Commission staff working document - Serbia 2009 progress report accompanying the Communication from the Commission to the European Parliament and the Council - Enlargement Strategy and Main Challenges 2009-2010 {COM(2009) 533 final}
Date: 2009-10-14
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, 14.10.2009 
SEC(2009) 1339 

COMMISSION STAFF WORKING DOCUMENT 

SERBIA 2009 PROGRESS REPORT 

accompanying the 

COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

Enlargement Strategy and Main Challenges 2009-2010 

{COM(2009) 533 final} 

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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. 

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 ............................................................ 19 

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

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

The capacity to cope with competitive pressure and market forces within the Union
.................................................................................................................................... 29 

4. 

European standards .................................................................................................... 30 

4.1. 

Internal market ........................................................................................................... 30 

4.1.1.  Free movement of goods............................................................................................ 30 

4.1.2.  Movement of persons, services and right of 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 .................................................................................................... 35 

4.1.7. 

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

4.1.8.  Social policies, employment and public health policy............................................... 36 

4.1.9.  Education and research .............................................................................................. 39 

4.1.10.  WTO issues ................................................................................................................ 40 

4.2. 

Sectoral Policies ......................................................................................................... 40 

4.2.1. 

Industry and SMEs..................................................................................................... 40 

4.2.2.  Agriculture and fisheries ............................................................................................ 41 

4.2.3.  Environment............................................................................................................... 43 

4.2.4.  Transport policy ......................................................................................................... 45 

4.2.5.  Energy ........................................................................................................................ 46 

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4.2.6. 

Information society and media................................................................................... 48 

4.2.7.  Financial control......................................................................................................... 49 

4.2.8.  Statistics ..................................................................................................................... 50 

4.3. 

Justice, freedom and security ..................................................................................... 50 

4.3.1.  Visa, border management, asylum and migration...................................................... 50 

4.3.2.  Money laundering ...................................................................................................... 52 

4.3.3.  Drugs .......................................................................................................................... 53 

4.3.4.  Police.......................................................................................................................... 53 

4.3.5.  Fighting organised crime and terrorism ..................................................................... 54 

4.3.6.  Protection of personal data......................................................................................... 55 

STATISTICAL ANNEX.......................................................................................................... 56 

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COMMISSION STAFF WORKING DOCUMENT 

Serbia 2009 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  early  October  2008  to  mid  September  2009. 
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 are awaiting 
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 EU 
Member States, European Parliament reports1 and information from various international and 
non-governmental organisations. 

The Commission draws detailed conclusions regarding Serbia in its separate communication 
on enlargement2 based on the technical analysis contained in this report. 

1.2. 

Context 

Serbia  is  a  potential  candidate  for  EU  membership.  On  29  April  2008  Serbia  signed  a 
Stabilisation and Association Agreement and an Interim Agreement on trade related measures 
with the EU. 

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2 

The rapporteur for Serbia is Mr Jelko Kacin.  
Enlargement Strategy and Main Challenges 2009-2010 (COM(2009)533 of 14.10.2009). 

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1.3. 

Relations between the EU and Serbia 

Serbia  is  participating  in  the  Stabilisation  and  Association  Process.  The  Stabilisation  and 
Association Agreement (SAA) provides a framework of mutual commitments on a wide range 
of  political,  trade  and  economic  issues.  The  SAA  was  signed,  along  with  the  Interim 
Agreement,  in  April  2008.  EU  ministers  agreed  to  submit  the  SAA  to  their  parliaments  for 
ratification  and  the  Community  agreed  to  implement  the  Interim  Agreement  as  soon  as  the 
Council decides that Serbia is fully cooperating with the International Criminal Tribunal for 
the former Yugoslavia (ICTY). In advance of a decision by the EU and following ratification 
of  the  SAA  by  the  Serbian  parliament,  in  January  2009  Serbia  has  already  started  to 
implement provisions of the Interim Agreement. 

The  visa  facilitation  and  readmission  agreements  between  Serbia  and  the  European 
Community  continued  to  be  implemented.  In  the  framework  of  the  visa  liberalisation 
dialogue, Serbia has made important progress in the areas of justice, freedom and security and 
has  fulfilled  the  majority  of  the  roadmap  benchmarks.  Therefore,  the  Commission  in  July 
2009  proposed  lifting  the  visa  obligation  for  Serbian  citizens3.  This  proposal  is  subject  to 
Serbia meeting the outstanding criteria before the Council of the EU takes its decision, after 
consultation of the European Parliament.  

Serbia has taken first steps to cooperate with the EU rule of law mission in Kosovo (EULEX) 
but these efforts need to be further strengthened. In December 2008 the government adopted a 
decision  supporting  the  UN  Secretary-General’s  plan  on  deployment  of  EULEX.  In 
September 2009 EULEX and Serbia signed a protocol on police cooperation. 

The  EU  is  providing  guidance  to  the  Serbian  authorities  on  reform  priorities  as  part  of  the 
European  Partnership.4  The  Serbian  government  has  begun  to  implement  a  national 
programme  for  integration  into  the  EU  and  has  established  a  monitoring  mechanism  on  the 
basis of which quarterly reports are published. Progress on reform priorities is encouraged and 
monitored  by  the  Enhanced  Permanent  Dialogue  (EPD).  The  plenary  EPD  meeting  was 
held in May 2009. Several sub-EPD meetings took place during the reporting period, covering 
sectors such as energy, transport, the environment, the internal market, trade, justice, freedom 
and  security  and  agriculture.  A  political  dialogue  at  ministerial  level  took  place  in  January 
2009. 

As a potential candidate for EU membership, Serbia aligned itself with 93 CFSP declarations 
from a total of 128 relevant declarations adopted by the EU during the reporting period. 

Serbia  receives  pre-accession  financial  assistance  from  the  Instrument  for  Pre-Accession 
Assistance (IPA). IPA assistance continues to be implemented by the Commission Delegation 
in Belgrade. A decentralised implementation system (DIS) for management of aid remains a 
medium-term objective for Serbia. Preparatory work has started. Extensive further efforts are 
required in order to put Serbia in a position to take over responsibility for implementation of 
all IPA components and for future management of Structural and Cohesion Funds.  

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4 

Residents of Kosovo (under UNSCR 1244/99) are not covered by the current proposal. The technical 
requirements for visa liberalisation have not yet been met on the territory of Kosovo. The Commission 
in this regard will continue to work closely with both the Serbian and Kosovo authorities and explore 
options for addressing the visa issue in the future. 
Council Decision 2008/213/EC. 

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Serbia’s  national  IPA  allocation for  2009  totalled  €194.8 million.  Financial  assistance  is 
focusing  on  areas  such  as  strengthening  the  rule  of  law,  human  rights, education,  transport 
and environmental protection. Serbia participates in multi-beneficiary programmes. Serbia is 
also participating  in cross-border cooperation with neighbouring  countries across  a  range of 
areas such as infrastructure, environmental issues, cultural exchanges, research, job creation, 
security and crime prevention. A number of civil society initiatives are being supported both 
under  the  national  and  regional  IPA  programmes  under  the  Civil  Society  Facility  and  by 
thematic  financing  instruments  such  as  the  European  Initiative  for  Democratisation  and 
Human Rights. Support for civil society under 2009 programmes totalled over €3 million and 
is  focused  on  civic  initiatives  and  capacity  building,  a  people  to  people  programmes  and 
partnership actions between civil society organisations and the EU. 

In response to the economic crisis, Serbia is receiving €100 million of exceptional budgetary 
support  from  the  2009  national  IPA  envelope.  Moreover,  an  IPA  crisis  package  has  been 
created  for  the  Western  Balkans.  It  amounts  to  €200  million  and  is  expected  to  leverage 
investments  of  at  least  €1  billion,  co-financed  by  the  partner  financial  institutions.  Of  this 
multi-beneficiary  fund,  Serbia  will  receive  a  share  to  finance  projects  on  competitiveness, 
SMEs,  energy  efficiency  and  banking  sector  regulation.  Serbia  will  also  benefit  from 
infrastructure projects. €9 million have been committed to the Infrastructure Project Facility 
for projects on water supply infrastructure and reconstruction of urban transport in Belgrade.  

Concerning  Community  programmes,  the  EU  has  co-financed  Serbia’s  participation  in  the 
Seventh European Community Research Framework Programme, the Culture Programme, the 
Fiscalis 2013 Programme, the Customs 2013 Programme and the Programme for Employment 
and Social Solidarity (PROGRESS). 

2. 

POLITICAL CRITERIA 

This section examines the 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  compliance  with 
international obligations, such as cooperation with the ICTY. 

2.1. 

Democracy and the rule of law 

Constitution 

The follow-up to the opinion of the Venice Commission of the Council of Europe concerning 
the  constitutional  provisions  considered  not  fully  in  line  with  European  standards  has  been 
only partial. The main concerns remain political party control over the mandates of Members 
of Parliament (MPs) and the role of parliament in judicial appointments.  

The Provincial Assembly of Vojvodina adopted a draft Statute of Vojvodina in October 2008, 
in line with constitutional requirements. However, the draft Statute has not yet been passed by 
the  national  parliament  as  required  by  the  Constitution.  The  deadline  for  this  expired  on 
31 December  2008.  Nor  has  parliament  adopted  the  accompanying  law  on  the  transfer  of 
powers from State to provincial level. The main reasons for this delay are related to political 
and party divisions in the approach to decentralisation in Serbia.  

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Overall,  there  has  been  little  progress  on  adopting  legislation  to  implement  the  new 
constitutional framework. The constitutional requirements regarding the status of Vojvodina 
have not yet been implemented. 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 

Following  a  prolonged  period  of  obstruction,  amendments  to  the  parliament's  rules  of 
procedure were adopted in February 2009, providing for more efficient parliamentary debates. 
This  has  led  to  improvements  in  the  functioning  of  the  parliament  including  the  passage  of 
laws through the legislature. The conditions for MPs to invoke procedural violations, the main 
source of the previous practice of obstruction, were tightened up. The agenda and timing of 
plenary  debates  have  been  streamlined.  Parliament  activated  the  existing,  but  previously 
rarely  used,  instrument  for  exercising  oversight  of  the  executive,  namely  the  possibility  for 
MPs  to  ask  both  written  and  oral  questions  and  for  organising  debates  on  specific  topics 
proposed by MPs.  

Parliament  adopted  a  new  Law  on  Political  Parties  in  May  2009,  a  fundamental  piece  of 
legislation  which  has  established  clearer  and  stricter  rules  for  registration  and  which  will 
reduce  the  number  of  parties,  some  of  which  exist  only  on  paper.  The  law  increased  the 
number  of  signatures  required  in  order  to  register  a  party  to  10,000  or  to  1,000  for  parties 
representing minorities. The new registration process started in July 2009.  

There has been increased legislative output from the parliament. There is, however, a need to 
improve ex ante compatibility checks with EU standards before legislation is adopted. There 
has, moreover, been insufficient public consultation on content and impact of draft laws. 

The  challenges  facing  operation  of  the  legislature  are  still  considerable.  The  changes  to  the 
rules  of  procedure  have  been  only  partial,  and  adoption  of  an  entirely  new  rulebook  is  still 
pending. Furthermore, the procedural revisions were adopted without the full participation of 
the opposition. The practice of obstruction and legislative delays, such as submission of large 
numbers of non-substantial amendments to draft laws has recurred. New election laws and the 
Law on the Assembly have yet to be adopted.  

In  February  2009,  disputes  over  the  decision  by  the  public  broadcasting  service  to  suspend 
live  transmission  of  parliamentary  sessions  led  to  suspension  of  the  work  of  parliament.  A 
temporary  solution  was  found,  whereby  sessions  would  continue  to  be  broadcast  until  a 
special parliamentary channel is established.  

Parliament  and  its  committees  still  lack  sufficient  numbers  of  qualified  staff.  Committees 
remain  weak  and  their  work  is  largely  reactive.  The  practice  of  law-making  by  urgent 
procedure  has  continued  and  this  has  had  an  impact  on  the  quality  of  legislation. 
Inflammatory,  and  at  times  offensive,  language  was  used  by  some  MPs  against  political 
opponents  and  human  rights  defenders.  Sanctions  were  applied  in  some  cases  but,  on  the 
whole, the current parliamentary rules have proved  inadequate  and  have not prevented such 
behaviour.  Parliament  still  lacks  a  coherent  approach  to  consultations  with  civil  society, 
international organisations and other stakeholders.  

The parliamentary committee for finances has not ensured adequate control of the funding of 
political  parties.  Under  the  current  deficient  legislation,  the  committee  lacks  powers  to 

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investigate  reports  fully  and  to  sanction  parties  which  fail  to  abide  by  their  obligation  to 
submit reports.  

The  electoral  framework  has  not  been  revised  and  is  not  in  line  with  European  standards. 
Constitutional provisions giving parties control over the mandates of MPs continue to hamper 
the work and reform of the legislature. Most parliamentary parties have concluded individual 
agreements with their MPs on blank resignations, which can be activated at any time by the 
party leadership. Legislation required by the Constitution has not been adopted. The current 
procedure  for  signing  blank  resignations  is,  therefore,  not  legally  regulated  and  triggered  a 
major  political  and  legal  dispute  following  the  split  in  the  Serbian  Radical  Party.  This  split 
resulted in the formation of a new party, the Serbian Progressive Party, with a separate caucus 
in the Serbian parliament.  

Overall, there have been some improvements on the functioning of the parliament including 
the  passage  of  laws  through  the  legislature,  such  as  in  the  areas  of  competition,  agriculture 
justice,  freedom  and  security.  There  has  also  been  some  progress  on  streamlining  debates 
following  the  procedural  revisions,  although  a  complete  reform  is  still  pending.  The 
institutional  capacity  of  parliament  remains  low  and,  in  spite  of  changes  to  the  rules, 
parliament has not sufficiently used its powers of control over the executive branch. The work 
of  parliament  continues  to  be  affected  by  the  controversial  issue  of  MPs’  mandates.  The 
capacity  of  parliamentary  committees  remains  limited.  Election  legislation  has  not  yet  been 
revised.  

Government 

The government has proven stable and has demonstrated a high degree of consensus on EU 
integration  as  a  strategic  priority.  In  January  2009,  the  government  started  to  implement 
provisions  of  the  Interim  Agreement  of  the  SAA.  Customs  duties  were  lowered  with  effect 
from 30 January 2009, and measures were taken in the areas of competition and State aid. The 
European Integration Council, chaired by the Prime Minister, met twice since the formation of 
the new government, giving its full political support to government efforts in the field of visa 
liberalisation,  implementation  of  the  Interim  Agreement  and  further  harmonisation  of 
domestic legislation with the acquis.  

In  March  2009  the  government  approved  a  new  organisational  structure  for  the  Serbian 
European  Integration  Office  with  a  view  to  ensuring  more  efficient  and  comprehensive 
coordination  of  the  EU  accession  process.  The  Serbian  European  Integration  Office  is 
functioning well. Government accountability to parliament has improved and the practice of 
regular hearings in parliament and replies to MPs’ questions was established. The Secretariat-
General of the government was reorganised with a view to strengthening its role in planning, 
monitoring and policy analysis. 

The  government  has  been  drafting  a  large  number  of  bills  aimed  at  further  alignment  of 
national  legislation  with  European  standards.  However,  the  quality  has  varied  considerably 
across  ministries  and  the  Legislative  Secretariat  has  not  been  given  sufficient  time  to  check 
reflects  uneven 
thoroughly  compatibility  with  existing  national 
administrative  capacity  on  European  integration  within  line  ministries.  Regulatory  impact 
analysis  is  not  sufficiently  thorough  and  not  enough  attention  has  been  paid  to  effective 
implementation of existing legislation and action plans.  

legislation.  This 

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The  government  was  criticised  for  withdrawing  the  draft  anti-discrimination  law  from  the 
parliamentary  procedure  in  response  to  pressure  exerted  by  religious  communities.  The 
reaction to the death threats against the State Secretary for Human and Minority Rights for his 
defence  of  the  rights  of  the  lesbian,  gay,  bisexual  and  transgender  (LGBT)  population  was 
insufficient.  

There were cases of interference by government in the work of the judiciary and conflicts of 
interest. In this respect, the government has failed to abide by the recommendations made by 
the board for the prevention of conflicts of interest.  

As regards local government, legislation regulating transfers of property to municipalities has 
not  been  adopted.  This  has  hampered  decentralisation.  Legislation  regulating  the  status  of 
local government employees is also pending.  

Overall,  stability  in  the  government  has  increased,  with  greater  consensus  on  European 
integration.  The  government  has  prepared  a  large  number  of  laws  across  a  range  of  areas. 
However,  insufficient  attention  has  been  paid  to  impact  assessment  and  to  effective 
implementation  of  existing  laws  and  strategies.  Insufficient  action  was  taken  in  cases 
involving  conflicts  of  interest  and  incompatible  functions.  Planning  of  government  work 
needs to be improved, with greater coordination between ministries.  

Public administration  

As  part  of  the  public  administration  reform,  the  Law  on  Civil  Servants  was  amended  in 
December 2008. The new provisions set clear educational requirements for civil servant posts, 
defined  the  role  of  the  Ombudsman  in  connection  with  dismissal  of  civil  servants  and 
extended the legal deadline for completion of open competitions for the recruitment of civil 
servants  until  the  end  of  2009.  As  part  of  an  arrangement  with  the  International  Monetary 
Fund (IMF) in response to the financial crisis, legislation was adopted to reduce salaries for 
all elected and appointed public servants until the end of 2009. In addition the government is 
taking measures to significantly reduce the number of employees in the public administration. 
The new Law on Registration Books was adopted in March 2009 with the aim of introducing 
electronic  communication  between  State  bodies  and  registries,  thus  facilitating  document 
management.  

However, the legislative framework governing public administration is not yet complete. The 
Law on Administrative Procedures, the Law on Administrative Disputes, updated action plans 
for  implementation  of  the  public  administration  reform  strategy  and  relevant  implementing 
legislation have not yet been adopted. Only initial steps have been taken to introduce specific 
anti-corruption  measures  for  the  public  administration  and  there  is  inadequate  follow-up  or 
judicial control. 

The  Ombudsman’s  offices,  at  both  State  and  provincial  levels,  have  been  very  active.  They 
issued  a  large  number  of  opinions  and  recommendations,  visited  relevant  institutions  and 
proposed amendments to legislation. Public awareness of the existence and responsibilities of 
the  Ombudsman  has  increased.  The  Provincial  Ombudsman  organised  awareness-raising 
campaigns in Vojvodina. However,  the State authorities have  not provided all the resources 
necessary  for  the  offices  to  carry  out  their  mandates  fully  and  there  has  not  been  sufficient 
follow-up  to  the  Ombudsman's  recommendations.  At  local  level,  offices  have  been 
established in only 11 cities and municipalities.  

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The commissioner for free access to information of public interest has become more active. 
Following  adoption  of  the  Personal  Data  Protection  Law  in  November  2008,  the 
commissioner’s  powers  were  extended  to  cover  data  protection  as  well.  Training  of  the 
commissioner’s staff in charge of data protection began in early 2009. However, insufficient 
staff, especially now that the office has taken on additional tasks and the lack of a mechanism 
for enforcing the commissioner’s decisions are major obstacles to the work of this office.  

Other independent regulatory institutions – the State Audit Institution, the Committee for the 
Suppression of Conflicts of Interest, the Anti-Corruption Council, the Competition Protection 
Commission,  the  Public  Procurement  Office  and  the  Commission  for  the  Protection  of 
Bidders’ Rights – continued to face difficulties in carrying out their mandates. These related 
mainly  to  lack  of  resources  and  inadequate  official  follow-up  to  their  decisions  and 
recommendations. 

Capacity-building  and  further  specialisation  within  the  police  have  continued,  with  positive 
steps  taken  to  modernise  police  work  and  improve  international  and  regional  cooperation. 
Better coordination within police structures and with other ministries contributed to adoption 
of several key strategies and laws. Steps were also taken to improve relations with the public 
and  civil  society,  but  cooperation  needs  to  be  further  developed  and  established  throughout 
the police service.  

Overall, Serbia has good capacity in the area of public administration. However the pace of 
public administration reform has been slow. The action plan for implementation of the public 
administration  reform  strategy  has  yet  to  be  adopted.  The  merit  system  provided  for  in  the 
amended  Law  on  Civil  Servants  has  not  been  implemented.  Transparency  in  the  public 
administration has to be improved and greater priority should be given to fighting corruption 
and  effectively  supporting  the  work  of  independent  bodies.  This  is  a  key  priority  of  the 
European  Partnership.  Greater  coordination  on  implementation  of  public  administration 
reform is needed, including monitoring and evaluation, and good management practices need 
to be developed.  

Civilian oversight of the security forces 

In March 2009 the Serbian government adopted a strategic defence review which provides the 
framework  for  medium-  and  long-term  defence  planning.  In  April  2009  the  government 
adopted  two  key  reform  documents  –  the  military  strategy  and  the  defence  strategy.  The 
parliamentary committee for security and defence held regular hearings with the civilian and 
military intelligence services. In April and May 2009 the committee carried out the first field 
visits to the premises of the civilian State security agency, the military security agency and the 
military  intelligence  agency.  The  Ministry  of  Defence  demonstrated  greater  openness  to 
consultations with civil society on preparing the new military strategies.  

In  December  2008  a  public  dispute  broke  out  between  the  Army  Chief  of  Staff  and  the 
Minister  of  Defence  regarding  the  pace  and  nature  of  defence  reforms.  In  line  with  his 
constitutional powers, the Serbian President dismissed the Chief of Staff and appointed a new 
one in February 2009.  

The  legislative  framework,  however,  is  incomplete.  The  national  security  and  defence 
strategies which were approved by the government in April 2009 have not yet been adopted 
by  parliament.  Moreover,  the  Laws  on  Alternative  Service  and  Conscientious  Objection, 

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Military Intelligence and Military Security Agencies and the Law regulating Trade in Arms 
and Military Equipment have not yet been adopted.  

Civilian  oversight  remains  insufficient  and  the  relevant  parliamentary  committee  lacks 
specialised  staff.  The  committee  mainly  held  routine  periodic  hearings  and  has  only  just 
started field visits to the security agencies. There have been no debates about how the military 
budget is spent or about public procurement of military equipment.  

Overall, there has been some progress on civilian oversight of the security forces, with more 
involvement of the parliamentary committee for security and defence. Reform in this sector 
still has to be completed.  

Judicial system  

There  has  been  progress  in  the  reform  of  the  judicial  system,  which  is  a  key  priority  of  the 
European  Partnership.  In  December  2008  a  set  of  judicial  laws  were  adopted,  introducing  a 
broad reform of the judiciary. They included laws on the High Judicial Council, on judges, on 
the  organisation  of  courts,  on  the  State  Prosecutorial  Council  and  on  the  public  prosecution 
service. 

Two  new  bodies  –  the  High  Judicial  Council  and  the  State  Prosecutorial  Council  –  were 
established in April 2009. They will be responsible for election and promotion of judges and 
prosecutors. This includes defining the criteria for and implementing a general reappointment 
procedure for judges and prosecutors.  

In  accordance  with  the  Constitution,  the  new  High  Judicial  Council  will  have  eleven 
members.  The  President  of  the  Supreme  Court of Cassation,  the Minister of  Justice  and the 
President of the Parliamentary Committee for Judicial Affairs will be ex officio members and 
parliament will appoint the remaining eight elected members, six of whom will be judges. By 
law, the nominees will be chosen by an election in which all judges in Serbia can participate. 
The fact that judges will hold the majority of seats in the Council should ensure that they are 
represented more fairly and adequately and reduce the political influence to which the current 
Council is exposed.  

The  autonomy  of  the  prosecution  service  was  strengthened  by  extending  the  mandate  of 
deputy  prosecutors  to  permanent  posts  upon  appointment  by  the  new  State  Prosecutorial 
Council. 

The  new  Law  on  Seats  of  Courts  introduces  major  changes  to  the  system,  which  currently 
consists of some 168 courts. Under this law, the new Serbian court network will consist of 34 
basic courts, 26 higher courts and 4 courts of appeal with general jurisdiction. The law also 
provides  for  specialised  commercial  and  administrative  courts  and  the  Supreme  Court  of 
Cassation. To secure adequate access to justice, basic courts will maintain court units in the 
former seats of the municipal courts and judges will travel to them on the days designated for 
hearings. The new system is expected to be applied from January 2010.  

However, the new package of judicial laws contains major weaknesses. As an exception to the 
general  rule,  the  members  representing  judges  in  the  first  composition  of  the  new  High 
Judicial Council were nominated by the previous High Judicial Council which was not bound 
by the proposal from the courts. This appointment procedure does not provide for sufficient 
participation  by  the  judiciary  and  leaves  room  for  political  influence.  This  is  of  particular 

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concern  as  the  first  new  High  Judicial  Council  will  be  fully  in  charge  of  implementing  the 
reappointment procedure for all judges.  

The  reappointment  procedure  faces  major  challenges.  The  criteria  adopted  for  the 
reappointment  of  both  judges  and  prosecutors  are  not  fully  in  line  with  the  Council  of 
Europe’s Venice Commission's recommendations. The criteria for reappointment leave room 
for political influence over the procedure, as they are difficult to assess in practice. The short 
deadline set – by the end of 2009 – raises serious concerns as to the possibility to carry out an 
objective  procedure.  This  creates  a  risk  of  long-term  politicisation  of  the  judiciary. 
Nevertheless,  the  Serbian  Constitutional  Court  confirmed  in  a  judgement  of  July  2009  the 
constitutionality  of  the  reappointment  procedure,  following  an  appeal  filed  by  the  Serbian 
Judges Association. 

Concerns as to the autonomy of the prosecution service persist. Despite certain improvements 
under  the  new  legislation,  the  procedure  for  the  election  of  public  prosecutors  and  their 
deputies remains subject to influence of the parliament.  

The  Constitutional  Court  continued  its  work  with  a  limited  staff  of  ten  judges,  while  the 
appointment  of  five  judges  is  pending.  On  top  of  the  already  large  backlog  of  cases,  1,787 
new cases were filed in 2008. The Court processed 786 cases.  

Despite attempts to implement a special programme, the significant backlog in civil, criminal, 
commercial and administrative cases remains a cause for concern. Enforcement of judgments 
remains  inefficient.  There  is  an  important  need  to  streamline  court  procedures  and  improve 
court management systems.  

Progress  on  domestic  war  crime  cases  has  been  slow.  The  entry  into  force  of  the  2006 
Criminal Procedure Code was postponed for the second time, until the end of 2010. 

Overall, Serbia is moderately advanced in the area of reform of the judiciary. There has been 
progress  in  the  form  of  adoption  of  a  new  legislative  framework  and  steps  to  implement  it. 
However,  the  ongoing  reform  and  its  partly  hasty  implementation  pose  big  risks  for  the 
independence, accountability and efficiency of the judiciary.  

Anti-corruption policy  

Implementation  of  Group  of  States 

Serbia  made  progress  on  improving  the  institutional  framework  for  the  fight  against 
corruption. 
(GRECO) 
recommendations  and  international  conventions  continued.  Parliament  elected  the  executive 
board of the Anti-Corruption Agency in April 2009. The Agency was also allocated premises, 
budgetary  resources  and  initial  technical  and  administrative  assistance.  Progress  can  be 
reported in access to information of public importance, where there has been a considerable 
increase in the number of requests. 

against  Corruption 

The  law  enforcement  authorities  have  shown  a  higher  level  of  commitment  to  fighting 
corruption, leading to the arrests of several suspects, and a number of high-profile cases have 
been opened. Internal control is operational in all law enforcement agencies.  

However, corruption remains prevalent in many areas and continues to be a serious problem. 
There are major obstacles to rooting out systemic corruption. The most vulnerable sectors are 
public  procurement,  privatisation  and  other  large  budgetary  expenditures,  but  also  taxation, 
customs and licensing. The 2007 action plan has not yet been implemented. There is no clear 

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plan  for  the  measures  needed  to  implement  the  international  conventions  that  have  been 
ratified. The overall processing of corruption cases remains inefficient, with only a few final 
convictions.  The  short  term  of  office  of  the  special  prosecutor  and  his  deputies  (two  years) 
limits their effectiveness and autonomy. 

In  the  absence  of  an  Anti-Corruption  Agency,  which  is  only  expected  to  be  operational  in 
2010, the 2008 provisions on conflicts of interest and financing of political parties have not 
yet  been  implemented.  Moreover,  these  provisions  contain  shortcomings,  in  particular  on 
party financing, which will make effective supervision difficult. Further improvements of the 
anti-corruption  legislation  are  necessary.  In  the  meantime,  application  of  the  old  Law  on 
Financing  Political  Parties  continued,  leading  to  the  absence  of  sufficient  control  over  this 
area.  The electoral commission,  which currently acts as a supervisory body, had neither the 
powers nor the capacity to enforce delivery of financial statements and to assess the accuracy 
of  the  information  provided.  The  same  applies  to  control  over  conflicts  of  interest,  where  a 
large proportion of public officials still fail to meet their reporting obligations. 

Insufficient  protection  of  whistleblowers  is  affecting  the  fight  against  corruption.  Public 
procurement  and  privatisation  procedures  along  with  budgetary  expenditure  are  still  not 
efficiently monitored by independent bodies. The State Audit Institution is still at a very early 
stage and has only started to carry out its first audits. Due to a serious lack of staff and audit 
capacity, no adequate supervision of public expenditure is ensured. 

Overall,  some  progress  has  been  achieved  on  adopting  the  new  legislative  and  institutional 
framework  for  the  fight  against  corruption,  which  is  a  key  priority  of  the  European 
Partnership.  However,  the  effectiveness  of  the  law  enforcement  and  judicial  authorities 
remains  low.  The  setting-up  of  the  Anti-Corruption  Agency  has  been  slow  and  the  relevant 
legislation  needs  further  improvement.  Political  party  financing  and  conflicts  of  interest 
remain serious causes for concern. 

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 the major human 
rights  instruments.  The  Revised  European  Social  Charter  and  the  European  Convention  on 
Trans-frontier Television were ratified in May 2009.  

The  European  Court  of  Human  Rights  (ECtHR)  received  1,361  new  applications  and 
delivered 17 judgments from October 2008 to September 2009, which found that Serbia had 
violated  the  European  Convention  for  the  Protection  of  Human  Rights  and  Fundamental 
Freedoms (ECHR). Judgments concerned violation of the right to a fair trial. As of September 
2009, there are almost 3000 eligible cases pending against Serbia.  

In  relation  to  promotion  and  enforcement  of  human  rights,  the  Ministry  for  Human  and 
Minority  Rights  has  been  raising  awareness  within  the  administration  about  international 
human  rights  obligations.  It  also  signed  a  memorandum  of  cooperation  with  more  than  150 
civil  society  organisations  active  in  the  field  of  human  rights,  thus  improving  the  level  of 
involvement  of  civil  society  organisations  in  policy-  and  decision-making.  The  Ministry  for 
Human and Minority Rights has been promoting tolerance and respect for human rights and 
has  used  occasions  such  as  the  International  Day  of  Tolerance,  the  International  Roma  Day 
and Universal Children’s Day to raise awareness among the population.  

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The Judicial Training Centre continues to provide training on the ECHR. Awareness among 
judges  of  international  human  rights  obligations  has  improved.  However,  courts  are  still 
reluctant to directly enforce ratified international treaties.  

Overall, the legal and institutional framework for the observance of human rights is in place 
and  some  progress  has  been  made  on  improving  observance  of  international  human  rights 
law.  The  new  Ministry  for  Human  and  Minority  Rights  is  playing  an  important  role  in 
promoting  such  rights.  Further  efforts  are  needed  to  increase  understanding  of  relevant 
international standards in this area.  

Civil and political rights  

There  has  been  some  progress  on  prevention  of  torture  and  ill-treatment  and  the  fight 
against impunity. The latest concluding observations by the UN Committee against Torture 
and  the  report  of  the  Council  of  Europe’s  Committee  for  the  Prevention  of  Torture  and 
Inhuman  or  Degrading  Treatment  or  Punishment  were  published  in  January  2009.  Serbia 
submitted  responses  to  both  reports  which  outlined  the  measures  taken  by  the  authorities  to 
prevent torture and ill-treatment.  

Greater efforts however are still necessary in order to prevent any further cases of torture and 
ill-treatment.  In  particular,  Serbia  has  not  yet  established  a  national  mechanism  to  prevent 
torture,  an  obligation  deriving  from  its  ratification,  in  2006,  of  the  Optional  Protocol  to  the 
Convention  against  Torture  and  other  Cruel,  Inhuman  and  Degrading  Treatment  or 
Punishment.  Further  reports  of  inhumane  treatment  by  the  police  suggest  that  such 
malpractices still have not been eradicated. 

A  Deputy  Ombudsman  for  the  rights  of  detainees  was  appointed  to  monitor  places  of 
detention. However police detention procedures remain of concern. In particular, there have 
been violations of detainees’ right to have access to a lawyer, doctor and, where necessary, an 
interpreter. Internal and external inspection of detention centres is irregular. No independent 
external oversight mechanism exists  

As  regards  access  to  justice,  no  progress  has  been  made  on  adopting  legislation  and 
establishing a comprehensive system of free legal aid.  

Some  progress  was  made  with  reform  of  the  prison  system.  Initial  steps  were  taken  in 
November  2008  to  introduce  a  system  of  alternative  sanctions.  Progress  was  made  on 
developing  programmes  and  capacity  for  individual  treatment  of  prisoners  and  providing 
better  medical  services.  However,  the  effects  of  these  measures  remained  limited  pending 
revision  of  the  legislation.  The  problem  of  overcrowding  in  prisons  continues,  due  to 
ineffective implementation of alternative sanctions and the lack of decriminalisation of minor 
offences  or  of  reintegration  programmes.  Moreover,  the  lack  of  training  is  hampering 
prevention of discrimination and protection of human rights. Increased levels of drug use and 
corruption in prisons were reported following independent monitoring by NGOs.  

Freedom  of  expression  is  generally  protected  under  the  Constitution  and  other  laws.  New 
anti-discrimination legislation introduced a rule prohibiting hate speech. A similar prohibition 
also exists in the Public Information Law and amendments to the Penal Code in August 2009 
have  further  elaborated  provisions  against  hate  speech.  However,  in  spite  of  the  legal 
framework,  incidents  involving  hate  speech,  threats  and  physical  attacks  against  journalists, 
human  rights  defenders  and  the  lesbian,  gay,  bisexual  and  transgender  (LGBT)  population 
have not been properly investigated and perpetrators have not been brought to justice. There 

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has been no progress in the investigations of murders of journalists dating back to the 1990s 
and 2001 and of an attempted murder of a journalist in 2007.  

As  regards  the  media,  changes  to  the  new  Broadcasting  Law,  clarifying  the  procedure  for 
appointment of members of the Broadcasting Council, were adopted in May 2009. Progress 
was made in terms of the transparency and accountability of the activities of the Republican 
Broadcasting Agency. The process of allocation of frequencies was completed in 2008. The 
Republican  Broadcasting  Council  issued  467  licenses  to  radio  and  TV  stations.  In  a  small 
number of cases, in particular those relating to media using minority languages, the decisions 
proved controversial and procedural irregularities  were  raised.  The appointment  of  two  new 
members  of  the  Broadcasting  Council,  whose  mandates  have  expired,  is  still  pending.  The 
new  Law  on  Media  Concentration  and  the  Law  on  Advertising  have  not  yet  been  adopted. 
Political interference in the work of media has continued. Breaches of the rules on protection 
of privacy and ethics by some sections of the media continued. In August 2009 amendments 
to Law on Public Information were adopted under urgent procedure. Both the government and 
parliament  were  criticised  by  civil  society,  professional  associations  and  international 
organisations  over  the  lack  of  transparency  and  lack  of  public  consultation  prior  to  the 
adoption of the amendments. There are concerns, moreover, that some of the new provisions, 
such  as  the  severity  of  penalties  for  violating  professional  norms,  may  have  the  effect  of 
infringing on media freedom. 

Freedom of assembly is guaranteed by the Constitution. It is the direct responsibility of the 
state  authorities  to  guarantee  the  effective  exercise  of  this  fundamental  right.  Legislation 
banning gatherings of neo-nazi and fascist organisations and prohibiting use of neo-nazi and 
fascist symbols was adopted in May 2009. There have been improvements in cooperation and 
action  by  the  Serbian  police  to  provide  protection  during  public  gatherings.  However,  a 
planned Belgrade Pride Parade had to be cancelled in September 2009 at the last minute as the 
Serbian authorities were unable to guarantee the safety of the participants. The organisation of 
this event was marred by threats from extremist and right wing groups against the organisers 
and the participants and a climate of prejudice against the LGBT community.  

Freedom  of  association  is  guaranteed  by  the  Constitution  and  by  new  laws  on  political 
parties  and  on  associations.  The  Constitutional  Court  received  four  requests  to  ban  political 
parties or citizen’s associations. One was dismissed and the other three are pending.  

Civil  society  organisations  play  an  active  part  in  the  social,  economic  and  political  life  of 
Serbia  and  have  provided  an  invaluable  contribution  to  the  democratic  transition  in  the 
country.  Human  rights  defenders  have  played  a  key  role  in  raising  awareness  of  civil  and 
political rights, positively influencing public policy and fighting impunity. The new Law on 
Associations  adopted  in  July  2009  has  clarified  the  legal  status  of  NGOs.  There  have  been 
some  improvements  within  the  Serbian  administration  to  cooperate  with  civil  society. 
However, cooperation remains mainly ad hoc and selective. NGOs, in particular human rights 
defenders, were once again victims of threats and verbal abuse for holding diverging views on 
issues such as Kosovo and the fight against impunity.  

Constitutional  guarantees  provide  for  freedom  of  religion  and  new  anti-discrimination 
legislation  prohibits  discrimination  on  religious  grounds.  According  to  reports  by  NGOs 
active in this field, there was a decrease in religiously motivated incidents in 2008. However, 
there  were  reports  of  attacks  against  ‘non-traditional’  religious  communities.  The  official 
follow-up  to  these  incidents  has  been  insufficient.  Implementation  of  the  2006  Law  on 
Churches  and  Religious  Communities  led,  in  practice,  to  a  number  of  arbitrary  decisions 

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concerning  registration  of  non-traditional  communities.  Out  of  approximately  170  religious 
organisations  active  in  Serbia,  only  13  were  registered  in  addition  to  the  seven  traditional 
communities  listed  in  the  law.  A  number  of  cases  are  pending  before  the  Serbian  Supreme 
Court,  including  the  long-standing  case  of  the  Montenegrin  Orthodox  church.  In  May  2009 
the  UN  special  rapporteur  on  freedom  of  religion  or  belief  concluded  that  a  number  of 
religious communities and groups had been aggrieved by the law because of its discriminatory 
effects. In April 2009 the State Ombudsman stated that the Law should be revised and that the 
criteria for registration should be clarified.  

Overall,  civil  and  political  rights  are  largely  respected  in  Serbia.  However,  existing 
constitutional  and  legal  guarantees  need  to  be  fully  enforced  and  violations  properly 
investigated.  Relevant  legislation  needs  to  be  further  brought  into  line  with  European 
standards. Greater efforts need to be made by the Serbian authorities to fight impunity at all 
levels.  

Economic and social rights 

As  regards  women’s  rights,  the  national  strategy  to  improve  the  position  of  women  and 
promote gender equality was adopted in February 2009, identifying the six most critical areas: 
improvement  of  the  economic  position,  health,  representation  in  public  and  political  life, 
equality  in  education,  suppression  of  violence  and  elimination  of  gender  stereotypes  in  the 
media.  Legislation  prohibits  discrimination  based  on  gender.  However,  no  specific  gender 
equality law has yet been adopted. The level of violence against women, including domestic 
violence remains a serious concern. Violation of women's rights often goes unreported. NGOs 
have  played  a  key  role  in  raising  awareness  of  this  problem.  At  provincial  level, 
implementation  of  the  strategy  for  protection  against  domestic  violence  and  other  forms  of 
gender-based violence in Vojvodina started in January 2009. 

Concerning  children’s  rights,  the  national  strategy  for  the  protection  of  children  from 
violence was adopted in December 2008 but has not yet been implemented. The Ministry of 
Justice has adopted a protocol aimed at protecting children from abuse. In June 2009 Serbia 
signed  the  European  Convention  on  the  Exercise  of  Children's  Rights,  and  the  revised 
European  Convention  on  the  Adoption  of  Children.  The  ongoing  reform  of  residential 
institutions  for  children  has  resulted  in  fewer  children  being  placed  in  such  institutions. 
However,  this  process,  together  with  development  of  alternative  measures,  should  be 
accelerated. 

More  concerted  efforts  need  to  be  made  to  raise  awareness  of  the  situation  of  vulnerable 
groups of children and ensure that their rights are protected. The rate of school attendance by 
Roma children,  especially girls,  is still  very low.  Due to their  insufficient knowledge of the 
Serbian  language,  many  children,  particularly  Roma  refugees  from  abroad,  are  placed  in 
special schools for children with disabilities. Inclusive education should be developed, as the 
right  to  education,  particularly  of  children  with  disabilities,  has  been  continuously  violated. 
Violence against children remains a persistent problem. 

As  regards  socially  vulnerable  persons  and  persons  with  disabilities,  some  progress  was 
made  with  the  adoption,  in  May  2009,  of  the  Law  on  Vocational  Rehabilitation  and 
Employment  of  Disabled  Persons,  which  regulates  several  areas  related  to  the  employment, 
including incentives for equal participation by persons with disabilities in the labour market, 
vocational  rehabilitation  and  compulsory  recruitment  of  persons  with  disabilities.  The  UN 
Convention on Rights of Persons with Disabilities and the Optional Protocol were ratified in 

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May 2009. Implementation of the strategy on improving the situation of disabled persons is 
continuing.  

In  the  area  of  mental  health,  the  government  continued  to  take  measures  aiming  at  de-
institutionalisation  of  mental  healthcare  and  at  developing  and  building  the  capacity  of 
community-based  services.  However,  this  reform  is  proceeding  at  a  slow  pace.  The  related 
community-based services remain insufficiently developed.  

In the area of labour rights and trade unions, the government signed an extended general 
collective agreement with the trade unions and the employers’ association in November 2008 
covering  various  rights  of  employees,  such  as  remuneration,  fringe  benefits  and  safety  at 
work.  This  became  binding  on  all  employers,  including  the  State.  However,  this  new 
agreement  has  been  temporarily  suspended  due  to  the  economic  crisis.  Social  dialogue 
remains  weak  and  consultations  between  social  partners  are  irregular.  The  capacity  of  the 
Socio-Economic Council remains weak, also due to lack of resources. It should play a more 
active consultative role in law-making. Local councils have been established in only a limited 
number of municipalities and their role remains marginal. 

The  Law  on  Prohibition  of  Discrimination  was  adopted  in  March  2009.  This  law  marks  a 
step  forward  in  protection  of  human  rights.  It  provides  for  appointment  of  an  independent 
commissioner  for  the  protection  of  equality.  Court  protection  is  also  envisaged.  The 
commissioner  will  deal  with  all  cases  of  discrimination,  except  those  already  processed  in 
court.  The  commissioner  is  expected  to  be  operational  from  January  2010  on.  In  practice, 
there is ongoing discrimination, in particular against vulnerable groups such as Roma, persons 
with  disabilities,  and  the  LGBT  population.  All  these  groups  are  frequently  victims  of 
intolerance and hate speech. There is little support for victims of discrimination and there is a 
need for greater commitment on the part of all involved – the police, the prosecution service 
and  the  judiciary  –  to  make  sure  that  the  legislation  is  fully  enforced.  (See  Section  4.1.8. 
Social policies, employment and public health policy). 

With regard to property rights, Serbia has adopted a new law regulating private ownership of 
urban  construction  land.  However,  the  continued  lack  of  a  legal  basis  prevents  proper 
launching  of  the  restitution  process.  Privatisation  of  some  of  the  properties  in  dispute  has 
continued with the risk of de facto prejudging future decisions on the return of property. The 
restitution process faces greater uncertainty, as a result of the economic crisis and consequent 
limited budgetary resources.  

Overall, the legal provisions on protection of economic and social rights are largely in place 
in Serbia. Enforcement of  the existing  legislation needs to be fully ensured. More sustained 
efforts  are  needed  to  improve  the  social  inclusion  of  children,  persons  with  disabilities  and 
other  vulnerable  groups.  Protection  of  women  against  all  forms  of  violence  needs  to  be 
strengthened.  

Minority rights, cultural rights and protection of minorities 

In  addition  to  constitutional  provisions,  new  legislation  explicitly  prohibits  discrimination 
against  ethnic  minorities.  The  Law  on  Political  Parties  provides  for  affirmative  action  in 
favour of ethnic minority parties, by allowing a lower number of signatures for registration. 
The  national  parliament  and  the  Provincial  Assembly  of  Vojvodina  have  laid  down  the 
conditions  under  which  minority  representatives  can  use  their  mother  tongue.  A  total  of  16 
minority  national  councils  have  been  established.  In  August  2009  the  Law  on  Minority 

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National Councils was adopted. This Law regulates competencies and the election of national 
minority  councils  in  line  with  international  standards.  In  May  2009  the  Committee  of 
Ministers  of  the  Council  of  Europe  issued  a  set  of  recommendations  in  connection  with 
application  of  the  European  Charter  for  Regional  and  Minority  Languages  in  Serbia.  These 
call  for  promotion  of  tolerance  and  better  regulation  of  use  of  minority  languages  in 
education. The Inter-State Commission provided for in the bilateral agreement with Hungary 
on  the  protection  of  national  minorities  met  in  May  2009.  Similar  agreements  signed  with 
Croatia,  Romania  and  the  former  Yugoslav  Republic  of  Macedonia  are  not  being  fully 
implemented and the Inter-State Commissions are not fully operational. 

The  Republican  Council  for  National  Minorities  has  not  yet  met.  The  status  of  different 
minorities  varies  in  practice  from  one  region  to  another.  In  particular,  the  position  of  the 
Vlachs and Bunjevci is uncertain and their status has not been clarified, as highlighted by the 
recommendations  made  by  the  Council  of  Europe’s  Committee  of  Ministers  in  May  2009. 
The  Bulgarian  national  minority  has  been  having  problems  with  exercising  its  right  to  have 
access to information in its language and the right to official use of the Bulgarian language in 
municipal administrations.  

The political situation in Vojvodina has been affected by the debate over adoption of the new 
Statute. Cooperation and coordination between the provincial institutions and the Ministry of 
the  Interior  have  improved.  The  Provincial  Assembly  and  Executive  Council  conducted  a 
campaign  to  promote  tolerance  and  multi-culturalism.  The  2008  report  by  the  Provincial 
Ombudsman noted that 24 of the 597 complaints received (4%) related to national minority 
rights. According to the Ministry of Justice, a number of legal proceedings have been initiated 
in connection with ethnically-motivated incidents. On the whole, ethnically-based incidents in 
the  province  decreased  in  2008.  However,  in  the  first  half  of  2009  incidents  involving 
physical assaults and offensive graffiti occurred in three towns in Vojvodina.  

The  situation  in  southern  Serbia  deteriorated  following  a  number  of  attacks  on  the  Serbian 
gendarmerie in July 2009. In March 2009 an agreement on restructuring of the government’s 
coordination  body  was  signed.  In  line  with  the  agreement,  a  representative  of  the  ethnic 
Albanian community was appointed as Deputy President of the coordination body. An initial 
boycott by some Albanians has been resolved and key Albanian leaders are now participating 
in  the  coordination  body.  In  October  2008  the  Serbian  government  agreed  to  recognise 
degrees awarded by Pristina University and stamped with UNMIK seals, in line with previous 
practice  which  had  been  interrupted  in  August  2008.  However,  a  long-term  solution  to  the 
issue  of  recognition  of  degrees  awarded  by  Pristina  University  still  has  to  be  found.  The 
government has issued licences for bilingual branches of the Economic and Law Faculties of 
the Nis University in Medvedja to be established. Problems persist with regard to integration 
of Albanians into the public administration and integration of Serbs into local governments in 
Presevo and Bujanovac.  

The  situation  in  Sandžak  has  deteriorated.  Divisions  within  the  Muslim  community  have 
continued  and  there  have  been  several  outbreaks  of  violence.  In  April  2009  the  incidents 
spilled  over  from  Sandžak  to  Vojvodina,  triggering  clashes  between  supporters  of  the 
opposing  Muslim  religious  factions.  Municipal  structures  lack  the  capacity  to  enforce 
minority rights fully in Sandžak. 

According  to  the  UNHCR  there  are  approximately  86,000  refugees  and  205,000  internally 
displaced persons (IDPs) in Serbia. The number of refugees living in collective centres has 
decreased.  However,  more  than  5500  people  are  still  living  in  these  centres,  enduring  very 

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poor conditions. Both the national strategy on refugees and the law regulating this issue still 
have  to  be  revised.  There  have  been  very  limited  improvements  in  the  housing  situation. 
Poverty is widespread and is particularly acute among refugees. Unemployment is high. The 
situation  for  IDPs  continues  to  be  very  difficult.  They  are  faced  with  many  obstacles  in 
exercising their basic social rights. Very few IDPs have returned to Kosovo.  

During the Serbian Presidency of the Decade of Roma inclusion, Serbia adopted the national 
strategy  for  improvement  of  the  status  of  the  Roma  in  April  2009.  An  action  plan  to 
implement  the  strategy  was  adopted  in  July  2009.  A  limited  number  of  scholarships  were 
provided by the State and Vojvodina budgets to Roma students. The quality of national and 
local  media  reporting  on  Roma  issues  has  improved.  The  League  for  the  Roma  Decade,  an 
alliance of 60 Roma  and  non  Roma  NGOs,  has become a respected partner to the state and 
local institutions. The initiative on legalisation of Roma settlements which started in 2007 is 
still  in  progress.  At  the  end  of  2008  the  relevant  ministries  signed  agreements  with  eight 
municipalities on preparation of legal documentation for legalisation and relocation of Roma 
settlements.  Affirmative  action  introduced  several  years  ago  in  the  area  of  education  is 
producing results, but is still insufficient. An additional 45 health mediators and 26 teaching 
assistants have been employed by the ministries concerned.  

However,  the  Roma  population,  especially  Roma  children  and  women,  remains  one  of  the 
most  vulnerable  groups  in  the  country.  There  is  no  organised  and  systematic  approach  to 
resolving  the  issue  of  housing  including  the  relocation  of  Roma  settlements,  but  instead  ad 
hoc and often inadequate solutions, which in some cases have led to fundamental rights being 
violated. The Roma population is subject to discrimination, prejudice and intolerance and has 
been victim of a number of individual attacks. There is still a problem with civil registration, 
particularly for Roma IDPs. A special law to regulate the procedure for recognition of legal 
subjectivity and allow subsequent inclusion in citizens’ registries has not been adopted. Low 
school attendance by Roma children and high unemployment are widespread.  

Overall,  the  framework  for  protection  of  minority  rights  in  Serbia  is  in  place  and  minority 
rights  are  broadly  respected.  Insufficient  attention  has  been  paid  to  resolving  the  status  of 
refugees and IDPs. The Roma population continues to endure very difficult living conditions 
and  frequent  discrimination,  particularly  regarding  access  to  education,  social  protection, 
health care, employment and adequate housing.  

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.  In  May  2009  the  High  Representative  and  EU  Special 
Representative  to  Bosnia  and  Herzegovina  visited  Belgrade,  following  his  appointment  in 
March 2009. Serbian officials reiterated their support for the stability and territorial integrity 
of Bosnia and Herzegovina. The Serbian President also stressed that constitutional changes in 
Bosnia and Herzegovina are possible only with the agreement of legitimate representatives of 
the three constituting nations.  

Cooperation with the International Criminal Tribunal for the former Yugoslavia (ICTY) 
has further improved. In his address to the UN Security Council in June 2009, the ICTY Chief 
Prosecutor,  stated  that  the  Serbian  authorities  have  responded  adequately  and  in  a  timely 
manner  to  specific  requests  for  assistance  and  that  cooperation  must  continue  and  lead  to 
further  specific  and  positive  results.  However,  in  spite  of  the  improved  cooperation  and  the 
searches that have taken place, the ICTY indictees Ratko Mladić and Goran Hadžić are still at 

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large. The ICTY Chief Prosecutor expressed concern regarding negative statements made by 
senior government officials about the Tribunal’s judicial decisions which he stated "seemed to 
be  in  contradiction  with  the  level  of  cooperation  on  the  ground".  Full  cooperation  with  the 
ICTY remains an international obligation and a key priority of the European Partnership.  

The status of the former State Union Law on the Freezing of Assets of ICTY Fugitives has 
still not been clarified. Procedures for freezing assets remain highly complex and the current 
legal framework contains potential loopholes and shortcomings.  

As regards domestic processing of war crimes, there were a number of first-instance rulings 
in cases concerning crimes committed in Kosovo and Croatia. The War Crimes Prosecutor is 
currently  investigating  over  100  suspects.  He  has  been  working  efficiently,  in  a  difficult 
political context and with limited resources. Twelve trials are underway.  

At  operational  level,  the  police  have  demonstrated  improved  professionalism.  However,  in 
cases  related  to  Kosovo,  there  have  been  allegations  of  intimidation  of  witnesses,  and  law 
enforcement authorities have been reluctant fully to investigate allegations within their own 
ranks. Final verdicts in some high-profile cases were criticised by NGOs and members of the 
public,  citing  legal  grounds,  mild  sentencing  and  denial  of  justice  to  victims  and  families. 
Trials relating to domestic war crimes have continued at a slow pace.  

There has been improved cooperation regarding the exchange of evidence and the transfer of 
some  war  crimes  cases  between  the  prosecutors  from  Croatia,  Bosnia  and  Herzegovina  and 
Serbia.  Obstacles  to  the  extradition  of  suspects  in  cases  of  war  crimes  and  crimes  against 
humanity between the countries of the region continue to exist, however. Serbia, together with 
its  neighbours,  should  address  the  regional  impunity  gap,  including  by  taking  steps  towards 
extradition agreements covering war crimes cases.  

Serbia’s policy regarding the International Criminal Court (ICC) remains aligned with the 
EU guiding principles and the EU Common Positions on the integrity of the Rome Statute. A 
Law on Cooperation with the ICC was adopted in August 2009.  

Serbia  continues  to  be  covered  by  the  procedure  of  the  Parliamentary  Assembly  of  the 
Council of Europe to monitor its fulfilment of obligations and commitments arising from its 
membership.  The  Parliamentary  Assembly  adopted  a  resolution  in  April  2009  stating  that 
Serbia  has  been  steadily  implementing  its  obligations  and  commitments.  However,  the 
resolution  highlighted  a  number  of  steps  that  need  to  be  taken  in  the  field  of  international 
obligations, democracy, rule of law and human rights.  

The  Serbian  government  continued  to  contest  Kosovo's  declaration  of  independence  and 
pursued legal and diplomatic measures to this effect, including via the International Court of 
Justice  (ICJ).  The  ICJ  received  36  written  statements  in  connection  with  the  UN  General 
Assembly’s initiative on the ICJ advisory opinion on the legality of Kosovo’s declaration of 
independence.  

In December 2008 the Serbian government adopted a decision supporting the UN Secretary-
General’s plan to deploy EULEX over the entire territory of Kosovo. In March 2009 the Head 
of  EULEX  officially  visited  Belgrade  for  the  first  time  and  had  several  meetings  with  the 
Serbian  authorities.  In  September  2009  EULEX  and  Serbia  signed  a  protocol  on  police 
cooperation.  The  Serbian  government  does  not  have  official  contact  with  the  Kosovo 
authorities, insisting on dealing only with UNMIK and EULEX.  

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As  regards  trade,  the  Serbian  government  does  not  recognise  Kosovo's  customs  stamps  that 
have  been  notified  to  the  European  Commission  and  which  are,  according  to  UNMIK,  in 
accordance with UNSCR 1244. Serbia insists that the stamps be labelled "UNMIK customs" 
or  alternatively  "EULEX  customs".  Serbia's  refusal  to  recognise  Kosovo's  customs  stamps 
raises  serious  concerns  regarding  the  impact  on  trade  and  regional  cooperation.  Serbia  and 
Kosovo  need  to  reach  pragmatic  solutions  enabling  key  regional  fora  to  continue  fulfilling 
their role in advancing regional cooperation and development. Cooperating constructively on 
matters relating to Kosovo is a key European Partnership priority. 

Serbia  maintained  parallel  institutions  in  Kosovo.  The  Serbian  authorities  have  organised 
local by-elections in Kosovo, which is not consistent with UNSCR 1244. At the same time, 
Serbia  has  discouraged  Kosovo  Serbs  from  participating  in  the  municipalities  elections 
organised by the Kosovo authorities for November 2009.  

The Serbian authorities protested against the establishment of the Kosovo security force and 
stated  that  it  is  an  illegal  body.  The  Serbian  government  introduced  more  stringent  rules  to 
control  use  of  State  funds  in  Kosovo.  The  Serbian  Ministry  for  Kosovo  released  a  working 
draft of a comprehensive strategy for sustainable stay and return of Serbs to Kosovo for public 
debate.  This  draft  strategy  envisages  cooperation  with  the  international  community  but  not 
with Kosovo institutions.  

In  May  2009,  a  total  of  1,911  persons  were  still  missing  in  connection  with  the  conflict  in 
Kosovo.  In  2008  only  43  cases  were  resolved.  A  working  group  between  Pristina  and 
Belgrade meets regularly under the auspices of the International Committee of the Red Cross 
(ICRC). However,  there are insufficient  exchanges  of  information  to  solve  cases  of  missing 
persons at a faster pace.  

There has  been little  progress in the Sarajevo declaration process,  which  aimed  to  finalise 
the regional refugee return process by the end of 2006. While Serbia continued to work to a 
greater or lesser extent on its roadmap, there has been limited discussion on implementation 
issues  either  at  bilateral  or  regional  basis.  The  Serbian  authorities  participated  in  the  high-
level  meeting  on  protracted  refugee  crises  organised  by  the  United  Nations  High 
Commissioner for Refugees (UNHCR) in Geneva in December 2008. Also in December 2008 
the Serbian authorities distributed a non-paper which identified outstanding issues relating to 
the Sarajevo Declaration process. However, there has been limited follow-up. 

Regional cooperation and good neighbourly relations form an essential part of the process 
of integrating with the European Union.  

Serbia  continued  to  participate  actively  in  regional  initiatives,  including  the  South-East 
European  Cooperation  Process  (SEECP)  and  the  Regional  Cooperation  Council  (RCC),  the 
Central  European  Free  Trade  Agreement  (CEFTA),  the  Energy  Community  Treaty  and  the 
European  Common  Aviation  Area  Agreement  (ECAAA).  Serbia’s  participation  in  regional 
cooperation  has,  however,  been  affected  by  its  approach  to  participation  by  Kosovo  in  the 
regional initiatives and other fora.  

As  regards  bilateral  relations  with  other  enlargement  countries  and  neighbouring 
Member  States,  there  was  no  progress  in  the  demarcation  of  borders  with  the  former 
Yugoslav  republics,  notably  with  Croatia  on  the  River  Danube  and  with  Bosnia  and 
Herzegovina  as  regards  several  disputed  border  crossings.  Demarcation  of  the  border  with 
Montenegro is still pending.  

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Political  relations  with  Albania  remained  stable,  although  they  were  affected  by  Albania’s 
recognition of the independence of Kosovo. There were no bilateral political visits, but there 
were senior-level meetings on the fringe of regional and international events. There have been 
ongoing  contacts  regarding  judicial  cooperation.  Economic  cooperation  progressed  and  in 
March  2009  a  memorandum  on  cooperation  was  signed  between  the  Serbian  and  Albanian 
Chambers of Commerce.  

Relations with Bosnia and Herzegovina remained stable. There were several high-level visits 
by  Serbian  officials.  Serbia  also  provided  assistance  to  Bosnia  and  Herzegovina  during  the 
gas  crisis.  As  part  of  the  implementation  of  the  2008  Protocol  on  inter-parliamentary 
cooperation, a delegation from the Serbian Parliament visited Republika Srpska in April 2009. 
No meetings of the Interstate Cooperation Council have taken place and there was no progress 
on addressing issues related to property. A border agreement between Serbia and Bosnia and 
Herzegovina has not yet been signed. Building on the existing agreement on special parallel 
relations with Republika Srpska, an agreement on economic cooperation was signed in June 
2009.  

Progress  has  been  made  in  relations  with  Croatia,  in  particular  following  the  visit  of  the 
Croatian Prime Minister to Belgrade in March 2009. The Serbian Ambassador, recalled after 
Croatia  recognised  the  independence  of  Kosovo,  returned  in  November  2008.  The  visa-free 
arrangement  between  the  two  countries  is  continuing  to  function  well.  There  has  been 
progress on cooperation on war crimes prosecutions. Croatia and Serbia signed agreements on 
police  cooperation,  on  readmission  of  illegal  migrants  and  on  cooperation  in  the  field  of 
European  integration.  There  has  been  some  progress  on  cooperation  on  the  2,000  cases  of 
missing  persons  from  the  war.  However,  there  has  been  no  progress  towards  a  border 
agreement nor has the bilateral commission met. Other open matters include property-related 
issues, in particular claims for compensation for lost occupancy and tenancy rights, return of 
refugees and the genocide lawsuits before the ICJ. Relations were particularly strained amid 
harsh  rhetoric  from  both  sides  concerning  the  ICJ  case  at  the  end  of  2008.  Economic 
cooperation is growing although there are limited Serbian investments in Croatia compared to 
the  level  of  Croatian  investments  in  Serbia,  possibly  due  in  part  to  reluctance  in  Croatia  to 
accept Serbian investments. 

Serbia’s relations with the former Yugoslav Republic of Macedonia improved. After a cooling 
of relations in 2008 after the former Yugoslav Republic of Macedonia recognised Kosovo’s 
independence,  Serbian  authorities  agreed  to  the  appointment  of  a  new  ambassador  in  April 
2009.  There  have  been  a  number  of  high-level  bilateral  visits  between  the  two  countries. 
Economic  cooperation  is  continuing  to  improve.  Unresolved  issues  concerning  relations 
between the Orthodox churches in the two countries had no major political implications.  

Relations with Montenegro continue to be affected by the Montenegrin decision to recognise 
Kosovo’s  independence.  The  Montenegrin  Ambassador  was  declared  persona  non  grata  in 
October  2008.  A  new  Ambassador  was  accredited  in  September  2009.  There  was  good 
cooperation in the defence sector and the Serbian Minister for Defence visited Podgorica in 
February 2009. The Montenegrin President visited Belgrade in May 2009. There continues to 
be good economic cooperation. On the basis of a bilateral agreement, Serbian diplomatic and 
consular  missions  in  some  countries  continue  to  provide  services  to  Montenegrin  citizens. 
Regarding  the  issue  of  dual  citizenship,  little  progress  was  made  towards  concluding  a 
bilateral  agreement  with  Montenegro.  Agreements  on  judicial  cooperation  and  joint  border 
patrols were signed. Police cooperation in the fight against organised cross-border crime was 
strengthened. Talks on border demarcation are proceeding.  

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Relations  with  Turkey  are,  on  the  whole,  good.  An  agreement  on  military  cooperation  was 
signed in May 2009. In June 2009 Serbia signed a free trade agreement with Turkey in line 
with SAA requirements.  

Serbia  continues  to  maintain  good  relations  with  Romania.  The  Serbian  President  visited 
Romania in March 2009. Preparations are being made for establishment of a joint inter-state 
commission  to  implement  the  agreement  on  protection  of  national  minorities.  Problems 
regarding the legal status of the Romanian Orthodox church in Serbia are being addressed.  

Relations  with  Bulgaria  and  Hungary  are  improving,  after  having  been  affected  after  both 
these countries recognised the independence of Kosovo. Several high-level bilateral meetings 
with  Bulgaria  and  Hungary  took  place.  Hungary  provided  emergency  assistance  to  Serbia 
during the gas crisis.  

Overall,  Serbia  has  continued  to  be  active  in  regional  cooperation  initiatives.  Bilateral 
cooperation  with  the  neighbouring  and  enlargement  countries  has  improved.  However, 
regional cooperation has been affected by developments related to Kosovo. Cooperation with 
the ICTY has further improved, however ICTY indictees Ratko Mladić and Goran Hadžić are 
still  at  large.  Significant  challenges  remain  regarding  the  domestic  prosecution  of  war 
criminals. 

3. 

ECONOMIC CRITERIA 

In examining economic developments in Serbia, the Commission’s approach was guided by 
the  conclusions  of  the  European  Council  in  Copenhagen  in  June  1993,  which  stated  that 
membership  of  the  Union  requires  the  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  January  2009,  the  government  submitted  to the  European  Commission  an  Economic  and 
Fiscal Programme (EFP), covering the years 2009-2011. The programme builds on the budget 
memorandum  of  May  and  the  December  2008  update  thereof  and  presented  a  generally 
coherent  and  ambitious  macroeconomic  and  fiscal  framework  together  with  an  ambitious 
agenda for structural reforms. In the light of the deteriorating economic situation in autumn 
2008  and  beginning  of  2009,  the  EFP  rapidly  became  outdated  and  it  retains  only  limited 
relevance  as  a  core  document  for  economic  policy  making.  In  June  2009,  the  Serbian 
government adopted a new budget memorandum, in the context of a budget revision. 

In December 2008, the Serbian authorities requested a Stand-by Arrangement (SBA) for over 
€420  million  from  the  International  Monetary  Fund  (IMF),  which  was  approved  in  January 
2009. As the impact of the global economic crisis turned into a domestic fiscal crisis, in April 
2009,  the  Serbian  government  agreed  with  the  IMF  on  a  revision  of  the  programme 
assumptions,  an  increase  of  the  available  loan  to  €2.9  billion  and  an  extension  of  the 
agreement to April 2011. A first tranche of this assistance, worth €788 million, was drawn in 
May 2009. A set of fiscal measures has been implemented in the context of the revised IMF 
programme,  with  the  objective  to  ease  the  fiscal  crisis.  However,  the  underlying  structural 
weaknesses of Serbian public finances, in particular as regards the unreformed welfare state, 

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have  not  been  addressed  in  depth.  Overall,  consensus  on  the  fundamentals  of  a  market 
economy has been maintained, but the government lacks a medium-term reform strategy. 

Macroeconomic stability 

In 2008, GDP growth decelerated to 5.4% compared to 6.9% in 2007 as the country started 
being affected by the global economic crisis. Growth in the last quarter of 2008 declined to 
2.8%  year-on-year  as  compared  to  an  average  growth  rate  of  6.5%  in  the  previous  three 
quarters.  During  the  first  quarter  of  2009,  GDP  declined  by  3.5%  year-on-year.  In  2008, 
industrial output was 1% higher than in the previous year, mainly due to good results during 
the first half of the year.  

The declining trend that started in the second quarter of the year accelerated sharply towards 
the end of 2008 and further intensified in early 2009. Industrial production declined by 17.4% 
in  the  first  half  of  2009  compared  to  the  same  period  of  the  previous  year.  In  2008,  export 
growth slowed to 15.5%, compared to 26.1% a year earlier. During the first quarter of 2009, 
exports  contracted  by  23.8%  year-on-year.  As  a  result,  growth  projections  for  2009  were 
revised  downwards  from  an  initial  6.5%  to  3.5%  and  to  -2%  in  March.  Growth  projections 
were  further  reduced  to  -6%  mid-2009  on  the  back  of  the  strongly  deteriorating  economic 
indicators during the first half of the year. In 2008, average per capita income in purchasing 
power  standards  rose  to  37%  of  the  EU-27  average,  up  from  33%  in  2007.  Overall,  the 
Serbian  economy  was  substantially  affected  by  the  global  economic  crisis  and  has  been  in 
recession during the first half of 2009. 

The international financial crisis strongly impacted Serbia’s economy and its financial sector. 
External  imbalances  rendered  the  Serbian  economy  vulnerable  to  possible  disruptions  in 
capital flows and the risks of a sudden stop or reversal of capital flows started growing. As 
this  disruption  occurred  during  the  last  quarter  of  2008,  the  Serbian  authorities  approached 
international  financial  institutions  to  secure  access  to  fresh  loans.  With  the  aim  to  inject 
liquidity in the financial sector, the authorities also adopted two packages in February and in 
May 2009, comprising loans at a preferential interest rates subsidised by the Government. The 
latter  loans  were  aimed  at  addressing  the  needs  of  local  companies  faced  with  serious 
problems in financing their activities. 

In  2008,  the  current  account  deficit  widened  to  17.6%  of  GDP  from  15.6%  a  year  earlier, 
driven  by  a  growing  deficit  in  the  trade  balance  and  a  decline  in  current  transfers.  Strong 
domestic demand, fuelled by a relaxation of fiscal and wage policies, and a drop in exports of 
some of the major export items — notably steel — contributed to the deterioration in external 
accounts. Capital inflows remained substantial at 16% of GDP. However, they fell short of the 
financing needs. Foreign direct investment remained stable at €1.81 billion or 5.3% of GDP. 
Long-term  borrowing  by  the  corporate  sector  continued  to  grow  by  €2.5  billion  albeit  at  a 
slower pace than in 2007. Short-term borrowing rose from almost zero to about € 500 million. 
Capital  inflows  practically  stalled,  however,  towards  the  end  of  the  year  and  in  the  first 
months of 2009. Foreign exchange reserves declined by €1.8 billion to €8.2 billion by the end 
of  2008.  However,  as  the  first  tranche  of  the  IMF  loan  was  disbursed  and  inflows  of 
remittances picked up in early 2009, foreign exchange reserves of the National Bank of Serbia 
(NBS)  grew  again  to  €  8.9  billion  at  end-May,  reaching  a  comfortable  9  months  worth  of 
imports  or  27%  of  GDP.  External  debt  grew  to  €  21.7  billion  or  70%  of  GDP  at  end-June 
2009 from €18.6 billion or 58% of GDP in June 2008. Overall, the Serbian economy is going 
through  a  process  of  substantial  external  adjustment,  as  reflected  in  a  rapidly  contracting 

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current account deficit, while foreign exchange reserves have been secured at a comfortable 
level. Consequentially, the level of external debt has been increasing.  

In  2008,  labour  market  conditions  improved  slightly.  The  employment  rate  rose  to  53.3%, 
compared to 51.5% a year earlier, but then again fell to 50.8% in April 20095. The registered 
unemployment  rate  fell  to  14.8%  compared  to  18.3%  in  2007.  This  rate  also  rose  in  April 
2009 to 16.4%. Nominal wages grew by 17.9% year-on-year in 2008, compared to 27.9% a 
year earlier. However, real wage growth slowed to 3.9% year-on-year, substantially less than 
in 2007 when real wages grew by a strong 19.5% year-on-year. Nominal wages grew by 8.9% 
year-on-year  in  May  2009  and,  as  inflation  remained  relatively  high  during  the  first  few 
months  of  the  year,  in  real  terms  by  0.6%  for  the  same  period.  Overall,  despite  strong 
economic growth rates in recent years, unemployment remains persistently high.  

The monetary policy framework that had been introduced in September 2006 was adjusted in 
January 2009, when the National Bank of Serbia (NBS) switched from targeting core inflation 
to  a  target  of  consumer  price  inflation.  For  2009,  the  annual  consumer  price  index  (CPI) 
inflation  target  band  was  announced  at  a  band  between  11%  and  15%  year-on-year.  In 
January  2009,  CPI  inflation  accelerated  back  to  10.4%,  driven  by  increases  in  regulated 
prices,  such  as  for  oil  derivatives,  medications,  communal  services  and  fixed  line  telephone 
service,  but  thereafter  declined  again  to  7.5%  in  June.  At  end-October  2008  the  NBS 
increased  its  policy  rate  by  200  basis  points  to  17.75%  to  stem  rising inflationary pressures 
but also to help support  the local  currency, which had come under growing pressure on  the 
foreign exchange market in late 2008. In early 2009, the NBS reversed course and reduced its 
policy rate in several steps by 5.75 percentage points to 12.0% at end-July, in an attempt to 
boost  dinar  liquidity  and  support  the  collapsing  domestic  economy.  Overall,  inflation 
remained relatively high in Serbia, despite the economic recession, due to strong increases in 
administered  prices  and  persistently  high  inflation  expectations.  The  monetary  policy 
framework of inflation targeting remained difficult to implement successfully. 

As far as the foreign exchange rate policy is concerned, the NBS was forced to intervene in 
the inter-bank market in late 2008 and early 2009, following the strong and rapid depreciation 
of  the  dinar  that  started  in  October.  In  the  last  quarter  of  2008,  the  dinar  nominally 
depreciated  against  the  euro  by  15.7%.  The  Serbian  currency  kept  losing  value  during 
October, November and early December when it reached 91.63 dinar against the euro when 
the NBS intervened. After a month of stabilisation, the dinar fell to an all-time low of 96.33 
dinar  against  the  euro,  in  spite  of  a  total  of  €480  million  in  interventions  in  January  and 
February.  Since  then,  the  exchange  rate  has  stabilised  between  92  and  95  dinar  against  the 
euro,  and  the  NBS  has  abstained  from  intervening.  Overall,  the  dinar  has  lost  some  23% 
against the euro since September 2008, but has stabilised since February 2009. 

The expansionary fiscal policy of 2007 and early 2008, further intensified in the second half 
of  2008  as  election  promises  were  being  delivered.  The  consolidated  fiscal  deficit  stood  at 
6.5%  of  GDP  during  the  last  quarter  of  the  year.  For  the  whole  of  2008,  the  consolidated 
fiscal deficit rose to 2.4% of GDP from 1.9% a year earlier. The rise of current expenditure 
was particularly large due to labour costs and pensions, which together continued to account 
for 54% of total public spending. Among all expenditures, those for pensions saw the highest 
growth  in  2008  (overall  35%  increase  in  nominal  terms).  On  the  other  hand,  capital 
expenditures  declined  to  3.9%  of  GDP  in  2008  compared  to  4.9%  a  year  earlier.  On  the 

5 

However,  the  drop  in  unemployment  between  2007  and  2008  was  mainly  due  to  methodological 
changes. 

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revenue side, there was a decrease in real revenues from indirect taxes in the fourth quarter of 
2008. Given this negative trend, the 2009 budget, adopted on 29 December 2009, was based 
on  a  growth  assumption  that  was  too  optimistic,  therefore  rendering  the  revenue  and 
expenditure  projections  for  2009  unrealistic.  This  was  confirmed  as  budget  revenues  in 
January and February were well below projections. In view of the need to agree on a revised 
macroeconomic  framework  with  the  IMF,  a  revised  budget  was  adopted  on  29  April  2009, 
aimed at keeping the fiscal deficit at 3.0% of GDP. However, by end-June it was clear that the 
mid-year  target  of  the  IMF  programme  would  not  be  met  amid  growing  expenditures  and 
declining revenues. The IMF programme had to be revised. The public deficit for 2009 is now 
predicted  to  be  higher,  at  about  4.5%  of  GDP.  Serbia  and  IMF  agreed  to  postpone  final 
discussions  until  end-October  allowing  Serbia  to  suggest  further  adjustments  in  view  of  the 
2010  budget.  Overall,  fiscal  policy  remained  expansionary  in  2008,  leaving  Serbia 
particularly  vulnerable  to  the  fallout  of  the  global  economic  crisis.  As  it  became  clear  that 
public  finances  were  deteriorating  fast  in  early  2009,  the  Serbian  authorities  committed  to 
budget adjustments that, in the context of the crisis, so far have turned out to be insufficient to 
stabilise public finances. 

Expansionary fiscal policy and current account deficits made Serbia particularly vulnerable to 
the global crisis. The situation further deteriorated throughout 2008 and in early 2009 as the 
impact  of  the  global  economic  crisis  was  increasingly  being  felt  domestically.  The  fiscal 
reform  measures  agreed  in  the  IMF  programme  appear  to  be  insufficient  to  fully  address 
adjustment needs over the short-term and further structural improvements of public finances 
will  be  needed  in  the  medium-term.  At  the  same  time,  structural  reforms,  in  particular 
enterprise  restructuring  and  privatisation,  would  contribute  to  cutting  wasteful  subsidies  to 
unviable enterprises and to fostering the establishment of a competitive and dynamic private 
sector. A review of the social security policies and systems, in particular pension and health 
reform as well as the education system, with a view to ensuring medium-term sustainability of 
the  systems  and  of  public  finances  is  still  missing.  This  would  also  contribute  to  lowering 
labour  costs  and  help  increasing  employment.  Overall,  further  efforts  are  needed  to  address 
short-term fiscal adjustment needs and fully re-establish medium-term fiscal sustainability.  

Interplay of market forces 

The share of the private sector remains small at between 55% and 60% of total output. The 
private sector employs about 60% of the total number of employees. 

The  privatisation  of  socially-owned  companies  continued  in  2008  and  about  560  socially-
owned companies were sold (15 tenders, 226 auctions and about 320 companies sold through 
the  sale  of  state-owned  stakes  on  the  capital  market).  This  brought  revenues  amounting  to 
about  €330  million.  By  the  end  of  2008,  the  total  number  of  companies  privatised  through 
tenders or auctions since the beginning of the process in 2002 had risen to over 1,800 and has 
brought about €2.3 billion in privatisation revenues. The number of firms that still need to be 
sold declined  substantially in 2008. Overall, progress in  selling  state-owned companies was 
hampered by reduced interest in acquiring such companies due to the global economic crisis.  

According  to  earlier  plans,  four  large  state-owned  companies  (the  electricity  company  EPS, 
Telekom, Belgrade airport and the pharmaceutical company Galenika) were to be offered for 
sale in the form of initial public offerings. This plan has been postponed for the time being. 
However,  the  government  is  still  considering  the  possibility  to  offer  Galenika  and  Telekom 
for  sale  in  2010  when  market  conditions  related  to  the  global  crisis  improve.  On  the  other 
hand, the state oil company NIS was sold (a 51% majority stake for €400 million) as part of a 

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wider  framework  agreement  for  supply  of  gas  and  oil  with  Russia.  The  agreement  was 
finalised in December 2008 and the new owner Gazprom took over the company in February 
2009. With regard to the long-standing issue of privatisation of national car producer Zastava, 
a  joint  venture  agreement  has  been  signed  with  Italian  car  manufacturer  Fiat  in  early  2009. 
The question of privatisation of about 500 utilities at the level of local communities remains 
open.  Their  restructuring  and  reorganisation  have  not  yet  begun  and  the  plan  for  their 
privatisation  remains  undefined.  After  the  legislation  on  the  free  distribution  of  minority 
shares in six state-owned companies to all adult citizens was adopted in December 2007, no 
new developments took place in 2008 and early 2009 as shares have not been distributed yet. 
This is a reflection of the fact that 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  the  development  of  competitive  domestic 
production  and  burdens  public  finances.  Finalising  the  process  of  privatisation  or,  when 
necessary, liquidation of socially- and state-owned enterprises is one of the key priorities of 
the European Partnership. Overall, some progress was made, as the privatisation of socially-
owned companies has been almost finalised. However, state-owned companies remain mainly 
non-restructured,  therefore,  a  competitive  and  dynamic  private  sector  has  not  been 
established. The private sector has been further weakened by the ongoing liquidity crisis.  

Market entry and exit 

With regard to market entry and exit, some progress was made. In April 2009 the number of 
registered  companies  slightly  increased  reaching  106,000  compared  to  100,000  of  the 
previous  year.  At  the  same  time,  about  220,000  entrepreneurs  were  registered  with  the 
Serbian Business Registry Agency. The process of registration has been further simplified as 
registration with the tax authorities is no longer done separately. With regard to market exit, 
implementation of the 2005 Bankruptcy Law has continued and a draft of the new legislation 
on bankruptcy was finalised in March 2009. The number of pending cases was still very high 
at the end of 2008. Further efforts are needed to improve the business environment such as in 
the  area  of  construction  permits.  Overall,  although  some  progress  was  registered,  excessive 
bureaucratic  requirements  and  complex  legislation  continue  to  hamper  the  business 
environment. 

Legal system 

With regard to the legal system, some progress can be reported in a number of acquis-related 
areas.  However,  a  number  of  reform-related  laws  have  been  held  up  and  implementation  of 
the existing laws is sometimes weak. The courts and administrative bodies sometimes lack the 
technical  capacity  and  personnel  to  perform  their  activities  properly  and  promptly,  and 
corruption remains prevalent in many areas. This has led to inconsistent implementation and 
very  lengthy  procedures,  which  frequently  exceed  the  deadlines  set  by  law.  Overall, 
weaknesses  in  the  judiciary  continued  to  limit  legal  predictability  and  to  undermine  trust  in 
the legal system among economic operators, in particular as regards effective enforcement of 
property rights.  

Financial sector development 

The lending activity of banks increased by 35% in 2008. The share of total loans granted to 
enterprises and households stood at 61.5% and 35.5% respectively. Deposit activities of banks 
grew by 7% (after 44% during the previous year). The largest share of deposits was accounted 

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for by the household sector (46%), followed by the enterprise sector (31%) and bank deposits 
(15%). Foreign currency deposits made up 69% of total deposits.  

These deposits were particularly affected by the start of the crisis. In October 2008 over EUR 
1 billion was withdrawn from local banks. However, fears related to banking sector stability 
turned out to be unfounded. Deposits  stabilised quickly. The banking system  has  weathered 
the crisis well so far. The large share of FX or FX-indexed loans in the portfolios of Serbian 
banks  remains  a  concern  (about  69%  of  all  loans)  as  it  is  a  source  of  credit  risk  from  un-
hedged beneficiaries. Non-performing loans increased to 7.2% in June 2009 from 4.0% a year 
earlier. However, the risks have been tempered somewhat by the banking system’s large share 
of liquid assets (23.6% as of February 2009) and substantial capital buffers (capital adequacy 
ratio of 21.9% at fourth quarter). Foreign banks agreed to maintain their exposure in Serbia 
unchanged  at  the  level  of  end-2008.  Overall,  financial  intermediation  continued  to  grow, 
though  at  a  slower  rate  than  in  the  past  and  from  a  still  relatively  low  level.  Substantial 
balance-sheet risks for banks exist due to large share of foreign nominated loan. 

The  number  of  majority  state-owned  banks  remained  unchanged  at  4  out  of  a  total  of  34. 
However, the National Bank and the Government of Serbia adopted a strategy to reduce state 
ownership in the banking sector. There are 20 banks that 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  46.2%  of  the  total  banking 
sector.  Overall,  competition  between  banks  is  well  established  and  privatisation  of  the 
remaining state-owned banks has advanced slowly. 

At  end-December  2008,  the  share  of  total  credits  in  default  (non  performing  loans)  in  total 
outstanding debt stood at 4.7% (from 3.7% a year earlier). The foreign exchange risk ratio of 
banks stood at 8%. The average capital adequacy ratio of the banking system stood at 21.9% 
(from 27.7% a year earlier) and, consequently, remained well above the required minimum of 
12% of risk-weighted assets for each bank. The profitability of the banking sector deteriorated 
in the last quarter of 2008 and the return on equity fell to 9.3% from 12.7% in 2007. Overall, 
the banking sector remains profitable and generally sound. However, the high share of high-
risk assets indicates substantial financial vulnerabilities. 

The  Belgrade  stock  exchange  registered  negative  performance  in  2008.  Both  indexes  fell 
sharply:  BELEX15  (of  the  15  largest  companies)  by  75.6%,  and  BelexLine  by  68.7%.  This 
negative trend continued in the first four months of 2009, followed by a recovery in May. In 
February 2009, the government started to issue on a large scale T-bills with 3 and 6 months 
maturity,  to  help  finance  the  growing  deficits  in  the  public  budgets.  The  total  amount 
outstanding  was  €  634  million  by  June  2009.  At  the  end  of  2008,  there  were  24  insurance 
companies  operating  in  Serbia  (from  20  a  year  earlier)  with  an  increase  in  staff  to  11,700 
(+21%). 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. Privately 
owned  insurance  companies  increased  their  previously  noted  prevalent  share  in  non-life 
premiums  from  59.1%  in  2007  to  61%  in  2008,  as  well  as  in  total  assets  from  58.6%  to 
61.2%. In the  five  years  from 2004 to 2008, the premium  income  more  than  doubled,  at  an 
annual  growth  rate  of  16.5%.  However,  the  insurance  sector’s  share  of  capital  in  the  total 
financial sector has decreased to 5.6%. Overall, progress continued in the development of the 
non-banking financial sector, but its size remains limited. 

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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 

Sharply  deteriorating  macroeconomic  stability  towards  the  end  of  2008,  and  in  particular  in 
early  2009,  contributed  to  creating  a  less  stable  and  less  predictable  climate  for  decision-
making  by  economic  operators.  The  functioning of  market  mechanisms  remained  hampered 
by distortions, legal uncertainty, heavy state involvement in the production of private goods 
and insufficient competition. 

Human and physical capital  

Little  progress  can  be  reported  on  the  reform  of  the  education  system  in  relation  to  labour 
market demand. The gap between demand and supply of skilled employees continues to be an 
obstacle to increasing foreign direct investment and developing new branches of the economy. 
Therefore, companies are responding to the growing shortages by becoming more proactive in 
offering personal/professional development and training incentives to new recruits. Attitudes 
towards  lifelong  learning  and  mobility  continued  to  change.  Public  education  expenditure 
accounts  for  a  relatively  small  3.4%  of  GDP,  well  below  average  EU  levels.  Overall,  the 
economy  has  been  suffering  from  a  shortage  of  skilled  employees,  while  supply  has  only 
gradually been building up in response. 

financial 

intermediation, 

Net  FDI  grew  by  12.5%  to  €1.9  billion  in  2008,  bringing  the  cumulative  net  FDI  inflow  to 
€13.3 billion since 2000. 50% of the totals foreign direct investment originated from Austria, 
Greece,  Norway  and  Germany.  The  three  sectors  receiving  most  foreign  direct  investment 
were 
telecommunication  as  well  as 
transportation  and 
manufacturing.  Funds  from  the  National  Investment  Plan  have  been  used  for  various 
infrastructure projects such as the Belgrade ring road and motorways in southern Serbia, but 
also in order to stimulate foreign investment and job creation. The policy has lately changed 
into the financing of only a limited number of larger projects. Continuation of the construction 
of Corridor X, development of infrastructure for the car centre in Kragujevac, and investment 
in the 40 least developed municipalities are priorities for Serbia in 2009. The total budget for 
expenditure under the National Investment Plan fell to €210 million for 2009 (in 2008 it stood 
at €600 million). Overall, investment activity from domestic sources has been declining, and 
foreign investors have become more hesitant, primarily due to growing the global economic 
downturn. 

Sectoral and enterprise structure 

Progress  in  selling  state-owned  companies  was  hampered  by  the  global  economic  crisis, 
which  significantly  reduced  interest  in  for  acquiring  such  companies.  Restructuring  and 
privatisation  on  the  other  hand  have  been  slow.  The  shift  of  economic  activity  towards  the 
service sector is continuing, with services currently accounting for more than  60% of GDP. 
About  40%  of  all  employees  are  working  in  state-owned  enterprises  or  the  public 
administration.  The  large  informal  sector  is  fuelled  by  weaknesses  in  tax  and  expenditure 
policies, as well as in law enforcement, including the fight against corruption and organised 
crime. The informal sector remains an important challenge, as it reduces the tax base and the 
efficiency of economic policies. Overall, the pace of structural adjustment of the economy is 
being held back by slow reforms, and has lately been aggravated by the economic crisis. 

State influence on competitiveness 

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Subsidies from the consolidated state budget remained high (at 1.8% of GDP) and they even 
rose by 36% in real terms in 2008. While relevant legislation on state aid control was adopted 
in  July  2009,  the  appropriate  monitoring  mechanism  and  authority  are  still  missing.  State-
controlled  monopolistic  structures 
influence  on 
competitiveness remained substantial. 

in  place.  Overall,  state 

remain 

Economic integration with the EU 

In January 2009, Serbia started implementing the Interim Agreement. 

The EU remained Serbia’s main trading partner. Exports and imports of goods to and from the 
EU  increased  by  11.8%  and  11%,  respectively,  in  2008 compared  to  the  2007  figures, 
accounting for 53% of Serbia’s overall trading volumes. However, as economic activity in the 
country slowed down due to the global financial crisis, a significant decrease was noted in the 
first  quarter  of  2009,  with  both  exports  and  imports  of  goods  from  Serbia  to  the  EU 
decreasing considerably, by 25.3% and 26.8% respectively.  

Standard  indicators  suggest  that  the  deterioration  in  export  price  competitiveness  of  recent 
years stopped in 2008. Real gross wages grew by 4.1% less than average labour productivity 
(estimated  at  6.1%),  resulting  in  a  1.8%  decrease  in  real  unit  labour  costs.  In  2008,  the 
nominal effective exchange rate of the dinar depreciated by 11.4%. In real effective terms, the 
dinar  depreciated  by  4.9%,  despite  consumer  prices  growing  faster  on  the  domestic  market 
than abroad. Overall, trade integration with the EU remained high and export competitiveness 
has slightly improved. 

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 

4.1.1.  Free movement of goods 

Good progress can be reported in the field of free movement of goods. 

As  regards  standardisation,  the  Law  on  Standardisation  and  the  Law  on  Technical 
Requirements for Products and Conformity Assessment were adopted. The latter establishes a 
legal basis for transposition of all the relevant acquis. Moreover, in June 2009 all mandatory 
standards  were  repealed,  while  a  number  of  relevant  technical  regulations  were  kept.  The 
action  plan  for  preparation  of  technical  regulations,  complete  with  measures  to  apply  them, 
was approved at the end of 2008 and is being implemented.  

The Ministry of Economic Affairs and Regional Development continued to play a central role 
in  coordinating  all  institutions  and  ministries  for  transposition  of  the  acquis.  Cooperation 
between  the  ministry  and  the  Serbian  Standardisation  Institute,  the  Serbian  Accreditation 
Board and the Directorate for Measures and Precious Metals has improved.  

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The  Serbian  Standardisation  Institute  represents  Serbia  in  international  and  European 
standardisation  organisations.  It  is  also  the  national  enquiry  point  for  standards.  In  March 
2009 the government approved the annual work programme and the standards adopted by the 
institute. The director of the institute was appointed by the government and the three expert 
councils were set up. However, the chairman and members of the supervisory board have not 
yet  been  appointed.  The  overall  administrative  capacity  of  the  institute  needs  to  be  further 
improved.  

By September 2009 the Standardisation Institute had adopted 5,072 European standards. It is 
no  longer  in  charge  of  mandatory  certification  of  products,  which  is  now  under  the 
responsibility  of  relevant  accredited  certification  bodies  and  testing  laboratories.  It  will 
remain  responsible  for  type-approval  of  vehicles  until  the  relevant  line  ministry  has  the 
administrative and technical capacity to take over this task.  

At the end of September 2009 the number of accredited conformity assessment bodies stood 
at 347. A new procedure for designating conformity assessment bodies has been established.  

There  has  been  progress  on  accreditation.  The  Serbian  Accreditation  Board  became  an 
associate member of International Laboratory Accreditation Cooperation. The new statutes of 
the  Accreditation  Board  have  been  approved  by  the  Serbian  government.  In  February  2009 
the  Accreditation  Board  applied  to  European  Cooperation  for  Accreditation  to  sign  the 
multilateral agreement on testing laboratories, calibration laboratories and inspection bodies. 
The  Accreditation  Board  applied  new  accreditation  systems  for  assessing  medical 
laboratories. It provided training and seminars for assessors and its own staff and carried out 
awareness-raising  activities.  It  has  further  improved  its  IT  capacity.  However,  an  adequate 
legal  framework  is  missing,  as  the  new  legislation  on  accreditation  has  yet  to  be  adopted. 
Human resources remain limited.  

In  the  area  of  metrology,  progress  can  be  reported  on  upgrading  specific  metrology 
equipment and with new laboratories for acoustics, length, time, frequency, road traffic, mass, 
electricity,  thermometry,  humidity  and  type-approval.  The  Directorate  for  Measures  and 
Precious  Metals  participates  in  the  activities  of  international  and  European  metrology 
organisations.  However,  further  efforts  are  still  needed  on  the  legislative  front,  as  the  new 
Law  on  Metrology  has  yet  to  be  adopted.  The  institutional  set-up  of  the  Directorate  for 
Measures and Precious Metals has still to be clarified and the limited administrative capacity 
upgraded. 

There has been little progress on market surveillance. Preparations for establishment of an 
appropriate  market  surveillance  structure  in  line  with  the  acquis  have  begun.  A  trade 
development  strategy  designating  a  special  body  consisting  of  representatives  of  all 
inspectorates responsible for harmonisation and coordination of inspections has been adopted. 
However,  the  capacity  of  the  market  inspectorate  remains  weak.  Coordination  between  the 
market surveillance authorities is still lacking.  

There has been further legal alignment in the field of consumer protection, with the adoption 
of  a  new  Law  on  General  Product  Safety  and  a  Law  on  Electronic  Trade.  The  annual 
consumer  protection  plan  was  adopted.  Training  activities  for  professional  staff  have 
continued. The selection criteria for awarding grants from the ministry to consumer protection 
organisations have improved. The administrative and IT capacity of the consumer protection 
unit  within  the  Ministry  of  Trade  has  been  improved,  but  the  human  resources  remain 
insufficient.  The  new  structure  of  the  ministry’s  Council  for  Consumer  Protection  was 

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established and a working group was set up with the task of protecting customers of financial 
services,  primarily  consumer  loans  and  leasing  products.  Public  awareness-raising  activities 
have been stepped up to some extent. However, new legislation on consumer protection – on 
which  establishment  of  advisory  centres  for  consumer  protection  and  out-of-court  dispute 
resolution  bodies  are  contingent  –  has  yet  to  be  adopted.  Consumer  organisations  remain 
fragmented  and  lack  adequate  resources.  This  has  hampered  their  overall  effectiveness. 
Implementation  of  the  national  consumer  protection  programme  continues  to  be  weak  and 
public awareness-raising activities are not yet sufficient.  

Overall, Serbia is moderately advanced on free movement of goods and the requirements of 
the SAA. The legal framework for accreditation and metrology has still to be adopted. Serbia 
needs  to  pay  greater  attention  to  consumer  protection  as  a  matter  of  priority  for  EU 
integration. The administrative capacity and cooperation between State institutions need to be 
further  strengthened.  Further  efforts  are  required  to  start  transposing  the  product-specific 
acquis into Serbian legislation. 

4.1.2.  Movement of persons, services and right of establishment 

There has been some progress on movement of persons. With regard to the coordination of 
social security schemes an agreement on social insurance was signed by Slovenia and Serbia 
in September 2009. This agreement primarily aims to solve the problems relating to pensions, 
invalidity and health insurance rights of about 10,000 pensioners living in Serbia who - in the 
former Yugoslavia – worked for Slovenian companies.  

The  administrative  capacity  of  the  Ministry  of  Economic  Affairs,  which  is  in  charge  of 
movement  of  workers,  remains  limited.  No  progress  has  been  made  towards  recognition  of 
professional  qualifications  and  its  differentiation  from  the  recognition  of  academic 
qualifications. As concerns the right of establishment no progress can be reported. 

Little progress was made in the area of company law. The Company Act and the Company 
Registration Act have still to be amended. 

The  legislation  on  accounting  and  auditing  is  not  fully  harmonised  with  the  acquis.  The 
strategy and action plan on corporate financial reporting still have to be prepared.  

There  has  been  some  progress  on  financial  services.  The  National  Bank  of  Serbia  is 
responsible for supervision of the banking, insurance and voluntary pension fund sectors and 
is  committed  to  actively  using  its  supervisory  powers  (on-site  inspections,  reporting  and 
regulatory powers). However, the Securities Commission, which is in charge of supervising 
the capital market, is still not sufficiently independent and still not operating fully in line with 
international  standards.  Serbia  prepared  a  roadmap  for  implementation  of  the  Basel  II 
framework,  which  was  introduced  in  the  EU  by  the  Capital  Requirements  Directive.  The 
supervisory capacity, particularly relating to employment and training of qualified personnel, 
needs to be further strengthened in order to comply with the Capital Requirements Directive 
and the requirements for risk-based supervision.  

Serbia has yet to sign memoranda of understanding with all home supervisory authorities of 
foreign banks operating on its territory. 

In the field of postal services, new legislation ratifying the Acts of the Universal Postal Union 
has  been  adopted.  However,  the  Postal  Services  Agency  established  in  2005  does  not  fully 

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meet  the  conditions  to  work  independently,  as  the  members  of  the  Postal  Services  Agency 
Council have not yet been approved by parliament.  

Overall, Serbia is moderately advanced towards meeting its SAA obligations in the areas of 
movement of persons, services, right of establishment and company law. A number of pieces 
of legislation are still awaiting parliamentary approval. 

4.1.3.  Free movement of capital 

Progress was made on free movement of capital during the reporting period.  

In March 2009, the National Bank of Serbia liberalised all personal transfers, via banks, of up 
to €10,000. With regard to capital flows, the National Bank of Serbia continued cooperating 
with  neighbouring  countries.  The  National  Banks  of  Serbia  and  of  Bosnia  and  Herzegovina 
continued to implement a clearing arrangement that includes a number of banks (in 2008, a 
total  of  over  €44  million  worth  of  payments  were  made  and  about  €10  million  in  the  first 
quarter of 2009). This has increased efficiency, as transactions are carried out in a single day.  

Serbia still has fully to liberalise outward payments and current account transactions and to 
lift restrictions on short-term credit and portfolio investments. Movement of capital to foreign 
countries,  both  from  individuals  and  from  legal  entities,  is  subject  to  rigorous  and  time-
consuming checks by the National Bank of Serbia, even in cases where the legal origin of the 
funds is proven.  

Under  the  Law  on  Foreign  Exchange  Operations,  non-residents  are  free  to  make  direct 
investments.  Restrictions  in  the  arms  sector  and  in  other  areas  are  laid  down  by  the  law. 
However, EU investors are still having problems, due to the unclear status of acquisition of 
real  estate  rights,  along  with  the  very  large  number  of  licences  required  and  the  numerous 
granting agencies and authorities involved.  

Overall, Serbia remains moderately advanced in the area of capital movements. Non-residents 
are free to make direct investments (with certain restrictions), but are hampered by the large 
number  of  licences  required  for  acquiring  property.  Serbia  needs  to  continue  its  efforts  to 
meet the gradual liberalisation requirements laid down in the SAA. 

4.1.4.  Customs and taxation 

Serbia  has  made  good  progress  in  the  area  of  customs.  A  set  of  legal  acts  were  adopted  in 
order to allow voluntary implementation of the Interim Agreement with the EU. The amended 
customs tariff nomenclature was published in February 2009 and is fully in line with the 2007 
World Customs Organisation Harmonised System and the 2009 EU Combined Nomenclature. 
Simplified  procedures  for  imports  and  exports,  based  on  accounting  documents,  have  been 
introduced.  However,  further  alignment  with  the  EU  Customs  Code  is  still  required,  in 
particular with regard to transit and risk analysis. There is also a need to strengthen customs 
operating procedures in order to reduce the discretionary powers of customs officers. 

The  administrative  capacity  of  the  Serbian  customs  administration  has  been  further 
strengthened by stepping up training activities. The World Customs Organisation’s (WCO) e-
learning Programme has been incorporated into the regular customs training curriculum. As a 
result,  post-clearance  controls  have  been  strengthened.  Implementation  of  the  Code  of 
Conduct  led  to  initiation  of  a  high  number  of  disciplinary  procedures  based  on  internal 
controls (27 cases concerning 73 customs staff).  

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A  risk  management  strategy  is  being  implemented,  based  on  an  improved IT system with 
more  risk  parameters.  In  the  fields  of  enforcement  and  trade  facilitation,  progress  was  also 
made on international cooperation and systematic exchanges of  pre-arrival information with 
neighbouring countries. The Serbian customs administration led its first operation as part of 
its  cooperation  with  the  South-East  European  Cooperative  Initiative  Centre  with  the  aim  of 
revealing channels for smuggling textile goods.  

Implementation of the integrated border management strategy and action plan has continued. 
In cooperation with neighbouring countries, Serbia has also continued to work on simplifying 
controls  on  goods  and  passenger  railway  traffic  with  the  aim  of  reducing  transit  times  at 
border  crossings.  Furthermore,  the  country  has  applied  for  membership  of  the  Customs 
Transit Convention. In April 2009 Serbia joined the Customs 2013 Programme. 

Overall,  Serbia  is  already  well  on  the  way  to  meeting  the  SAA  requirements  and  remains 
committed to reforms in the area of customs. However, Serbia’s customs and IT infrastructure 
and  procedures,  risk-analysis  system,  post-clearance  controls  and  human  capital  in  this  area 
need to be further strengthened.  

In the area of taxation, some progress has been observed. In January 2009 parliament adopted 
a  set  of  budget  laws,  including  amendments  to  the  Laws  on  excises,  administrative  taxes, 
property tax, social security contributions and pension and invalidity insurance. The customs 
duties  on  imported  cars  decreased  from  20%  to  12.5%,  whereas  excise  duties  on  oil 
derivatives,  especially  car  fuels,  and  on  beer  and  cigarettes  and  the  tax  on  luxury  goods 
increased. Parliament also adopted new taxes on mobile telephony. There was little progress 
on approximation of tax legislation to the acquis regarding direct taxation.  

The tax administration stepped up its efforts to improve tax collection. Tax revenue had been 
rising  constantly  since  2003.  However,  in  early  2009  the  tide  turned,  due  to  the  decline  in 
overall economic activity. Progress has been made on enforcement. In 2008 some 58% of the 
registered  debts  were  collected,  as  opposed  to  50%  and  54%  in  the  two  previous  years.  In 
addition, the tax administration has continued to identify ‘ghost’ companies and successfully 
implement its audit programme. It has also continued work on introduction of e-government.  

The  administrative  capacity  of  the  Serbian  tax  administration  has  improved  as  a  result  of 
training and education. At the beginning of 2009 about 500 out of its 6,800 employees were 
on various training courses. The tax administration also needs to recruit more staff with the 
qualifications sought, especially in the IT sector.  

International  cooperation  between  the  Serbian  tax  administration  and  its  counterparts 
continued  to  improve.  Implementation  of  the  bilateral  agreements  ratified  has  continued,  in 
particular  on  issues  such  as  avoidance  of  double  taxation  and  on  cooperation  and  mutual 
assistance. 

Overall, in the area of taxation, Serbia is well on the way to meeting the requirements of the 
SAA.  The  enforcement  capacity  of  the  tax  administration  and  tax  collection  has  further 
improved. However, the problem of the informal economy has not been tackled. Serbia needs 
to  continue  improving  collection  of  registered  tax  debts.  The  tax  legislation  remains  partly 
aligned  with  the  acquis  and  certain  provisions,  most  notably  on  excise  duties  and  VAT, 
require  further  alignment.  Serbia  needs  to  take  follow-up  action  to  ensure  that  its  tax 
legislation complies with the Code of Conduct for business taxation. 

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4.1.5.  Competition 

There  has  been  good  progress  in  the  area  of  anti-trust.  The  new  Law  on  Competition 
Protection  was  adopted  in  July  2009,  following  a  wide  and  transparent  public  debate.  It 
revised  the  notification  threshold  for  mergers  and  introduced  the  possibility  for  the 
competition authority to impose fines. These legislative developments mark a step forward in 
alignment with the SAA and the Interim Agreement. A number of implementing laws need to 
be adopted. 

In 2008 the Commission for the Protection of Competition dealt with about the same number 
of cases as in 2007, further building its track record. As in previous years, the majority of the 
competition  cases  in  2008  (around  84%)  related  to  merger  control.  The  number  of  cases 
concerning agreements which considerably prevent, restrict or distort competition more than 
doubled in 2008, compared with the previous year. The number of cases of abuse of dominant 
positions  decreased  to  two  in  the  same  period.  Work  on  competition  advocacy  among 
government officials, regulators, judges, the business community and the general public has 
continued. However, the Commission for the Protection of Competition needs to strengthen 
its  capacity  to  carry  out  economic  analyses  when  dealing  with  cases.  The  enforcement 
capacity of the judiciary remains weak for lack of specialised knowledge. 

There has been progress in the area of State aid. The Law on State Aid Control was adopted 
in July 2009. It provides for establishment of an operationally independent State aid authority, 
as required by the SAA and the Interim Agreement. Moreover, in September 2009 the Serbian 
government  adopted  the  State  aid  inventory  for  2008.  However,  Serbia’s  monitoring  and 
administrative capacity in the area of State aid is still weak. 

Overall,  Serbia  remains  moderately  advanced  in  meeting  the  SAA  requirements  the  area  of 
anti-trust, including mergers. The new legislative framework needs to be completed and fully 
enforced.  The  new  legislation  on  State  aid  needs  to  be  followed  up  by  adoption  of 
implementing  legislation  and  establishment  of  an  operationally  independent  State  aid 
authority. 

4.1.6.  Public procurement 

Good progress has been made in the area of public procurement. 

Serbia  adopted  a  new  Law  on  Public  Procurement  in  December  2008  and  implementing 
legislation  in  July  2009.  The  law  paved  the  way  for  a  major  overhaul  of  the  Serbian 
procurement  framework  and  is  a  positive  step  towards  alignment  with  the  acquis.  It  has 
brought  about  several  changes,  such  as  certification  of  professional  public  procurement 
officials, introduction of e-procurement and establishment of an electronic public procurement 
portal,  the  possibility  of  court  review  in  public  procurement  cases,  introduction  of  anti-
corruption  clauses  and  institutional  independence  of  the  public  procurement  bodies,  notably 
the  Public  Procurement  Office  and  the  Commission  for  the  Protection  of  Rights  in  public 
procurement  matters.  There  are  nevertheless  certain  shortcomings  in  the  new  legislation 
regarding the definition of public bodies, the scope of exemptions and excluded contracts and 
the  conditions  for  use  of  the  restricted  procedure.  There  is  still  a  need  for  further  efforts  to 
prepare an appropriate regulatory framework on concessions.  

Serbia  needs  to  ensure  the  full  implementation  of  the  new  Law  by  electing  members  of  the 
new  Commission  for  the  Protection  of  Bidders'  Rights  and  by  ensuring  sufficient  financial 
resources  for  the  public  procurement  bodies.  The  strategy  for  upgrading  the  public 

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procurement  system  in  Serbia  needs  to  be  finalised.  The  weaknesses  in  the  public 
administration’s internal  and external  audits are undermining the  effectiveness of  the public 
procurement system as a whole. Administrative capacity and coordination mechanisms of the 
main  stakeholders  in  the  public  procurement  system  still  need  further  strengthening,  in 
particular to reduce the scope for corruption. 

Overall,  Serbia  is  moderately  advanced  towards  establishing  an  effective  and  fully 
independent  public  procurement  system  with  streamlined  award  procedures.  Additional 
efforts remain necessary on strengthening the capacity to implement the requirements of the 
SAA in this field. 

4.1.7. 

Intellectual property law 

Progress has been made in the area of intellectual property rights. The Intellectual Property 
Office continues to play the role of national coordinator for intellectual property rights and a 
new  management  team  was  appointed.  The  Intellectual  Property  Office  has  started 
preparations for drafting a national intellectual property rights strategy and establishing an in-
house education and information centre. Following the changes in the General Administrative 
Fees Act, the fees of the office have been substantially increased. However, the office is still 
under the State financing rules and has not yet been established as a financially autonomous 
agency. No new legislation, notably on optical disks has been adopted. 

In  relation  to  industrial  property  rights,  Serbia  is  preparing  for  full  membership  of  the 
European  Patent  Office.  A  number  of  international  conventions  (including  the  Vienna 
Agreement,  the  Strasbourg  Agreement  and  the  Geneva  Act)  were  ratified  by  parliament  in 
May  2009.  No  progress  has  been  made  on  copyrights  and  related  rights  in  the  reporting 
period.  Although  Serbia's  copyright  legislation  is  largely  aligned  with  the  acquis, 
shortcomings persist, in particular with respect to rental and lending rights. 

In the field of enforcement, some progress can be reported. As part of their daily controls, tax 
inspectors have been taking increasing action against pirated software and databases. Seizures 
by  market  inspectors  have  further  improved,  thanks  to  new  technical  equipment  and 
additional training. The customs administration, although short-staffed, has continued to make 
progress on enforcing intellectual property rights, both in response to requests by companies 
and  ex  officio.  For  this  purpose,  an  electronic  database  of  customs  offences  in  intellectual 
property  rights  matters  has  been  set  up.  However,  the  issue  of  inadequate  storage  space  for 
counterfeited  and  pirated  goods  that  infringe  copyright  and  related  rights  or  other  industrial 
property rights has not been addressed. Also, there is still a shortage of judges specialising in 
this  area,  which  leads  to  inefficiency  in  the  system  for  protection  of  intellectual  property 
rights as a whole.  

Overall,  Serbia’s  preparations  in  the  area  of  intellectual  property  law  are  moderately 
advanced. The legislative alignment required by the SAA is well advanced but administrative 
capacity  and  enforcement,  especially  in  relation  to  training  for  judges,  remain  weak.  Public 
awareness-raising  activities  also  need  to  be  sustained  in  the  fight  against  piracy  and 
counterfeiting. An overall national strategy on intellectual property rights is missing.  

4.1.8. 

Social policies, employment and public health policy 

Regarding social policies, an amendment to the Labour Law adopted in July 2009 extended 
employers’ possibility to grant paid leave for over 45 days. 

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Good  progress  has  been  made  in  the  area  of  health  and  safety  at  work  in  the  form  of  new 
legislation.  The  Regulation  on  Occupational  Safety  and  Health  at  Work  at  Temporary  or 
Mobile  Construction  Sites,  based  on  the  acquis,  was  adopted  in  February  2009.  In  March 
2009 two by-laws  were  adopted  with the aim  of aligning with the acquis on temporary  and 
mobile  construction  sites,  health  and  safety  requirements  at  the  workplace,  use  of  work 
equipment and use of personal protective equipment. Also, the strategy on occupational safety 
and  health  for  2009-2012  was  adopted  in  April  2009.  Within  the  National  Social  and 
Economic Council, a permanent working party has been established to deal with occupational 
health and safety. However, the number of accidents at work remains high.  

As regards social dialogue, the Social and Economic Council has met more frequently and all 
four  specialised  bodies  (on  legislation,  the  economy,  collective  bargaining  and  health  and 
safety at work) are now operational. Social and economic councils have also been established 
at local level (16 in all), but only a few of them are operational. The input of social partners 
into  decision  making  process  remains  quite  limited  and  the  operations  of  the  Council  still 
need to be improved. Moreover, bipartite social dialogue is still rather weak. 

Regarding social inclusion, the Serbian poverty reduction strategy has continued to contribute 
to  reducing  the  number  of  people  living  in  absolute  poverty.  However,  with  the  economic 
crisis,  poverty  levels  are  likely  to  rise.  Fighting  poverty  and  social  exclusion  of  vulnerable 
categories of the population, with particular reference to the Roma population, IDPs and some 
pensioners,  remains  a  key  challenge.  Promoting  social  inclusion  plays  an  important  role  in 
contributing  to  national  cohesion.  The  UN  Convention  on  the  Rights  of  Persons  with 
Disabilities and the Optional Protocol was ratified by the Serbian Parliament in May 2009. 

Concerning anti-discrimination, the new Law on Prohibition of Discrimination is a welcome 
step  towards  the  implementation  of  the  European  standards  in  this  field.  However,  certain 
definitions  relating  to  discrimination  still  need  to  be  better  formulated.  A  number  of 
exceptions  are  wider  than  allowed  under  European  standards  and  the  rights  of  NGOs  and 
associations  to  pursue  discrimination  before  the  courts  still  need  to  be  clarified.  Vulnerable 
groups,  such  as  Roma,  persons  and  children  with  disabilities  and  the  lesbian,  gay,  bisexual 
and transgender (LGBT) population, remain the most exposed to discrimination.  

As regards gender equality, the Government adopted the National Strategy for the Improved 
Status of Women and Promotion of Gender Equality. The Gender Equality Act still needs to 
be adopted and women continue to face discrimination in the labour market. 

In the area of social protection the process of de-institutionalization of parentless children has 
continued  with  the  number  of  children  in  institutions  decreasing  and  the  number  of  those 
children staying with families increasing. The Centre for Family Care started providing help 
and  support  to  host  families  in  Belgrade  in  December  2008.  Significant  amounts  were 
invested in social protection institutions providing care for persons with special needs. In line 
with the national strategy, local strategies for social protection were launched in 122 Serbian 
municipalities.  Training  programmes  for  employees  in  social  protection  institutions  have 
continued with more than 600 participants in January and February 2009 alone. 

Good  progress  has  been  made  on  employment  policy.  In  March  2009,  the  government 
adopted the national action plan for employment for 2009 as part of the employment strategy. 
Active policy measures aimed at boosting employment, particularly in SMEs, were provided 
for in the 2009 budget and implemented in the course of the year. The government continued 

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with the start-up loans aimed at generating new jobs. All these measures have been used to 
counter the impact of the economic crisis and maintain the level of employment.  

In 2008, the employment rate rose to 53.3%, compared to 51.5% a year earlier, but then again 
fell  to  50.8%  in  April  2009.  The  registered  unemployment  rate  fell  to  14.8%  compared  to 
18.3%  in  2007.  This  rate  also  rose  in  April  2009  to  16.4%.  However,  the  drop  in 
unemployment between 2007 and 2008 was mainly due to methodological changes. Without 
these changes the rate would have stood at around 17.5%. 

In May 2009 two laws were adopted: the Law on Employment and Unemployment Insurance 
and the Law on Vocational Rehabilitation and Employment of Disabled Persons. The aim of 
the new Law on Employment is to establish an efficient and flexible legal framework in order 
to achieve the highest  possible  level  of employment.  The Law on Vocational Rehabilitation 
and  Employment  of  Disabled  Persons  better  regulates  several  areas  related  to  the 
employability  of  disabled  people.  The  Ministry  of  Economy  and  the  National  Employment 
Service  have  increased  their  organisational  capacity.  Work  has  also  continued  on 
development  of  regional  training  centres  under  the  National  Employment  Service.  This  has 
helped  to  create  new  jobs.  In  March  2009  the  government  adopted  two  action  plans  for, 
respectively, the implementation of the strategy for the development of vocational education 
and training in Serbia and the implementation of the adult education strategy. 

However,  reforms  of  the  employment  services  have  also  been  delayed  and,  although  some 
progress  has  been  made,  the  effectiveness  and  administrative  capacity  of  the  National 
Employment Service are not yet sufficient. Further efforts are needed to improve coordination 
and collaboration between the Ministry of Economy and the National Employment Service. 

Further progress was made in the field of public health policy, although more efforts must be 
made towards alignment with and implementation of the acquis. The Law on Public Health, 
along with the laws on organ transplantation, on tissues and cells transplantation, on infertility 
treatment  by  biomedical  assisted  fertilisation  and  on  blood  transfusion  were  adopted. 
Cooperation  with  the  European  Centre  for  Disease  Prevention  and  Control  has  begun.  The 
National Health Council was constituted in April 2009, consisting of 15 members with a five-
year  mandate.  This  professional  and  consultative  institution  is,  inter  alia,  in  charge  of 
developing  the  quality  of  the  healthcare  system,  the  organisation  of  health  services  and  the 
health  insurance  system  and  bringing  them  into  line  with  European  and  international 
standards. The Health Insurance Fund has introduced a functioning IT system and developed a 
database  of  insured  persons.  There  has  been  progress  in  the  reform  of  primary  healthcare. 
Awareness-raising  campaigns,  such  as  on  the  harmful  effects  of  smoking  and  exposure  to 
second-hand  smoke,  have  been  stepped  up  to  boost  preventive  healthcare.  A  number  of 
strategy  papers  were  adopted,  notably  on  public  health,  the  fight  against  drugs  and  alcohol 
abuse,  tobacco  control,  prevention  of  breast  and  colorectal  cancer,  mental  healthcare  for 
young people, healthcare quality and patient safety. In the field of communicable diseases, a 
national  focal  point  was  appointed  within  the  framework  of  the  international  health 
regulations.  A  waste  management  system  has  been  established  at  health  institutions 
throughout the country and administrative capacity has been strengthened in this area. 

However,  the  administrative  capacity  within  the  Public  Health  Institute  is  still  very  limited. 
Furthermore, funding in the public health sector is still low. In the area of mental health, the 
government continued to take measures aimed at de-institutionalisation of mental healthcare 
and  at  developing  and  building  up  the  capacity of  community-based  services.  However,  the 
related  community-based  services  are  still  insufficiently  developed  and  continued  focus  is 

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needed on mental health care for children and young people. Further efforts are needed in the 
area of public health in order to strengthen the administrative capacity and implement a more 
patient-oriented  system  based  on  the  national  strategy  for  improvement  of  health  service 
quality and patient safety that was adopted in February 2009.  

Overall,  Serbia’s  capacity  to  implement  employment  policies  effectively  has  improved,  but 
unemployment  remains  a  cause  for  concern.  Coordination  and  harmonisation  with  other 
policies  remain  insufficient  to  reduce  unemployment.  With  regard  to  social  policies  and 
public health policy, the legislative framework needs to be developed and existing legislation 
needs to be properly implemented. 

4.1.9.  Education and research 

Some progress has been made with regard to European standards on education. 

Serbia is largely meeting the EU Education and Training 2010 benchmarks concerning early 
school leavers and upper secondary attainment. There has been an increase in the proportion 
of tertiary graduates in mathematics, science and technology. However, participation of adults 
in lifelong learning is well below the EU average and has not increased since 2001. 

Reforms  aimed  at  adapting  the  higher  education  system  to  the  Bologna  requirements  are 
continuing.  The  process  of  accreditation  of  higher  education  institutions  is  on-going.  The 
ministry  has  established  a  department  that  will  be  responsible  for  implementation  of  EU-
funded projects in this area. 

An  action  plan  was  adopted  for  the  implementation  of  the  strategy  for  the  development  of 
vocational  education  and  training,  and  another  one  for  the  implementation  of  the  adult 
education  strategy.  Adult  training  has  been  developed  in  five  regional  training  centres  in 
Serbia but needs to be put in place more systematically. Limited administrative capacity and 
weak coordination between the institutions concerned are still causes for concern. The agency 
for vocational education and training and adult education needs to be established. 

Future  challenges  include  adopting  a  National  Qualification  Framework,  making  the  higher 
education system more flexible and responsive to the needs of the labour market, improving 
links  between  university  education  and  vocational  education  and  training,  facilitating 
enrolment in higher education institutions and improving recognition of informal learning. 

Financing of education is still low, on 3.4 % of GDP, and there has been limited investment in 
infrastructure.  Moreover,  there  is  insufficient  funding  from  local  governments  and  limited 
involvement of the business sector.  

Good progress has been made in the field of culture. Serbia has continued to participate in the 
Community's  Culture  Programme.  A  contact  point  has  been  established  within  the  Institute 
for Cultural Development Research to provide information and encourage participation in the 
programme. The UNESCO Convention on the Protection and Promotion of the Diversity of 
Cultural Expressions was ratified in May 2009. A new Law on Culture was adopted in August 
2009. 

In the area of science and research, Serbia has been very active and successful in obtaining 
research projects under the Seventh EC Research Framework Programme (FP7). A promotion 
bureau for research cooperation with international partners has been set up. However, further 
efforts on research cooperation under FP7 remain necessary in particular with respect to the 

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involvement  of  SMEs  and  the  mobility  of  scientists.  The  fact  that  Serbia  also  became 
associated with the Competition and Innovation Programme (CIP) is a positive step towards 
engaging the private sector in research and innovation. The procedure to associate Serbia with 
the Seventh Euratom Research Framework Programme (2007-2011), as requested by Serbia, 
is  proceeding  well  and  the  aim  is  to  make  the  association  effective  in  the  course  of  2010. 
Possibilities  for  increased  cooperation  between  Serbia  and  the  Joint  Research  Centre  (JRC) 
are under discussion. 

With  respect  to  designing  an  integrated  research  policy  aiming  inter  alia  at  increasing 
investment in research and ensuring a sufficient number of scientists, Serbia proposed a draft 
national  strategy  in  August  2009.  Adoption  and  implementation  need  to  follow  as  part  of 
Serbia's  integration  into  the  European  Research  Area.  National  funding  of  research  is  still 
very low.  

The  national  EURAXESS  Jobs  Portal  as  well  as  the  EURAXESS  Services  Network,  which 
aims to facilitate the mobility of researchers, has been established in a fully satisfactory way. 

Overall, Serbia needs to continue its efforts to improve the education system, particularly as 
regards  funding  mechanisms,  development  of  vocational  training  and  adult  education,  and 
recognition  of  informal  learning.  Substantial  efforts  are  needed  to  facilitate  Serbia’s 
integration  into  the  European  Research  Area  and  strengthen  its  national  research  capacity. 
Good progress has been made in the field of culture. 

4.1.10.  WTO issues 

Serbia’s preparations to join the World Trade Organisation (WTO) are well advanced. A big 
step  forward  has  been  taken  on  the  bilateral  track  of  negotiations.  Progress  has  also  been 
made on the multilateral track, with the adoption of WTO-compatible laws (such as the Law 
on Standardisation). However, finalisation of the process will depend on the pace of further 
legislative reforms. Serbia is 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. 

It  has  moved  from  the  phase  of  formulating  policy  and  defining  strategic  objectives  to 
implementing policy in areas such as innovative companies, start-ups, provision of business 
services and dissemination of information.  

A  new  strategy  for  the  development  of  competitive  and  innovative  SMEs  was  adopted  in 
October 2008. The SME Council took it as the basis for adoption of the 2009 action plan. The 
performance  of  the  institutional  framework  for  SMEs  has  further  improved.  In  particular, 
cooperation and coordination between the various stakeholders have been strengthened. The 
SME  Council,  which  is  made  up  of  representatives  of  various  ministries  and  entrepreneurs, 
meets  regularly  and  is  effective.  The  Agency  for  SME  Development,  one  of  the  key 
stakeholders, has developed a network of regional agencies and local offices providing non-
financial  support.  A  one-stop  shop  for  business  registration  has  been  established  within  the 
Serbian  Business  Registration  Agency.  Application  of  the  new  legislation  on  electronic 
signatures  has  also  started.  New  legislation  on  the  chamber  of  commerce  system  has  been 

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adopted introducing affiliation on a voluntary basis. However, the law will not enter into force 
until 2013. Serbia remains fully committed to the European Charter for Small and Medium-
sized  Enterprises,  to  which  it  provided  high-quality  input.  Internal  coordination  is  efficient 
and all the relevant bodies are participating actively in the process.  

As regards the programme for the development of business incubators and clusters, about 20 
incubators are operating. In addition, 20 clusters are at various stages of development, 14 of 
which have obtained direct financial support from the Ministry of Economic Affairs. 

Regarding  the  regulatory  burden  on  businesses,  the  Council  for  Regulatory  Reform  is 
continuing its work on the plan to reduce existing laws and regulations by one quarter by the 
end of 2011. However, so far the effects of the reform have been very limited. 

In November 2008, Serbia signed a Memorandum of Understanding for its participation in the 
Entrepreneurship  and  Innovation  Programme  (EIP)  the  first  pillar  of  the  community 
programme  Competitiveness  and  Innovation  Community  Programme  (CIP).  Within  this 
programme, Serbia is an active member of the Enterprise Europe Network. 

Serbia has still not made any progress on developing and implementing a modern industrial 
policy. 

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

4.2.2.  Agriculture and fisheries 

Progress has been made in the area of agriculture and rural development, where efforts are 
ongoing on alignment with the acquis.  

The National Agricultural Programme for 2009-2011 has been prepared but now needs to be 
adopted.  Moreover,  budgetary  constraints  have  affected  the  administrative  capacity  of  the 
Ministry of Agriculture, Forestry and Water Management.  

The  Law  on  Agriculture  and  Rural  Development  was  adopted  in  May  2009  providing  the 
legal basis for the establishment of a paying agency and a managing authority in line with EU 
requirements. They will serve as the managing authority and IPARD agency in the future. The 
government adopted a Decree on the use of subsidies for rural development through support 
measures for the improvement of economic activities of rural inhabitants in 2009. The Serbian 
authorities already have some experience with channelling financial support to farmers from 
the  national  budget.  The  national  rural  development  network  has  expanded  and  now  has  14 
regional rural development centres and 140 sub-regional offices. 

The National Strategic Plan for Rural Development, on which a public consultation was held, 
and the National Programme for Rural Development still need to be adopted. Furthermore, an 
inter-ministerial mechanism for coordination of policies related to rural development still has 
not been established. The rural development unit within the Ministry of Agriculture, Forestry 
and  Water  Management  is  understaffed  and  the  National  Agency  for  Rural  Payments 
(Directorate for Agrarian Payments) and the managing authority are yet to be established. 

Progress has been made in the wine sector. The new Law on Wine was adopted. The vineyard 
and  wine  sector  registers  required  by  the  law  have  been  partially  established.  However,  a 
sustainable  system  for  vineyard  and  wine  management  and  inspections  has  yet  to  be 

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established.  The  capacity  of  the  relevant  unit  within  the  ministry  needs  to  be  further 
strengthened. A national network of oenology laboratories has yet to be established.  

Support  for  the  development  of  organic  production  continues.  The  number  of  accredited 
certifying  organisations  for  organic  production  slightly  increased  in  2009  and  progress  has 
been made in terms of alignment with the acquis. 

Some progress can be reported in the area of food safety. The new Law on Food Safety was 
adopted  in  May  2009.  It  clarifies  the  responsibilities  of  and  cooperation  between  the 
ministries  responsible  for  food  chain  safety.  Veterinary  inspection  -  formerly  transferred  to 
the  newly  established  General  Inspectorate  -  has  been  reorganised.  A  new  allocation  of 
responsibilities  for  inspections  has  been  introduced  which  improves  the  framework  for  the 
control activities.  

Serbia  is  still  at  an  initial  stage  with  regard  to  the  upgrading  of  food  and  by-product 
establishments. No establishments have yet been approved for export of milk or milk-based 
products to the EU. Implementing legislation on the quality of raw milk has been published. 
There  are  still  a  number  of  deficiencies  in  the  food  chain  safety.  Further  improvements  are 
needed in implementation of the hazard analysis critical control points (HACCP) principles.  

Some  progress  can  be  reported  in  the  veterinary  area.  The  Law  on  Animal  Welfare  was 
adopted  in  May  2009.  Action  plans  for  improvement  and  extension  of  the  system  for  the 
identification of bovine animals and for the registration of their movements were adopted. A 
strategy for exchanges of data from the animal identification and registration IT systems with 
other  IT  systems  was  endorsed  by  the  Ministry  of  Agriculture,  Forestry  and  Water 
Management. The rulebook on bovine animal identification and registration development was 
adopted in July 2009 together with three rulebooks for the eradication of bovine diseases. 

However, Serbia still needs to adopt the amended version of the Framework Veterinary Law 
and  the  relevant  rulebooks  for  implementation  of  the  action  plans.  The  IT  systems  of  the 
Veterinary  Directorate  (including  the  system  for  the  identification  of  animals  and  the 
registration  of  their  movements)  need  further  upgrading  and  strengthening  in  terms  of 
staffing. The Veterinary Directorate still needs training activities, notably on implementation 
of official controls of registration of holdings and animals.  

Progress  towards  upgrading  laboratories  for  the  control  of  food  chain  safety  has  been 
limited.  According  to  the  Law  of  Food  Safety  a  national  reference  laboratory  has  been 
established  with  defined  responsibilities.  An  information  management  system  for  veterinary 
laboratories  has  not  yet  been  integrated  with  the  veterinary  information  system  because  of 
lack of funding. 

There has been some progress in the phytosanitary area. The Law on Plant Health, the Law 
on  Plant  Protection  Products  and  the  Law  on  Protection  of  Plant  Breeders'  Rights  were 
adopted in May 2009. There is still no annual programme on plant health measures for 2009. 
A phytosanitary laboratory information management system has not yet been developed. 

In the area of fisheries, the Law on Sustainable Use of Fish Funds and the Law on Livestock 
Breeding have been adopted. The Regulation on the closed season for certain fish species and 
the minimum landing size was adopted to comply with international conventions. However, 
the  new  Law  on  Sustainable  Use  of  Fish  Funds  does  not  cover  all  fishing  activities.  The 
distribution  of  powers  between  the  Ministry  of  the  Environment  and  the  Ministry  of 

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Agriculture  needs  to  be  clarified.  No  progress  has  been  made  on  marketing  standards  for 
fisheries products or on structural policy. 

Overall, in the area of agriculture Serbia is advancing in fulfilling the SAA requirements and 
its European Partnership priorities. The administrative capacity of the Ministry of Agriculture, 
Forestry  and  Water  Management  needs  to  be  strengthened.  Serbia  needs  to  improve  even 
further its record on implementation of food safety, veterinary, phytosanitary and agricultural 
and rural development policies. Institutional coordination of the food chain safety needs to be 
ensured. Veterinary, phytosanitary, wine and sanitary laboratories, inspectorates and controls 
need to be upgraded. Further efforts are still needed in the fisheries sector in order to comply 
with the relevant parts of the acquis. 

4.2.3.  Environment 

Good progress can be reported in the area of the environment, notably with the adoption of a 
large package of laws and the ratification of several international conventions.  

As regards horizontal legislation, the Law on Environmental Impact Assessment (EIA) and 
the  Law  on  Environmental  Protection  were  amended.  The  Aarhus  Convention  on  Access  to 
Information, Public Participation in Decision-Making and Access to Justice was ratified.  

The  cleaner  production  strategy  was  adopted  to  implement  part  of  the  national  strategy  for 
sustainable development. There has been an increase in the number of awareness-raising and 
environmental  clean-up  activities,  notably  for  cleaning  up  large  waste  tips,  thus  preventing 
further pollution and strengthening the green industry. 

The  Serbian  Environmental  Protection  Agency  has  maintained  a  good  level  of  cooperation 
with  the  European  Environment  Agency  on  the  European  environment  information  and 
observation  network.  However,  the  rules  on  environmental  impact  assessment  and  strategic 
impact assessment are not fully enforced. The environmental departments at local level still 
lack the necessary capacity, awareness and specialist knowledge in these fields. 

Serbia has taken further steps in approximating to the European Eco-Management and Audit 
Scheme (EMAS) by adopting the rulebook on conditions, procedures for acquiring the right to 
use the eco-label.  

In  the  area  of  air  quality,  progress  can  be  reported,  with  the  adoption  of  the  Law  on  Air 
Protection. A National Ozone Office was established within the Ministry of the Environment. 
The  capacity  for  monitoring  and  managing  air  quality  has  been  strengthened.  Concerning 
climate  change,  the  administrative  structures  to  implement  the  Kyoto  Protocol  are  being 
established. The inter-ministerial body for the clean development mechanism (CDM) is now 
operational and a rulebook regulating criteria for approval of CDM projects and of procedure 
for designated national authority operations has been adopted. However, the national strategy 
for inclusion in the CDM under the Kyoto Protocol and the greenhouse gas inventory need to 
be finalised. 

Progress  can  be  reported  on  waste  management,  with  the  adoption  of  the  Law  on  Waste 
Management and the Law on Packaging and Packaging Waste. Implementing legislation has 
been adopted, transposing the relevant acquis. However, the waste management strategy and 
the national plan for waste management at both national and local levels need to be finalised.  

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There has been little progress on water quality. Serbia signed the Protocol on prevention of 
water  pollution  of  the  Sava  River.  However,  the  new  Law  on  Water  introducing  new 
instruments  for  financing  the  water  sector,  including  appropriate  tariffs,  has  not  yet  been 
adopted.  There  is  no  system  to  monitor  nitrates  concentrations  and  contamination  in 
groundwater.  The  wastewater  treatment  infrastructure  throughout  the  country  needs 
upgrading. 

Progress  can  be  reported  on  nature  protection,  with  the  adoption  of  the  Law  on  Nature 
Protection, along with several by-laws. A network was established to identify areas of special 
conservation  interest.  However,  the  national  strategy  for  biodiversity  conservation  and  the 
related action plan need to be finalised.  

On industrial pollution control and risk management, a number of by-laws were adopted, 
notably  on  submission  of  integrated  permit  applications.  The  first  integrated  permits  are 
scheduled  to  be  issued  in  2009  to  2010.  The  list  of  installations  which will  have  to  comply 
with the Integrated Pollution Prevention and Control Directive before 2015 is being revised. 

Progress can be reported on chemicals, with the adoption of the Law on Chemicals and of the 
Law  regulating  the  placing  on  the  market  of  biocidal  products  and  the  ratification  of  the 
Rotterdam  Convention  on  the  Prior  Informed  Consent  Procedure  for  Certain  Hazardous 
Chemicals  and  Pesticides  in  International  Trade.  Steps  have  been  taken  to  implement  the 
Stockholm  Convention  on  Persistent  Organic  Pollutants.  The  national  profile  for  chemical 
management,  a  preliminary  inventory  of  discarded  persistent  organic  pollutants,  has  been 
created. . The decision on establishing a Chemical Agency, a regulatory and implementation 
body dealing with biocidal products and chemicals was adopted by the government.  

Serbia  has  adopted  a  new  Law  on  genetically  modified  organisms  (GMOs).  The  law  bans 
imports of genetically modified reproductive material but allows imports of soya bean meal 
with a certain degree of modification. 

Progress can be reported on noise, with the adoption of the Law on Noise Protection which, 
notably, establishes the powers of the various inspectorates. 

Positive  steps  have  been  taken  towards  strengthening  the  administrative  capacity.  The 
environmental protection inspectorates continued to receive specific training.  

The Environmental Protection Fund is active, especially in the field of waste and hazardous 
waste management, sanitation, soil remediation and air quality monitoring. 

However,  the  institutional  capacity  and  technical  and  human  resources  remain  insufficient, 
especially  at  local  level.  Better  coordination  with  the  central  level  is  needed  and  greater 
attention will have to be paid to enforcement. The Water Directorate within the Ministry of 
Agriculture,  Forestry  and  Water  Management  remains  understaffed  and  its  institutional 
capacity  inadequate.  The  division  of  responsibilities  for  water  management  remains 
fragmented. Overall, the capacity for water management remains weak. 

The  Environmental  Protection  Agency  remains  fully  operational  and  its  performance  is 
improving.  However,  it  still  lacks  the  capacity  to  ensure  proper  implementation  of  the 
integrated monitoring strategy. Budgetary resources for environmental protection remain low.  

Overall,  Serbia  is  moderately  advanced  in  the  area  of  environmental  protection,  and  has 
continued  to  adopt  a  number  of  important  laws  thereby  advancing  well  in  fulfilling  the 

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requirements of the SAA. However, enforcement of the legislation needs to be improved at all 
levels. In this regard, further efforts are needed to build up administrative capacity. 

4.2.4.  Transport policy 

Serbia has made some progress in the area of transport. 

The government has approved the 2009 annual programme for implementation of the strategy 
on the development of rail, road, water, air and inter-modal transport for the period from 2008 
to 2015, which lays down the financial resources and an implementation schedule. 

Some progress has been made in the area of trans-European transport networks. Serbia has 
continued  to  participate  actively  in  the  implementation  of  the  2004  Memorandum  of 
Understanding  on  the  development  of  the  South  East  Europe  Core  Regional  Transport 
Network,  and  in  the  South  East  Europe  Transport  Observatory  (SEETO)  particularly  by 
updating  and  implementing  the  Multi-annual  Plan  2009-2013.  The  National  Council  for 
Infrastructure adopted the national plan for the construction of road and rail infrastructure for 
the period 2008-2012 and the action plan for the construction of road and rail infrastructure 
for corridor X for 2009, which lists the infrastructure projects to be undertaken along corridor 
X and the national and international resources to be secured. Work has started on some of the 
rail and road infrastructure projects provided for in the action plan for corridor X. The general 
master plan covering infrastructure projects for all modes of transport up to 2027 needs to be 
finalised. The Corridor X Company was set up as a subsidiary of the public entity ‘Roads of 
Serbia’ with the task of implementing the action plan for corridor X. 

In  the  case  of  road  transport,  some  progress  can  be  reported.  The  Law  on  Road  Safety, 
imposing an obligation to conduct a road safety audit and inspection and impact assessments, 
was adopted in May 2009. However, the necessary legislation transposing the acquis on road 
haulage, transport of dangerous goods and passenger transport has still not been adopted. In 
December  2008  bilateral  and  transit  road  transport  with  Bosnia  and  Herzegovina  was 
liberalised.  The  government  adopted  a  decision  establishing  a  single  tariff  for  domestic  and 
foreign  vehicles  with  effect  from  February  2009,  harmonising  the  road  tolls  and  thereby 
meeting  one  of  the  main  requirements  in  the  provisions  of  the  Interim  Agreement  on  road 
transit traffic.  

There  has  been  limited  progress  on  rail  transport.  There  has  been  no  progress  towards 
gradual opening of the rail transport market. Amendments to the Railways Law have yet to be 
adopted and this is preventing a number of reforms. The Directorate for Railways is still not 
fully carrying out its role as a regulatory body. Separation of infrastructure management from 
provision  of  transport  services  is  still  pending,  as  is  separation  of  the  accounts  between 
operations and services. The conditions for market opening are not in place. The sector still 
needs major restructuring, though staff of the incumbent railways has been reduced. Work on 
the network statement has advanced, but with the decision on the infrastructure charges still 
pending, the network statement has not been finalised.  

In the field of inland waterways, in May 2009 Serbia has ratified the Protocol on combined 
transport  on  inland  waterways  to  the  European  Agreement  on  Important  International 
Combined Transport Lines and Related Installations. The Law on Inland Waterway Transport 
has yet to be adopted and Serbia still needs to ratify further European agreements in this field. 
Development of infrastructure, particularly along the Danube and Sava, and of inland ports as 
intermodal terminals,  including port facilities and  security  requirement, still requires special 

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attention  and  earmarked  resources.  Consideration  should  also  be  given  to  potential  security 
requirements for inland port facilities and ports. 

There was little progress in the area of combined transport and inter-modality. The limited 
liability company set up as a subsidiary of the Serbian railways for combined transport is still 
not operational.  

In the area of air transport, the Agreement on a European Common Aviation Area (ECAA), 
the Montreal Convention and the Horizontal Agreement on Certain Aspects of Air Services 
were  ratified  in  May  2009.  Implementation  of  the  first  transitional  phase  of  the  ECAA 
remains  to  be  completed.  Some  progress  was  made  towards  harmonisation  of  national 
legislation with the acquis in fields such as aviation safety and air traffic management. Serbia 
has  made  good  progress  in  the  area  of  air  traffic  management  but  further  approximation  to 
European standards is still required. Serbia has made use of the ISIS6 Programme set up by 
the  European  Commission  to  assist  States  of  the  South  East  Europe  to  transpose  Single 
European  Sky  legislation.  In  addition,  it  Serbia  has  participated  actively  to  the  Single 
European  Sky  Committee.  In  the  field  of  safety,  relations  with  EASA  have  been  put  on  a 
formal footing by a working arrangement signed in July 2009. 

However,  the  provisions  on  market  access  have  not  been  applied  by  Serbia  in  line  with  the 
ECAA  Agreement . Some issues are still  pending before Serbia  can move on to  the second 
transitional  phase,  which  includes  implementation  of  the  legislation  on  ground  handling, 
accident  investigation,  search  and  rescue  and  a  number  of  ECAA  air  traffic  management 
commitments and the participation of Serbia in a functional airspace block. The Law on Civil 
Aviation,  which  should  be  in  compliance  with  the  ECAA  Agreement,  has  not  yet  been 
adopted. Privatisation of the national carrier – JAT Company – was declared unsuccessful.  

The  administrative  capacity  of  the  Ministry  of  Infrastructure  still  needs  to  be  reinforced  in 
order to be able to fulfil the obligations as regards alignment of the national legislation with 
the acquis. The distribution of tasks between the ministry and the Civil Aviation Directorate is 
unclear. 

Overall, Serbia is relatively advanced in the area of transport and has progressed well in the 
implementation  of  the  requirements  of  the  SAA  and  the  interim  agreement.  However  in  the 
area of air transport problems with the implementation of the ECAA Agreement have arisen 
and  must  be  resolved  to  allow  for  market  access.  Further  alignment  with  the  acquis  is  still 
necessary.  The  administrative  and  structural  reform  of  the  relevant  departments  is  still 
pending. 

4.2.5.  Energy 

Some progress was made in the energy field during the reporting period.  

Security  of  supply  is  progressing  moderately,  with  a  slight  increase  in  gas  reserves.  A 
memorandum  of  understanding  was  signed  with  Russia  on  development  of  an  underground 
gas storage facility in Banatski Dvor on17 June 2009].Construction of  the facility  is almost 
complete, with a view to securing gas supplies in the event of unexpected cuts from current 
sources. A joint stock company for the storage facility is due to be established by the end of 
2009.  Natural  gas  interconnections between  Serbia  and  other  countries  in  the  region  remain 

6 

Implementation of Single European Sky In South Eastern Europe. 

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limited. The necessary investment in gas infrastructure still needs to be secured. As regards 
electricity  interconnections,  construction  of  a  400  kV  overhead  line  between  Niš  and 
Leskovac  has  been  completed  and  the  section  from  Leskovac  to  the  border  with  the  former 
Yugoslav Republic of Macedonia is under construction. Preparatory work is under way on the 
feasibility  of  improving  interconnections  with  Romania  and  with  Bosnia  and  Herzegovina. 
Oil stocks remain far below European requirements.  

Serbia continued to make good progress in the context of the internal energy market. The 
electricity  sector  has  separated  transmission  from  other  costs.  The  electricity  transmission 
system operator has, to a large extent, become financially sustainable. Formal opening-up of 
the electricity and gas markets to non-household consumers has been completed. The Energy 
Agency has been working well, in line with Energy Community Treaty requirements. In the 
gas  sector,  the  State-owned  public  enterprise  Srbijagas  has  fulfilled  the  requirements  for 
unbundling of its accounts, but further restructuring of the company is still pending. 

Amendments  to  the  Energy  Law,  concerning  the  supply  function  in  both  the  electricity  and 
gas sectors, have not been adopted. No progress has been made on separating distribution and 
supply  in  the  electricity  sector.  The  deadlines  set  by  the  Energy  Treaty  have  not  been  met. 
Further  efforts  are  needed  to  achieve  unbundling  and  real  market  opening  together  with  a 
pricing policy offering a sustainable tariff reflecting costs. 

As a result of the agreement on cooperation in the energy sector with Russia, a contract was 
signed  for  the  sale  of  the  Serbian  oil  company  NIS  to  the  Russian  Gazprom  Neft. 
Construction  of  the  South  Stream  gas  pipeline  through  Serbia  and  establishment  of  a  joint 
company for the gas storage facility in Banatski Dvor are covered by a framework agreement. 
In  May  2009  Srbijagas  and  Gazprom  signed  a  cooperation  agreement  paving  the  way  for 
establishment of a joint company that will build the South Stream section of the gas pipeline 
through Serbia.  

Little  progress  was  made  in  the  area  of  energy  efficiency  and  renewable  energy.  The 
Serbian  power  generation  sector  needs  to  comply  with  the  acquis  before  2015,  involving 
significant investments in specific projects. 

Serbia has made good progress in the areas of nuclear safety and radiation protection. The 
Law on Ionising Radiation Protection and Nuclear Safety Waste was adopted in May 2009. 
The  provisions  of  the  Law  stipulate  the  next  establishment  of  a  nuclear  regulatory  agency. 
This agency is expected to be fully operational during the first half of 2010. Decommissioning 
of the Vinča RA research reactor, preparation for the repatriation of spent nuclear fuel to the 
Russian  Federation,  and  management  of  radioactive  waste  on-site  are  progressing  well.  All 
the  decommissioning  activities  at  Vinča  are  now  being  performed  under  a  new  Public 
Company for Nuclear Facilities of Serbia.  

Serbia  has  not  ratified  the  Convention  on  Nuclear  Safety  and  the  Joint  Convention  on  the 
Safety of Spent Fuel Management and on the Safety of Radioactive Waste Management.  

Significant  progress  was  achieved.  However,  considerable  efforts  still  need  to  be  made  in 
order to align nuclear safety and radiation protection with the acquis and best EU practices.  

Overall, Serbia is moderately advanced in terms of alignment with European standards in the 
energy sector. However, progress remains uneven. Environmental issues in the energy sector, 
remain to be addressed in order to comply with the Energy Community Treaty. 

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4.2.6. 

Information society and media 

Progress  can  be  reported  in  the  areas  of  the  information  society  and  electronic 
communications,  notably  with  the  adoption  of  the  Law  on  Electronic  Commerce  which 
completes the legal framework for electronic business in Serbia and the new Law on Public 
Procurement  which  allows  electronic  procurement.  The  Law  on  Personal  Data  Protection 
entered  into  force  in  January  2009  and  has  started  to  be  implemented.  Action  plans  for  the 
electronic  South-East  Europe  Agenda  Plus  and  the  Law  on  Electronic  Documents  were 
adopted.  Concerning  digital  signatures,  the  by-laws  necessary  for  qualified  electronic 
signature  were  adopted  and 
the  first  certification  service  provider  was  certified. 
Implementation  of  paperless  government  meetings  (electronic  government)  began  in  June 
2009.  However,  the  digital  divide  in  electronic  access  and  digital  inclusion  needs  to  be 
addressed  and  a  broadband  strategy  needs  to  be  finalised.  IT  capacity  needs  to  be 
strengthened, especially at local level, with a view to e-government. Administrative capacity 
for implementation of the legislation in this area is insufficient.  

The  government  finally  included  timelines  in  the  action  plan  for  the  telecommunications 
strategy (2006 - 2010). The basic principles of the strategy for switchover from analogue to 
digital broadcasting of radio and television programmes were approved in January 2009 and 
the  digital  switchover  strategy  was  adopted  in  July  2009.  The  switchover  date  is  set  for  4 
April 2012. The Ministry adopted implementing legislation on determination of the initial set 
of  services  of  the  universal  service  in  July  2009.  An  amendment  of  the  Law  on  Urban 
Planning shortened the deadlines for the granting of building permits for the communications 
sector. 

The  fixed  telephony  sector  is  not  yet  liberalised  in  practice  and  there  is  still  a  lack  of 
competition on this market. To supplement the fixed-line network, in June 2009 two new code 
division  multiple  access  (CDMA)  technology  licences  were  awarded  (one  to  the  fixed  line 
incumbent  operator,  one  to  a  new  entrant  operator)  to  provide  CDMA-based  internet  and 
fixed  wireless  telephony  services  to  the  parts  of  southern  Serbia  with  no  access  to  landline 
telephony.  

Following  the  adoption  of  rules  on  the  provision  of  Voice  over  Internet  Protocol  (VoIP) 
services  and  on  international  connectivity  in  2008  twenty-three  VoIP  authorisations  were 
awarded,  along  with  licences  for  international  connectivity.  However,  only  few  of  the 
operators have yet become active in the market. 

Rules  on  application  of  the  cost-accounting  principle,  of  separate  accounts  and  of  reporting 
were adopted and are in the process of being applied to dominant companies on the market. 
The  Regulatory  Agency  approved  new  prices  for  fixed  telephony  services  and  for  cable 
services.  It  also  adopted  by-laws  on  radio-station  permits  and  equipment,  numbering  plans 
and regulation of fees. However, the October 2008 decision regarding tariff rebalancing was 
not put into effect.  

There  is  still  no  competition  on  the  fixed  telephony  market.  As  tariffs  have  not  been 
rebalanced  and  as  other  competitive  safeguards  such  as  number  portability,  carrier  (pre-) 
selection  and  local  loop  unbundling  have  not  been  introduced,  only  few  market  players  are 
interested  in  investing  in  the  Serbian  market.  The  Serbian  State  has  an  80%  share  in  the 
incumbent operator. However, the Ministry of Telecommunications has announced that it will 
organise a tender for a second national fixed telephony operator.  

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In June 2009 a 10% tax on mobile communications was introduced as a temporary measure 
for the duration of the global economic crisis to help fill the current budget deficit. This tax 
could weigh heavily on the mobile telephony sector. 

In terms of administrative capacity, the Ministry of Telecommunications still lacks sufficient 
human  resources.  The  Regulatory  Agency  is  in  operation  and  financially  autonomous. 
However,  its  independence  needs  to  be  strengthened  and  it  lacks  sufficient  expertise  to 
regulate a liberalised market. The nomination procedure for those members of its management 
board whose mandates have expired has not yet started. 

Progress can be reported in the area of audiovisual policy. In May 2009 Serbia ratified the 
European  Convention  on  Transfrontier  Television  and  the  UNESCO  Convention  on  the 
Protection and Promotion of the Diversity of Cultural Expressions. Amendments to the Law 
on  Broadcasting  were  also  adopted.  This  will  allow  election  of  the  members  of  the 
Broadcasting Council, a process which has been delayed due to lack of agreement on the final 
shortlist.  The  Law  on  Public  Information  was  adopted,  but  not  the  new  Law  on  Media 
Concentration  or  the  Law  on  Advertising.  The  process  of  allocation  of  frequencies  was 
completed in 2008.  

Progress  can  also  be  reported  on  the  transparency,  accountability  and  efficiency  of  the 
Broadcasting  Agency.  Since  2008  all  the  decisions  of  the  agency  are  published  on  the 
internet.  In  December  2008  the  Broadcasting  Council  awarded  63  licences  for  broadcasting 
radio and TV programmes in regions, local areas and the city of Belgrade. After completion 
of the last tender, a total of 467 licences for broadcasting radio and TV programmes will have 
been issued. The agency opened a new branch of its monitoring service in Novi Sad. Branches 
in Niš and Kragujevac are planned. The capacity of the agency was reinforced by acquiring 
new equipment allowing more efficient monitoring of broadcasters. 

Under the Broadcasting Law, privatisation of the broadcast media in Serbia was due by the 
end of 2007. However, this process was blocked by certain provisions of the Law on Local 
Self-Government and the Law on the Capital City. The problem remains unresolved. 

Overall,  preparations  in  the  area  of  the  information  society  and  media  have  continued.  The 
relevant authorities have organised a number of awareness-raising activities, training sessions, 
conferences and events. However, the inadequate institutional and regulatory capacity needs 
to be addressed and real progress remains contingent on implementation of the legislation. 

4.2.7.  Financial control 

Progress has been made in the area of financial control. A working group led by the Ministry 
of Financial Affairs has prepared a comprehensive policy paper on public internal financial 
control  (PIFC),  which  was  adopted  by  government  in  July  2009.  The  Budget  System  Law, 
which also includes the legal basis for PIFC, was adopted and entered into force in July 2009. 
The internal audit department of the Ministry of Financial Affairs will perform the function of 
central harmonisation of internal audits until a separate unit is established. In ministries where 
internal  audit  units  have  been  established,  auditors  generally  lack  experience  and  training. 
Managerial  accountability  and  subsequent  development  of  financial  management  control 
systems are still embryonic.  

With  regard  to  external  audit,  the  State  Audit  Institution  has  not  yet  become  fully 
operational. Delays in allocating appropriate premises for the office are continuing and only 
eight additional staff has been recruited in the past year.  

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49 

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Overall,  Serbia  is  still  at  an  early  stage  in  its  preparations  for  introducing  public  internal 
financial control and a new system of external audit. 

4.2.8. 

Statistics 

There  has  been  some  progress  on  statistical  infrastructure.  Cooperation  and  coordination 
between  the  statistical  office  and  other  official  producers  of  statistics  have  improved,  in 
particular with the National Bank of Serbia and with the Ministry of Finance. In January 2009 
the  government  adopted  the  development  strategy  for  official  statistics  for  2009-2012.  The 
new  Law  on  Statistics,  as  well  as  laws  regulating  the  agriculture  and  population  censuses, 
have not yet been adopted. The Statistical Office has recruited a small number of new staff. 
However,  budgetary  allocations  are  not  yet  sufficient  to  cover  all  the activities  planned  and 
additional staff is still needed. Metadata have been prepared for all statistical domains.  

Little  progress  was  made  on  classifications  and  registers.  Development  of  the  statistical 
business  register  is  progressing  very  slowly.  Introduction  of  the  classification  of  the 
nomenclature  of  economic  activities  (NACE  rev.  2)  is  pending,  awaiting  adoption  of  the 
legislation  on  the  classification  of  business  activities.  The  Statistical  Office  still  needs  to 
create tools to convert codes from the old NACE version to the new one. There has been no 
progress  towards  harmonisation  of  the  Serbian  regional  statistical  classification  with  the 
NUTS Regulation of the EU. 

There has been progress on sector statistics. A pilot census on population and housing was 
carried out in April 2009. Preparations are being made for an agricultural census, one of the 
short-term  priorities  of  the  European  Partnership.  A  pilot  census  will  be  conducted  in 
December  2009.  Pilot  surveys  on  energy,  innovation and industrial waste have been carried 
out. A new method for air transport statistics and the  new customs tariff based on the 2009 
Combined  Nomenclature  were  introduced.  A  full  labour  cost  survey  was  conducted  for  the 
first time in 2008. The structural business statistics were expanded to cover additional items 
from the EU Regulation on the subject. 

Overall,  Serbia  has  made  progress  on  statistics,  but  has  advanced  only  moderately  towards 
meeting  the  requirements  of  the  SAA  and  the  European  Partnership.  Further  progress  is 
needed  on  the  business  register.  Additional  efforts  are  needed  to  strengthen  administrative 
capacity. 

4.3. 

Justice, freedom and security 

4.3.1.  Visa, border management, asylum and migration 

Good progress has been made in the area of visa policy and  in the wider  framework of the 
visa liberalisation dialogue.  

In particular, Serbia has taken important steps towards the benchmarks set in the road-map for 
visa  liberalisation  and  met  the  majority  of  conditions,  allowing  the  Commission  to  include 
Serbia  in  its  proposal  of  July  2009  for  visa  free  travel.  Serbia  issued  more  than  1.2  million 
biometric passports by September 2009. The administrative infrastructure was amended and 
now  provides  for  overall  secure  personalisation  and  distribution  procedures  with  concrete 
measures having been taken to minimise the risk of corruption.  

The  visa  facilitation  and  readmission  agreements  between  Serbia  and  the  European 
Community  continued  to  be  implemented.  Serbia  exempts  the  citizens  of  all  EU  Member 

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States from visa requirements and maintains a visa-free regime for citizens of Croatia, Bosnia 
and  Herzegovina,  the  former  Yugoslav  Republic  of  Macedonia,  Montenegro  and  Turkey. 
Serbia's diplomatic and consular representations continue to provide most types of visas  for 
Montenegro on the basis of an agreement.  

However, Serbia has not yet fully aligned its legislation with the EU negative list. Concerns 
over the integrity and security of national registers for persons residing in Kosovo persist. The 
new Law on Registry Books, which was adopted in March 2009, is expected to improve this 
situation,  but  has  not  yet  entered  into  force.  A  bilateral  agreement  on  dual  citizenship  with 
Montenegro could not yet be concluded.  

Overall,  Serbia  is  moderately  advanced  in  terms  of  alignment  to  European  standards  in  the 
area of visa policy. 

Progress  has  been  achieved  in  the  area  of  border  management.  The  new  Law  on  State 
Border Protection entered into force in November 2008 and a one-year deadline was set for 
adoption of the implementing legislation. Risk analysis capacities have been increased and are 
being  applied  in  carrying  out  border  surveillance.  Some  1000  biometric  travel  document 
readers have been set up at border crossing points.  

Regarding  inter-agency  cooperation,  a  cooperation  agreement  between  the  main  ministries 
involved  in  border  management  was  signed  in  February  2009.  Cooperation  between  border 
police  and  other  law  enforcement  authorities  is  satisfactory.  Cross-border  cooperation  is 
improving. Bilateral protocols for the regular meetings of the heads of border services have 
been concluded with Montenegro and the former Yugoslav Republic of Macedonia. In March 
2009, a joint declaration on border security cooperation in south-east Europe was signed by 
Serbia, Albania, Bosnia and Herzegovina, and the former Yugoslav Republic of Macedonia. 
A  working  agreement  with  Frontex  was  signed  in  February  2009.  The  signing  of  a  police 
cooperation  agreement  with  EULEX  was  completed  in  September  2009.  Capacity-building 
activities, initial training and provision of equipment for the border police continued.  

However, important differences persist between the 82 border crossing points. Infrastructure 
at  long-established  border  crossing  points  is  generally  acceptable.  Newer  border  crossing 
points, in particular with Montenegro, and the control of the boundary line with Kosovo still 
show significant weaknesses. Not all border crossing points are fully connected to the Single 
Information  System.  Further  upgrading  of  equipment  and  an  increase  in  staffing  levels  is 
needed. Basic and specialised training courses should be improved in line with the Common 
Core Curriculum for border guards.  

Overall, Serbia has started to address its priorities in the area of border control. However, it 
needs  to  step-up  its  efforts  to  address  important  differences  between  individual  border 
crossings. 

Little  progress  was  made  in  the  area  of  asylum.  Implementation  of  the  Law  on  Asylum 
continued.  As  the  Asylum  Office  foreseen  by  the  law  has  not  yet  been  formally  created, 
asylum  claims  are  processed  by  an  asylum  unit  within  the  Border  Police.  From  September 
2008 to September 2009, 190 applications were received; four of these applications received 
positive decisions in the first instance. The significant increase in asylum applications is due 
to larger numbers of applicants from Afghanistan. First instance appeals are processed by the 
independent  administrative  body,  composed  of 
Asylum  Commission,  which 
governmental experts appointed by the Prime Minister. Judicial appeals against decisions of 

is  an 

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51 

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the Asylum Commission may be lodged to the Supreme Court. The centre for asylum-seekers 
in Banja Koviljaca can accommodate 80 applicants in adequate conditions.  

However, there has been no forward-planning to address the potential increase in the number 
of  applications  and  there  is  no  coordination  body  responsible  for  integration  of  asylum-
seekers  in  Serbia.  Serbia  has  still  not  acceded  to  the  UN  Convention  on  Reduction  of 
Statelessness. 

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

There has been good progress on migration management with the adoption of the migration 
management strategy in July 2009. A national strategy to fight illegal migration was adopted 
in March and the national strategy for the reintegration of returnees was adopted in February 
2009.  Implementation  of  the  EC  readmission  agreement  continued.  The  Law  on  Foreigners 
entered into force in April 2009 and is largely in compliance with EU standards. It establishes 
separate  systems  for  issuing  residence  and  work  permits.  Provisions  on  carriers'  obligations 
and sanctions for infringements are also provided for. At the end of 2008 Albania, Bosnia and 
Herzegovina, Croatia, Montenegro, the former Yugoslav Republic of Macedonia and Serbia 
signed a memorandum of understanding on setting up a system for sharing statistical data on 
illegal migration and participating in the regional system of advance notification. 

However,  further  efforts  are  needed  to  effectively  implement  the  newly  adopted  strategies. 
Resources for the integration of returnees remain very limited. A more proactive approach is 
required  in  order  to  ensure  effective  integration  of  migrants  and  returnees  based  on  reliable 
statistical  information  on  their  number  and  socio-economic  profile.  Certain  problems  of 
obtaining documents, particularly for children born in foreign countries and those from mixed 
marriages, persist. 

There has been an increase in the numbers of visa denials, illegal border crossings and illegal 
women  and  children  migrants.  There  is  no  overall  strategy  on  data  collection  in  order  to 
follow  trends  and  carry  out  detailed  analysis.  Police  and  border  police  access  to  existing 
databases  related  to  illegal  migration  is  not  clearly  regulated.  Staffing  needs  to  be  further 
improved and codes of ethics are properly enforced. Conditions in detention centres remain a 
matter of concern.  

Overall, Serbia continues to be moderately advanced in the area of migration policy. 

4.3.2.  Money laundering 

There has been some progress on fighting money-laundering. The Law on the Prevention of 
and  Fight  against  Money-Laundering  and  Terrorist  Financing  was  adopted  in  March  2009, 
with further amendments in August 2009. The Financial Intelligence Unit has stepped up its 
efforts to raise awareness on reporting of suspicious transactions amongst reporting entities.  

However, a new action plan has not yet been adopted. Reports on suspicious transactions are 
mostly limited to the banking sector. The number of investigations and convictions in money-
laundering  cases  remained  low.  The  expertise  and  capacity  of  the  criminal  investigators, 
public prosecutors and judges still need to be improved. There are considerable challenges in 
the areas of privatisation and real estate and financial market transactions.  

Overall, Serbia has started to address its priorities in the area of fighting money laundering. 
Money-laundering continues to be a serious cause for concern. 

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52 

   EN 

4.3.3.  Drugs 

Progress was made in the fight against drugs, with the adoption of the national strategy for the 
fight  against  drugs  in  February  2009  and  the  related  action  plan.  The  basic  legislation  is  in 
place.  Special  investigative  techniques,  such  as  secret  surveillance  measures  and  controlled 
deliveries, have been used increasingly by the law enforcement authorities. Significant drug 
seizures  and  dismantling  of  organised  criminal  groups  have  continued  as  a  result  of  good 
inter-agency  and  international  police  cooperation  at  operational  level.  In  the  period  from 
January to August 2009, 530 kg of drugs were seized and 3450 criminal charges have been 
filed.  The  department  for  suppression  of  drug  smuggling  within  the  Ministry  of  the  Interior 
has established a database containing basic information on drug-related offences and criminal 
groups. The Ministry of Health continued its activities to prevent drug abuse and its negative 
effects. 

However,  serious  weaknesses  remain  in  surveillance  and  control  of  the  administrative 
boundary with Kosovo, allowing major drug-smuggling activities in this area. Control of the 
border with Montenegro also needs urgent improvement in this respect. The newly established 
database  is  not  linked  to  other  databases  and  border  police  at  border  crossing  points  do  not 
have access. Currently, seized drugs are not destroyed, but are stored in a drugs warehouse. 
This practice, which is allegedly due to environmental considerations, raises serious security 
concerns.  

While preparations in the fight against drugs are moderately advanced, Serbia remains a key 
transit country for smuggling drugs to Europe, which is a serious cause for concern. 

4.3.4.  Police 

Some  progress  has  been  made  in  the  area  of  police  reform.  Capacity-building  and  further 
specialisation  within  the  police  force  has  continued  and  positive  steps  have  been  taken  to 
modernise  police  work  and  improve  international  and  regional  cooperation  Provision  of 
modern  equipment  continued  and  some  good  results  were  achieved  on  investigating  serious 
crime. There have been improvements in basic training for the police, and overall professional 
development. The Ministry of the Interior has taken a proactive approach to reforms and there 
is now better coordination between police structures at all levels.  

However,  a  strategy  for  further  reform  of  the  police  and  an  analysis  to  define  longer-term 
priorities  and  needs  are  missing.  The  decision-making  process  remains  highly  centralised, 
leading  to  inefficient  management  of  human  resources.  More  open  and  transparent 
recruitment and career development are needed. The internal control sector continues to lack 
support,  in  terms  of  staff  and  training,  for  improving  mechanisms  and  for  more  proactive 
investigation.  This  remains  a  concern  in  view  of  the  increase  in  the  number  of  criminal 
charges brought against police officers, mostly for abuse of office and disciplinary measures. 
Corruption within the police remains a serious problem.  

The  private  security  sector  continues  to  be  inadequately  regulated.  Small  arms  and  light 
weapons remain widespread and their illicit possession among the general public continues to 
be very high. Small arms and light weapons pose a significant challenge to security in Serbia 
and are subject to illegal trafficking by organised crime groups in the region. 

Overall, the Serbian police system is moderately advanced.  

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53 

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4.3.5.  Fighting organised crime and terrorism 

Progress has been made in the fight against organised crime.  

Serbia adopted a national strategy for the fight against organised crime in March 2009. The 
Law  on  Organisation  and  Competences  of  the  State  Institutions  in  Suppressing  Organised 
Crime  was  adopted  in  August  2009,  giving  broader  competencies  to  the  Specialised 
Prosecutor for Organised Crime, along with the Law on Enforcement of Prison Sanctions for 
Criminal  Offences  of  Organised  Crime.  Changes  to  the  Criminal  Code,  adopted  also  in 
August 2009, introduced new criminal offences, in particular in the area of financial crime. 

Police actions led to the arrest of a number of suspects of organised crime activities. Police 
capacity  for  investigating  financial  crimes  was  improved  by  setting  up  a  financial 
investigation unit within the Ministry of the Interior, which became operational in June 2009. 
Specialisation within the criminal police continued, with the creation of special units fighting 
cybercrime and drug-smuggling. A directorate for the management of seized assets has been 
in operation since March 2009. A Commission for Inter-ministerial Coordination in the field 
of Justice and  Home  Affairs  was  established in December 2008, with the aim of improving 
inter-ministerial  coordination  in  the  fight  against  organised  crime.  A  number  of  suspected 
members of organised crime groups were arrested. 

However, a comprehensive threat analysis and an action plan for implementation of the new 
organised  crime  strategy  are  missing.  The  adoption  and  entry  into  force  of  a  substantially 
revised  Criminal  Procedure  Code  was  further  postponed,  as  prosecution  services  still  lack 
adequate premises, infrastructure and the training to carry out the new task of leading criminal 
investigations. The newly established bodies, such as the financial investigation unit and the 
directorate for the management of seized assets, face serious staff shortages and are therefore 
only partially operational.  

International  police  cooperation  is  mostly  based  on  informal  contacts,  while  official 
cooperation and implementation of cooperation agreements still faces problems. The lack of 
adequate  surveillance  and  control  of  the  administrative  boundary  with  Kosovo  and  the 
insufficient  cooperation  with  EULEX  make  the  whole  area  vulnerable  to  organised  crime 
activities. 

Coordination between individual police departments needs to be improved. Despite a series of 
police investigations into organised crime cases, the number of final convictions remains low. 
A common database on organised crime has not yet been set up. The availability of reliable 
statistics remains insufficient. The witness protection system needs further upgrading.  

Overall, there has been progress in the fight against organised crime, but tangible results are 
still  rare.  Organised  crime  remains  a  serious  cause  for  concern,  in  particular  in  the  region 
adjacent to the administrative boundary line with Kosovo.  

Serbia made some progress in the fight against trafficking of human beings. The Council of 
Europe Convention against Trafficking in Human Beings was ratified in March 2009 and an 
action plan for the period 2009-2011 was adopted in April 2009. Amendments to the Criminal 
Code, adopted in August 2009, increase penalties for human trafficking offences. 

The national coordinator was appointed and a ministerial-level National Council established. 
This  should  lead  to  better  cooperation  between  the  various  stakeholders.  Awareness  raising 

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activities continued and a telephone helpline for victims has been set up. Cooperation between 
social centres, the police, NGOs and the judiciary has improved. 

From  January  to  August  2009,  78  victims  of  human  trafficking  were  identified,  which 
constitutes a significant increase compared to 55 victims in 2008. 

However, the number of final convictions in this area remains low. The number of under-age 
victims continued to rise, which is a matter of concern.  

Overall,  Serbia’s  preparations  for  fighting  trafficking  in  human  beings  are  moderately 
advanced. 

There  was  limited  progress  in  the  fight  against  terrorism.  The  new  Law  on  Money-
Laundering, adopted in March 2009, introduced new provisions against financing of terrorist 
groups. Police investigations have resulted in seizures of illegal arms. However, ratification of 
key  international  conventions  remains  pending.  Cooperation  and  exchanges  of  information 
between the police and the security agency are still insufficient. There is no specific database 
on terrorist suspects. Overall, Serbia’s framework for the fight against terrorism is still at an 
early stage. 

4.3.6.  Protection of personal data 

Some progress has been made on protection of personal data. The Law on the Protection of 
Personal Data entered into force in January 2009 and implementing legislation was adopted. 
The  Commissioner  for  Information  of  Public  Importance  took  over  supervisory  powers  for 
enforcing  it  and  was  renamed  Commissioner  for  Information  of  Public  Importance  and 
Personal Data Protection. 

However, the Law on the Protection of Personal Data is not fully in line with EU standards. 
The office of the commissioner lacks staff and funding, which prevents effective supervision. 
At  the  same  time,  there  is  a  potential  conflict  of  interest  between  the  commissioner’s  two 
roles of securing public access to documents on the one hand and protecting personal data on 
the other. 

Overall,  Serbia  is  moderately  advanced  in  the  area  of  protection  of  personal  data.

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STATISTICAL DATA (as of 14 September 2009) 
Serbia 

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

Note

1999 
2002 
7 502 
7 553 
77 474  77 474  77 474  77 474 

2000 
7 528 

2001 
7 505 

2003 
7 491 
77 474 

2004 
7 470 
77 474 

2005 
7 456 
77 474 

2006 
7 425 
77 474 

2007 
7 398 
77 474 

2008 
7 366 
77 474 

STATISTICAL ANNEX 

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-27=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-27=100) 
Gross value added by main sectors (%) 

Agriculture 
Industry 
Construction 
Services 

Final consumption expenditure, 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) 

Note

1999 

2000 

2001 

2002 

2003 

2004 

2005 

2006 

2007 

205 624 384 225  762 178 972 901 1 133 027 1 384 253 1 687 832 1 980 237 2 362 850 
17 522  25 539  12 821  16 034 
2 138 
2 324 
: 
: 
: 
: 
3.9 
-11.2 
-0.4 
: 
4.3 
-10.1 
: 
: 
: 
: 

29 543 
4 002 
8 500.0 
33.0 
6.9 
2.3 
4.5 
: 
: 

19 075 
2 556 
: 
: 
8.3 
1.1 
7.1 
: 
: 

17 416 
2 328 
: 
: 
2.4 
-4.4 
7.1 
: 
: 

23 521 
3 174 
: 
33.0 
5.2 
7.2 
-1.8 
: 
: 

20 358 
2 736 
: 
32.0 
5.6 
-5.5 
11.8 
: 
: 

3 398 
: 
: 
5.3 
: 
5.6 
: 
: 

1 709 
: 
: 
5.6 
2.0 
3.5 
: 
: 

19.0 
23.3 
3.6 
54.1 
96.3 
11.0 
-0.5 
11.4 
18.2 

1999 
89.8 

1999 
43.5 

20.2 
26.4 
3.6 
49.8 
97.2 
12.7 
-3.9 
10.9 
16.8 

20.1 
24.7 
3.2 
52.0 
104.0 
10.7 
3.2 
24.6 
42.5 

15.3 
24.3 
3.5 
56.9 
106.9 
12.4 
0.5 
22.9 
42.7 

2000 
100.0 

2001 
100.1 

2002 
101.9 

2000 
79.6 

2001 
93.3 

2002 
16.6 

13.5 
23.0 
4.3 
59.3 
102.4 
16.7 
1.8 
22.9 
43.7 

2003 
98.8 

2003 
9.9 

1999 
-427 
-1 167 

2000 
-166 
-1 713 

2001 
-318 
-2 577 

2002 
-1 319 
-3 414 

2003 
-1 255 
-3 555 

14.0 
24.0 
4.8 
57.2 
96.8 
19.2 
11.8 
24.6 
52.5 

2004 
105.9 

2004 
11.4 

2004 
-2 306 
-5 201 

12.2 
23.6 
4.6 
59.6 
95.6 
19.0 
6.2 
28.7 
49.4 

2005 
106.7 

2005 
16.2 

2005 
-1 788 
-4 252 

11.3 
24.4 
4.8 
59.4 
95.1 
20.8 
4.8 
31.7 
52.4 

2006 
111.7 

2006 
11.7 

2006 
-3 157 
-4 992 

Note

Note

Note

10.2 
23.7 
5.1 
60.9 
93.4 
23.4 
7.1 
30.6 
54.4 

2008 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 

: 
: 
: 
: 
: 
: 
: 
: 
: 

2007 
115.8 

2008 
117.1 

2007 
7.0 

2008 
13.5 

2007 
-4 615 
-6 638 

2008 
-5 876 
-7 633 

EN 

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56 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance of payments current account: net services (million euro) 
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) 
Net foreign direct investment (FDI) (million euro) 
Foreign direct investment (FDI) abroad (million euro) 

of which FDI of the reporting economy in EU-27 countries (million euro) 

Foreign direct investment (FDI) in the reporting economy (million euro) 

of which FDI of EU-27 countries in the reporting economy (million euro) 

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 
Value of imports: all goods, all partners (million euro) 
Value of exports: all goods, all partners (million euro) 
Trade balance: all goods, all partners (million euro) 
Terms of trade (export price index / import price index, 1998=100) 
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) 
Infant mortality rate: deaths of children under one year of age per 1000 live births 

EN 

Note 

Note 

Note 
1) 
1) 
1) 
1) 
1) 
1) 

Note 

57 

109 
8 
624 
0 
: 
: 
: 
: 
: 

1999 
: 
: 

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

1999 
2 694 
1 270 
-1 423 
92.5 
50.5 
59.9 

1999 
-3.9 
11.1 

153 
-1 
1 396 
293 
55 
-2 
: 
56 
: 

2000 
: 
: 

2000 

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

2000 
3 606 
1 680 
-1 926 
100.2 
54.3 
61.6 

2000 
-4.0 
10.6 

272 
7 
1 980 
660 
185 
-14 
: 
198 
: 

2001 
: 
104.8 

2001 
98.3 
464.2 
974 
1 139 
2 098 
: 
: 
: 
: 
59.770 
: 
2 050 

2001 
4 758 
1 896 
-2 862 
103.1 
58.2 
57.6 

2001 
-2.7 
10.2 

137 
-77 
2 035 
525 
505 
-21 
: 
526 
: 

2002 
: 
71.9 

2002 
67.2 
343.6 
1 546 
1 828 
3 156 
: 
: 
: 
: 
60.680 
: 
2 937 

2002 
5 919 
2 192 
-3 727 
98.0 
59.5 
59.6 

2002 
-3.3 
10.1 

179 
-120 
2 241 
421 
1 205 
3 
1 
1 202 
850 

2003 
: 
63.3 

2003 
62.3 
281.6 
1 526 
1 920 
3 762 
: 
: 
: 
: 
65.060 
: 
3 548 

2003 
6 589 
2 442 
-4 147 
101.6 
53.9 
58.3 

2003 
-3.3 
9.0 

141 
-174 
2 927 
382 
778 
2 
2 
775 
397 

2004 
: 
50.7 

2004 
54.3 
231.7 
1 533 
2 015 
4 449 
: 
: 
: 
: 
72.570 
: 
3 780 

2004 
8 623b 
2 832b 
-5 792b 
108.4b 
56.6b 
58.0b 

2004 
-3.5 
8.1 

-5 
-260 
2 730 
264 
1 247 
-18 
4 
1 265 
932 

2005 
1.0 
50.5 

2005 
64.2 
245.9 
1 748 
2 318 
5 535 
: 
: 
: 
: 
82.910 
: 
5 525 

2005 
8 439 
3 608 
-4 831 
98.4 
58.7 
54.2 

2005 
-4.6 
8.0 

-41 
-330 
2 207 
186 
3 399 
-68 
4 
3 467 
3 335 

2006 
-1.6 
39.8 

2006 
63.3 
213.5 
2 378 
3 315 
7 539 
: 
: 
: 
: 
84.160 
: 
9 593 

2006 
10 463 
5 102 
-5 360 
104.5 
57.5 
54.4 

-254 
-599 
2 876 
166 
1 821 
-692 
-45 
2 513 
1 820 

2007 
-1.9 
30.0 

2007 
60.2 
204.8 
3 112 
4 882 
11 302 
: 
: 
: 
: 
79.980 
: 
10 897 

2007 
13 507 
6 432 
-7 075 
102.6 
56.0 
55.1 

-171 
-929 
2 857 
210 
1 812 
-192 
-76 
2 004 
1 488 

2008 
-2.4 
25.3 

2008 
64.7 
214.7 
2 721 
4 463 
11 205 
: 
: 
: 
: 
81.470 
: 
8 148 

2008 
15 589 
7 428 
-8 161 
97.5 
54.2 
53.0 

2006 
-4.3 
7.4 

2007 
-4.7 
7.1 

2008 
: 
6.7 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Life expectancy at birth: male (years) 
Life expectancy at birth: female (years) 

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 (%) 
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) 

69.7 
74.8 

1999 
68.2 
58.3 
67.1 
49.8 

69.7 
74.8 

2000 
68.2 
59.2 
68.2 
50.4 

69.6 
74.8 

2001 
68.9 
59.7 
68.6 
50.8 

69.7 
75.0 

2002 
68.4 
58.5 
67.1 
50.0 

69.9 
75.1 

2003 
68.9 
57.9 
67.0 
48.7 

69.9 
75.4 

2004 
66.4 
53.4 
63.1 
44.0 

70.0 
75.4 

2005 
65.2 
51.0 
61.2 
40.8 

70.6 
75.9 

2006 
63.6 
49.9 
59.2 
40.6 

70.7 
76.2 

2007 
63.4 
51.5 
60.0 
43.0 

71.1 
76.3 

2008 
62.7 
53.7 
62.3 
45.3 

42.3 

43.3 

42.1 

42.0 

44.3 

37.3 

35.4 

32.6 

33.5 

36.7 

: 
: 
: 
: 
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 

: 
: 
: 
: 
14.5 
12.9 
16.5 

45.3 
9.9 

: 
: 
: 
: 
16.0 
15.1 
17.2 

44.8 
11.0 

24.0 
21.7 
5.2 
49.1 
18.7 
15.3 
23.1 

48.1 
14.5 

23.3 
21.5 
6.1 
49.1 
21.1 
17.0 
26.5 

47.7 
16.7 

20.5 
23.2 
6.1 
50.2 
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 

25.1 
19.9 
6.3 
48.6 
13.6 
11.9 
15.8 

35.2 
9.7 

Note

1999 

2000 

2001 

2002 

2003 

2004 

2005 

2006 

2007 

2008 

1 992.0 3 799.0  8 691.0 13 260.0 16 612.0 20 555.0 25 514.0 31 745.0 38 744.0  45 674.0 

94.2 

100.0 

118.4 

154.9 

176.5 

196.1 

209.5 

233.3 

266.1 

275.7 

: 

: 

: 

: 

: 

11.5 

11.4 

12.6 

10.7 

: 

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 
894.7 

2007 
199.7 
1 142.6 

2008 
201.8 
1 194.2 

1999 
49.2 
0.4 

1999 
2.7 
: 
: 

1999 
: 

2000 
49.2 
0.4 

2000 
2.5 
: 
: 

2000 
: 

2001 
49.2 
0.4 

2001 
2.5 
: 
: 

2001 
: 

2002 
49.2 
0.4 

2002 
3.0 
: 
: 

2002 
: 

2003 
49.2 
0.4 

2003 
3.8 
: 
: 

2003 
: 

2004 
49.2 
0.4 

2004 
3.5e 
: 
: 

2004 
: 

2005 
49.2 
0.4 

2005 
: 
: 
: 

2005 
: 

2006 
49.2 
0.4 

2006 
: 
: 
18.5 

2006 
: 

2007 
49.2 
0.4 

2007 
: 
: 
26.3 

2007 
: 

2008 
49.2 
0.4 

2008 
: 
: 
33.2 

2008 
: 

Note
2) 

Note

Note

Note

EN 

58 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SI: Energy intensity of the economy (kg of oil equivalent per 1000 euro GDP 2004) 
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) 

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 

: 
52.2 

49.8 

1999 
: 
: 
: 
: 
: 
: 
31.0 

: 
42.1 

: 
43.3 

: 
41.2 

: 
36.5 

: 
44.9 

413.1 
46.9 

413.6 
41.8 

: 
37.9 

: 

: 

: 

: 

: 

: 

: 

: 

2000 
: 
: 
: 
: 
: 
: 
32.0 

2001 
: 
: 
: 
: 
: 
: 
31.0 

2002 
: 
: 
: 
: 
: 
: 
31.0 

2003 
: 
: 
: 
: 
: 
: 
32.0 

2004 
: 
: 
: 
: 
: 
: 
34.0 

2005 
7 729 
: 
6 696 
: 
1 431 
8 322 
36.0 

2006 
7 907 
: 
6 966 
: 
1 686 
8 765 
36.0 

2007 
8 797 
654 
7 073 
198 
: 
: 
37.0 

: 
: 

: 

2008 
: 
: 
: 
: 
: 
: 
: 

Note 

1999 

2000 

2001 

2002 

2003 

2004 

2005 

2006 

2007 

2008 

3) 
3) 
3) 
4) 
5) 

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

93.0 
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 
5 075 
1 096 
3 212 
1 748 
1 616 
9 510 
3 101 
1 289 

100.0 
5 066 
1 106 
3 999 
1 718 
1 602 
8 268 
3 189 
1 348 

92.0e 
5 053 
1 087 
3 832 
1 756 
1 562 
6 115 
3 206 
1 128 

108.0 
5 055 
1 057 
3 594 
1 760 
1 548 
8 707 
2 300 
1 277 

SI = Structural indicators 
: = not available 
e = estimated value 
b = break in series 
All data from 1999 to 2008 refer to the territory of the Republic of Serbia excluding Kosovo under UNSCR 1244/99. 
1) 
used. 
2) 
3) 
4) 
5) 

Ministry of Internal Affaires excluded the vehicles that were not registered before the given deadline (1 month). 
Since 2006, the reference date is 1 December (instead 15 January as it was before). 
In million litres, includes cow and sheep milk. 
Without triticale, buckwheat and millet, which are minor; rice production does not exist in Serbia. 

Break in series: from 2004 onwards the data are not comparable with the previous years because since January 2004 Uniform Customs Document harmonized with EU regulations has been 

EN 

59 

EN