian 
authorities  officially  took  over  responsibility  for  handling  asylum  cases  from  the  UNHCR. 
The  asylum  centre  in  Banja  Koviljaca  became  fully  operational  and  was  handed  over  by 
UNHCR in June 2008. It has a capacity of 83 places, which is sufficient for current needs.  

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Asylum claims are assessed in the first instance by the new Asylum Office, which is located 
within the Ministry of the Interior. Appeals can be lodged at the Asylum Commission, which 
consists  of  eight  members  and  a  chairman  appointed  by  the  government.  In  certain  cases,  a 
legal review by the Supreme Court is possible. 

However, the new law shows some procedural weaknesses. In particular, there is no provision 
for a general appeal to an independent judicial body. Implementing legislation has not been 
fully  adopted.  The  capacities  of  the  Asylum  Office  and  the  Asylum  Commission  remain 
limited and training needs have not been sufficiently fulfilled.  

Due to the lack of referral mechanisms and asylum structures, asylum seekers who enter or 
remain illegally in Serbia continue to be subject to judicial and administrative detention. 

Overall, Serbia has started to address the main priorities in the area of asylum.  

There has been some progress in the area of migration. The Law on foreigners was adopted 
in  October  2008.  Implementation  of  the  readmission  agreement  with  the  European 
Community started in January 2008. Between September 2007 and June 2008, 871 requests 
were  filed  under  bilateral  agreements  and  100  under  the  EC  readmission  agreement.  Serbia 
has  agreed  to  688  of  these  requests.  In  November  2007,  Serbia  established  a  Council  for 
returnee reintegration and an inter-agency working group in charge of formulating a strategy 
and action plan in the area. 

However, Serbia's capacities for integrating returnees remain poor. The national strategy has 
not yet been adopted, nor has the legal framework for reintegration been developed to allocate 
the necessary resources for implementing a comprehensive reintegration policy.  

The handling of legal migration faces difficulties. Applications can only be filed from within 
the country. There is no central database of previous applications. Capacities of the competent 
Department for foreigners are weak. Currently, there are 5,253 foreign citizens permanently 
residing in Serbia. 

Serbia has continued to strengthen the capacities of the border police in order to fight illegal 
migration.  Sections  for  suppression  of  illegal  migration  and  trafficking  within  the  border 
police and the criminal police directorate continued to ensure good coordination with the 34 
police  secretariats.  From  September  2007  to  June  2008,  506  illegal  border  crossings  were 
recorded. In 2007, 952 overstay cases were reported.  

Overall, Serbia is moderately advanced in the area of migration policy. 

4.3.2.  Money laundering 

There has been little progress in the fight against money laundering. Activities were mainly 
focused  on  capacity  building  within  the  administration  for  the  prevention  of  money 
laundering  and  the  Financial  Intelligence  Unit.  A  national  strategy  for  the  prevention  of 
money  laundering  and  financing  of  terrorism  was  adopted  by  the  government  in  September 
2008. A manual for practitioners was developed and the number of cases being handled has 
increased. 

However, new legislation for the prevention of money laundering and financing of terrorism 
have  not  been  adopted.  Current  legislation  is  not  in  line  with  the  Council  directive  on 

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prevention  of  the  use  of  the  financial  system  for  the  purpose  of  money  laundering  and 
financing terrorist financing.  

Criminal investigations in money laundering cases have had very limited success. Police and 
prosecution service lack the capacities and expertise to follow up properly reports issued by 
the  Financial  Intelligence  Unit  concerning  suspicious  transactions.  This  results  in  a  low 
number  of  final  convictions  in  such  cases.  Proper  management  of  seized  assets  is  still  not 
assured. Legal entities do not fully comply with their reporting obligations and enforcement 
remains insufficient. Further efforts are needed in order to better control the high number of 
cash transactions.  

Preparations  in  the  area  of  money  laundering  are  still  at  an  early  stage.  Money  laundering 
continues to be a serious problem in Serbia. 

4.3.3.  Drugs 

Some  progress  has  been  achieved  in  the  fight  against  drugs.  Serbia  is  on  one  of  the  major 
Balkan  routes  for  transit  of  heroin,  cocaine,  marijuana  and  synthetic  drugs,  with  organised 
groups originating from Serbia being an important part of the criminal network. 

Capacities of the border police have been strengthened and efforts have been made to improve 
regional  and  international  cooperation.  A  number  of  successful  operations  were  carried  out 
which  resulted  in  the  detection  of  organised  crime  groups  and  narcotic  drugs  networks,  as 
well as increased quantities of drugs seizures. From January to June 2008, Serbian authorities 
seized  350  kg  of  heroin,  15  kg  of  cocaine  and  1000  kg  of  marijuana.  Over  4000  criminal 
charges have been filed in relation to drug offences, compared to 5151 in 2007. 

The  Ministry  of  Health  has  stepped  up  its  efforts  to  combat  drug  abuse  in  Serbia,  mainly 
through awareness raising campaigns and support programmes for drug addicts. 

However, neither the national strategy on preventing drug abuse and reducing supply nor the 
action  plan  for  its  implementation  has  yet  been  adopted.  The  same  applies  to  the  Law  on 
production  and  trade  of  narcotic  drugs.  Cooperation  with  international  bodies  in  the  drug 
control field, such as the European Monitoring Centre for Drugs and Drug Addiction and the 
United Nations Office on Drugs and Crime, needs to be improved. There is no exchange of 
operational data with UNMIK police. There is no databank on drug seizures. Drug abuse, in 
particular among young people, is increasing. 

Preparations  in  the  area  of  the  fight  against  drugs  are  moderately  advanced,  but  drug 
trafficking remains a serious concern. 

4.3.4.  Police 

Progress  in  the  area  of  police  and  policing  has  been  limited.  A  strategic  cooperation 
agreement with Europol was signed in September 2008. Regional police cooperation has been 
improved, following ratification of the Convention on South-East Europe Police Cooperation. 
Additional training efforts have been undertaken in order to improve professional capacity. A 
new police training centre came into operation in November 2007. The technical equipment 
of  centralised  police  forces  is  of  a  relatively  good  standard,  and  includes  modern  forensic 
facilities. 

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   EN 

Measures  have  been  taken  to  improve  police  accountability.  Four  regional  centres  were 
established and the system for citizens' complaints was improved by developing a new leaflet 
on complaints procedures. 

However,  structural  problems  in  the  police  forces  persist.  In  the  absence  of  new  legislation 
concerning the division of responsibilities, there is a lack of coordination in core areas such as 
corruption,  organised  crime  and  war  crimes.  Legislation  on  the  reform  of  the  secret  service 
has not been adopted. Considerable differences in the capacities of departments and services 
as well as a lack of coherent approach to human resources and financial management within 
the  Ministry  of  Interior  pose  serious  challenges  for  ongoing  reform  efforts.  International 
cooperation needs to be further improved. Although police equipment for secret surveillance 
measures  has  been  upgraded,  police  still  need  some  support  from  the  Security  Information 
Agency  in  order  to  carry  out  telephone  surveillance  measures.  Preparations  for  broader 
application  of  secret  surveillance  measures  as  foreseen  under  the  new  Criminal  Procedure 
Code have not been sufficient. 

The internal control department has not been sufficiently effective owing to  limited support 
within the police, staff shortages and a lack of resources. Concerns remain over the level of 
transparency in police work and potential undue political influence. 

Private  security  is  not  adequately  regulated.  Estimates  suggest  that  up  to  3,000  agencies, 
providing a wide range of security services, are operating in the absence of proper licensing 
and control. Small arms and light weapons are widespread and often subject of illicit use. This 
is  a  serious  problem  regarding  criminal  activity.  Illicit  arms  possession  among  the  general 
public remains very high. This still poses a significant challenge to security in Serbia.  

Overall, Serbia is moderately advanced in the area of policing. 

4.3.5.  Fighting organised crime and terrorism 

There  has  been  little  progress  in  the  fight  against  organised  crime.  Organised  criminal 
activities in the areas of drug trafficking and financial crime, including corruption and money 
laundering, remain a source of serious concern. 

Responsibility for the fight against organised crime is shared between the department for the 
fight  against  organised  crime  within  the  Ministry  of  Interior  and  a  number  of  specialised 
police  departments.  New  laws  on  seizure  of  assets  acquired  through  criminal  acts  and  on 
criminal liability of legal persons were adopted in October 2008. Several high-level cases are 
ongoing,  including  the  trial  concerning  the  assassination  of  former  PM  Zoran  Djindjic,  for 
which  the  second  instance  procedure  started  in  September  2008.  Support  for  the  witness 
protection system continued.  

However, the legal framework is still incomplete, due to the delayed entry into force of the 
new Criminal Procedure Code. This is hampering the restructuring of police and prosecution 
services. The national strategy for fighting organised crime and the action plan have not been 
adopted. The shortness of the term of office of the special prosecutor for organised crime and 
his deputies continues to hamper the efficiency of work.  

International  police  cooperation  and  the  capacities  of  the  specialised  police  services  to 
investigate  financial  crime  remain  insufficient.  Owing  to  the  large  number  of  police 
departments  involved  in  the  fight  against  organised  crime,  internal  coordination  is  a 
challenge.  Final  convictions  in  organised  crime  cases  are  rare.  A  common  database  on 

EN 

51 

   EN 

information related to organised crime has not been set up. Although some efforts have been 
undertaken to improve the witness protection system, its capacities remain very limited and it 
suffers from a lack of trust and cooperation. Management capacities for seized assets acquired 
through criminal acts are not in place and provisions on confiscation of the proceeds of crime 
are not sufficiently implemented. Preparations in the area of the fight against organised crime 
remain  at  an  early  stage,  which  is  a  matter  of  concern  and  affects  the  rule  of  law  and  the 
business environment. 

There has been little progress in the fight against trafficking in human beings. As a general 
trend,  the  number  of  persons  trafficked  through  South  Eastern  Europe  is  decreasing.  Serbia 
continues to be a source, transit and destination country, but the trend towards an increasing 
percentage of victims being Serbian continues. 

In the period from September 2007 to June 2008, out of 41 identified victims of trafficking in 
human  beings,  34  were  Serbian  citizens,  five  originated  from  Bosnia  and  Herzegovina,  one 
from  Romania  and  one  from  Ukraine.  In  the  same  period,  police  services  filed  27  criminal 
charges of trafficking in human beings against 59 suspects. Fifty-three criminal charges were 
filed against 88 suspects of illegal state border crossing and the smuggling of 188 migrants. 
Criminal cases against police officers suspected of involvement in trafficking activities have 
been processed, but are not yet finalised. 

The  Agency  for  the  Coordination  of  Protection  of  Victims,  which  is  under  the  Ministry  of 
Labour,  Employment  and  Social  Policy,  has  received  additional  financial  resources.  It 
launched an awareness raising campaign on national  television and  provided shelter and re-
integration  programmes  for  victims.  Eleven  centres  for  social  assistance  were  established  at 
municipal level. Temporary residence permits were issued for seven victims in 2007. 

However, the post of the national coordinator for combating trafficking in human beings has 
been  vacant  since  January  2008.  The  growing  number  of  under-age  victims  is  a  matter  of 
concern. Further efforts are needed to increase cooperation between state institutions and the 
NGO sector to a sufficiently high level. Compensation for victims  has  been  very  slow. The 
action plan for the implementation of the national strategy for combating trafficking in human 
beings has not been adopted. 

Overall, Serbia is moderately advanced in the fight against trafficking in human beings.  

Progress  in  the  fight  against  terrorism  has  been  limited  to  improved  protection  of  official 
buildings  and  training  efforts.  Ratification  of  key  international  conventions  is  still  pending. 
Specific legislation is not in place. A database on terrorism suspects has not been established. 
Cooperation  between  police  and  the  security  agency,  as  well  as  their  ability  to  exchange 
information,  need  to  be  reinforced.  Serbia  remains  at  an  early  stage  in  developing  a 
comprehensive approach to fighting terrorism. 

4.3.6.  Protection of personal data 

There  has  been  some  progress  in  the  area  of  protection  of  personal  data.  Serbia  ratified  the 
Additional  Protocol  to  the  Council  of  Europe  Convention  for  the  Protection  of  Individuals 
with  regard  to  Automatic  Processing  of  Personal  Data.  A  new  Law  on  data  protection  was 
adopted in October 2008.  

However, in the absence of an independent and efficient data protection supervisory authority, 
existing  data  protection  rules  have  not  been  implemented.  Preparations  in  the  area  of 
protection of personal data are not well advanced. 

EN 

52 

   EN 

STATISTICAL ANNEX 

STATISTICAL DATA (as of 29 September 2008) 
Serbia 

Basic data 
Population (thousand) 
Total area of the country (km²) 

National accounts 
Gross domestic product (GDP) (million national currency) 
GDP (million euro) 
GDP (euro per capita) 
GDP (in Purchasing Power Standards (PPS) per capita) 
SI: GDP (in PPS per capita, EU-25=100) 
SI: Growth rate of GDP (national currency, at constant prices, % change on previous year) 
SI: Employment growth (national accounts, % change on previous year) 
Labour productivity growth: GDP growth per person employed (% change on previous year) 
SI: Unit labour cost growth (national accounts, % change on previous year) 
SI: Labour productivity (GDP in PPS per person employed, EU-25=100) 
Gross value added by main sectors (%) 

Agriculture 
Industry 
Construction 
Services 

Final consumption expenditure, as a share of GDP (%) 
Households and NPISH, as a share of GDP (%) 
General government, as a share of GDP (%) 
Gross fixed capital formation, as a share of GDP (%) 
Changes in inventories, as a share of GDP (%) 
Exports of goods and services, relative to GDP (%) 
Imports of goods and services, relative to GDP (%) 

Industry 
Industrial production volume index (2000=100) 

Inflation rate 
SI: Consumer price index (CPI), (total, % change on previous year) 

Balance of payments 
Balance of payments: current account total (million euro) 
Balance of payments current account: trade balance (million euro) 
Balance of payments current account: exports of goods (million euro) 
Balance of payments current account: imports of goods (million euro) 
Balance of payments current account: net services (million euro) 

Note
1) 

Note
2) 
2) 
2) 

2) 
2) 
2) 

2) 
2) 
2) 
2) 
2) 
2) 
2) 
2) 
2) 
2) 
2) 

Note

Note

Note

1998 
7 583 
77 474 

1999 
7 553 
77 474 

2001 
2000 
7 528 
7 505 
77 474  77 474 

2002 
7 502 
77 474 

2003 
7 491 
77 474 

2004 
7 470 
77 474 

2005 
7 456 
77 474 

2006 
7 425 
77 474 

2007 
7 382 
77 474 

1998 

1999 

2000 

2001 

2002 

2003 

2004 

2005 

2006 

169 517 210 232b 397 656 783 897 1 020 117 1 171 564 1 431 313 1 747 459 2 042 048p 

17 907b 
8 006 
2 371e b  1063e 

: 
: 
: 
: 
: 
: 
: 
: 
: 

15.4 
22.6 
4.3 
57.7 
98.5 
78.2 
20.3 
9.8 
-0.6 
21.2 
28.9 

1998 
120.7 

1998 
29.9 

1998 
-419 
-1 283 
2 585 
3 868 
271 

: 
: 
: 
: 
: 
: 
: 

18.8b 
23.2b 
3.6b 
54.4b 
96.3b 
78.0b 
18.3b 
10.8b 
-0.5b 
11.1b 
17.8b 

1999 
89.8 

1999 
43.5 

1999 
-427 
-1 167 
1 452 
2 620 
109 

13 186 
1 757 
: 
: 
4.8 
-0.2 
5.1 
: 
: 

19.8 
24.4 
3.2 
52.6 
103.5 
83.1 
20.4 
10.4 
5.7 
21.7 
41.3 

: 
: 
4.5 
: 
: 
: 
: 

19.8 
25.8 
3.6 
50.8 
97.3 
78.4 
18.9 
12.3 
-3.8 
10.5 
16.3 

2000 
100.0 

2001 
100.1 

2000 
79.6 

2001 
93.3 

2000 
-166 
-1 713 
1 781 
3 494 
153 

2001 
-318 
-2 577 
2 033 
4 610 
272 

16 812 
2 242 
: 
: 
4.2 
-0.5 
4.7 
: 
: 

14.8 
23.7 
3.4 
58.1 
103.5 
81.2 
22.3 
11.8 
5.5 
19.9 
40.7 

2002 
101.9 

2002 
16.6 

2002 
-1 319 
-3 414 
2 339 
5 753 
137 

18 009 
2 407 
: 
: 
2.5 
-4.0 
6.7 
: 
: 

13.1 
22.5 
4.2 
60.2 
98.9 
76.4 
22.5 
16.1 
6.6 
20.6 
42.2 

2003 
98.8 

2003 
9.9 

2003 
-1 255 
-3 555 
2 934 
6 489 
179 

19 724 
2 643 
: 
: 
8.4 
1.2 
7.2 
: 
: 

13.7 
23.5 
4.8 
58.0 
90.5 
70.7 
19.8 
17.7 
18.6 
23.8 
50.8 

2004 
105.9 

2004 
11.4 

2004 
-2 306 
-5 201 
3 282 
8 482 
141 

21 077 
2 833 
: 
: 
6.2 
-3.9 
10.5 
: 
: 

11.9 
23.2 
4.5 
60.4 
87.9 
70.0 
17.9 
17.3 
14.9 
27.7 
47.8 

2005 
106.7 

2005 
16.2 

2005 
-1 788 
-4 252 
3 995 
8 247 
-5 

24 255p 
3 273 
: 
: 
5.7 
-1.0 
6.8 
: 
: 

11.2 
24.1 
4.7 
60.0 
87.4p 
70.4p 
17.0p 
19.7p 
12.9p 
30.7p 
50.8p 

2006 
111.7 

2006 
11.7 

2006 
-3 157 
-4 992 
5 128 
10 121 
-41 

2007 
: 
: 
: 
: 
: 
7.5e 
: 
: 
: 
: 

: 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 

2007 
115.8 

2007 
7.0 

2007 
-5 021 
-6 445 
6 463 
12 908 
-13 

EN 

EN 

53 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance of payments current account: net income (million euro) 
Balance of payments current account: net current transfers (million euro) 

of which government transfers (million euro) 

Foreign Direct Investment (FDI) in the reporting economy (million euro) 

9 
583 
0 
: 

8 
624 
0 
: 

Public finance 
General government deficit/surplus, relative to GDP (%) 
SI: General government debt, relative to GDP (%) 

Financial indicators 
Gross foreign debt of the whole economy, relative to GDP (%) 
Gross foreign debt of the whole economy, relative to total exports (%) 
Money supply: M1 (banknotes, coins, overnight deposits, million euro) 
Money supply: M2 (M1 plus deposits with maturity up to two years, million euro) 
Money supply: M3 (M2 plus marketable instruments, million euro) 
Total credit by monetary financial institutions to residents (consolidated) (million euro) 
Interest rates: day-to-day money rate, per annum (%) 
Lending interest rate (one year), per annum (%) 
Deposit interest rate (one year), per annum (%) 
euro exchange rates: average of period - 1 euro = … national currency 
Effective exchange rate index (2000=100) 
Value of reserve assets (including gold) (million euro) 

External trade 
Trade balance: all goods, all partners (million euro) 
Value of exports: all goods, all partners (million euro) 
Value of imports: all goods, all partners (million euro) 
Terms of trade (export price index / import price index, % change to the previous year)  
Share of exports to EU-27 countries in value of total exports (%) 
Share of imports from EU-27 countries in value of total imports (%) 

Demography 
Natural growth rate: natural change (births minus deaths) (per 1000 inhabitants) 
Net migration rate: immigrants minus emigrants (per 1000 inhabitants) 
Infant mortality rate: deaths of children under one year of age per 1000 live births 
Life expectancy at birth: male (years) 
Life expectancy at birth: female (years) 

Note 

Note 

Note 
3) 
3) 
3) 
3) 
3) 
3) 

Note 
1) 

Labour market 
Economic activity rate (15-64): share of population aged 15-64 that is economically active (%) 
SI: Employment rate (15-64): share of population aged 15-64 that is in employment (%) 

Note 

Share of male population aged 15-64 that is in employment (%) 
Share of female population aged 15-64 that is in employment (%) 

SI: Employment rate of older workers (55-64): share of population aged 55-64 that is in 
employment (%) 

1998 
: 
: 

1998 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 
652 

1998 
-1 575 
2 393 
3 968 
3.4 
48.9 
56.7 

1998 
-3.1 
: 
11.9 
69.7 
74.7 

1998 
67.6 
58.2 
66.3 
50.3 

40.5 

EN 

54 

-1 
1 396 

7 
1 980 

-77 
2 035 

-120 
2 241 

-174 
2 927 

-260 
2 730 

-330 
2 207 

293 
: 

1999 
: 
: 

1999 
: 
: 
1 259 
1 591 
2 125 
: 
: 
: 
: 
11.740 
: 
659 

1999 
-1 423 
1 270 
2 694 
-7.5 
50.5 
59.9 

1999 
-3.9 
: 
11.1 
69.7 
74.8 

1999 
68.2 
58.3 
67.1 
49.8 

42.3 

660 
: 

2000 
: 
: 

2000 
: 
: 
544 
662 
1 313 
: 
: 
: 
: 
49.670 
: 
958 

2000 
-1 926 
1 680 
3 606 
8.3 
54.3 
61.6 

2000 
-4.0 
: 
10.6 
69.7 
74.8 

2000 
68.2 
59.2 
68.2 
50.4 

43.3 

525 
: 

421 
: 

382 
: 

264 
: 

186 
: 

2001 
: 
101.6 

2001 
94.2 
455.0 
974 
1 139 
2 098 
: 
: 
: 
: 
59.770 
: 
2 050 

2001 
-2 862 
1 896 
4 758 
2.9 
58.2 
57.6 

2001 
-2.7 
: 
10.2 
69.6 
74.8 

2001 
68.9 
59.7 
68.6 
50.8 

42.1 

2002 
: 
69.5 

2002 
64.0 
344.0 
1 546 
1 828 
3 156 
: 
: 
: 
: 
60.680 
: 
2 937 

2002 
-3 727 
2 192 
5 919 
-4.9 
59.5 
59.6 

2002 
-3.3 
: 
10.1 
69.7 
75.0 

2002 
68.4 
58.5 
67.1 
50.0 

42.0 

2003 
: 
64.3 

2003 
60.3 
282.0 
1 526 
1 920 
3 762 
: 
: 
: 
: 
65.060 
: 
3 548 

2003 
-4 147 
2 442 
6 589 
3.7 
53.9 
58.4 

2003 
-3.3 
: 
9.1 
69.9 
75.1 

2003 
68.9 
57.9 
67.0 
48.7 

44.3 

2004 
: 
53.3 

2004 
52.5 
231.8 
1 533 
2 015 
4 449 
: 
: 
: 
: 
72.570 
: 
3 780 

2004 
-5 791b 
2 748b 
8 539b 
6.7b 
56.6b 
58.2b 

2004 
-3.5 
: 
8.1 
69.9 
75.4 

2004 
66.4 
53.4 
63.1 
44.0 

37.3 

2005 
0.8 
50.1 

2005 
62.0 
246.3 
1 748 
2 318 
5 535 
: 
: 
: 
: 
82.910 
: 
5 525 

2005 
-4 867 
3 572 
8 439 
-9.2 
58.7 
54.7 

2005 
-4.6 
: 
8.0 
70.0 
75.4 

2005 
65.2 
51.0 
61.2 
40.8 

35.4 

2006 
-1.5 
33.2 

2006 
61.4 
213.4 
2 378 
3 315 
7 539 
: 
: 
: 
: 
84.160 
: 
9 593 

2006 
-5 471 
4 992 
10 463 
6.2 
57.5 
54.4 

2006 
-4.3 
: 
7.4 
70.6 
75.9 

2006 
63.6 
49.9 
59.2 
40.6 

32.6 

-503 
1 939 

202 
: 

2007 
-1.9 
28.7e 

2007 
59.5 
206.8 
3 112 
4 882 
11 302 
: 
: 
: 
: 
79.980 
: 
10 897 

2007 
-7 296 
6 205 
13 501 
-2.0 
57.5 
55.0 

2007 
-4.7 
: 
7.1 
: 
: 

2007 
63.4 
51.5 
60.0 
43.0 

33.5 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Employment by main sectors (%) 

Agriculture 
Industry 
Construction 
Services 

SI: Unemployment rate: share of labour force that is unemployed (%) 

Share of male labour force that is unemployed (%) 
Share of female labour force that is unemployed (%) 

Unemployment rate of persons < 25 years: share of labour force aged <25 that is unemployed 
(%) 
SI: Long-term unemployment rate: share of labour force that is long-term unemployed (%) 

Social cohesion 
Average nominal monthly wages and salaries (national currency) 
Index of real wages and salaries (index of nominal wages and salaries divided by the CPI) 
(2000=100) 
SI: Early school-leavers: share of population aged 18-24 having not completed upper 
secondary education and not currently in education or training (%) 

Standard of living 
Number of passenger cars per 1000 population 
Number of subscriptions to cellular mobile telephone services per 1000 population 

Infrastructure 
Density of railway network (lines in operation, per 1000 km²) 
Length of motorways (thousand km) 

Innovation and research 
SI: Spending on human resources (public expenditure on education) relative to GDP (%) 
SI: Gross domestic expenditure on research & development, relative to GDP (%) 
SI: Percentage of households who have Internet access at home (%) 

Environment 
SI: Total greenhouse gases emissions, CO2 equivalent (tons, 1990=100) 
SI: Energy intensity of the economy (kg of oil equivalent per 1000 euro GDP) 
SI: Share of renewable energy in electricity consumption (%) 
SI: Road freight transport as a share of total inland freight transport (modal split of freight 
transport) (%) 

Energy 
Primary production of all energy products (thousand TOE) 
Primary production of crude oil (thousand TOE) 
Primary production of hard coal and lignite (thousand TOE) 
Primary production of natural gas (thousand TOE) 

Net imports of all energy products (thousand TOE) 
Gross inland energy consumption (thousand TOE) 
Electricity generation (thousand GWh) 

: 
: 
: 
: 

: 
: 
: 
: 

14.0 
12.3 
16.0 

50.6 

10.0 

: 
: 
: 
: 
14.5 
12.5 
16.9 

53.2 

10.5 

: 
: 
: 
: 

: 
: 
: 
: 

13.3 
11.1 
15.9 

50.2 

9.9 

: 
: 
: 
: 
13.3 
11.5 
15.7 

46.4 

9.0 

24.0 
21.7 
5.2 
49.1 
14.5 
12.9 
16.5 

45.3 

9.9 

23.3 
21.5 
6.1 
49.1 

16.0 
15.1 
17.2 

44.8 

11.0 

18.7 
15.3 
23.1 

48.1 

14.5 

20.5 
23.2 
6.1 
50.2 

21.1 
17.0 
26.5 

47.7 

16.7 

21.0 
18.1 
24.9 

47.8 

17.0 

20.8 
23.4 
6.1 
49.7 

18.3 
16.0 
21.2 

43.7 

14.8 

Note

1998 
1 702.0

1999 

2000 
1 992.0  3 799.0

2001 
8 691.0

2002 

2003 

2004 

2005 

2006 

2007 

13 260.0  16 612.0  20 555.0  25 514.0  31 745.0  38 744.0 

115.5 

94.2 

100.0 

118.4 

154.9 

176.5 

196.1 

209.5 

233.3 

266.1 

: 

: 

: 

: 

: 

: 

11.5 

11.4 

12.6 

10.7 

Note
4) 

Note

Note

Note

Note

1998 
230.7 
: 

1999 
208.3 
: 

2000 
169.2 
155.1 

2001 
184.2 
251.1 

2002 
179.1 
322.5 

2003 
185.3 
399.3 

2004 
194.8 
578.8 

2005 
198.6 
700.4 

2006 
203.6 
894.7e 

2007 
200.1 
: 

1998 
49.2 
0.4 

1998 
3.3 
: 
: 

1998 
: 
: 
32.3 

1999 
49.2 
0.4 

1999 
2.7 
: 
: 

1999 
: 
: 
52.2 

2000 
49.2 
0.4 

2000 
2.5 
: 
: 

2000 
: 
: 
42.1 

2001 
49.2 
0.4 

2001 
2.5 
: 
: 

2001 
: 
: 
43.3 

38.8 

49.8 

: 

: 

1998 
: 
: 
: 
: 
: 
: 
38.0 

1999 
: 
: 
: 
: 
: 
: 
31.0 

2000 
: 
: 
: 
: 
: 
: 
32.0 

2001 
: 
: 
: 
: 
: 
: 
31.0 

2002 
49.2 
0.4 

2002 
3.0 
: 
: 

2002 
: 
: 
41.2 

: 

2002 
: 
: 
: 
: 
: 
: 
31.0 

2003 
49.2 
0.4 

2003 
3.8 
: 
: 

2003 
: 
: 
36.5 

: 

2003 
: 
: 
: 
: 
: 
: 
32.0 

2004 
49.2 
0.4 

2004 
3.5e 
: 
: 

2004 
: 
: 
44.9 

: 

2004 
: 
: 
: 
: 
: 
: 
34.0 

2005 
49.2 
0.4 

2005 
: 
: 
: 

2005 
: 
: 
46.9 

: 

2005 
: 
: 
6 696 
: 
: 
: 
36.0 

2006 
49.2 
0.4 

2006 
: 
: 
18.5 

2006 
: 
: 
41.8 

: 

2006 
: 
: 
6 966 
: 
: 
: 
36.0 

2007 
49.2 
0.4 

2007 
: 
: 
26.3 

2007 
: 
: 
: 

: 

2007 
: 
: 
: 
: 
: 
: 
37.0 

EN 

55 

EN 

 
  
 
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agriculture 
Agricultural production volume index of goods and services (producer prices, previous 
year=100) 
Total utilised agricultural area (thousand hectare) 
Livestock: cattle (thousand heads, end of period) 
Livestock: pigs (thousand heads, end of period) 
Livestock: sheep and goats (thousand heads, end of period) 
Production and utilisation of milk on the farm (total whole milk, thousand tonnes) 
Crop production: cereals (including rice) (thousand tonnes, harvested production) 
Crop production: sugar beet (thousand tonnes, harvested production) 
Crop production: vegetables (thousand tonnes, harvested production) 

Note 

1998 

1999 

2000 

2001 

2002 

2003 

2004 

2005 

2006 

2007 

5) 
5) 
5) 
6) 
7) 

99.0 

5 086 
1 283 
4 293 
1 868 
1 637 
8 104 
1 972 
1 274 

100.0 

5 086 
1 246 
4 066 
1 794 
1 665 
8 584 
2 428 
1 145 

87.0 

5 074 
1 162 
3 615 
1 670 
1 585 
5 213 
1 070 
1 043 

118.0 

5 077 
1 128 
3 587 
1 612 
1 594 
9 001 
1 806 
1 283 

97.0 

93.0 

5 071 
1 112 
3 634 
1 685 
1 596 
8 298 
2 098 
1 340 

5 079 
1 102 
3 439 
1 741 
1 590 
5 453 
1 738 
1 172 

120.0 

5 075 
1 079 
3 165 
1 728 
1 593 
9 867 
2 814 
1 340 

95.0 

100.0 

92.0e 

5 075 
1 096 
3 212 
1 748 
1 616 
9 510 
3 101 
1 289 

5 066 
1 106 
3 999 
1 718 
1 602 
8 268 
3 189 
1 348 

5 053 
1 087 
3 832 
1 756 
1 562 
6 115 
3 206 
1 128 

SI: Structural Indicator  
e: estimate  
f: forecast  
p: provisional  
bbreak in series  
1. 
2. 
3. 
4. 
5. 
6. 
7. 

Source: Eurostat. 
From 1999 onwards, excluding Kosovo under UNSCR 1244. 
From January 2004 onwards the Uniform Customs Document harmonised with EU regulations has been used. 
Minister of Internal Affaires excluded the vehicles that were not registered before a given deadline (1 month). 
Since 2006, the reference date is 1 December (instead 15 January as it was before). 
In million liters, includes cows and sheep milk. 
Without triticale, buckwheat and millet, which are small; rice production does not exist in Serbia. 

EN 

56 

EN