COMMISSION STAFF WORKING DOCUMENT SERBIA 2010 Progress Report    accompanying the  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL  Enlargement Strategy and Main Challenges 2010-2011
Date: 2010-11-09
Institutions: European Commission
Subjects: North Macedonia, accession to the European Union, enlargement of the Union, pre-accession strategy, report

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EUROPEAN COMMISSION 

Brussels, 9.11.2010 
SEC(2010) 1330 final 

COMMISSION STAFF WORKING DOCUMENT 

SERBIA 2010 PROGRESS REPORT 

accompanying the 

COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

Enlargement Strategy and Main Challenges 2010-2011 

{COM(2010) 660 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 .......................................................... 12 

Regional issues and international obligations ............................................................ 18 

Economic criteria ....................................................................................................... 22 

The existence of a functioning market economy ....................................................... 22 

The capacity to cope with competitive pressure and market forces within the Union
.................................................................................................................................... 28 

4. 

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

4.1. 

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

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

4.1.2.  Movement of persons, services and right of establishement...................................... 31 

4.1.3.  Free movement of capital........................................................................................... 32 

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

4.1.5.  Competition................................................................................................................ 34 

4.1.6.  Public procurement .................................................................................................... 35 

4.1.7. 

Intellectual property law ............................................................................................ 35 

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

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

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

4.2. 

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

4.2.1. 

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

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

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

4.2.4.  Transport policy ......................................................................................................... 44 

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

4.2.6. 

Information society and media................................................................................... 47 

4.2.7.  Financial control......................................................................................................... 48 

4.2.8.  Statistics ..................................................................................................................... 49 

4.3. 

Justice, freedom and security ..................................................................................... 49 

4.3.1.  Visa, border management, asylum and migration...................................................... 49 

4.3.2.  Money laundering ...................................................................................................... 51 

4.3.3.  Drugs .......................................................................................................................... 52 

4.3.4.  Police.......................................................................................................................... 52 

4.3.5.  Fighting organised crime and terrorism ..................................................................... 53 

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

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COMMISSION STAFF WORKING DOCUMENT 

2010 Progress Report 

1. 

INTRODUCTION 

1.1. 

Preface 

Since March 2002, the Commission has reported regularly to the Council and Parliament on 
progress made by the countries of the Western Balkans region. 
This progress report largely follows the same structure as in 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  mid-September  2009  to  early  October  2010. 
Progress  is  measured  on  the  basis  of  decisions  taken,  legislation  adopted  and  measures 
implemented.  As  a  rule,  legislation  or  measures  that  are  under  preparation  or  are  awaiting 
parliamentary  approval  have  not  been  taken  into  account.  This  approach  ensures  equal 
treatment across all reports and 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  (SAA)  and  an  Interim  Agreement  on  trade-related 
measures with the EU. The Interim Agreement entered into force on 1 February 2010. On 14 
June 2010, the Council agreed to launch the ratification process for the SAA.  

On 22 December 2009, the Serbian President and Prime Minister handed over the country’s 
application  for  EU  membership.  The  accompanying  Government  Memorandum  highlighted 
that the application reflected an overall social consensus on the European orientation of Serbia 
and its aspiration to EU membership. 

1 
2 

The rapporteur for Serbia is Mr Jelko Kacin. 
Enlargement Strategy and Main Challenges 2010-2011 (COM(2010) 660 of 9.11.2010). 

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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 EU agreed to implement the Interim Agreement on trade and trade-related 
matters  as  soon  as  the  Council  decided  that  Serbia  was  fully  cooperating  with  the 
International  Criminal  Tribunal  for  the  former  Yugoslavia  (ICTY).  Serbia  started  on  1 
January 2009 to implement the Interim Agreement. Following ICTY Prosecutor Brammertz’s 
report  to  the  UNSC  in  December,  the  Council  decided  to  start  implementing  the  Interim 
Agreement.  The  Interim  Agreement  entered  into  force  on  1  February  2010.  At  the  14  June 
2010  Foreign  Affairs  Council,  Ministers  agreed  to  submit  the  Stabilisation  and  Association 
Agreement to their parliaments for ratification and took note that Serbia had applied for EU 
membership on 22 December 2009. 

The  EU  is  providing  guidance  to  the  Serbian  authorities  on  reform  priorities  as  part  of  the 
European  Partnership.  The  Serbian  government  has  continued  to  implement  a  national 
programme  for  integration  into  the  EU  and  has  used  quarterly  reporting  as  a  monitoring 
mechanism. Progress made on reform priorities as part of the European integration process is 
encouraged and monitored by the Interim Committee and its structure of sub-committees and 
the Enhanced Permanent Dialogue (EPD). An EPD plenary meeting was held in July 2010. 
Several sub-EPD meetings took place during the reporting period, covering all sectors of the 
SAA that are not included in the Interim Agreement, such as energy, the environment, social 
policy,  justice,  freedom  and  security.  A  political  dialogue  at  ministerial  level  took  place  in 
Brussels  in  January  2010.  Economic  dialogue  took  place  in  a  bilateral  meeting  with  the 
Commission  and  Serbian  senior  officials  in  November  2009.  Moreover,  the  multilateral 
economic  dialogue  between  the  Commission,  EU  Member  States  and  potential  candidate 
countries  in  the  context  of  the  pre-accession  fiscal  surveillance  took  place  in  an  expert 
meeting in June 2010. 

The  first  meeting  of  the  Interim  Committee  took  place  in  March  2010  in  Belgrade. 
Subsequently,  a  number  of  sub-committees  also  met,  including  on  the  internal  market, 
competition,  transit  traffic,  trade,  customs,  taxation,  agriculture  and  fisheries.  Serbia  has 
continued to build a positive track record in implementing the Interim Agreement. 

Visa  liberalisation  for  Serbian  citizens  travelling  to  the  Schengen  area  was  granted  by  the 
Council, after consultation with the European Parliament, as of 19 December 2009. It applies 
to holders of biometric passports travelling to the Schengen area. This decision was based on 
substantial progress in the areas of justice, freedom and security and fulfilment of the specific 
conditions set out in the roadmap for visa liberalisation. 

As a potential candidate for EU membership, Serbia aligned itself with 51 CFSP declarations 
out of a total of 74 relevant declarations adopted by the EU during the reporting period (69%).  

Serbia  receives  pre-accession  financial  assistance  under  the  Instrument  for  Pre-accession 
Assistance  (IPA).  IPA  is  implemented  by  the  EU  Delegation  in  Belgrade.  A  decentralised 
implementation  system  (DIS)  for  managing  aid  remains  a  short-term  objective  for  Serbia. 
Under  the  adopted  roadmap,  management  units  in  line  ministries  have  been  established. 
Preparation  for  DIS  has  continued  at  a  slow  pace.  However,  further  extensive  efforts 
including on staff, are necessary in order to put Serbia in a position to take over responsibility 

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for  implementation  of  all  IPA  components  and  for  future  management  of  Structural  and 
Cohesion Funds.  

Serbia’s national IPA allocation for 2010 totalled €197.9 million. Financial assistance focuses 
on  areas  such  as  strengthening  the  rule  of  law,  human  rights,  education,  transport  and 
environmental  protection.  Serbia  participates  in  the  IPA  multi-beneficiary  programmes 
including  in  an  IPA  crisis  response  package  developed  in  2008.  The  package  is  fully 
operational  in  2010.  Serbia  has  continued  to  take  part  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. The first €50 million 
instalment  under  the  IPA  2009  budget  support  initiative  was  disbursed  in  December  2009. 
The purpose of the budgetary support is to ease the social and economic consequences of the 
current economic downturn in Serbia, and help Serbia to pursue the pace of EU integration-
related  reforms.  An  Agreement  on  Macro  Financial  Assistance  was  signed  in  July  2010 
between the EU and Serbia.  

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

2. 

POLITICAL CRITERIA 

This  section  examines  progress  made  by  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 UN International Criminal Tribunal for 
the former Yugoslavia (ICTY).  

2.1. 

Democracy and the rule of law 

Constitution 

There has been some progress in implementing the November 2006 Constitution, which is a 
key priority of the European Partnership. In November 2009 the Serbian parliament adopted a 
Decision endorsing the draft Statute of Vojvodina, and the law determining the competencies 
of  Vojvodina.  The  Statute  was  proclaimed  in  the  Provincial  Assembly  of  Vojvodina  in 
December  2009  and  came  into  force  in  January  2010.  However,  as  regards  Vojvodina,  the 
laws  on  public  property  and  on  its  own  resources  required  by  the  Constitution  have  not  yet 
been adopted. This impedes the effective exercise of the new competencies.  

Overall, implementation of the new constitutional framework is well advanced. However, the 
laws regulating public property and Vojvodina’s own resources are still to be adopted.  

Parliament  

In  February  2010,  parliament  adopted  the  Law  on  the  National  Assembly,  required  by  the 
Constitution.  The  law  establishes  parliamentary  budgetary  autonomy  through  a  separate 
budget as opposed to the previous practice of government-decided allocations. It also provides 
for procedural innovations, in particular the establishment of a parliamentary collegium which 
formalises the earlier ad hoc practice of consultations between the Speaker and the heads of 
political groups in the parliament. New parliamentary rules of procedure were also adopted. 

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The new rules of procedure consolidate the existing instruments of control over the executive 
and  further  clarify  the  legislative  procedures.  However,  some  provisions  related  to 
parliament's  relations  with  other  state  bodies  and  institutions  have  been  criticised  by  the 
Ombudsman and by the Commissioner for Free Access to Public Information as an attempt to 
interfere on the functioning of the independent regulatory bodies.  

The current legislature has continued to be active in adopting legislation. However, the quality 
of the legislative output has been affected by the practice of lawmaking by urgent procedure. 
This  continued  to  be  used  frequently  and  for  major  systemic  pieces  of  legislation.  Public 
consultation on content and impact of draft laws has remained insufficient.  

The new rules of procedure provide for a reduction of the number of standing parliamentary 
committees  from  30  to  19.  However,  this  provision  remains  to  enter  into  force  for  the  next 
legislature. The functioning of the committees remains largely reactive and their effectiveness 
varies  significantly.  There  is  a  lack  of  adequate  expert  and  support  staff  to  assist  the 
committees.  Parliament  has  continued  with  regular  hearings  of  the  government.  However 
these  remain  formalistic  rather  than  substantive  in  nature.  Inflammatory  and  offensive 
language has continued, with sanctions being applied in some cases.  

The electoral framework legislation has been partially revised. Parliament adopted the law on 
the  single  voter  register  in  December  2009.  This  legislation  regulates  in  a  coherent  and 
consolidated  way  the  establishment  and  management  of  the  permanent  central  register  of 
voters,  including  Serbian  citizens  residing  abroad.  The  register  will  take  the  form  of  an 
electronic  database  managed  by  the  Ministry  for  Public  Administration  and  Local  Self-
Government.  However,  the  Law  on  the  State  Electoral  Commission  has  not  been  adopted. 
Constitutional  and  legal  provisions  which  do  not  meet  European  standards  remain  in  force. 
These  relate  to  political  party  control  over  the  mandates  of  the  MPs  and  parties'  ability  to 
arbitrarily appoint MPs instead of following the order of candidates from electoral lists.  

Overall,  further  steps  were  taken  to  improve  the  functioning  of  parliament  through  the 
adoption  of  a  new  Law  on  the  National  Assembly  and  new  rules  of  procedure.  However, 
efforts  are  necessary  to  further  improve  the  quality  of  the  legislative  output.  The  electoral 
framework legislation needs to be brought fully into line with European standards.  

Government 

The government remained stable and continued to demonstrate a high degree of consensus on 
EU integration as a strategic priority. The government continued to implement provisions of 
the  Interim  Agreement  of  the  SAA  in  line  with  the  agreed  liberalisation  schedule  and  took 
additional  measures  in  the  areas  of  competition  and  state  aid.  The  European  Integration 
Council, chaired by the Prime Minister and involving civil society representatives, met once, 
giving its full political support to government European integration efforts.  

The government adopted a Decision, in January 2010, activating the Coordinating Body for 
accession to the EU chaired by the Prime Minister. The Coordinating Body met once during 
the reporting period. The Serbian European Integration Office has continued to function well 
and was exempted from the overall cuts in numbers of employees.  

The  government  has  been  drafting  a  number  of  bills  aimed  at  further  alignment  of  national 
legislation with European standards. However, the quality of the legislation was uneven and 
continued to be affected by inadequate impact assessment of proposed acts. The government 

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lacks  coherent  rules  and  practices  for  public  consultations.  Effective  implementation  and 
monitoring of the adopted legislation still need to be improved. 

There  was  no  public  condemnation  from  the  government  in  reaction  to  repeated  threats 
against  the  State  Secretary  for  Human  and  Minority  Rights  for  his  defence  of  rights  of 
vulnerable groups.  

Ministries abided  to a varying degree by the opinions and recommendations of independent 
regulatory bodies, including the State Audit Institution.  

As  regards  local  self-government,  decentralisation  has  continued  and  a  number  of 
competencies  have  been  transferred  to  the  local  level.  However,  this  was  done  without 
ensuring  sufficient  capacity  and  resources  at  local  level.  There  has  been  insufficient 
consultation with local authorities in the decision-making process relating to the development 
of  new  legislation  or  amendments  to  existing  laws  that  have  implications  at  the  local  level. 
The law required by the Constitution to restore public property at municipal level has not been 
adopted. In April 2010, the Constitutional Court ruled that the provisions of the law on local 
elections  establishing  blank  resignations  and  allowing  political  parties  to  arbitrarily  allocate 
seats are not in line with the Constitution. 

Overall,  the  government  continued  to  be  stable,  and  the  consensus  on  strategic  priorities, 
including EU integration, was maintained. However, both the preparation and implementation 
of new legislation need to become more effective.  

Public administration 

There has been some progress in public administration reform.  

The  law  on  administrative  disputes,  which  regulates  judicial  scrutiny  of  administrative  acts 
and  the  work  of  the  Administrative  Court,  was  adopted  in  December  2009.  As  part  of  an 
arrangement  with  the  International  Monetary  Fund  (IMF)  to  reduce  the  fiscal  deficit,  a  law 
was adopted on reducing the number of employees in the administration by 10%. The overall 
level of staff effectively employed in the field of European integration has been maintained. 
Changes to the law on civil servants from December 2009 introduced quarterly appraisal of 
the  work  of  civil  servants  instead  of  an  annual  appraisal.  The  Law  on  Ratification  of  the 
Agreement  Establishing  the  Regional  School  of  Public  Administration  was  adopted  in  June 
2010.  

However,  the  legislative  framework  remains  incomplete.  The  law  on  administrative 
procedures has not been adopted yet. The law on administrative disputes is not fully in line 
with European standards. Further efforts are needed to introduce a merit-based career system 
and  effective  human  resources  management.  The  capacity  of  the  public  administration  in 
certain sectors is weak and coordination is not fully ensured. In view of an intensification of 
the EU integration process in the coming years, Serbia needs to further strengthen capacity on 
EU  integration,  in  particular  the  central  coordination  between  the  General  Secretariat,  the 
Serbian EU Integration Office and in Ministry of Finance.  

The various Ombudsman’s Offices at both state and provincial level were very active. They 
reported an increase in the numbers of complaints, showing increased trust in the institution. 
In addition to dealing with individual cases, they proposed amendments to legislation, issued 
a  number  of  opinions  and  recommendations,  visited  various  institutions  and  organised 

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activities  aimed  at  promoting  and  protecting  human  and  minority  rights.  Cooperation  with 
local ombudsman’s offices was also enhanced. In June 2010, the state Ombudsman opened a 
local  field  office  in  Southern  Serbia.  In  Vojvodina,  the  Ombudsman  and  his  two  deputies 
were  elected  but  the  Vojvodina  Ombudsman  passed  away  in  July  and  a  new  one  was 
appointed in October 2010.  

The  Office  of  the  Commissioner  for  Information  of  Public  Importance  and  Personal  Data 
Protection has stepped up its activities. Changes to the law on free access to information of 
public  importance  as  of  May  2010  introduced  a  mechanism  for  the  enforcement  of  the 
Commissioner’s  decisions.  They  empower  the  Commissioner  to  impose  fines  on  persons 
responsible  for  breaches  of  the  law.  However, the  office  still  lacks  permanent  premises  and 
suffers from staff shortages. 

Concerning other independent regulatory institutions, the State Audit Institution has expanded 
in terms of both staff and office space. However, it has only performed a partial audit of the 
2008 state accounts. The Competition Protection Commission, the Public Procurement Office 
and the Commission for the Protection of Bidders’ Rights had difficulties in carrying out their 
duties  owing  to  lack  of  resources  and,  in  some  cases,  delays  in  the  implementation  of  the 
relevant legislation.  

Overall, the capacity of the public administration is good but reform in this area is advancing 
at a slow and uneven pace. Further improvement of the legislative framework and a stronger 
commitment to respect the mandate of independent regulatory bodies and provide them with 
adequate resources are needed.  

Civilian oversight of the security forces  

Parliament adopted six new legal acts in October 2009, completing the legislative framework 
for defence reform. These comprised the national security strategy, the defence strategy, the 
law regulating the military intelligence and military security agencies, the law on the military, 
labour and material obligations, the law on civilian service and the law on the use of the army 
and  other  defence  forces  in  multinational  operations  outside  Serbia.  The  law  on  civilian 
service replaced the previous government decree and regulated the constitutionally guaranteed 
right  to  conscientious  objection.  This  also  fulfilled  one  of  Serbia’s  obligations  under  its 
Council of Europe post-accession commitments. A section for cooperation with the EU was 
established in 2010 as part of the overall restructuring of the Ministry of Defence.  

Parliamentary oversight of the security forces remains weak, however, as the legislature is not 
proactive  and  lacks  capacity.  The  head  of  the  parliamentary  committee  for  security  and 
defence was dismissed in March 2010 on abuse of office grounds. The committee has limited 
resources  to  deal  with  its  wide  scope  of  work,  which  covers  internal  affairs,  defence  and 
security. 

The State Ombudsman carried out the first inspection of the state security agency in February 
2010 to review the legality of measures with implications for human and minority rights. The 
overall  assessment  was  that,  in  performing  its  functions  that  have  an  impact  on  human  and 
minority rights, the agency abides by the legal order. 

Overall, there was further progress towards completing the legislation providing for civilian 
oversight  of  security  forces  and  implementing  constitutionally  guaranteed  rights.  However, 

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civilian  oversight,  including  the  work  of  the  relevant  parliamentary  committee,  needs  to  be 
reinforced.  

Judicial system  

Serbia  made  little  progress  towards  further  bringing  its  judicial  system  into  line  with 
European standards, which is a key priority of the European Partnership.  

The  Law  on  the  Judicial  Academy  was  adopted  in  December  2009  and  the  Academy 
established  as  the  body  responsible  for  the  vocational  training  and  continued  professional 
development  of  judges,  prosecutors  and  judicial  staff.  New  Court  Rules  of  Procedure  were 
adopted in December 2009. They regulate the work of courts and the internal organisation of 
the new court network. A new Law on Expert Witnesses was adopted in June 2010. 

The reappointment procedure for all judges and prosecutors was carried out under the lead of 
the  Ministry  of  Justice  in  the  second  half  of  2009  and  took  effect  as  of  January  2010.  The 
overall  number  of  judges  and  prosecutors  was  reduced  by  20–25%.  More  than  800  judges 
were not reappointed, out of previously around 3.000 judges and misdemeanour judges.  

A  new  structure  of  the  court  network  was  implemented  as  of  January  2010.  The  138 
municipal courts were reorganised into 34 basic courts. In addition, there are 26 higher courts, 
4 courts of appeal and the Supreme Court of Cassation. The organisation of the prosecution 
service  was  changed  accordingly.  The  service  was  divided  into  basic,  higher  and  appellate 
prosecution  offices.  Special  departments  exist  for  war  crimes  and  for  organised  crime.  The 
new Administrative Court became operational in January 2010. In July 2010, the appointment 
of members of the Constitutional Court was completed.  

However,  major  aspects  of  the  recent  reforms  are  a  matter  of  serious  concern.  The 
reappointment procedure for judges and prosecutors was carried out in a non-transparent way, 
putting at risk the principle of the independence of the judiciary. The bodies responsible for 
this  exercise,  the  High  Judicial  Council  and  the  State  Prosecutorial  Council,  acted  in  a 
transitory composition, which neglected adequate representation of the profession and created 
a high risk of political influence. In addition, not all members had been appointed to either of 
the  councils.  Objective  criteria  for  reappointment,  which  had  been  developed  in  close 
cooperation with the Council of Europe’s Venice Commission, were not applied. Judges and 
prosecutors were not heard during the procedure and did not receive adequate explanations for 
the  decisions.  First-time  candidates  (876  judges  and  88  deputy  prosecutors)  were  appointed 
without conducting interviews or applying merit-based criteria. The overall number of judges 
and prosecutors was not calculated in a reliable way and adjusted several times after the re-
appointment had already been carried out. The right to appeal for non re-appointed judges was 
limited  to  recourse  to  the  Constitutional  Court,  which  does  not  have  the  capacity  to  fully 
review the decisions. Out of more than 1,500 appeals, only one case has been dealt with. In 
this case, the Constitutional Court, for procedural reasons, annulled the initial decision.  

The  High  Judicial  Council  and  the  State  Prosecutorial  Council  have  not  yet  been  elected  in 
their permanent composition. New court presidents have not been appointed. The respective 
legal deadlines expired in July and March 2010. The planned new Criminal Procedure Code, 
the new Civil Procedure Code, the law on enforcement of judgments and the law on notaries 
have not been adopted.  

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The  large  backlog  of  pending  cases  remains  a  matter  of  concern,  in  particular  as  the  recent 
reforms impacted negatively on the overall efficiency of the judicial system. The reduction of 
the number of judges and prosecutors was not based on a proper needs assessment. Under the 
new court system, courts which were closed continue to function as court units, in which civil 
cases are heard. This means that judges and judicial staff have to travel between courts and 
court units requiring significant resources and creating security concerns. A uniform system 
for organising the  work  of  the court seats and the new court units has not been established. 
Case registration and the IT system connecting all courts and court units and allowing access 
to files are not fully operational.  

The Constitutional court faces a backlog of some 7,000 pending cases, including the appeals 
filed by judges and prosecutors who have not been reappointed. The setting up of the Judicial 
Academy still is at an early stage and vocational trainings have not yet started.  

Progress on domestic cases of war crimes continued to be slow. There are 20 ongoing court 
cases and investigations against 103 individuals.  

Overall, Serbia’s judicial system only partially meets its priorities. There are serious concerns 
over the way recent reforms were implemented, in particular the reappointment of judges and 
prosecutors.  

Anti-corruption policy  

Serbia made some progress in the fight against corruption. Implementation of the outstanding 
GRECO  recommendations  of  June  2006  continued.  Amendments  to  the  Law  on  Civil 
Servants  and  the  Law  on  Free  Access  to  Information  introduced  the  obligation  for  civil 
servants to report corruption and provided a certain protection from retaliatory measures. Also 
the access to information was improved. As regards the processing of corruption cases, there 
is good cooperation between the police and the state prosecution. 

The  new  Anti-Corruption  Agency  started  its  work  in  January  2010.  It  is  competent  for 
preventive measures and the supervision of conflict of interest cases and funding of political 
parties.  It  received  asset  declarations  from  around  16,000  of  the  18,000  officials  who  were 
required to submit such a declaration. The Agency maintains an asset register on its website. 
In  March  2010,  the  Agency  issued  rules  on  the  content  of  records  and  financial  reports  of 
political  parties.  It  maintained  the  earlier  deadline  of  15  April  for  parties  to  submit  their 
annual reports and all parliamentary parties abided by the deadline. 

The Anti-Corruption Council continued its advisory activities and raised public awareness of 
several high-profile cases.  

However, implementation of the Action Plan was slow. There has been little progress in the 
investigation  and  prosecution  of  corruption  cases,  with  the  number  of  final  convictions 
remaining low, in particular in high level cases. 

The  Anti-Corruption  Agency  is  not  yet  fully  staffed  and  lacks  permanent  premises  and 
technical equipment. It still has to establish a track record of its capability to efficiently assess 
the correctness and completeness of asset declarations of public officials. In this respect, the 
Agency has little competencies on its own and remains dependent on the cooperation of other 
state bodies and the effectiveness of law enforcement authorities.  

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New legislation rendering the financing of political parties more transparent and providing for 
better control of expenditure has not yet been adopted. The existing legislation has significant 
shortcomings and does not provide the Anti-Corruption Agency with sufficient investigative 
and  sanctioning  powers  to  monitor  party  funding  effectively,  in  particular  during  election 
campaigns.  

Following efforts by the Anti-Corruption Agency to enforce the ban for officials to hold more 
than  one  public  function,  the  relevant  law  was  changed  in  July  2010  to  partly  suspend  this 
ban.  This  raises  concerns  over  the  respect  for  decisions  of  the  Agency  and  political  will  to 
support  its  work.  The  constitutionality  of  this  suspension  is  subject  to  a  case  in  the 
Constitutional Court.  

Public procurement, privatisation procedures and public expenditure continue to be areas of 
serious  concern,  as  independent  supervision  is  not  yet  ensured.  The  setting  up  of  the  State 
Audit Institution remains slow and the first audit report produced covered only a small part of 
the  state  budget.  Effective  legal  protection  of  whistleblowers  is  still  missing,  despite  the 
newly introduced reporting obligation for civil servants. Protection is only applicable in cases 
where whistleblowers disclose information that is not classified. There is a lack of practical 
guidance on protective measures. Corruption within the police remains a matter of concern. 

Overall, the institutional  framework to fight corruption  is in  place  with  the  Anti-Corruption 
Agency  starting  its  work  in  January  2010.  However,  corruption  remains  prevalent  in  many 
areas  and  continues  to  be  a  serious  problem.  The  legislative  framework  still  shows 
shortcomings,  in  particular  with  regard  to  supervision  of  political  party  funding  and  the 
protection  of  whistleblowers.  The  Anti-Corruption  Agency  needs  to  be  strengthened. 
Implementation  of  existing  laws  needs  to  be  improved.  Further  efforts  are  needed  to  better 
process corruption cases, from investigation to final convictions.  

2.2. 

Human rights and the protection of minorities 

Observance of international human rights law 

Concerning  the  ratification  of  human  rights  instruments,  Serbia  has  signed  and  ratified  all 
significant international instruments.  

The European Court of Human Rights (ECtHR) delivered since October 2009 45 judgments 
finding that Serbia had violated the European Convention for the Protection of Human Rights 
and Fundamental Freedoms (ECHR). Over the same period, a total of 1364 new applications 
were made to the ECtHR. The largest number of judgments refers to the violation of the right 
to a fair trial due to the length of the procedure. As of September 2010, there were over 3,000 
eligible cases pending before the ECtHR regarding Serbia.  

There  has  been  some  progress  in  the  promotion  and  enforcement  of  human  rights.  Several 
state bodies contributed to awareness-raising on human rights by organising various activities 
addressing  issues  relating  to  different  human  and  minority  rights.  The  Judicial  Academy 
provided regular training on human rights standards for relevant professionals such as police 
officers,  judges  and  prosecutors.  However,  the  enforcement  of  the  relevant  ratified 
international agreements needs to improve. The State Secretary for human rights resigned in 
September 2010. 

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Overall, the legal framework for human rights protection is in place and generally respected. 
However,  further  efforts  in  education  on  international  human  rights  standards  and  their 
implementation are needed.  

Civil and political rights 

There has been little progress in further improving the prevention of torture, ill-treatment and 
the fight against impunity. Police detention procedures are still of great concern, as well as the 
lack of internal and independent external oversight mechanism.  

Additional  efforts  aimed  at preventing  any  further  cases  of  torture  and  ill-treatment  are 
needed.  The  Deputy  Ombudsman  in  charge  of  the  protection  of  persons  deprived of  their 
liberty is operational but still not fully effective. 

The obligation to establish a National Preventive Mechanism in accordance with the Optional 
Protocol to the Convention against torture and other cruel, inhuman and degrading treatment 
or punishment, has not yet been fulfilled. 

The parliamentary commission provided for by the law on enforcement of criminal sanctions 
of 2006 has not yet been set up. 

Access to justice is generally ensured, but there has been no further progress as legislation and 
funding for a more effective system of free legal aid is still missing.  

Serbia  made  little  progress  in  the  reform  of  its  prison  system.  A  strategy  to  prevent 
overcrowding was adopted in July 2010. In order to address drug abuse, five ‘drug-free’ units 
were  established.  Efforts  to  provide  training  and  adequate  medical  services  to  prisoners 
continued.  However,  poor  conditions  in  prisons  and  in  police  detention  facilities  are  of 
concern.  Prisons  remain  significantly  overcrowded  with  a  prison  population  of  over  11,000 
for  a  capacity  of  6,000  persons.  This  led  to  several  protests  and  riots  in  prisons  in  2010. 
Decisive action is needed to develop an efficient probation system and to introduce alternative 
sanctions  on  a  broader  scale.  The  availability  and  use  of  illicit  drugs  by  prisoners  and 
shortcomings in the provision of medical services remain of concern.  

The general constitutional and legal framework for the protection of freedom of expression is 
in place and generally respected. However, incidents involving death threats, attacks and hate 
speech,  in  particular  against  journalists,  have  continued.  The  response  of  the  police  and 
prosecution has improved. However, further efforts are needed to ensure adequate follow-up 
by the courts. There is still no progress in the investigation of the murders of journalists which 
took place during the 1990s and in 2001, and of the attempted murder of a journalist in 2007.  

The  legal  framework  generally  allows  the  media  to  operate  freely.  In  July  2010,  acting  on 
motions by the State Ombudsman and other organisations, the Constitutional Court ruled as 
unconstitutional several amendments to the Public Information Law, adopted in August 2009. 
The  Court  struck  down  the  provision  restricting  the  right  of  domestic  legal  persons  to 
establish  a  public  outlet,  as  well  as  the  provisions  which  introduced  heavy  fines  and  other 
penalties.  

Freedom  of  assembly  is  guaranteed  by  the  Constitution  and  in  general  respected.  Police 
response to acts of violence has improved. The acting state prosecutor filed a motion to the 
Ministry of the Interior to prohibit organised gatherings of extremist organisations of football 
fans following the murder of a French citizen in September 2009. The police took additional 

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measures to prevent sport-related incidents and some matches were closed to the public. The 
police  also  prevented  a  rally  by  members  and  supporters  of  a  neo-Nazi  group  in  December 
2009. The Belgrade Pride Parade took place in October 2010 thus representing a step forward 
in  promoting  constitutionally  guaranteed  fundamental  rights.  However,  violent  clashes 
occurred  between  the  police  and  rioters  protesting  against  the  Parade.  Rioters  also  targeted 
state institutions as well as ruling parties' premises. The response of the police was adequate 
and a large number of perpetrators were arrested.  

Freedom  of  association  is  guaranteed  by  the  Constitution  and  respected.  The  process  of  re-
registration of existing political organisations and registration of new ones was completed in 
January  2010.  72  parties  were  registered,  including  42  parties  representing  national 
minorities.  501  organisations  that  failed  to  abide  by  the  new  criteria  were  deleted  from  the 
register.  Motions  were  filed  by  the  state  prosecution  for  the  banning  of  two  extreme  right-
wing organisations. The Constitutional Court started to process a motion filed by the acting 
state prosecutor in October 2009 to ban 14 sports fans organisations. This was on the grounds 
that their activities sought to violently overthrowing the constitutional order, violated human 
and minority rights and were an incitement to racial, ethnic and religious hatred. 

Civil society organisations continued to be active in the social, economic and political life of 
Serbia  and  remain  important  in  promoting  democratic  values.  The  Office  for  Cooperation 
with Civil Society was established by the government in April 2010. However, the Office is 
still not operational and cooperation between state authorities and civil society is still uneven. 
Legislation  implementing  the  law  on  citizen’s  associations  to  prevent  possible  abuses 
regarding  financing  from  the  state  budget  is  not  yet  adopted.  Human  rights  defenders 
continued to be subject to harassment, verbal threats and physical attacks.  

Constitutional  guarantees  providing  for  freedom  of  religion  are  in  place  and  generally 
respected. In practice, the inter-faith situation has improved and fewer religiously motivated 
incidents  were  recorded.  In  February  2010,  the  long  outstanding  case  concerning  Jehovah’s 
witnesses was settled and this organisation was registered. However, the 2009 annual report 
of the State Ombudsman identified an insufficient level of transparency and consistency in the 
registration  process  as  the  main  obstacle  to  some  smaller  religious  groups  exercising  their 
rights. Several cases, including the outstanding case of the Montenegrin Orthodox Church, are 
pending before the courts.  

Overall,  the  constitutional  framework  providing  for  respect  for  civil  and  political  rights  is 
largely  in  place.  However,  full  implementation  and  enforcement  remain  to  be  ensured. 
Relevant  legislation  remains  to  be  brought  more  closely  into  line  with  European  standards. 
Further action by the authorities in combating violence of all types is needed.  

Economic and social rights 

There has been some progress on economic and social rights.  

Concerning  women's  rights,  the  law  on  gender  equality,  aimed  at  improving  the  position  of 
women, was adopted in December 2009. Different projects and activities were carried out by 
Vojvodina provincial bodies and NGOs with a view to implementing Vojvodina’s strategy for 
protection against domestic violence and other forms of gender-based violence. However, the 
action plan for the implementation of the National Strategy to improve the position of women 
and  promote  gender  equality  is  still  pending.  In  practice,  women  remain  discriminated 
against, particularly in the labour market. Those facing the most discrimination are disabled 

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women,  single  mothers,  older  women  and  those  living  in  rural  areas.  There  has  been  an 
increase  in  domestic  violence.  This  situation  remains  insufficiently  reported  and  the 
institutions  responsible  often  fail  to  respond  adequately  to  gender-based  violence.  The  rules 
on legal protection of women during court proceedings are not sufficiently applied in practice.  

In  relation  to  children’s  rights  there  has  been  progress  in  strengthening  the  system  for 
protecting children suffering from abuse and negligence. In May, the Ministry of Education 
adopted  rules  of  procedure  on  violence  in  educational  institutions  aimed  at  replacing  the 
separate  protocols existing  signed on  this  issue with  relevant  ministries.  Various  training 
programmes  were  implemented.  Some  aim  at  police  officers,  others  at  raising  awareness 
among  pupils  in  elementary  schools.  Two  new  shelters  for  street  children  were  opened  in 
Novi  Sad  and  Nis.  The  parliamentary  working  group  for  children’s  rights,  established  last 
year with the aim of enhancing the role of parliament in improving the position of children, 
continues its activities. It regularly assesses all legislation, reports and other documents that 
affect children’s rights. 

However, in practice, there is a lack of follow up by state bodies of the requests for protection 
of  pupils’  rights  in  educational  institutions.  The  rate  of  school  attendance,  particularly  by 
Roma girls, is still of concern. There has been some progress towards inclusive education, but 
implementing legislation remains to be adopted. Amendments to the Family Law prohibiting 
corporal punishment are still pending. The revision of the national action plan for children, to 
include the protection of children from pornography and other forms  of exploitation, is still 
awaited.  Violence  against  children  continues  to  be  of  great  concern.  Different  measures 
available  for  the  protection  of  children  during  court  proceedings  are  not  sufficiently 
implemented.  

As  regards  socially  vulnerable  persons  and  persons  with  disabilities,  the  law  on  vocational 
rehabilitation  and  employment  of  disabled  persons  entered  into  force  in  May  2010.  The 
process of de-institutionalisation for parentless children has continued. Initiatives have been 
taken  to  prevent  institutionalisation,  for  example  by  promoting  day  care  centres.  However, 
both capacity and resources need to be strengthened. 

In the area of labour rights and trade unions, the general agreement with the trade unions and 
the  employers’  associations  continues  to  be  suspended  due  to  the  economic  crisis.  In  the 
private  sector,  the  number  of  employees  not  receiving  full  wages  or  not  having  social 
contributions  regularly  paid  has  been  increasing.  Social  dialogue  remains  weak  and 
consultation of social partners irregular. The Economic and Social Council is still not playing 
an  active  role  in  strengthening  the  social  dialogue  and  remains  rather  marginalised,  also 
including in the consultation process for legislation falling under its remit. Local councils still 
exist only in a small number of municipalities, and their role remains marginal. 

The  legislative  framework  prohibiting  any  kind  of  discrimination  and  establishing  a 
mechanism  for  protection  against  discrimination  is  in  place.  The  equality  protection 
commissioner  mandated  to  ensure  full  implementation  of  the  law  on  the  prohibition  of 
discrimination  was  elected  by  parliament  in  May  2010  but  is  not  fully  operational  yet.  In 
practice,  discrimination  continues,  particularly  against  the  Roma,  the  LGBT  community, 
women,  national  minorities,  and  persons  with  disabilities.  These  groups,  but  also  human 
rights  defenders  and  journalists,  are  exposed  to  hate  speech  and  threats  that  are  rarely 
followed up by the authorities.  

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With regard to property rights, the implementation of the law regulating private ownership of 
urban construction land adopted in September 2009 has been slow and inefficient. There has 
been little conversion of the right of usage into ownership of construction land. The issue of 
ownership over land acquired through the privatisation process has not been solved. The legal 
situation in this respect remains unclear. The announced legislation on restitution has not yet 
been adopted.  

Overall,  the  legal  framework  for  the  protection  of  social  and  economic  rights  is  broadly  in 
place. However, the protection of women and children against all forms of violence needs to 
be  ensured.  Further  measures  fighting  all  kinds  of  discrimination  remain  to  be  introduced. 
Further efforts are required to clarify property rights.  

Respect for and protection of minorities, cultural rights 

Good progress has been made in the protection of minorities. The first direct elections for the 
National Minority Councils were held on 6 June 2010. The Councils have to be consulted on 
legislation  relating  to  minority  languages,  education,  culture  and  media.  Councils  were 
elected for 19 national minorities. Four national minorities formed and elected their councils 
for the first time. Both the number of registered voters and the turnout were relatively high. 
Elections were assessed by the OSCE as meeting international standards. Some irregularities 
and  difficulties  were  reported,  including  during  the  registration  process,  although  these  did 
not  significantly  affect  the  overall  results  of  the  elections.  The  Councils  are  yet  to  become 
operational. Difficulties were experienced in the formation of the Bosniak National Minority 
Council which remains to be formally constituted.  

In  October  2009,  the  Republican  Council  for  National  Minorities  held  a  session,  due  to  a 
change  in  its  composition.  However,  it  has  only  met  once.  Information  and  education  in 
minority languages remains to be improved and the relevant legal framework clarified. This is 
particularly the case for the Bosniak, Bulgarian, Bunjevci and Vlach minorities.  

The inter-ethnic situation in Vojvodina continued to improve. The implementation of the new 
Statute  and  of  the  law  on  determination  of  competencies  is  ongoing.  The  adoption  of  new 
laws on public property and on provincial own resources is still pending. The overall number 
of  inter-ethnic  incidents  has  on  the  whole  been  decreasing.  The  provincial  authorities 
continued  organising  regional  youth  camps  to  promote  tolerance.  Regular  cooperation  and 
coordination has been established with the state authorities, in particular the Ministry of the 
Interior, and joint visits to vulnerable communities have been organised. Investigations by the 
police into inter-ethnic incidents has improved, as well as police sensitivity in treating them as 
ethnically motivated acts as opposed to the previous practice of classifying them as ordinary 
incidents. Their legal follow up has however been insufficient. The prosecution continued to 
dismiss  them  as  criminal  acts  and  referred  them  instead  to  misdemeanour  courts.  The  2009 
annual  report  of  the  Provincial  Ombudsman  noted  that  out  of  730  complaints  received,  25 
(3.42%) related to rights of national minorities.  

The situation in southern Serbia was on the whole stable but tense. In October 2009, bilingual 
branches  of  the  faculties  of  law  and  of  economics  were  opened  in  Medvedja.  The 
establishment of the task force intended to follow up the feasibility study on the development 
of higher education in Presevo and Bujanovac has been stalled.  No  sustainable solution  has 
been found yet to the issue of the recognition of diplomas issued by the University of Pristina. 
The Albanian National Minority Council was established following direct elections. Tensions 
between Albanian political parties preceded these elections. The Council is however not yet 

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fully  active,  since  the  parties  have  not  been  able  to  agree  on  distribution  of  posts.  Some 
parties continue with the boycott of the council. An agreement was signed on the inclusion of 
Serbs  in  the  local  government  in  Bujanovac.  A  decision  was  made  on  opening  additional 
vacancies  in  State  institutions,  which  will  allow  for  integration  of  Albanians  in  public 
administration. This decision remains to be implemented.  

Clashes  both  between  ethnic  groups  and  within  the  Muslim  community  in  Sandžak  have 
continued.  Tensions  persist  in  particular  between  the  two  existing  Islamic  organisations.  In 
September  2010,  incidents  occurred  in  Novi  Pazar  during  a  protest  over  a  land  dispute 
between  the  local  Islamic  organisation  and  the  municipal  authorities.  The  Bosniak  National 
Minority Council, which members have been elected in June 2010, is not yet registered and 
fully functional due to a number of open issues related to its constitution. 

There are approximately 83,000 refugees and 205,000 internally displaced persons (IDPs) in 
Serbia,  according  to  the  United  Nations  High  Commissioner  for  Refugees.  The  number  of 
collective centres has decreased. Changes were made to the law on refugees enabling refugees 
to  buy  out  their  apartments  when  these  had  been  built  from  donations.  The  programme  to 
support  municipalities  that  prepared  local  action  plans  for  the  improvement  of  the  status  of 
refugees  and  IDPs  who  opt  for  local  integration  has  continued.  An  additional  81 
municipalities  have  received  donations  for  the  implementation  of  their  plans.  However,  the 
situation  of  refugees  and  IDPs  remains  very  difficult.  Further  improvement  is  needed  to 
address the housing situation. Many refugees and IDPs are unemployed and live in poverty. 
The national strategy on refugees needs to be revised.  

There has been some improvement in the position of the Roma population. Some affirmative 
action measures have been undertaken in the education sector with the goal of enhancing the 
status  of  Roma.  Actions  aimed  at  raising  public  awareness  for  Roma  inclusion  have  been 
conducted  on  different  occasions  such  as  international  Roma  day.  Action  plans  for  the 
improvement  of  the  status  of  Roma  have  been  adopted  in  a  number  of  municipalities.  An 
additional  15  health  mediators  and  179  pedagogic  assistants  have  been  employed  during 
reporting period. 

However,  the  Roma  minority  continues  to  face  discrimination.  Most  Roma  people  live  in 
extreme poverty and illegal settlements. Problems with access to personal documents persist 
for  Roma  people  living  in  illegal  settlements  without  a  registered  address  or  who  are 
homeless.  A simplified  procedure  for  recognition  of  legal  subjectivity  and  subsequent 
registration  in  citizens’  registries  has  not  been  introduced  yet.  This  adversely  affects  the 
exercise of their social and economic rights. Relocation of illegal Roma settlements is often 
conducted  inadequately,  resulting  in  breaches  of  basic  human  rights.  The  Roma  population, 
especially  Roma  women,  are  discriminated  in  the  labour  market  and  only  5%  of  the  Roma 
population  have  a  permanent  job.  Roma  women  and  children  are  frequently  subject  to 
exploitation and family violence, which often passes unreported.  

Overall,  the  legal  framework  on  the  respect  for  and  protection  of  minorities  in  Serbia  is  in 
place.  The  National  Minority  Council  elections  were  on  the  whole  successfully  organised. 
Some improvements were recorded towards addressing the issue of the status of refugees and 
IDPs. However, the National Minority Councils are yet to become operational. The number of 
IDPs remains high and their situation critical. The majority of the Roma population lives in 
extreme  poverty  and  continues  to  face  discrimination  in  particular  as  regards  access  to 
education, social protection, health care, employment and adequate housing.  

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2.3. 

Regional issues and international obligations 

There  are  no  outstanding  issues  in  connection  with  Serbia’s  compliance  with  the 
Dayton/Paris  peace  agreement.  Serbia  has  demonstrated  a  constructive  approach  in 
connection with developments in Bosnia and Herzegovina.  

The  Prosecutor  of  the  International  Criminal  Tribunal  for  the  former  Yugoslavia  (ICTY) 
noted in his latest report to the UN Security Council that Serbia’s responses to the Office of 
the  Prosecutor’s  requests  for  access  to  documents,  archives  and  witnesses  have  been  timely 
and  adequate  and  that  no  requests  remain  outstanding.  He  also  stressed  the  professionalism 
and commitment  of the operational services  working  on  the  search  for  fugitives.  The  report 
however recommended that Serbia review the strategies employed to apprehend the remaining 
fugitives, Ratko Mladić  and  Goran  Hadžić. The need for an increase in Serbia's operational 
capacities and the adoption of a more rigorous and multi-disciplinary approach to arresting the 
fugitives was also highlighted by the ICTY report. Full cooperation with the ICTY remains an 
essential  condition  for  membership  of  the  EU,  in  line  with  the  Council  conclusions  of  25 
October 2010. 

The status of the former State Union Law on the freezing of assets of ICTY fugitives, which 
was adopted in  2006,  has  not  yet  been  clarified. In practice, the freezing of  assets has been 
implemented  on  the  basis  of  a  decision  made  in  2005  by  the  war  crimes  chamber  of  the 
Belgrade District Court. The legal basis for this decision was the Criminal Procedure Code.  

Good  cooperation  with  EULEX  has  been  established  in  relation  to  war  crimes  in  Kosovo3. 
The  investigative  capacity  of  the  police  in  war  crimes  was  hampered  by  the  lack  of  expert 
staff such as military analysts and intelligence officers. This adversely affected the quality of 
the work of relevant services. Problems of extradition and recognition of sentences with some 
countries of the region continued to exist.  

Serbia’s  policy  regarding  the  International  Criminal  Court  continues  to  be  in  line  with  the 
EU’s guiding principles and the EU Common Positions on the integrity of the Rome Statute. 

The Serbian government has continued to contest Kosovo’s declaration of independence. The 
case before the International Court of Justice (ICJ), initiated by Serbia, came to an end in July 
2010  with  the  issuing  of  an  advisory  opinion.  The  Court  concluded  that  the  declaration  of 
independence  of  Kosovo  adopted  on  17  February  2008  did  not  violate  general  international 
law  and  the  UN  Security  Council  Resolution  1244  (1999).  The  Serbian  parliament 
consequently  adopted  by  an  overwhelming  majority  a  decision  reiterating  Belgrade’s  policy 
of  non-recognition  of  Kosovo  and  supporting  the  government’s  initiative  to  have  the  issue 
referred  to  the  UN  General  Assembly.  Serbia  has  also  maintained  its  opposition  to  the 
participation  of  Kosovo  in  regional  meetings  and  initiatives  other  than  under  the  UNMIK 
umbrella.  

The  UN  General  Assembly  adopted  on  9  September  a  joint  resolution  tabled  by  Serbia  and 
co-sponsored by the EU as a follow-up to the ICJ advisory opinion on Kosovo. The resolution 
acknowledged  the  content  of  the  ICJ  advisory  opinion  and  welcomed  the  readiness  of  the 
European  Union  to  facilitate  a  process  of  dialogue  between  the  parties;  the  process  of 
dialogue  in  itself  would  be  a  factor  for  peace,  security  and  stability  in  the  region,  and  that 

3 

Under UNSCR 1244/99.  

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dialogue  would  be  to  promote  cooperation,  achieve  progress  on  the  path  to  the  European 
Union and improve the lives of the people.  

In  Kosovo,  Serbia  maintained  parallel  structures  and  organised  parallel  municipal  by-
elections. Serbia also discouraged Serb participation in the municipal elections organised by 
the Kosovo authorities in November 2009. Serbian officials visiting Kosovo continued to give 
prior notification to UNMIK and EULEX for the purpose of obtaining security escorts. Serbia 
failed to play a constructive role in the return of Kosovo Serb and Kosovo Albanian judges 
and  prosecutors  back  to  Mitrovica  District  Court,  which  remains  staffed  only  by  EULEX 
personnel. The Serbian government protested against the disconnection and dismantling of the 
Serbian mobile phone transmitters in Kosovo which had operated without a licence. 

The policy on Kosovo has also affected Serbia’s bilateral relations with its neighbours. The 
Serbian  government  still  does  not  accept  the  Kosovo  customs  stamps  notified  by  UNMIK, 
blocking Kosovo’s exports to Serbia and hampering transit of Kosovo goods for export to the 
EU by EU hauliers.  

In August 2010, a total of 14,631 persons were still missing as a result of the conflicts in the 
region. Of these, 10,402 cases were related to the conflict in Bosnia and Herzegovina; 2,392 
to the conflict in Croatia and 1,837 to the conflict in Kosovo according to figures provided by 
the Red Cross (ICRC). The process for solving these cases has been very slow. Solving these 
remaining cases within a reasonable time limit is essential for the reconciliation process. The 
working  group  set  up  between  Belgrade  and  Pristina  met  three  times  under  ICRC  auspices, 
but  progress  on  resolving  cases  has  slowed  because  of  the  lack  of  information  on  gravesite 
locations.  In  2010,  the  Serbian  Commission  for  Missing  Persons  received  for  the  first  time 
copies  of  documents  from  the  archives  of  the  Serbian  Ministry  of  Defence  in  response  to 
detailed  requests  for  information  submitted  by  the  ICRC  on  persons  who  went  missing  in 
Kosovo in 1998 and 1999. The Serbian Police also provided the ICRC-chaired working group 
with  new  information  from  its  own  archives.  The  Belgrade-Pristina  working  group  met  in 
May  2010  and  discussed  a  newly  discovered  location  on  the  territory  of  Serbia  that  is 
suspected  of  being  a  mass  grave.  The  Serbian  war  crimes  prosecution  proposed  opening  an 
investigation into this matter. The Commission on Missing Persons – a bilateral forum set-up 
between Belgrade and Zagreb to deal with the issue – meets only irregularly. 

Fresh  impetus  was  given  to  the  Sarajevo  declaration  process  following  the  Ministerial 
meeting held in Belgrade in March 2010, at Serbia’s initiative. This brought together Bosnia 
and  Herzegovina,  Croatia,  Montenegro  and  Serbia,  all  of  which  agreed  to  work  together  in 
order to clarify refugee statistics. The countries also committed themselves to work towards 
solutions  to  a  number  of  outstanding  issues  by  the  end  of  the  year.  However,  there  are  a 
number of difficult issues, in particular that of occupancy and tenancy rights, which still need 
to  be  tackled  with  the  objective  of  finding  mutually  acceptable  solutions.  The  Sarajevo 
Process was initially launched through the Sarajevo Declaration of January 31, 2005. Bosnia 
and  Herzegovina,  Croatia,  Montenegro  and  Serbia  cooperate  within  this  process  to  find 
solutions for refugees and other persons who were displaced as a result of the armed conflicts 
in ex-Yugoslavia between 1991 and 1995.  

Regional  cooperation  and  good  neighbourly  relations  form  an  essential  part  of  Serbia's 
process  of  moving  towards  the  European  Union.  The  Serbian  government  has  declared 
regional  cooperation  one  of  its  priorities.  Serbia  continued  to  be  an  active  participant  in 
regional  initiatives,  including  the  South  East  European  Cooperation  Process  (SEECP),  the 
Regional  Cooperation  Council  (RCC),  the  Central  European  Free  Trade  Area  Agreement 
(CEFTA),  the  Energy  Community  Treaty  (ECT)  and  the  European  Common  Aviation  Area 

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Agreement  (ECAAA).  Serbia  participated  in  the  technical  negotiations  for  the  Transport 
Community  Treaty,  the  signing  of  which  has  been  delayed  over  differing  positions  on 
Kosovo.  Serbia  held  the  Chairmanship  of  CEFTA  in  2010.  Serbia  has  been  actively 
participating in the preparations for the forthcoming Danube Strategy. Serbia participated in 
the  EU-Western  Balkans  High-Level  Meeting  that  took  place  in  June  2010  in  Sarajevo. 
However,  regional  cooperation  was  affected  by  a  lack  of  agreement  between  Serbia  and 
Kosovo  on  the  latter's  participation  in  various  regional  meetings.  An  acceptable  and 
sustainable solution for the participation of both Serbia and Kosovo in regional fora needs to 
be  agreed  as  soon  as  possible.  This  is  essential  for  inclusive  and  functioning  regional 
cooperation. 

Trilateral meetings took place in 2009 between Turkey, Serbia and Bosnia and Herzegovina. 
In  April  2010,  the  heads  of  state  of  Serbia  and  Turkey,  and  the  Chair  of  the  Presidency  of 
Bosnia  and  Herzegovina  signed  a  Declaration  in  Istanbul  endorsing  the  territorial  integrity, 
sovereignty and legal personality of Bosnia and Herzegovina. 

President Tadić, together with the Chair of the Presidency of Bosnia and Herzegovina and the 
Presidents of Croatia and Montenegro, attended the May 2010 summit of the Igman Initiative 
in Sarajevo. This year marked the 10th anniversary of this initiative involving more than 140 
NGOs  from  the  region  which  is  aimed  at  promoting  and  facilitating  local  and  regional 
cooperation.  

Bilateral  relations  with  other  enlargement  countries  developed  further.  Judicial  cooperation 
in penal matters has improved between Bosnia and Herzegovina, Croatia and Serbia. Serbia 
signed  an  agreement  with  Bosnia  and  Herzegovina  in  February  on  mutual  recognition  and 
enforcement  of  court  rulings  in  criminal  matters.  The  new  agreements  introduce  the 
possibility  of  forced  transfers  of  convicted  persons  to  serve  imprisonment.  The  convicted 
person could, according to the previous agreements, not be transferred from a country where 
he had a citizenship without giving his consent. The new bilateral agreements put an end to 
this possibility to escape imprisonment, in particular for persons with dual nationality. 

There was good progress in relations with Albania. In March 2010, the Albanian Minister of 
Foreign Affairs visited Belgrade for the first visit of this kind in five years. On this occasion, 
an  agreement  on  cooperation  in  fighting  organised  crime,  international  drug  trafficking  and 
international  terrorism  was  signed.  As  a  follow-up  to  this  visit,  in  April  2010  Albania 
abolished visas for Serbian citizens.  

Relations  with  Bosnia  and  Herzegovina  have  improved.  The  Serbian  parliament  adopted  in 
March  2010  a  Declaration  condemning  the  crime  in  Srebrenica  and  referring  to  the 
International  Court  of  Justice  ruling  on  Srebrenica.  The  preamble  to  this  Declaration  also 
restates  the  commitment  to  respect  the  territorial  integrity  and  sovereignty  of  Bosnia  and 
Herzegovina.  President  Tadić  attended  in  July  2010  the  Srebrenica  commemoration.  The 
Speaker  of  the  Bosnia  and  Herzegovina  House  of  Peoples  met  the  President  of  Serbia  in 
Belgrade in June. A new ambassador from Bosnia and Herzegovina was accredited after the 
post  had  been  vacant  for  three  years.  In  March  2010  the  Serbian  parliament  ratified  the 
agreement on determination of border crossings with Bosnia and Herzegovina. The Inter-State 
Cooperation Council for the border between the two countries met in May 2010 for the first 
time  after  four  years.  The  Economic  Cooperation  Agreement  between  Bosnia  and 
Herzegovina and Serbia entered into force in April. Amendments to the agreement on mutual 
legal assistance in criminal matters were signed in February 2010. A bilateral agreement on 
police  cooperation  in  areas  such  as  organised  crime  and  terrorism  was  signed,  as  was  an 

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agreement  on  culture  and  sport.  However,  border  demarcation  remains  an  open  issue. 
Republika  Srpska  continues  to  cooperate  closely  with  Serbia  on  the  basis  of  the  Special 
Parallel Relations Agreement and the related Protocol on Cooperation. 

Relations  with  Croatia  have  gained  a  fresh  impetus.  Following  the  election  of  President 
Josipović  in  Croatia,  the  two  Presidents  and  other  senior  officials  met  several  times,  both 
bilaterally  and  in  the  margins  of  regional  and  international  events.  A  Serbian  parliamentary 
delegation  visited  Zagreb  in  February  2010  and  a  return  visit  was  made  by  the  Croatian 
parliament in June 2010. The Croatian President visited Serbia in July 2010. The inter-state 
border commission met in April 2010 for the first time in seven years. A Police Cooperation 
Agreement  entered  into  force  in  May  2010.  A  defence  cooperation  agreement  and  an 
agreement  on  inland  water  navigation  were  signed.  An  agreement  for  the  extradition  of 
citizens  suspected  or  convicted  of  serious  crimes  was  signed  in  June  2010.  However, 
outstanding issues remain. In December 2009, the Serbian government lodged a counter-suit 
against  Croatia  in  the  ICJ  on  the  grounds  of  genocide  allegations.  The  issue  of  missing 
persons is still problematic.  

Relations with the former Yugoslav Republic of Macedonia are overall good. The President of 
Serbia  visited  Skopje  in  June  2010.  The  Serbian  authorities  maintained  their  policy  of  non-
recognition  of  the  border  demarcation  agreement  between  the  former  Yugoslav  Republic  of 
Macedonia and Kosovo. In September the countries signed a bilateral agreement to facilitate 
traffic over the local border crossing points. Unresolved issues concerning relations between 
the Orthodox churches in the two countries remain.  

There  were  mixed  trends  in  relations  with  Montenegro.  The  Serbian  President  visited 
Montenegro in July 2010. An agreement on cooperation in the military sector was signed by 
the  two  Ministers  of  Defence  in  April  2010.  The  Serbian  government  protested  over  the 
establishment  of  diplomatic  relations  between  Montenegro  and  Kosovo  and  temporarily 
recalled  its  ambassador  from  Podgorica  in  January  2010.  The  ambassador  returned  in 
February 2010. There were also outstanding issues in connection with the finalisation of the 
distribution of assets and liabilities, citizenship rights, and the fight against organised crime. 
Agreements on judicial cooperation and extraditions were ratified by Serbia in May 2010, but 
do not provide for the extradition of own nationals. 

There was significant progress in relations with Turkey. The new format of regular trilateral 
meetings  at  the  level  of  Ministers  of  Foreign  Affairs  with  Turkey  and  Bosnia  and 
Herzegovina  was  launched  in  2009  and  several  meetings  took  place.  The  summit  of  the 
Presidents  of  Serbia,  Turkey  and  of  the  Bosnia  and  Herzegovina  Presidency  took  place  in 
Istanbul in April 2010. The Turkish Prime Minister visited Serbia in July 2010. The Serbia-
Turkey free trade agreement entered into force in September 2010. 

Relations with Romania, Bulgaria and Hungary are good. In April 2010 the Bulgarian Prime 
Minister visited Belgrade. The Serbian and Bulgarian Interior Ministers signed an agreement 
on the establishment of a joint contact centre for police and customs cooperation. High-level 
meetings  with  Hungary  took  place  at  bilateral  level  and  in  the  new  trilateral  format  of 
cooperation  with  Hungary  and  Croatia.  In  June  2010  the  Romanian  Minister  of  Foreign 
Affairs visited Belgrade. The two countries also maintain a high level of cooperation between 
their police departments.  

Overall, Serbia’s international obligations are broadly complied with. Despite the active on-
going  cooperation  of  Serbia  with  ICTY,  the  two  remaining  fugitives  are  still  at  large. 

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Domestic processing of war crimes cases continued. Regional cooperation has improved and 
Serbia  made  significant  progress  in  its  bilateral  relations  with  other  enlargement  countries, 
particularly  Croatia  and  Bosnia  and  Herzegovina,  while  continuing  to  have  good  relations 
with  neighbouring  EU  member  states.  Regional  cooperation  was  affected  by  a  lack  of 
agreement between Serbia and Kosovo on the latter's participation in regional meetings. An 
acceptable and sustainable solution for the participation of both Serbia and Kosovo in regional 
fora  needs  to  be  agreed  as  soon  as  possible.  This  is  essential  for  inclusive  and  functioning 
regional cooperation. 

3. 

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  2010,  the  government  submitted  to  the  European  Commission  its  economic  and 
fiscal programme for the period 2010-12. The programme sets out a revised macroeconomic 
and fiscal policy framework for the medium term based on the supplementary budget for 2009 
and  the  2010  budget  that  were  both  adopted  by  parliament  in  December  2009.  Overall,  the 
programme  is  an  appropriate  medium-term  policy  document,  presenting  a  realistic  macro-
fiscal scenario that is broadly consistent with the country’s reform agenda. 

Serbia’s macroeconomic policy has been anchored by the economic programme supported by 
the  International  Monetary  Fund  (IMF)  under  the Stand-By Arrangement (SBA) since early 
2009.  Pursuant  to  the  SBA  requirements,  a  number  of  fiscal  measures  were  implemented 
throughout 2009 and in early 2010. Notwithstanding a number  of adjustments, including an 
upward  revision  of  fiscal  deficits  in  2009  and  2010,  the  SBA  has  been  on  track.  The 
government  made  significant  strides  towards  enhancing  fiscal  responsibility  by  adopting 
amendments  to  the  budget  system  law  and  a  new  pension  bill.  However,  comprehensive 
structural reforms that would gear the economy towards a more sustainable path will need to 
be further pursued and implemented.  

Overall,  macroeconomic  stability  was  broadly  preserved  against  the  backdrop  of  the  global 
crisis  owing  to  the  adoption  of  timely  measures  in  agreement  with  the  IMF.  There  is 
consensus  on  the  fundamentals  of  a  market  economy.  Medium-term  fiscal  and  structural 
reforms will have to be implemented without delay to enhance the resilience of the economy. 

Macroeconomic stability 

In 2009, Serbia’s GDP shrank by 3% in real terms as a consequence of the global economic 
crisis,  interrupting  a  period  of  steady  growth  with  an  annual  average  rate  of  6%  recorded 
between  2005  and  2008.  The  2009  average  per  capita  GDP  in  purchasing  power  standards 
stood  at  37%  of  the  EU-27  average,  up  marginally  from  the  year  before.  The  recovery  has 
been under way since early 2010 but the pick-up in economic activity has been slower than 
expected,  prompting  the  IMF  and  the  national  authorities  to  revise  downwards  their  initial 
GDP growth projection from 2% to 1.5%. While economic growth in the past was driven by 

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domestic demand, it has been recently fuelled more by export expansion. This shift remains to 
be sustained, based on the strengthening industrial production. While in 2009 industrial output 
was some 12% lower than the year before, with manufacturing recording the sharpest fall, the 
negative trend has reversed in 2010. Overall, the Serbian economy continues to be affected by 
the global economic crisis while recovery has been slow and fragile. 

In 2009, international trade and financial transactions were significantly affected by the global 
economic and financial crisis. At 5.8% of GDP, the current account deficit was considerably 
lower compared to levels of 10-18% in previous years. This was mainly due to a sharp decline 
in  imports  as  well  as  an  increase  in  net  inflows  of  remittances.  As  imports  fell  faster  than 
exports the merchandise trade deficit also narrowed as compared to past levels of above 20%. 
However,  at  15.5%  of  GDP  it  remained  substantial.  In  2010,  as  the  international  economic 
environment improved, Serbia’s external position stayed solid. In the period to September, the 
trade deficit was narrowing compared to last year on the back of vigorous export growth as 
exports  of  intermediate  goods  soared  following  the  revived  industrial  activity  in  the  EU, 
Serbia's main trade partner. Annual import growth turned positive in May following a marked 
pick-up in imports of energy, partly due to the higher international oil prices, and intermediate 
goods  against  the  backdrop  of  a  gradual  recovery  in  domestic  production  while  investment 
activity was subdued. 

Financial and capital flows remained modest. In 2009, foreign direct investment (FDI) fell by 
a  quarter  compared  to  a  year  earlier,  to  €1.37  billion,  accounting  for  4.3%  of  GDP.  At  the 
same time, long-term borrowing by the corporate sector at €600 billion was only a quarter of 
the 2008 level while short-term borrowing at €200 million was down by almost 60% on the 
year  before.  Notwithstanding  the  slowly  recovering  economic  activity  as  of  2010,  foreign 
currency inflows have remained subdued. Over the eight months to September, FDI and other 
investments  were  substantially  lower  than  a  year  ago.  The  capital  and  financial  account 
increased as a  consequence  of  domestic  commercial banks resorting to additional long-term 
borrowing while hefty repayments by corporate sector of the pre-crisis foreign loans and an 
outflow  of  cash  and  deposits  have  been  taking  place.  Still,  total  foreign  exchange  reserves 
remained  largely  stable  during  2010  at  over  €11  billion,  i.e.  more  than  a  third  of  GDP  or 
sufficient  to  cover  some  10  months’  worth  of  imports.  Serbia’s  foreign  debt  has  been 
increasing since 2009 while capital inflows have been largely insufficient to cover the current 
account deficit. By end-July 2010, gross external debt had risen by around €0.5 billion since 
the beginning of the year, to €23.3 billion, i.e. close to 80% of projected GDP. Overall, the 
Serbian  economy  saw  a  substantial  external  adjustment  in  2009  reflected  in  a  considerably 
narrower current account deficit as well as a lower merchandise trade deficit compared to past 
levels.  In  parallel,  foreign  exchange  reserves  were  built  up  and  are  now  maintained  at  a 
comfortable level. External debt is, however, high and growing indebtedness remains an issue 
of concern. 

The unemployment rate in 2009 increased to 16.1%. 2009 saw significant wage moderation 
owing  also  to  the  nominal  freezing  of  salaries  in  the  public  sector,  with  nominal  wages 
increasing by 6.9% on average compared to 17.9% a year earlier. Moreover, real wage growth 
slowed  to  only  0.3%  per  annum,  which  was  substantially  lower  than  in  2007  (19.5%)  and 
2008  (3.9%).  While  economic  activity  has  been  picking  up  gradually,  the  situation  on  the 
labour  market  has  worsened  in  2010.  In  the  first  half  of  the  year,  employment  continued  to 
fall in annual terms, with the number of employed persons dropping to historic lows at 1.85 
million. According to the national labour force survey of April 2010, the unemployment rate 
soared  to  19.2%.  The  poor  labour  market  performance  has  further  undermined  the  social 
conditions. Wage growth has remained broadly constrained during 2010. In the period from 

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January  to  July,  the  average  net  wage  increased  compared  to  the  same  period  last  year,  by 
6.7%  in  nominal  and  2.5%  in  real  terms.  Overall,  under  the  impact  of  the  economic  crisis 
labour  market  conditions  deteriorated  as  employment  fell  and  unemployment  approached 
20%. Salaries remained almost unchanged in real terms.  

The  current  monetary  policy  framework  has  been  in  place  since  January  2009  when  the 
National  Bank  of  Serbia  (NBS)  committed  itself  to  price  stability  based  on  consumer  price 
index  (CPI)  inflation  instead  of  core  inflation.  The  NBS’s  target  was  to  keep  annual  CPI 
inflation between 6% and 10% throughout 2009. At end-December 2009, CPI inflation stood 
at 6.6%, largely in line with the projections, bringing the yearly average inflation rate of 8.1% 
well  within  the  target  band.  In  2009,  inflation  was  largely  fuelled  by  an  increase  in 
administered prices of oil derivatives and communal services. For the end of 2010, the NBS 
set  the  inflation  target  band  at  between  4%  and  8%,  where  the  main  contribution  to  overall 
price growth would come from the rise in regulated prices and excise duties. Disinflation was 
on track in the first half of the year. However, inflationary tensions were rekindled by rising 
food  prices  and  the  dinar  depreciation.  The  renewed  pressures  were  also  based  on  the 
expected  strengthening  of  domestic  demand  in  line  with  the  gradual  pick-up  of  economic 
activity  and  higher  bank  lending.  The  acceleration  of  inflation  prompted  the  NBS  to 
discontinue the course of a gradual relaxation of monetary conditions. Since the second half 
of  2009,  the  key  reference  interest  rate  was  cut  in  a  number  of  consecutive  steps  from  its 
October  2008  peak  at  17.75%  to  10%  by  end-December  2009,  and  further  to  8%  by  early 
May.  Following  the  two  latest  rate  hikes,  the  interest  rate  currently  stands  at  9%.  Overall, 
disinflation  has  remained  the  key  policy  objective,  but  price  developments  need  to  be 
monitored  carefully  as  further  inflationary  pressures  might  be  generated  by  the  increases  in 
regulated prices of energy, gas and oil as well as the pass-through effect of the depreciating 
dinar. 

Since late 2009, the NBS has been actively engaged in preserving exchange rate stability. As 
the pace of the dinar depreciation in December 2009 was deemed to undermine the process of 
economic  stabilisation,  the  NBS  started  intervening  again  in  the  interbank  foreign  currency 
market. After two interventions at the end of the year, the operations became more frequent in 
2010,  especially  from  mid-May  when  the  pressure  on  the  exchange  rate  again  intensified. 
Despite the NBS’s interventions, the dinar continued to slide, rising to RSD106.2 per euro at 
end-September, i.e. losing about 10% of its value since the beginning of the year. By then, the 
NBS  had  sold  more  than  €2  billion  in  total  with  the  aim  of  buffering  extreme  daily 
fluctuations  in  the  dinar’s  value.  Overall,  the  dinar  has  been  on  a  depreciating  trend  since 
December  2009.  In  line  with  the  policy  of  preventing  excessive  volatility  of  the  exchange 
rate,  the  NBS’s  interventions  on  the  interbank  market  were  considerable  in  the  first  half  of 
2010 and have, in practice, somewhat overshadowed its inflation targeting policy. 

The  year 2009 saw a  shift in the fiscal stance as the expansionary policy  of 2007  and 2008 
became constrained by the SBA programme requirements. Ad hoc short-term measures were 
introduced  to  mitigate  the  sharp  deterioration  of  public  finances  during  the  economic 
recession,  resulting  in  two  2009  budget  revisions.  The  consolidated  fiscal  deficit  in  2009 
widened to 4.1% of GDP from 2.4% of GDP a year earlier. A set of emergency expenditure 
measures  only  partly  compensated  for  the  sizeable  revenue  shortfall.  The  fiscal  adjustment 
came largely from restricted hiring in the public sector and a nominal freeze on public sector 
wages  and  pensions.  Capital  expenditures  were  again  reduced  in  comparison  with  a  year 
earlier.  Extensive  lay-offs  in  the  private  sector  and  salary  freezes  in  the  public  sector 
translated into a shortfall in personal income tax revenue. Furthermore, VAT plunged due to 
restrained domestic demand. Because of the drop in imports and also the lowering of tariffs 

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following  the  start  of  implementation  of  the  trade  agreement  under  the  SAA,  customs 
revenues  were  much  lower  compared  to  past  years.  Conversely,  excise  taxes  increased  as  a 
consequence of the hike in excise duties on diesel and gasoline. During 2010, public finances 
remained  under  pressure  as  the  fiscal  policy  allowed  automatic  stabilisers  to  operate.  In 
agreement  with  the  IMF,  Serbia  announced  a  supplementary  budget  to  allow  for  a  higher 
budget deficit in 2010. At 4.8% of GDP, the deficit would be the highest in the past decade, 
but  driven  by  lower-than-planned  public  revenue  rather  than  growing  public  expenditure. 
However,  in  the  period  to  September  public  spending  was  contained  largely  through  a 
significant  cut  in  capital  expenditure,  while  current  expenditure,  accounting  for  the  bulk  of 
total outlays, was in line with the plan against the freeze of public administration salaries and 
pensions.  As  of  2009,  public  debt  has  been  increasing  steadily  and  stood  at  close  to  €11 
billion,  i.e.  some  36%  of  GDP,  at  end-August.  With  the  aim  to  strengthen  fiscal  discipline, 
Serbia adopted the amendments to the budget system law. These amendments introduce a set 
of  quantitative  fiscal  rules  to  underpin  fiscal  consolidation  over  the  medium  term. 
Furthermore, improved procedures as well as the setting-up of a fiscal council are deemed to 
anchor fiscal responsibility. However Serbia still needs to adopt the new pension law which, 
for  the  purpose  of  strengthening  public  finances  in  the  long  run,  includes  an  extension  of 
working period and age for assuming pension rights as well as adjustments to the indexation 
mechanism. Overall, given the adverse impacts of the economic crisis and despite the ad hoc 
fiscal  adjustments,  the  2009  budget  deficit  was  substantially  higher  than  in  previous  years. 
The  corrective  short-term  measures  will  need  to  be  backed  up  by  full-fledged  systemic 
reforms, such as reform of the pension and healthcare systems, to improve fiscal sustainability 
in the medium to long term.  

Expansionary  fiscal  policy  and  the  increasing  gap  between  savings  and  investment  of  the 
private  sector,  which  fuelled  external  imbalances  in  the  years  prior  to  the  2009  economic 
downturn  exacerbated  the  economy’s  vulnerabilities  to  adverse  shocks  such  as  a  global 
recession. The negative effects of the last crisis have been partly cushioned by the economic 
measures implemented under the IMF SBA programme. However, the macroeconomic policy 
mix has proven rather limited in responding to the crisis. Effectiveness of monetary policy has 
been  restricted  given  the  high  degree  of  euroisation  and  the  NBS  effectively  pursuing  dual 
objectives, i.e. smoothing the exchange rate depreciation while being committed to inflation 
targeting. Moreover, counter-cyclical fiscal policies, which would have been necessary in the 
period  of  low  economic  activity,  could  not  be  implemented.  This  was  due  to  the  pre-crisis 
fiscal expansion and the low capital market integration. To broadly preserve the stability of its 
economy, Serbia had to apply budget tightening measures, including expenditure cuts, which 
tend  to  operate  pro-cyclically  in  such  circumstances.  Overall,  the  economic  policy  mix  in 
place  has  proven  limited  in  facing  the  crisis.  However,  the  accompanying  policies  and 
measures  agreed  with  the  IMF  under  the  SBA  programme  have  provided  an  adequate 
response towards the most pressing negative macroeconomic effects. 

Interplay of market forces 

The price liberalisation process slowed down in 2009, with the share of administrative prices 
still representing about a quarter in the CPI inflation basket. The market formation of prices 
was challenged in mid-2010 as the state intervened following the shortage of basic food items 
such as dairy and cooking oil. The share of the private sector remained small, accounting for 
55-60% of total output and about 60% of the total number of employees. Finalisation of the 
process of privatisation and/or liquidation of socially and state-owned enterprises remains one 
of the key priorities of the European partnership for Serbia. 

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Privatisation of the socially owned companies continued in 2009 but at a slower pace as only 
95 such companies were sold. Privatisation proceeds amounted to about €81 million. By the 
end of 2009, the total number of companies privatised through tenders and auctions, since the 
start of the process in 2002, had risen to over 2,300, with privatisation revenue totalling about 
€2.6  billion.  The  least  attractive  companies  remain  unsold.  The  number  of  privatisations 
annulled  —  due  to  non-compliance  with  the  contracted  obligations  —  rose  to  almost  one 
quarter  of  the  firms  initially  scheduled  for  privatisation.  The  government  extended  the 
deadline  for  finalising  privatisation  of  the  socially  owned  companies  to  30  June  2011. 
Overall,  progress  in  selling  socially  owned  companies  was  limited,  while  the  number  of 
revoked privatisation deals increased.  

Given the economic circumstances in 2009, privatisation of the large state-owned companies 
was  delayed.  As  the  situation  in  the  global  markets  gradually  improved,  the  government 
announced privatisation strategies for a number of companies. A few were slated for sale by 
the end of 2010. Privatisation of the pharmaceutical company Galenika failed, however, and 
has  been  postponed.  The  initial  procedures  were  launched  for  the  telecoms  incumbent 
Telekom but the tender had not been called by the end of September, as planned. As regards 
the sale of the national air carrier  JAT Airways, the government decided to establish  a new 
national  airline  company  that  will  take  over  the  assets  and  some  of  the  staff.  The  debt 
estimated  at  €146  million  (€25  million  in  2009  alone)  would  be  left  to  the  old  company, 
which will remain in state ownership. To facilitate the sale of the remaining state-share in the 
oil company NIS, the government distributed free shares to the population in mid-2010 and 
announced  further  distributions  (Belgrade  Airport,  Telekom,  the  electricity  operator  EPS). 
Privatisation of about 500 utilities in the local communities is outstanding. Their restructuring 
and reorganisation has not yet begun and the strategy for privatising them remains undefined. 
Overall,  limited  progress  was  made  in  finalising  the  privatisation  process.  Privatisation  of 
socially owned companies has advanced but in the meantime a number of privatisation deals 
have also been cancelled. State-owned companies have not initiated the restructuring. 

Market entry and exit 

In  2009,  some  progress  was  made  in  facilitating  market  entry.  The  number  of  registered 
companies stood at 113,000 in May 2010, up from 106,000 in April 2009. At the same time, 
about 225,000 entrepreneurs were registered with the Serbian Business Registry Agency, i.e. 
around 5,000 more than a year earlier. The one-stop-shop system for registering a company 
has been in place since May 2009. It now takes on average 5 instead of 23 days to register and 
has been estimated to significantly lower administration cost for companies. The Agency has 
also further extended the number of registers, including the Registry for Financial Statements, 
which  will  do  away  with  the  past  practice  of  multiple  submissions  of  these  statements  to 
various  state  bodies.  Nevertheless,  further  efforts  are  needed  to  improve  the  conditions  for 
starting-up a business, particularly in the area of construction permits, where implementation 
of the new Law on planning and construction from 2009 has been very slow. With regard to 
market  exit,  a  new  Bankruptcy  Law  came  into  effect  in  January  2010  but  the  number  of 
pending  cases  remains  very  high.  Overall,  there  has  been  some  progress,  particularly 
regarding  the  registration  of  new  companies  and  submission  of  the  financial  statements  of 
those already operating. However, excessive red tape and complex legislation remain in place 
and continue to hamper the business environment. 

Legal system 

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Some  progress  was  observed  in  adopting  new  legislation  in  line  with  the  acquis.  However, 
preparation  and  implementation  of  the  laws  are  sometimes  slow  and  uneven.  Also,  legal 
enforcement  is  weak  due  to  technical  and  personnel  shortcomings  in  the  courts  and 
administrative  bodies.  Inconsistent  implementation  of  laws  and  very  lengthy  procedures, 
which frequently exceed the deadlines set by law, hinder investment. Overall, weaknesses in 
the rule of law and prevalent corruption continued to limit legal predictability and undermined 
trust  in  the  legal  system  among  economic  operators,  in  particular  as  regards  effective 
enforcement of property rights. 

Financial sector development 

The number of banks decreased from 34 to 33 after the merger of two state-owned banks in 
September 2010. There are now 3 majority state-owned banks, holding a 2.6% market share. 
Foreign ownership has risen to almost 75% of the total banking sector and currently 21 out of 
33  banks  operating  in  Serbia  are  owned  by  foreign  entities.  Subsidiaries  of  Austrian,  Greek 
and Italian banks are within the top five banks in terms of assets and together control almost 
60% of the market. Domestic private banks are small with only one of them among the top 10 
banks. 

Serbia’s financial sector has been relatively unscathed by the international financial crisis. In 
line with the agreement reached in March 2009 (‘Vienna Initiative’), the parent commercial 
banks  having  subsidiaries  in  Serbia  maintained  their  exposure  in  the  Serbian  market  at  the 
pre-crisis  level  and  effectively  increased  their  capital  adequacy  ratios  in  2009.  Given  the 
positive  results  of  the  economic  stabilisation  programme,  it  was  agreed  that  exposure 
commitments  could  be  reduced  as  of  April  2010,  from  100%  to  80%  of  the  end-2008 
exposure as a first step towards phasing-out of the initiative. Deposits, of which 70% are in 
foreign currency, represent almost 60% of the total liabilities of the banking sector. Similarly, 
loans  account  for  some  60%  of  banking  sector  assets.  Over  three  quarters  of  loans  are 
denominated in foreign currency or are foreign-currency linked, predominantly in euros. More 
than  half  of  the  loans  are  granted  to  the  corporate  sector  (mainly  to  trade  and  industry  — 
around 20% each) while about a third is for households. Since the crisis credit growth for the 
private  sector  has  decelerated  substantially  and  the  government  has  put  in  place  a  support 
scheme to subsidise commercial bank loans to companies and households.  

Capitalisation of the banking sector is high. The average capital adequacy ratio stands at 21% 
while  all  systemic  banks  maintain  it  above  the  prescribed  minimum  of  12%.  However,  the 
asset  quality  of  the  banking  sector  has  worsened,  with  a  rise  in  bad  loans  since  2009.  The 
gross  non-performing  loans  ratio  peaked  at  17.5%  by  the  second  half  of  2010.  A  systemic 
liquidity crisis is unlikely as liquid assets accounted for over 36% of total assets at end-June. 
The  NBS  can  release  ample  amounts  of  liquidity  by  further  relaxing  relatively  high  reserve 
requirements,  which  were  introduced  with  the  aim  to  limit  rapid  credit  growth  prior  to  the 
crisis.  The  high  capital  and  reserve  requirements  have  been  partly  responsible  for  the 
generally low profitability of the Serbian banking sector by regional standards. Stress tests for 
31 banks carried out in 2010 concluded that banks are sufficiently resilient to further adverse 
shocks but remain vulnerable to credit risk. The weak performance of the corporate sector in 
the  face  of  the  slow  economic  recovery  may  raise  defaults  in  the  servicing  of  loans. 
Furthermore, there is some exchange rate risk on the borrowers’ side given the high degree of 
euroisation of Serbia’s economy.  Overall, financial intermediation  growth has  slowed  down 
against the backdrop of the economic downturn. The banking sector remained generally sound 
and profitable, but a close watch needs to be kept for possible deterioration in the repayment 

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capacity of borrowers due to the relatively high share of bad loans and considerable exposure 
to exchange rate risk. 

At the end of 2009, there were 26 insurance companies operating in Serbia, up from 24 a year 
earlier.  19  insurance  companies  are  in  majority  foreign  ownership  while  7  rely  on 
predominantly  domestic  capital.  The  recession  has  impacted  the  performance  of  the  sector, 
with premium income having risen only by 2.6% on the year in 2009. The insurance sector’s 
share of capital in the total financial sector dropped to 3.9%. Overall, progress in development 
of  the  non-banking  financial  sector  slowed  down  and  consequently  its  size  in  financial 
intermediation remained limited. 

3.2. 

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

Existence of a functioning market economy 

The overall economic climate deteriorated in the face of the global crisis but the authorities 
have  succeeded  in  broadly  maintaining  macroeconomic  stability  to  support  the  continued 
transition  to  a  market  economy.  In  particular,  the  monetary  authorities  applied  timely  and 
adequate  measures  to  restore  trust  in  the  banking  system.  On  the  fiscal  side,  the  corrective 
short-term  measures  will  need  to  be  backed  up  by  full-fledged  systemic  reforms  to  ensure 
fiscal  sustainability  in  the  medium  to  long  term.  The  adoption  of  the  fiscal  responsibility 
legislation  is  an  important  step,  which  paves  the  way  towards  bolstering  fiscal  discipline. 
Pension  reform  will  also  contribute  will  also  contribute  to  the  long-term  sustainability  of 
public finances However, the weak corporate governance and the deficiencies in competition 
continue  to  be  barriers  to  business.  Overall,  in  the  more  challenging  environment  the 
previously  identified  handicaps  have  become  more  acute.  Market  mechanisms  remained 
hampered  by  distortions,  legal  uncertainty,  heavy  state  involvement  in  production,  and 
insufficient competition. 

Human and physical capital 

Some progress was observed following the accelerated reform of the education system, which 
is poised to better meet labour market demand. Nevertheless, the gap between demand for and 
supply of skilled workforce identified in previous reports continues to be a drag on FDI and 
the development of new segments of the economy. The attitude towards lifelong learning and 
mobility  has  been  improving,  albeit  at  a  rather  slow  pace.  Public  education  expenditure 
accounted  for  3.3%  of  GDP  in  2009,  lower  than  the  planned  3.9%.  Overall,  the  economy 
continues  to  suffer  from  a  shortage  of  skilled  labour  while  supply  has  been  only  gradually 
adjusting to market needs. 

In 2009, investment activity was constrained and the private investment rate dropped to 20% 
of  GDP.  Net  FDI  fell  by  almost  25%  on  the  year  before,  to  €1.37  billion,  bringing  the 
cumulative  inflow  since  2000  to  €12.2  billion.  The  three  sectors  receiving  most  FDI  were 
financial  intermediation,  manufacturing,  and  transport  and  telecommunication.  However,  a 
large share of FDI was destined to the non-tradable sectors of the economy, which contributed 
to the increasing external imbalances. In 2009, domestic investment dwindled. The funds of 
the National Investment Plan were slashed to €210 million, a third of the 2008 amount, and 
were  used  for  various  projects  related  to  the  development  of  communal  and  road 
infrastructure  in  the  40  least developed  municipalities  but  also  in  support  of  industrial  hubs 
(such  as  Kragujevac)  along  Corridor  X,  as  well  as  for  construction  of  social  housing.  For 

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2010,  the  National  Investment  Plan  was  further  reduced  to  about  €100  million.  Overall, 
domestic investment has been declining as local sources have been scarce and FDI has also 
lost momentum given the globally unfavourable economic conditions. 

Sectoral and enterprise structure 

The restructuring process has advanced only slowly. The shift of economic activity towards 
the  service  sector  has  stabilised,  with  services  contributing  more  than  60%  of  GDP.  The 
public  companies  still  generate  a  large  part  of  Serbia’s  output.  However,  their  performance 
has  been  undermined  considerably  by  the  crisis,  with  the  erosion  of  capital  and  the 
accumulated loss rising to €3 billion, i.e. more than a quarter of their total capital at end-2009. 
The private companies account for a smaller share of production but the bulk of foreign trade. 
Around  75%  of  Serbia's  export  is  undertaken  by  companies  in  predominantly  foreign 
ownership.  Small  and  medium-sized  enterprises  contribute  for  just  over  51%  of  the  total 
value-added  and  slightly  more  than  57%  of  the  overall  employment.  The  informal  sector, 
fuelled  by  weaknesses  in  tax  and  expenditure  policies,  as  well  as  in  law  enforcement, 
including the  fight  against corruption and  organised crime, remains large. It reduces the tax 
base and the efficiency of economic policies. Overall, structural adjustment of the economy 
has  been  lagging  on  the  back  of  the  slow  reform  process,  which  has  been  hampered  by  the 
economic crisis. The informal sector remains an important challenge.  

State influence on competitiveness 

State  subsidies  were  relatively  high  at  around  2.2%  of  GDP  in  2009  following  a  nominal 
increase  of  almost  a  quarter  compared  to  2008.  The  amount  of  subsidies  could  be 
underreported  as  the  state  schemes  as  well  as  the  individual  state  aid  are  not  systematically 
referred  for  prior  approval.  The  legislation  on  state  aid  control  from  July  2009  needs  to  be 
effectively  enforced  by  the  recently  established  State  aid  authority,  but  an  appropriate 
monitoring mechanism is still missing. The state-controlled monopolistic structures remain in 
place.  Overall,  the  state  continues  to  influence  substantially  on  competitiveness  through  its 
legal and financial mechanisms. 

Economic integration with the EU 

The EU has remained Serbia’s main trading partner, accounting for 58% of the country’s total 
exports and 57% of the total imports. The negative trade gap which Serbia had with the EU 
was declining steadily in the period to August 2010. Serbia also continued to improve a trade 
surplus with the countries in the region. The CEFTA countries account for 16% of Serbia’s 
trade. 

Export  price  competitiveness  improved  in  2009.  Real  gross  wage  growth  at  0.2%  was 
considerably smaller than average labour productivity growth, which translated into a 3% fall 
in  real  unit  labour  costs.  In  real  effective  terms,  the  dinar  lost  3%  of  its  value,  despite 
consumer  prices  growing  faster  on  the  domestic  market than abroad on average. In the first 
half  of  2010,  the  real  effective  exchange  rate  of  the  dinar  weakened  further  by  some  7%. 
Against the background of subdued wage growth and increasing unemployment, unit labour 
costs  continued  to  drop  in  real  terms.  Overall,  trade  integration  with  the  EU  remained  high 
and export competitiveness continued to improve. 

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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  the  Stabilisation  and  Association  Agreement  and  the  European  Partnership 
priorities. It also analyses Serbia’s administrative capacity. In each sector, the Commission’s 
assessment  covers  progress  achieved  during  the  reporting  period,  and  summarises  the 
country’s overall level of preparations.  

4.1. 

Internal market 

4.1.1.  Free movement of goods 

Progress can be reported in the field of the free movement of goods. 

Legislation  aligning  with 
the  New  Approach  Directives  on  safety  of  machinery, 
electromagnetic  compatibility  and  low  voltage  equipment  was  adopted.  The  Ministry  of 
Economic Affairs and Regional Development continued to play a central role in coordinating 
the  establishment  and  improvement  of  the  horizontal  legislation,  the  quality  infrastructure 
institutions and the transposition of the acquis on free movement of goods. Its capacity in this 
area has been strengthened with additional human resources.  

Cooperation  between  the  ministry  and  the  Serbian  Standardisation  Institute,  the  Serbian 
Accreditation  Board  and  the  Directorate  for  Measures  and  Precious  Metals  has  further 
improved. 

As  regards  standardisation,  the  change  of  status  of  the  Serbian  Standardisation  Institute 
(ISS)  from  an  independent  non-profit  organisation  to  a  public  institution  came  into  force  in 
January  2010.  During  the  reporting  period  the  ISS  further  increased  the  number  of  adopted 
European  standards  (ENs),  to  a  total  of  8.986.  The  ISS  is  no  longer  responsible  for  type 
approval  of  vehicles,  as  the  Traffic  Safety  Agency  developed  the  capacity  to  take  over  this 
task.  However,  the  chairman  and  members  of  the  supervisory  board  have  not  yet  been 
appointed.  

In the area of conformity assessment and accreditation, the number of accredited conformity 
assessment  bodies  (CABs)  rose  to  413.  Implementing  legislation  to  the  law  on  technical 
requirements for products and conformity assessment of products has been adopted. 

There has been good progress on accreditation. The Law on Accreditation, fully aligned with 
the  new  legislative  framework  (765/2008),  was  adopted.  The  Serbian  Accreditation  Board 
extended the scope of its activities. It continued to provide training and seminars for assessors 
and its own staff and carried out awareness-raising activities. However, the chairman and the 
members of the supervisory board have not yet been appointed. The administrative capacity 
of the Board needs to be strengthened. 

In the area of metrology, progress was made with the adoption of the new law in May 2010 
and  implementing  legislation.  The  Directorate  for  Measures  and  Precious  Metals  has  been 
restructured  to  implement  the  new  law,  and  the  government  appointed  the  Metrological 
Council. The Directorate has been participating in the activities of international and European 
metrology  organisations.  However,  further  efforts  are  needed  to  continue  aligning  with  the 
acquis,  notably  by  implementing  the  already  existing  legislation  and  improving  the  limited 
capacity of the Directorate. 

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There  has  been  progress  on  market  surveillance.  Implementing  legislation  in  the  area  of 
general  product  safety  and  the  Market  Surveillance  Strategy  for  the  period  2010-2014  was 
adopted. The rapid exchange system providing information on dangerous products similar to 
RAPEX, NEPRO, was established. However, new legislation in this area, fully implementing 
the 2008 horizontal acquis on marketing of harmonised products, remains to be adopted. The 
capacity  of  the  market  inspectorate  needs  to  be  strengthened,  not  least  through  training. 
Coordination  between  the  different  market  surveillance  authorities  needs  to  be  established, 
including the development of a common database. 

There  has  been  good  progress  in  the  field  of  consumer  protection.  The  Law  on  Consumer 
Protection was adopted, transposing 14 relevant EU directives. A Consumer Protection Centre 
was  established  within  the  Ministry  of  Trade  and  Services  aimed  at  solving  the  complaints 
brought by consumers, notably on contract warranty. Further steps have been taken towards 
establishing  regional  advisory  centres  for  consumer  protection  which  are  to  be  devolved  to 
non-governmental organisations. Training activities for professional staff have continued. The 
administrative  capacity  of  the  consumer  protection  department  within  the  ministry  has  been 
improved,  but  the  level  of  human  resources  remains  insufficient.  Public  awareness-raising 
activities  have  increased.  Consumer  protection  organisations  have  started  improving  their 
coordination.  

The  Law  on  Electronic  Trade  is  in  place.  However,  capacities  for  monitoring  its 
implementation  need  to  be  further  developed.  The  role  of  the  ministry’s  Council  for 
Consumer  Protection  remains  limited.  Consumer  organisations  are  still  weak  and  lack 
adequate  resources.  This  continues  to  hamper  their  overall  effectiveness.  Public  awareness-
raising activities need to be further developed. 

Overall,  Serbia  is  moderately  advanced  on  free  movement  of  goods  in  meeting  the 
requirements  of  the  SAA  in  this  area.  A  new  legal  framework  for  market  surveillance  still 
needs to be adopted. The administrative capacity and cooperation between the Ministries and 
other State institutions need to be further strengthened. Further efforts are required to continue 
transposition of the product-specific acquis into Serbian legislation. 

4.1.2.  Movement of persons, services and right of establishement 

There has been little progress on movement of persons. With regard to the coordination of 
social  security  schemes,  agreements  on  social  insurance  with  Cyprus  and  Turkey  were 
ratified.  The  Agreement  on  social  security  with  Bosnia  and  Herzegovina  was  amended  to 
further regulate the pension issues between the two countries.  

Little  progress  was  achieved  in  the  provision  of  services.  Preparations  for  transposing  the 
Services Directive are at an early stage.  

There  has  been  little  progress  on  financial  services.  Serbia  prepared  a  roadmap  for 
implementation  of  the  Basel  II  framework.  However,  new  legislation  on  banking,  securities 
and insurance needs to be adopted. Serbia needs to further align with the Financial Services 
Directives.  Serbia  has  yet  to  sign  memoranda  of  understanding  with  all  home  supervisory 
authorities of foreign banks operating on its territory.  

The  National  Bank  of  Serbia  is  responsible  for  supervision  of  the  banking,  insurance  and 
voluntary  pension  fund  sectors  and  is  actively  using  its  supervisory  powers.  The  Securities 
Commission,  responsible  for  supervising  the  capital  market,  is  not  sufficiently  independent 

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and  does  not  operate  fully  in  line  with  international  standards.  The  supervisory  capacity,  in 
particular  regarding  employment  and  staff  training,  needs  to  be  further  strengthened  to 
comply with the Capital Requirements Directive and requirements for risk-based supervision.  

There  was  progress  in  the  area  of  postal  services.  The  law  on  postal  services  was  further 
brought into line with the acquis. The parliament appointed the members of the Agency for 
Postal Services Council. It became operational as an independent regulatory body for postal 
services and the government adopted its financial plan. However, the administrative capacity 
in this area needs to be strengthened.  

No  progress  has  been  made  in  the  area  of  the  right  of  establishment.  As  regards  the 
recognition of professional qualifications and recognition of foreign degrees further efforts are 
needed.  

Little progress has been made on company law. The One-Stop-Shop system is in its second 
phase and has shortened the time to set up a business to two days. Companies can submit an 
application  for  registration  electronically.  However,  the  e-Registration  system  has  yet  to 
become  fully  operational.  The  Company  Registration  Law  and  Securities  Law  need  to  be 
amended.  

Some  progress  was  made  in  the  field  of  accounting  and  auditing.  Amendments  to  the 
Accounting and Auditing Law, which are further aligned with the EU Accounting directives, 
were  adopted.  These  amendments  brought  the  statutory  register  and  register  of  financial 
reporting to a single institution, the Business Registry Agency. However, strategy and action 
plan on upgrading corporate financial reporting remain to be fully aligned with the acquis.  

Overall, preparations in the area of movement of persons, services and right of establishment 
are moderately advanced. A number of legal acts still need to be adopted. 

4.1.3.  Free movement of capital 

Little progress was made on free movement of capital.  

Serbian  legislation  provides  for  the  free  movement  of  credit  related  to  commercial 
transactions  or  to  the  provision  of  services  as  well  as  to  financial  loans  and  credit  with 
maturity  longer  than  a  year.  While  simplifying  procedures  for  foreign  payments,  Serbia 
retains  restrictions  on  short-term  capital  movements.  Under  the  current  law  on  foreign 
exchange,  non-residents  are  free  to  make  direct  investments  with  restrictions  in  the  arms 
sector and in some other areas laid down by the law. Under the law, foreigners may acquire 
real estate, subject to reciprocity, with the exception of agricultural land. EU investors are still 
having  problems,  due  to  the  unclear  legal  status  of  the  acquired  real  estate  and  incomplete 
process of property restitution, along with the very large number of permits required and the 
numerous  granting  agencies  and  authorities  involved  in  the  process.  The  implementation  of 
the legislation on urban planning and construction remains slow.  

Overall,  Serbia  is  still  moderately  advanced  in  the  area  of  capital  movements.  With  certain 
restrictions,  non-residents  are  free  to  make  direct  investments.  Serbia  needs  to  continue  its 
efforts to meet the gradual liberalisation requirements laid down in the SAA. 

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4.1.4.  Customs and taxation 

Serbia  has  made  good  progress  in  the  area  of  customs.  The  new  Customs  Law  has  been 
adopted and is largely harmonised with the acquis. The amended customs tariff nomenclature 
is fully in line with the 2010 EU Combined Nomenclature.  

The Government adopted in September 2010 the Amendments to the Decree on Harmonised 
Custom Tariff  Nomenclature for 2010.  The  amended  decree has  allowed Serbia to catch up 
with  the  liberalisation  schedule  for  processed  agricultural  products  (PAPs)  and  fishery 
products foreseen for 2010 in the Interim Agreement. 

The  administrative  capacity  of  the  Serbian  customs  administration  has  been  further 
strengthened, notably by improved post-clearance controls and by the roll-out of an upgraded 
risk analysis system. Progress was also made through the conclusion of several agreements on 
international  cooperation,  where  the  customs  also  improved  information  sharing  with  other 
national  institutions.  In  terms  of  trade  facilitation,  the  customs  administration  formalised 
procedures for exchange of pre-arrival information with neighbouring countries. 

Implementation  of  the  integrated  border  management  strategy  and  action  plan  continued. 
Serbia  obtained  the  status  of  informal  observer  under  the  Customs  Transit  Convention.  The 
country  also  participated  in  regular  activities  under  the  Customs  2013  Programme.  Fight 
against  corruption  in  customs  was  stepped  up,  which  resulted  in  a  higher  number  of 
disciplinary procedures based on internal controls. Two new free zones and one new customs 
house  were  opened.  However,  the  IT  infrastructure  needs  upgrading,  in  particular  since  the 
customs  central  IT  system  is  reaching  the  limits  of  its  capacity.  The  strategic  planning 
process, both with regard to business and IT, should be reinforced.  

Overall, Serbia is already well on the way to meeting the EU acquis and remains committed 
to  reforms  in  the  area  of  customs.  The  obligations  stemming  from  the  Interim  Agreement 
were  well  respected.  Further  efforts  are  needed  as  regards  legislative  alignment,  and 
administrative capacity, including preparing for IT interconnectivity and interoperability with 
EU IT systems.  

In  the  area  of  taxation,  some  progress  has  been  registered.  The  parliament  adopted 
amendments to the law on company profits tax and the law on income tax, in line with the EU 
acquis.  In  July,  the  Serbian  Parliament  adopted  amendments  to  the  Law  on  Tax  Procedures 
and Tax Administration. Implementing legislation by which the Large Taxpayer Centre will 
cover larger number of tax payers was adopted in July which should result in higher collection 
of revenues. Implementing legislation on tax identification number of legal entities aimed at 
simplifying  procedure  and  cutting  unnecessary  paperwork  in  line  with  the  comprehensive 
regulatory  reform  was  also  adopted  in  July.  Laws  on  avoidance  of  double  taxation  were 
ratified  for  a  number  of  EU  Member  States.  However,  discriminatory  excise  duties  on 
imported spirits need to be brought into line with the same duties on local production in order 
to comply with the relevant provision of the Interim Agreement.  

The  administrative  capacity  of  the  Serbian  tax  administration  continued  to  improve  as  a 
result  of  intensive  training  efforts.  In  April  2010  the  administration  opened  a  new  Contact 
Centre  as  an  integrated  and  centralised  information  point  for  taxpayers.  Some  new 
organisational  units,  such  as  groups  for  strategy  and  coordination,  for  risk  management  and 
for  internal  audit,  were  created  in  December  2009.  New  management  tools  were  developed 
and  the  overall  business  strategy  was  adopted  in  June  2010.  At  the  end  of  2009  a  single 

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taxpayers’  register  was  completed,  as  the  basis  for  the  future  new  information  system. 
However,  despite  good  results  in  enforcement  by  the  tax  police,  the  general  collection 
capacity  of  the  administration  improved  only  slightly.  The  share  of  the  ‘grey’  economy 
remains high and cumbersome procedures for tax collection remain in place.  

Overall, in the area of taxation, Serbia is well on the way to meeting the EU standards. The 
enforcement  capacity  of  the  tax  administration  and  tax  collection  has  improved,  although 
further progress is required in this respect. In addition, the problem of the informal economy 
remains  yet  to  be  tackled.  Serbia  needs  to  take  follow-up  action  to  ensure  that  its  tax 
legislation complies with the Code of Conduct for business taxation. 

4.1.5.  Competition 

Some progress can be reported in the area of anti-trust.  

Implementing legislation pursuant to the law on competition protection was adopted, further 
aligning  Serbia  with  the  Interim  Agreement  (IA)  requirements.  This  covers  notably  market 
definition,  merger  notifications,  individual  and  block  exemptions  for  restrictive  agreements 
fines  and  leniency  program.  The  Commission  for  the  Protection  of  Competition  (CPC)  has 
continued its activity and has adopted decisions on mergers and abuse of dominant positions 
further improving its track record. It has also adopted guidelines for implementing legislation. 
The services of the Commission for the Protection of Competition were restructured, notably 
by establishing separate divisions for economic analysis and legal affairs. The CPC's capacity 
to carry out economic analysis has been strengthened. A number of cooperation agreements 
were  signed  with  sector-specific  regulators  as  well  as  with  competition  authorities  of  some 
EU Member States and neighbouring countries. The president and members of the Council of 
the Commission for the Protection of Competition were elected by the Serbian Parliament in 
October 2010. 

However,  the  law  on  competition  protection  has  been  undermined  by  the  adoption  of  some 
conflicting  horizontal  legislation  notably  on  mandatory  car  insurance.  The  financial  plan  of 
the CPC for 2010 has not yet been adopted by the Government. The CPC's capacity to carry 
out economic analysis and to deal with procedural matters remains to be further strengthened 
in order to fully implement with the IA requirements. Moreover, the CPC needs to improve its 
expertise  and  knowledge  in  procedural  matters.  The  capacity  of  the  judiciary  to  deal  with 
substantive  issues  of  competition  remains  weak  and  significant  efforts  are  needed  in  this 
respect. A solid enforcement record remains to be demonstrated.  

There has been some progress in the area of state aid. A State aid authority was established in 
December  2009,  as  required  by  the  SAA,  and  became  operational  in  April  2010.  The 
Commission  is  supported  by  the  Permanent  Secretariat  of  the  State  Aid  Control  as  an 
independent department within the Finance Ministry. In July 2010 the Commission for State 
Aid Control adopted the State aid inventory for 2009. However, the administrative capacity of 
the  State  aid  authority  secretariat  needs  to  be  substantially  strengthened.  Serbia  needs  to 
continue its efforts to establish a track record in enforcing State aid decisions. 

Overall, Serbia remains moderately advanced in meeting the Interim Agreement requirements 
in the area of competition. However, the capacity and the expertise of the Commission for the 
Protection of Competition and of the judiciary have to be strengthened.  

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4.1.6.  Public procurement 

Little  progress  has  been  made  in  the  area  of  public  procurement.  The  Public  Procurement 
Office  (PPO)  published  a  number  of  decision  templates  and  models  of  tendering 
documentation,  with  the  aim  of  assisting  the  contracting  authorities.  The  PPO  carried  out 
training  seminars  for  various  stakeholders  throughout  the  country  and  further  promoted  and 
serviced  the  public  procurement  web  portal.  The  members  of  the  Commission  for  the 
Protection of Bidders' Rights were appointed in October 2010.  

However,  the  substantial  delays  in  the  establishment  of  the  new  Commission  for  the 
Protection  of  Bidders’  Rights  have  undermined  the  overall  development  of  the  public 
procurement  framework.  In  addition,  shortcomings  in  the  existing  legislative  framework, 
including the lack of an appropriate regulatory framework on concessions, still remain to be 
addressed. The weak administrative capacity of public procurement bodies, in particular the 
public  procurement  unit  in  the  Ministry  of  Finance,  the  PPO  and  the  review  body,  has 
persisted.  The  financial  resources  of  these  bodies  remain  scarce.  The  coordination 
mechanisms among the main stakeholders in the public procurement system, especially with a 
view  to  reducing  the  scope  for  corruption,  remain  weak.  The  certification  of  public 
procurement officials has not yet started. The strategy for upgrading the public procurement 
system in Serbia remains at early stage. As a result, inefficiencies in the use of public money 
persist, as detected by the Supreme Audit Institution in its 2008 budget audit report.  

Overall,  Serbia’s  preparations  for  establishing  an  effective  and  fully  independent  public 
procurement  system  with  streamlined  award  procedures  are  still  moderately  advanced. 
Significant efforts remain necessary to strengthen the capacity to implement the EU acquis in 
this field. 

4.1.7. 

Intellectual property law 

Progress has been made in the area of intellectual property rights. The Intellectual Property 
Office (IPO), which plays the role of national coordinator for intellectual property rights, has 
set up an in-house education and information centre. However, the financial sustainability of 
the IPO has been a source of concern. Discussions on the long term financial sustainability of 
the  IPO  have  been  ongoing  but  no  solution  has  yet  been  found.  The  national  intellectual 
property rights strategy needs to be finalised. 

A new law on copyright and related rights was adopted in December 2009 and was followed 
by  implementing  legislation.  It  establishes  a  Commission  on  Copyright  and  Related  Rights 
empowered  to  decide  on  the  tariffs  if  no  agreement  is  reached  between  the  associations  for 
collective management of copyrights. However, the members of the Commission have not yet 
been appointed by the Government. The law on optical discs remains to be adopted. 

Progress was made in relation to industrial property rights. As of October 2010, Serbia has 
become  member  of  the  European  Patent  Organisation.  In  line  with  the  Interim  Agreement, 
some  international  conventions  including  the  European  Patent  Convention  as  well  as  the 
International  Union  for  the  Protection  of  New  Varieties  of  Plants  Convention  were  ratified. 
Legislation  on  industrial  design,  on  topography  of  integrated  circuits  and  on  indications  of 
geographical  origin  has  been  adopted,  in  line  with  the  Interim  Agreement.  The  new  law  on 
trademarks  introduces  an  administrative  procedure  for  appealing  against  IPO  decisions.  A 
newly  adopted  Strategy  for  Scientific  and  Technological  Development  fosters  a  number  of 

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innovative  activities,  and  provides  an  indirect  impetus  to  raise  the  number  of  patent 
applications. However, the law on patents has not yet been adopted. 

Some  progress  was  made  in  the  field  of  enforcement.  Serbia  has  set  up  specialised  units 
(high-tech  crime  prosecutor,  police  cyber  unit,  specialised  customs  unit,  tax  unit  and  tax 
police) aimed at enforcing the legislation in this area. The length of investigations has been 
shortened. The frequency of checks by tax inspectors has risen, whereas the number of cases 
brought  for  prosecution  has  dropped,  pointing  to  better  compliance  overall  with  the  law. 
Seizures  by  market  inspectors  have  further  improved.  The  customs  administration  has 
continued  to  make  progress  in  enforcing  intellectual  property  rights.  It  fully  updated  an 
electronic  database  of  customs  offences  in  the  field  of  intellectual  property  rights  and 
introduced  electronic  handling  of  requests  for  protection  of  Intellectual  Property  Rights.  A 
Memorandum of Understanding has been signed between the Intellectual Property Office and 
the Judicial Academy to provide specialised training. 

However,  specialisation  of  judges  and  court  panels  in  this  area  needs  to  be  ensured. 
Inadequate  storage  space  for  counterfeited  and  pirated  goods  that  infringe  copyright  and 
related rights or other industrial property rights continues to be a problem. 

Overall,  Serbia’s  preparations  in  the  area  of  intellectual  property  law  remain  moderately 
advanced.  Further  efforts  are  needed  in  terms  of  alignment  with  the  acquis.  Concerning 
enforcement, better co-ordination among relevant agencies is required, as well as substantial 
investment in specialised judicial training.  

4.1.8.  Employment and social policies, public health policy 

Some  progress  has  been  made  on  employment  policy.  Implementing  legislation  concerning 
the law on employment and unemployment insurance and the law on vocational rehabilitation 
and  employment  of  disabled  persons  was  adopted.  In  September  2009  the  action  plan  for 
implementation  of  the  youth  employment  policy  for  2009-2011  entered  into  force.  In 
February  2010,  the  government  adopted  the  national  action  plan  for  employment  for  2010, 
which defines priorities, goals, programmes and measures of employment policy. The plan is 
the main instrument of an active employment policy aimed at boosting investment in human 
resources, supporting social inclusion in the labour market and creating new jobs. In August 
2010,  the  national  employment  action  plan  for  2011  was  adopted  to  provide  continuity  in 
implementation  of  the  employment  strategy.  The  general  budget  cuts  in  response  to  the 
economic  crisis  did  not  affect  the  budget  allocated  to  active  labour  market  policies.  The 
government also continued with start-up loans aimed at generating new jobs.  

The national employment service has reallocated its human resources to keep administrative 
capacity  unchanged  for  its  main  functions.  A  centre  for  professional  rehabilitation  and 
employment of disabled persons has been established, as well as a Fund for employment of 
young  persons.  From  January  until  September  2010  the  number  of  employed  persons  with 
disabilities  increased.  Coordination  and  cooperation  between  the  ministry  and  the  national 
employment service has improved and regular monthly meetings have been established. The 
Republican Health Insurance Fund has completed a database on all insurers, and established a 
system for social security registration with the national employment service, thus simplifying 
the registration procedure.  

All these measures have been used to counter the impact of the economic crisis and maintain 
the  level  of  employment  but  have  not  brought  the  desired  results.  Only  a  limited  share  of 

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unemployed  people  could  be  addressed,  whilst  in  the  aftermath  of  the  global  financial  and 
economic  crisis  unemployment  continued  to  rise  and  the  employment  rate  dropped  to  50%. 
The situation of young jobseekers and of long-term unemployed is of particular concern. The 
economy  continues  to  suffer  from  skills  mismatch.  Serbia  has  to  face  considerable  labour 
market challenges and the policy response is insufficient to deal with the scale of the problem. 

Regarding  social  policies,  there  have  been  no  changes  to  the  Labour  Law  since  the 
amendments made in July 2009.  

Some progress has been made in the area of health and safety at work. Activities related to 
implementation  of  integrated  inspection  control  have  intensified.  Under  this  approach,  one 
inspector will be competent to carry out inspection of workplaces concerning compliance with 
both  the  labour  law  and  occupational  health  and  safety  regulations.  In  the  legislative  area, 
several  Rulebooks  were  adopted  with  the  aim  of  transposing  EU  Directives  on  health  and 
safety  at  work  into  national  law.  A  rulebook  on  risk  assessment  was  amended.  The 
Occupational Safety and Health Strategy Action Plan was adopted. An action plan for 2010-
2014 for  the  labour  inspectorate has been drawn up. However, despite an improvement,  the 
number of accidents at work remains high.  

As regards social dialogue, amendments to the law on peaceful settlement of work disputes 
were  adopted.  This  enlarged  the  list  of  disputes  that  can  be  treated  under  this  law  and 
prescribed  conditions  for  appointing  an  arbitrator.  The  amended  law  regulating  the  work  of 
the Agency for Peaceful Settlement of Labour Disputes was passed by parliament. However, 
social  dialogue  is  weakened  by  the  unresolved  issue  of  representativeness  of  the  social 
partners  and  a  burden  of  mistrust  among  the  social  partners.  Moreover,  the  input  of  social 
partners into the decision-making process and the drafting of legislation remains limited due 
to  both  the  government's  lack  of  strategic  approach  in  the  consultation  process  and  to  the 
limited capacities of the social partners. The functioning of the Economic and Social Council 
at central as well as at municipal levels still needs to be improved. Bipartite social dialogue is 
still rather weak.  

Regarding social inclusion, after having established the team for social inclusion in 2009, the 
government  continued  with  establishment  in  early  2010  of  the  working  group  on  social 
inclusion, made up of representatives from all institutions in charge of defining, implementing 
and  monitoring  social  inclusion.  However,  with  the  economic  crisis,  poverty  has  risen:  the 
rate of those living below the absolute poverty level rose from 6.1% in 2008 to 6.9% in 2009, 
while  the  rate  of  those  living  below  the  relative  poverty  level  rose  from  13.2%  in  2008  to 
13.6% in 2009. As the number of those living close to this relative poverty level is quite high, 
further deterioration of the economic situation may increase these rates. Fighting poverty and 
social exclusion, not least of vulnerable categories of the population, with particular reference 
to the Roma population, Roma refugees, IDPs and some pensioners, remains a key challenge. 
The deepening disparity between regions is a matter of concern. 

Concerning  discrimination,  an  important  step  forward  was  appointment  of  the  Anti-
Discrimination  Commissioner  in  early  2010.  The  Commissioner  has  a  wide  range  of  duties 
related  to  dissemination  of  information  on  discrimination,  providing  legal  support  to  the 
victims  of  discrimination  and  monitoring  the  implementation  of  laws  which  may  have 
discriminatory elements, including the right to initiate amendments or new laws related to this 
topic.  However,  further  efforts  are  needed  to  ensure  that  the  Commissioner  becomes 
operational. A comprehensive approach in the field of the anti-discrimination policies remains 

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to  be  ensured.  Vulnerable  groups,  such  as  Roma,  persons  and  children  with  disabilities  and 
the LGBT population, remain the most exposed to discrimination.  

As  regards  gender  equality,  the  law  on  gender  equality  was  adopted  and  has  been  in  force 
from  December  2009.  In  August  2010,  the  Government  adopted  an  action  plan  for 
implementation  of  the  national  strategy  aimed  at  improving  position  of  women  and  gender 
equality. Harmonisation with EU legislation has also been carried out. Institutional structures 
have been established, and despite the general context of budget cuts and a staff freeze, the 
number of staff dealing with this policy was maintained. However, women and in particular 
disabled women, single mothers, older women and those living in rural areas still continue to 
face  discrimination  in  the  labour  market.  Women  are  under-represented  in  decision-making 
positions.  

In the area of social  protection, the  amendments  to  the  law  on  financial  support  to  families 
with  children  were  adopted  in  December  2009.  In  May  2010,  the  rulebook  on  the  work  of 
centres for social care was adopted. However, the pension system continues to record a high 
deficit despite pension reforms conducted in recent years. Many older people are exposed to 
poverty, including those not covered by the pension system.  

There has been progress in the area of public health. The National Health Council of Serbia 
prepared the strategic ‘Health Protection Development Plan’ for 2010-2015, which is pending 
adoption  by  the  Parliament.  In  the  fields  of  blood  and  tissues  and  cells,  the  Directorate  for 
Biomedicine was established within the Ministry of Health, and a coordinator for organ, tissue 
and cell transplantation has been designated at the Clinical Centre in Serbia. Furthermore, an 
awareness-raising  campaign  on  transplantation  has  been  launched.  The  legislation  on 
biomedicine and transfusion is being implemented. Some progress can be reported in the field 
of  tobacco.  The  law  on  protection  from  exposure  to  second-hand  tobacco  smoke  has  been 
adopted. However, pictorial health warnings remain to be introduced on cigarette packages. 

The law on drugs and medical devices was adopted in April 2010. Activities related to mental 
health,  cancer  prevention,  communicable  diseases  and  alcohol  continued.  The  Serbian 
Institute of Mental Health was designated as a WHO Collaborating Centre for mental health 
care  and  workforce  development.  Good  cooperation  with  the  European  Centre  for  Disease 
Prevention  and  Control  continues.  However,  efforts  towards  de-institutionalisation  and 
community-based institutions need to continue. The administrative capacity of the Ministry of 
Health  and  of  the  Institute  for  Public  Health  needs  to  be  strengthened.  Further  efforts  are 
needed to implement adopted strategies.  

Overall,  preparations  are  continuing  towards  meeting  European  Standards  in  the  areas  of 
employment  and  social  policy.  However,  declining  employment  rates  and  increasing 
unemployment are a source of concern, in particular with regard to young people and the most 
vulnerable groups. 

4.1.9.  Education and research 

Some progress has been made in the field of education. Serbia has started reforms in primary 
and  secondary  levels  of  education  and  is  continuing  Bologna  reforms  in  higher  education. 
With  the  help  of  the  European  Training  Fund,  it  is  starting  the  process  of  reforming  its 
vocational education and training system. 

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Several laws in the field of education and training were adopted in 2010. In April a new law 
on pre-school education aimed at improving the quality and access to education was adopted. 
In May a Law on Pupils' and Students' Standards has been adopted, based on the principle of 
social inclusion. Amendments to the Law on Higher Education were adopted in June 2010 by 
the Parliament.  

Primary  and  secondary  school  curricula  have  been  revised  and  were  implemented  in 
September 2010 in the first year of secondary level. As regard higher education, the European 
Credit Transfer and Accumulation System (ECTS) has been fully implemented in all higher 
education institutions. The three-cycle system is in place and preparation of doctoral studies 
under Bologna  guidelines is  starting.  In the vocational  education  and training (VET) sector, 
the  Council  for  Vocational  Education  and  Adult  Education  has  been  established;  it  is  a 
tripartite  body  with  key  functions  including  links  with  business,  national  qualification 
framework and curricula. 

Wide  consultations  with  youth  and  social  partners  have  been  initiated  with  a  view  to 
developing a Youth Law. Another 12 Youth Offices have been opened as part of the strategy 
for quality leisure time and personal development of young people.  

However,  an  overall  strategy  covering  all  levels  of  education,  including  lifelong  learning, 
needs  to  be  developed.  A  national  qualification  framework  remains  to  be  adopted.  Adult 
education is weak and needs a reform of contents, methods and infrastructure. The process of 
accreditation of universities and programmes has not been completed. Adjusting the education 
system to the labour market needs further improvement. Planned investment in the education 
sector has been cut from 3.9% to 3.3% of GDP.  

Good  progress  has  been  made  in  the  field  of  culture.  Serbia’s  participation  in  the  EU’s 
Culture  Programme  has  been  increasing  steadily.  The  UNESCO  Convention  for  the 
Safeguarding  of  the  Intangible  Cultural  Heritage  and  the  Council  of  Europe  Framework 
Convention on the Value of Cultural Heritage for Society have been ratified.  

Good  progress  was  registered  in  the  area  of  science  and  research.  Serbian  research  entities 
have  continued  to  successfully  bid  for  research  projects  under  the  7th  EU  Research 
Framework Programme (FP7). Serbia has improved its administrative capacity to implement 
the  FP7  Memorandum  of  Understanding  by  appointing  additional  contact  points  and 
observers  in  the  FP7  management  committees.  Interministerial  cooperation  has  been 
strengthened  in  relation  to  Serbia’s  participation  in  the  Competitiveness  and  Innovation 
Programme  (CIP).  Negotiations  to  associate  Serbia  with  the  7th  Euratom  Research 
Framework  Programme  (2007-2011)  are  ongoing.  In  February  2010,  Serbia  and  the  Joint 
Research  Centre  (JRC)  concluded  a  memorandum  of  understanding  on  scientific  and 
technological cooperation which will provide additional research opportunities. 

With respect to future integration into the European Research Area (ERA), Serbia adopted a 
national  strategy  for  scientific  and  technological  development  2010-2015  in  February  2010 
and  has  appointed  observers  in  most  ERA  governance  bodies.  In  March  2010,  further 
legislation was adopted, particularly with respect to issues such as innovation, scientific and 
research activities and intellectual property rights. This addresses the brain drain and reforms 
the Serbian Academy of Sciences. In May 2010 a bill was adopted allocating €400 million to 
fund research at national level over the four coming years. However, both public and private 
investment  in  research  remains  low  (less  than  0.5%  of  GDP)  and  Serbia  generally  needs  to 
reinforce its national research capacity.  

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Overall,  Serbia  is  moderately  advanced  towards  meeting  European  standards  in  the  area  of 
education. However, an overall strategy involving all levels of education, including lifelong 
learning,  remains  to  be  developed.  The  implementation  of  the  recent  reforms  should  be 
monitored closely. Further efforts are needed in the field of vocational education and training. 
Further efforts are needed to facilitate Serbia’s integration into the European Research Area 
and to strengthen its national research capacity.  

4.1.10.  WTO issues 

Negotiations for Serbia’s accession to the World Trade Organisation (WTO) are nearing their 
end,  the  bilateral  track  of  negotiations  being  already  completed  with  most  WTO  partners. 
Progress  has  also  been  made  on  the  multilateral  track.  However,  finalisation  of  the  process 
will  depend  on  the  pace  of  remaining  bilateral  negotiations  and  internal  reforms.  Serbia  is 
well placed to meet its objective of joining the WTO. 

4.2. 

Sectoral Policies 

4.2.1. 

Industry and SMEs 

Little progress was made in the SME sector. 

Serbia  continued  previous  efforts  to  move  from  the  phase  of  policy  formulation  and  the 
identification  of  strategic  objectives  to  policy  implementation  in  support  of  innovative 
companies, start-ups, provision of business services and information dissemination.  

The  action  plan  for  2009  was  successfully  implemented  —  with  some  activities  however 
postponed  due  to  lack  of  financial  resources.  The  action  plan  for  2010  was  adopted  and  is 
currently being implemented. The SME Business Council, with 80 SME representatives, was 
established  in  March  2010  and  steps  to  link  it  up  with  other  private  initiatives  have  been 
taken.  The  transformation  of  the  SME  Agency  into  the  National  Agency  for  Regional 
Development has been finalised. Financial support continued with start-up loans, investments 
in underdeveloped areas, programmes for innovation and clusters. 

Serbia  continued  its  participation  in  the  Entrepreneurship  and  Innovation  Programme  and 
joined  the  Information  Communication  Technologies  policy  Support  Programme  in  2010, 
thus  becoming  a  member  of  two  out  of  the  three  operational  programmes  under  the  EU’s 
Competitiveness  and  Innovation  Programme.  Serbia  also  continued  being  active  in  the 
Enterprise Europe Network. 

In  the  reporting  period  Serbia  continued  implementing  several  measures  to  improve  SME's 
access  to  finance  and  more  specifically  the  support  of  start-ups.  However,  developments  in 
the area of SMEs were affected by the shift of the focus of the ministry in charge of SMEs to 
regional development and also by a significant cut in human resources in its SME department. 
Reduced  administrative  capacity  raises  concern  for  the  implementation  of  the  national 
strategy for SME development 2008–2013 and for the implementation of the Small Business 
Act.  The  level  of  cooperation  between  the  ministry  in  charge  of  policy  and  the  agency  in 
charge of implementation needs to be improved.  

Serbia has made little progress in developing and implementing a modern industrial policy. 
The industrial strategy remains to be adopted. 

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Overall, Serbia’s preparations in the area of industry and SMEs are well advanced. However, 
reduced administrative capacity may adversely affect the good level that the SME policy has 
attained.  

4.2.2.  Agriculture and fisheries 

Progress  can  be  reported  in  the  area  of  agriculture  and  rural  development,  food  safety, 
veterinary and phytosanitary policy. 

In the area of agriculture and rural development, legislation on farm advisory systems has 
been adopted. The Directorate for Agrarian Payments, which is planned to serve as a future 
Instrument  for Pre-Accession  Assistance for Rural Development (IPARD) agency, has  been 
established. An action plan for IPARD programming and the establishment of the operating 
structures has been developed and a regular reporting mechanism on its implementation has 
been initiated. Two new regional rural centres have been established within the national rural 
development network, bringing their number to 16 country-wide. 

However,  implementation  of  the  law  on  agriculture  and  rural  development  remains  to  be 
completed.  The  national  strategy  for  agriculture  and  rural  development,  the  national 
programme  for  agriculture  and  the  national  programme  for  rural  development  have  not  yet 
been adopted. The managing authority remains to be appointed. The Directorate for Agrarian 
Payments  remains  to  be  fully  staffed.  An  interministerial  mechanism  for  coordinating  rural 
development policies has yet to be established.  

Progress has been made in the wine sector. Implementing legislation for the vineyard register 
has  been  adopted.  The  University  of  Belgrade,  Faculty  of  Agriculture,  Department  for 
Viticulture,  has  been  appointed  as  the  control  organisation  responsible  for  the  ‘System  of 
Designation for Wine with Geographical Indication’. However, the vineyard register remains 
to  be  established.  The  procedure  for  the  authorisation  of  the  oenology  laboratories  has  not 
started.  Implementing  legislation  regulating  import  conditions  and  marketing  and  quality 
matters remains to be adopted.  

Some  progress  has  taken  place  on  quality  policy.  The  law  on  indications  of  geographical 
origin was adopted, further aligning with the EU acquis and reinforcing implementation of the 
requirements  of  the  Interim  Agreement  on  the  protection  of  geographical  indications 
registered in the Union.  

Some  progress  has  been  made  on  organic  farming.  A  National  Action  Plan  for  the 
development  of  organic  farming  has  been  adopted.  A  new  law  on  organic  farming  was 
adopted  with  entry  into  force  foreseen  in  2011.  It  establishes  the  Directorate  for  National 
Reference  Laboratories  as  the  competent  authority  for  organic  farming.  However,  the 
Accreditation Body of Serbia needs to be internationally accredited in order to allow for the 
new law to enter into force in January 2011.  

Little progress has taken place in the area of food safety. Implementing legislation relevant 
for allowing export to European Union was adopted. However, the implementation of the law 
on food safety needs to improve. Substantial implementing legislation needs to be enacted and 
enforced.  The  principle  of  risk  analysis  is  not  yet  applied  and  an  adequate  database  system 
needs  to  be  set  up  for  this  purpose.  The  Hazard  Analysis  and  Critical  Control  Points  Plans 
need to be better implemented by operators and associated official controls. Inspections and 

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controls  at  the  external  border  need  to  be  further  upgraded.  The  ministry  needs  to  improve 
capacities to take on its new competences on food safety. 

Little  progress  can  be  reported  as  regards  upgrading  of  agri-food  establishments.  The 
instruction on hygiene requirements and official controls of products and establishments being 
approved for exports of milk and dairy products and exports of fish and fishery products to 
the  EU  was  adopted  following  the  Food  and  Veterinary  Office  mission’s  recommendations. 
However, a national programme for upgrading the establishments remains to be adopted.  

Progress  has  been  made  in  the  veterinary  area.  The  amendments  to  the  law  on  veterinary 
matters were adopted. They further align the legislation with the EU acquis on border issues 
and  simplify  the  current  system  of  import  licences.  The  law  on  medicine  was  adopted, 
establishing  limits  on  residue  levels.  Implementing  legislation  was  adopted  among  other 
things  on  conducting  border  veterinary  controls,  eradication  of  a  number  of  diseases  and 
animal  welfare.  In  the  field  of  animal  welfare,  two  European  conventions  on  pets  and 
protection of vertebrate animals were ratified.  

However, further amendments to the import licensing system will be necessary as the current 
system is not compatible with the acquis. The implementing legislation on border controls is 
not  enforced  and  veterinary  inspections  and  controls  at  external  borders  have  not  been 
upgraded.  Enforcement  of  legislation  in  relation  to  registration  and  control  of  all  cattle 
markets  needs  to  be  improved.  Awareness  of  the  legal  framework  for  animal  identification 
and registration needs to be raised and IT infrastructure needs to be upgraded. The Veterinary 
Directorate’s  capacities  for  database  operation  need  to  be  strengthened.  The  Veterinary 
Inspectors need continuous training on the new principles introduced by legislation.  

Progress  has  been  made  concerning  official  control  laboratories.  The  Directorate  for 
National  Reference  Laboratories  has  been  established  and  is  partly  operational.  The  legal 
competence  of  the  National  Reference  Laboratories  has  been  extended  to  animal  health. 
However, the administrative capacity of the Directorate remains to be further improved. . The 
national reference laboratories are not operational. The administrative competence with regard 
to  seeds  needs  to  be  clarified.  The  funding  and  charging  policy  for  laboratory  tests  at  the 
border is not unified. 

As regards genetically modified organisms (GMOs), the law banning imports of genetically 
modified reproductive material needs to be amended to be aligned with the acquis and WTO 
requirements. 

Some  progress  has  taken  place  in  the  phytosanitary  area.  The  law  on  recognition  of  plant 
varieties  was  adopted.  The  International  Convention  for  the  Protection  of  new  Varieties  of 
Plants was ratified. Implementing legislation has been adopted on control of potato bacterial 
diseases. Implementing legislation for the law on plant nutrition products and for the Law on 
Plant  Health  has  been  adopted.  A  rulebook  on  maximum  residue  levels  of  plant  protection 
products in food has been published. Implementing legislation has been adopted in the area of 
plant  breeders’  rights.  However,  further  implementing  legislation  needs  to  be  adopted 
especially  for  the  Law  on  Plant  Protection  Products.  The  procedure  for  registration  of  new 
plant protection products is not harmonised with the EU acquis. There is no official pesticide 
residues  monitoring  programme  meeting  the  EU  requirements  in  place.  The  strategy  and 
action  plan  for  the  introduction  of  a  plant  passport  scheme  are  not  yet  adopted.  Control  at 
external borders has not been upgraded. 

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Progress has taken place in the area of fisheries. Implementation of the new legal framework 
has almost been completed. The distribution of competences between the ministries has been 
clarified. Serbia has been included in the list of countries allowed to export fishery products to 
the EU.  

Overall,  Serbia  is  advancing  well  in  the  areas  of  agriculture  and  rural  development,  food 
safety,  veterinary  and  phytosanitary  policy  towards  meeting  European  Standards.  The  legal 
framework  continues  to  improve.  However,  implementation  and  enforcement  of  the 
legislation need to be upgraded, especially in the food safety area. Administrative capacity is 
weak  and  needs  to  be  more  efficiently  allocated.  Inspection  services  need  further  training. 
Recruitment of qualified staff needs to take place in the newly established bodies.  

4.2.3.  Environment 

Good progress can be reported in the area of the environment.  

As  regards  horizontal  legislation  the  National  Programme  for  Environmental  Protection 
(NPEP) 2010–2019 was adopted. The financing projections outlined in the NPEP are based 
on  a  low-cost  scenario  and  on  increased  user  charges,  which  will  require  considerable 
liberalisation  of  current  tariff  policies.  The  Serbian  Environmental  Protection  Agency 
continues to maintain a good level of cooperation with the European Environment Agency. 

In the area of air quality, progress can be reported. Implementing legislation to the law on air 
quality  was  adopted.  However,  implementing  legislation  on  emission  limit  values  and 
emission measurements at large point sources remains to be adopted.  

Progress can be reported on waste management. A regulation on establishing the plan for the 
reduction of packaging waste for the period from 2010 until 2014 has been adopted, following 
the  adoption  of  laws  on  waste  management.  In  addition,  the  National  Waste  Management 
Strategy  (NWMS)  was  adopted.  The  NWMS  provides  guidance  on  the  implementation  of 
waste  legislation.  It  establishes  systems  for  the  management  of  specific  waste  streams. 
However, the procedures for setting product charges, as well as criteria and procedures for the 
Environmental  Fund  to  finance  waste  recovery  and  recycling  activities  need  to  be  further 
established. Waste management plans at regional and local levels have to be developed.  

There  has  been  progress  on  water  quality.  A  new  law  on  water  was  adopted.  Water 
management is to be financed by the national and the Vojvodina provincial budget, as well as 
by water fees, concession fees and other funds. Dissuasive water pollution fees are to be paid 
to  the  Environmental  Protection  Fund  and  to  be  used  for  the  construction  of  waste  water 
treatment  plants.  However,  there  is  still  no  system  to  monitor  nitrate  concentrations  in  and 
contamination  of  groundwater.  The  wastewater  treatment  infrastructure  throughout  the 
country needs upgrading. The Water Directorate within the Ministry of Agriculture, Forestry 
and Water Management remains to be strengthened. The administrative capacity of the water 
directorate was reduced.  

Progress  can  be  reported  on  nature  protection.  Serbia  adopted  the  law  on  wild  game  and 
hunting  in  March  2010,  aligning  further  with  the  acquis  and  international  obligations  under 
the Bonn Convention on Conservation of Migratory Species of Wild Animals. Serbia adopted 
the  new  law  on  forests,  which  provides  for  a  framework  to  protect  the  forest  against 
atmospheric pollution and fire. However, the strategy on biodiversity remains to be adopted. 

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On  industrial pollution control and risk management there  has been some progress. The 
process  of  implementing  the  International  Plant  Protection  Convention  has  started  with  the 
first applications received from existing installations in the cement industry as well as from a 
new installation for pesticide production. The list of installations which will have to comply 
with the acquis before 2015 is being revised. 

Good  progress  can  be  reported  on  chemicals.  The  Chemicals  Agency,  a  regulatory  and 
implementation body dealing with biocidal products and chemicals became operational.  

Concerning  climate  change,  good  progress  can  be  reported  even  if  a  number  of  important 
implementation steps remain. The National Strategy for Incorporation of Serbia into the Clean 
Development  Mechanism  under  the  Kyoto  Protocol  was  adopted  by  the  Government  in 
February  2010  for  agriculture,  forestry  and  waste  management  sectors.  The  first  National 
Communication under the UNFCCC and greenhouse gas inventory is under development and 
is expected to be finalised in 2010. Serbia also associated itself with the Copenhagen Accord. 
A  national  ozone  office  was  established  within  the  Ministry  of  Environment  and  Spatial 
Planning  responsible  for  the  phasing  out  of  ozone  depleting  substances.  There  has  been  an 
improvement  in  human  resources  working  on  climate  change  but  further  increase  in  staff  is 
still needed. 

As regards noise, there has been no progress in implementation of the legislation. 

As regards administrative capacity there was little progress. Further training was provided to 
the  environmental  protection  inspectorates.  The  Environmental  Protection  Agency  remains 
fully  operational  and  its  performance  is  improving.  The  Environmental  Protection  Fund 
continues to be active. However, it still lacks the capacity to ensure proper implementation of 
the integrated monitoring strategy. Budgetary resources for environmental protection remain 
low.  The  institutional  capacity  needs  to  be  strengthened,  especially  at  local  level.  Better 
coordination with the central level as well as further enforcement remain necessary.  

Overall,  Serbia  is  moderately  advanced  in  the  area  of  environmental  protection  towards 
fulfilling the European standards. The capacity to implement and enforce legislation remains 
to be strengthened. 

4.2.4.  Transport policy 

Serbia has made some progress in the area of transport.  

In  the  area  of  trans-European  transport  networks,  there  has  been  some  progress.  Serbia 
participated  in  the  update  of  the  Multiannual  Plan  2010-2014  of  the  South  East  Europe 
Transport  Observatory  (SEETO).  A  new  road  route  was  introduced  in  the  Core  Network 
within  Serbia.  A  General  Master  Plan  covering  infrastructure  projects  for  all  modes  of 
transport  up  to  2027  was  adopted.  The  action  plan  for  2010  for  the  implementation  of  the 
national transport strategy was adopted. Regarding the implementation of the action plan for 
construction  of  Corridor  X,  works  on  some  road  sections  have  continued.  However,  the 
implementation  of  the  action  plan  is  at  an  early  stage,  with  the  company  responsible  for 
Corridor X being restructured. 

There has been some progress in the area of road transport. Serbia has allowed unrestricted 
transit traffic for EU carriers to comply with its obligation under the Interim Agreement. The 
European Agreement concerning the International Carriage of Dangerous Goods by Road has 

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been  ratified.  The  agreement  with  Montenegro  on  transport  of  passengers  and  goods  in 
international  road  transport  was  ratified.  The  law  on  road  safety  entered  into  force  in 
December  2009.  The  number  of  road  accidents has  been  reduced  over  the  reporting  period. 
The  amendments  to  the  law  on  international  road  transport  have  further  aligned  national 
legislation  with  the  acquis  by  introducing  the  certificate  of  professional  competence  for 
managers.  Implementing  legislation  on  driving  and  rest  periods,  digital  tachographs  and 
technical  conditions  of  vehicles  has  been  adopted.  The  Agency  for  Road  Safety  has  been 
established and became operational in September 2010.  

However the legislation on transport of dangerous goods, on transport of passengers and on 
carriage  of  goods  remains  to  be  adopted.  An  interministerial  coordination  body  needs  to  be 
established  for  road  safety  and  the  implementing  legislation  needs  to  be  adopted.  The 
implementation  of  digital  tachographs  has  been  delayed  due  to  the  lack  of  administrative 
capacity. 

In rail transport, there has been little progress. Regarding restructuring of the railway sector, 
the  methodologies  for  determining  the  public  service  obligation  and  for  calculating  access 
charges  for  railway  infrastructure  were  adopted.  Implementing  legislation  on  the  public 
service  obligations  and  compensations  has  been  adopted.  Serbia  has  ratified  the  Bilateral 
Agreement with Montenegro for border control in railway traffic.. However the conditions for 
full market opening are not in place to allow gradual market opening. The law on railways has 
not  yet  been  amended.  No  Network  Statement  has  yet  been  published.  The  separation  of 
accounts  between  infrastructure  and  services  within  the  infrastructure  manager  has  not  yet 
taken place. The Directorate for Railways is still not exercising its role as regulatory body.  

Little  progress  has  taken  place  in  combined  transport.  Serbia  has  ratified  the  Agreement 
with Hungary on combined transport and logistical services and the agreement has started to 
be implemented.  

Good  progress  was  made  in  inland  waterways.  Serbia  has  adopted  six  international 
conventions of the International Maritime Organisation. Serbia has also ratified the bilateral 
agreement with Croatia on navigation on inland waterways and their technical maintenance. 
The  Law  on  Navigation  and  Ports  on  Inland  Waterways  has  been  adopted.  However,  river 
information systems need to be set up. 

Good  progress  has  taken  place  in  air  transport.  The  provisions  of  the  European  Common 
Aviation  Area  (ECAA)  Agreement  in  relation  to  market  access  have  been  applied  and  the 
market has been opened to new carriers. The law on civil aviation aimed at implementing the 
first  transitional  phase  of  the  ECAA  has  been  adopted,  addressing  a  number  of  previously 
outstanding issues in the field of aviation safety, ground handling, and aviation security. On 
air  traffic  management,  Serbia  organised  with  Montenegro  their  respective  airspace  into  a 
functional  airspace  block.  However,  Serbia  still  needs  to  make  further  efforts  to  complete 
regulatory  alignment  with  the  single  European  sky  within  the  Implementation  of  Single 
European  Sky  in  South-East  Europe  (ISIS)  Programme.  Legislation  of  the  single  European 
sky, in particular the regulations on provision of air navigation services, organisation and use 
of airspace, interoperability of the European Air Traffic Management network and the flexible 
use of airspace regulation need to be adopted. Separation of responsibilities for inspection and 
audits as well as establishment of an independent air accident investigation have not yet been 
done.  The  security  control  system  remains  to  be  overseen  by  an  independent  body.  The 
administrative capacity of the ministry has not been reinforced.  

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Overall,  Serbia  is  moderately  advanced  in  the  area  of  transport.  It  has  continued  to  comply 
with  the  obligations  of  the  Interim  Agreement  and  SAA.  Market  access  provisions  of  the 
ECAA  Agreement  are  now  applied.  Framework  legislation  has  been  adopted  for  inland 
waterways  and  air  transport.  However,  framework  legislation  remains  to  be  adopted  for 
railways. Reform of the railway sector needs to be stepped up. Administrative capacity needs 
to be strengthened for the implementation of the adopted legislation.  

4.2.5.  Energy 

Some  progress  can  be  reported  in  the  energy  sector.  The  programme  for  implementing  the 
current Energy Sector Development Strategy 2007-2012 was revised in April 2010. 

There  has  been  little  progress  in  security  of  supply,  with  no  developments  as  regards  oil 
stocks. At an estimated 45 days, they remain far below European requirements (90 days), and 
oil  stocks  legislation  remains  to  be  adopted.  There  has  been  an  increase  in  gas  reserves. 
Construction  of  the  underground  gas  storage  facility  in  Banatski  Dvor  has  been  completed 
with a view to securing gas supplies in the event of unexpected cuts from current sources. A 
joint  venture  or  the  storage  facility  was  established  with  Gazprom  (51%)  in  October  2009. 
The contract for the establishment of a joint company for the construction of the South Stream 
gas pipeline through Serbia was signed in October 2009. In March 2010 a Joint Statement for 
the  development  of  the  Nis-Dimitrovgrad  gas  interconnector  with  Bulgaria  was  signed. 
However,  the  financing  of  the  project  needs  to  be  secured.  Natural  gas  interconnections 
between  Serbia  and  other  countries  in  the  region  remain  limited  and  there  is  no  physical 
possibility for diversification of gas supply sources. 

As regards electricity interconnections, the 400 KV overhead line between Nis and Leskovac 
has  been  completed.  The  section  from  Leskovac  to  the  border  with  the  former  Yugoslav 
Republic of Macedonia is still under construction as well as the new line with Romania. 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.  However, 
following a complaint from the Kosovan Transmission System Operator, the Secretariat of the 
Energy Community launched a dispute settlement procedure taking the preliminary view that 
Serbia "failed to fulfil its obligation under the Energy Community Treaty".  

Serbia  made  little  progress  in  the  context  of  the  internal  energy  market.  In  the  electricity 
sector, transmission costs have been separated from other costs. The electricity transmission 
system operator has, to a large extent, become financially sustainable. Formal opening-up of 
the electricity and gas markets to non-household consumers has been completed. The Energy 
Regulatory Agency (AERS) has been working well, in line with Energy Community Treaty 
requirements.  

However, several competencies foreseen under the Energy Community Treaty have not been 
granted to the regulator. Tariffs are not yet cost-reflective. Amendments to the Energy Law, 
concerning  the  supply  function  in  both  the  electricity  and  gas  sectors  and  extension  of  the 
legal responsibilities of the AERS, remain to be adopted. The separation of distribution and 
supply  in  the  electricity  sector  still  has  to  be  completed.  The  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. In the gas 
sector,  the  legal  unbundling  of  Srbijagas  remains  to  be  achieved  along  with  proper 
implementation  of  the  Regulation  on  conditions  for  access  to  the  natural  gas  transmission 
networks.  

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There  has  been  little  progress  in  energy  efficiency  and  renewable  energy.  The  national 
energy  efficiency  action  plan  was  adopted  in  July  2010.  The  government  adopted 
implementing  legislation  on  renewable  energy  in  November  2009,  namely  on  privileged 
producers of electricity, including incentive measures (feed-in tariffs) for electricity produced 
from  renewable  energy  sources.  However  the  main  elements  of  the  acquis  on  renewable 
energy  remain  to  be  transposed.  Serbia  does  not  have  a  legislative  framework  on  energy 
efficiency in place. The law on rational use of energy remains to be adopted. 

Serbia  has  made  some  progress  in  the  areas  of  nuclear  safety  and  radiation  protection 
especially concerning the decommissioning programme of the "RA" research reactor at Vinca. 
Decommissioning  of  the  Vinča  research  reactor,  preparation  for  the  repatriation  of  spent 
nuclear  fuel  to  the  Russian  Federation  and  management  of  radioactive  waste  on-site  are 
progressing  well  although  not  fully  in  line  with  the  planned  time  schedule.  The  Serbian 
Radiation Protection and Nuclear Safety Agency (SRPNA) was established in December 2009 
and became operational in the second half of 2010. The Director of the Agency was appointed 
in July 2010. 

However, legislation and working procedures in the nuclear area need be revised in order to 
comply  with  the  EU  acquis.  Working  procedures,  appropriate  staffing  and  technical  means 
have to be established to enable the SRPNA to work properly. Responsibility for inspection 
and the operating budget for the Agency need to be clearly defined. Serbia still needs to ratify 
the  Convention  on  Nuclear  Safety  and  the  Joint  Convention  on  the  Safety  of  Spent  Fuel 
Management and on the Safety of Radioactive Waste Management.  

Overall,  Serbia  is  moderately  advanced  in  the  implementation  of  the  SAA  and  of  the 
European standards in the energy sector. Further efforts are needed to achieve unbundling and 
real market opening together with a pricing policy offering a sustainable tariff reflecting costs. 
The  implementation  of  the  internal  market  requires  transparency  and  non-discriminatory 
access rules. To this end, the current Energy Law needs to be amended and put in line with 
the  electricity  and  gas  acquis,  and  the  role  and  independence  of  the  AERS  needs  to  be 
strengthened. Further efforts need to be made to strengthen the nuclear regulator.  

4.2.6. 

Information society and media 

Some  progress  can  be  reported  on  electronic  communications  and 
information 
technologies. The law on electronic communications was adopted by the parliament in June 
2010. The law aims at approximating the Serbian legislation to the 2002 and partly the 2009 
EU  regulatory  framework  on  electronic  communications.  The  new  strategy  for  electronic 
communications was adopted in September 2010. The Regulatory Agency has adopted rules 
on  costs  for  radio  station  licence  issuance  and  on  radio  frequency  usage  fees.  It  has  also 
adopted a decision on designation of universal service operators and adopted rules on number 
portability in public mobile telecommunication networks which will enter into force in 2011. 
However, few competitive safeguards have yet been introduced and tariffs are not rebalanced. 
Market competitiveness is still limited.  

The  process  of  privatising  the  incumbent  operator  in  the  fixed  telephony  market  has  been 
launched.  In  February  2010  a  second  national  fixed  telephony  licence  was  awarded  for  an 
initial period of 10 years but with the agreement not to allow similar new licences until the 
end  of  2011,  thereby  keeping  competition  in  the  sector  limited  despite  the  adoption  of  the 
primary law. 

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Concerning administrative capacity, both the Regulatory Agency and the ministry need to be 
strengthened. In particular, the regulator needs expertise to ensure the implementation of the 
new  law  on  electronic  communications.  The  board  members  of  the  regulatory  authority 
remain to be appointed. 

There has been some progress on information society services. A law regulating e-commerce 
and implementing legislation regarding the law on electronic documents have been adopted. 
Concerning electronic signatures, two more certification service providers were certified. The 
government  adopted  in  October  2009  the  strategy  for  e-government  development  and  the 
action  plan  for  its  implementation  from  2009  to  2013  as  well  as  the  national  broadband 
strategy  and  action  plan.  A  10  year  strategy  for  development  of  the  information  society  in 
Serbia  was  adopted  in  July  2010.  A  number  of  planning  decisions  regarding  the  transition 
from  analogue  to  digital  terrestrial  broadcasting  were  adopted  and  several  international 
agreements were ratified. 

However,  implementing  rules  remain  to  be  adopted  to  ensure  that  the  switchover  process 
takes place as indicated in the 2009 digital switchover strategy.  

As  regards  audiovisual  policy,  implementation  of  the  law  on  public  information  and  its 
amendments has continued, producing some positive effects such as greater responsibility for 
distribution  companies,  founders  of  media  outlets  and  editors-in-chief  as  well  as  increased 
accountability for breaking the presumption of innocence and violating the rights of minors. 
However, some provisions of the law include excessive fines for the violation of professional 
standards and for non-registration of media outlets.  

Preparations for a comprehensive media strategy are ongoing. Media legislation remains to be 
aligned with the Audiovisual Media Services Directive.  

Overall,  preparations  in  the  area  of  information  society  and  media  have  continued.  The 
legislative  framework  has  been  strengthened,  but  implementation  remains  slow  and 
inadequate market and regulatory developments in the electronic communications sector are 
of particular concern. Preparations in the field of information society services are moderately 
advanced. In the audiovisual area, media legislation needs to be aligned with the acquis, and a 
number of provisions of the law on public information continue to raise concerns.  

4.2.7.  Financial control 

Progress has been made in the area of public internal financial control (PIFC). A Central 
Harmonisation Unit (CHU) was established in the Ministry of Finance in March 2010.Budget 
inspection  was  fully  separated  from  the  CHU  function.  A  certification  scheme  for  internal 
auditors  has  been  developed  by  the  CHU,  and  a  committee  for  the  examination  and 
certification  of  internal  auditors  in  the  public  sector  was  established  by  the  Minister  of 
Finance.  The  Budget  System  Law  was  amended  to  improve  alignment  with  international 
standards.  

However,  Serbia  needs  to  continue  with  the  establishment  of  internal  audit  units  in  budget-
user  organisations  and  auditors  require  further  training.  Managerial  accountability  and 
development of financial management and control are still at early stages. Centralised budget 
inspection needs to be further developed. 

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48 

   EN 

 
With regard to external audit, in May 2010 the Law on the State Audit Institution (SAI) was 
amended primarily to allow easier recruitment of audit staff and better salary conditions. The 
SAI  performed  a  partial  audit  of  the  2008  state  accounts  and  reported  to  parliament  in 
November 2009. However, the SAI is not yet fully operational and further audit staff needs to 
be recruited.  

Overall,  there  has  been  progress  in  this  area,  but  Serbia  is  still  at  an  early  stage  in  the 
implementation of PIFC and external audit.  

4.2.8. 

Statistics 

There  has  been  some  progress  on  statistical  infrastructure.  Cooperation  and  coordination 
between  the  Statistical  Office  and  other  producers  of  official  statistics  have  improved,  in 
particular  with  the  Ministry  of  Agriculture.  A  Statistical  Council,  bringing  together 
representatives  from  various  ministries,  has  been  created.  Legislation  on  statistics,  on  the 
agricultural census, the population census and the classification of economic activities, were 
adopted in December 2009. The Statistical Office was reorganised in April 2010 following a 
10% staff cut. However, further budgetary as well as staff resources required for the statistical 
production remains to be ensured.  

Good progress was made on classifications and registers. A substantial effort has been made 
to  develop  the  statistical  business  register  on  which  two  regulations  were  adopted  in  July. 
There  has  been  some  progress  towards  harmonising  the  Serbian  regional  statistical 
classification with the EU NUTS4 Regulation, but a formal agreement still has to be reached 
with Eurostat.  

There has been good progress on sector statistics. Preparations for the census on population 
and  housing  are  well  advanced.  Special  efforts  have  been  made  to  involve  the  Roma 
population  in  the  census.  Preparations  are  being  made  for  an  agricultural  census.  A  pilot 
agricultural  census  was  conducted  in  December  2009.  National  accounts  have  been  further 
developed. A labour cost survey has been carried out for the first time. Business and Energy 
statistics have been further developed. However, the budget for the population census is not 
yet allocated. 

Overall,  Serbia  has  made  good  progress  in  statistics  and  is  moderately  advanced  towards 
meeting  the  requirements  of  the  European  standards.  Preparations  for  the  population  census 
are well advanced but its funding remains to be ensured. Further progress is needed in several 
statistical  domains  and  notably  concerning  strengthening  of  the  capacity  of  the  Statistical 
Office.  

4.3. 

Justice, freedom and security 

4.3.1.  Visa, border management, asylum and migration 

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

Visa-free travel to the Schengen area entered into force in December 2009 for Serbian citizens 
holding  biometric  passports,  after  Serbia  had  fulfilled  the  requirements  of  the  visa 

4 

Nomenclature of Territorial Units for Statistics 

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49 

   EN 

 
                                                 
liberalisation  roadmap.  In  the  first  months  of  the  visa-free  travel  regime  with  the  Schengen 
countries, increased numbers of asylum seekers from Serbia had been registered in Belgium 
and  Sweden.  After  the  readmission  of  Serbian  citizens,  who  had  filed  unfounded  asylum 
applications,  and  preventive  action  taken  by  the  Serbian  authorities,  the  numbers  have 
declined.  However,  a  new  rise  in  asylum  applications  was  registered  in  August  and 
September.  The  authorities  need  to  continue  informing  citizens  about  the  rights  and 
obligations  stemming  from  visa-free  travel.  Allegations  of  bogus  changes  of  residence  of 
Kosovo residents to Serbia, facilitated by corrupt behaviour of officials, are being investigated 
by the Serbian authorities. 

New visa stickers have been issued since June 2010. The visa-free regime with several former 
Soviet  republics  was  suspended  in  July  2010.  Serbia  maintained  a  visa-free  regime  for  the 
citizens of all EU Member States and citizens of Croatia, Bosnia and Herzegovina, the former 
Yugoslav Republic of Macedonia and Montenegro.  

However, the current list of countries the citizens of which require visas to travel to Serbia is 
not  fully  in  conformity  with  the  EU  acquis.  Challenges  persist  for  diplomatic  missions  and 
consular posts in issuing visas due to limited access to central databases as well as a lack of 
qualified staff. The validity of old passports has been extended until the end of 2010 due to 
the limited capacity for issuing new passports.  

Overall, Serbia is moderately advanced in aligning its visa policy with European standards.  

There has been some progress in the area of border management. The coordination body for 
implementing the Integrated Border Management strategy has been established in June 2010. 
Serbia  has  continued  to  improve  the  infrastructure  and  equipment  at  border  crossing  points 
and  to  strengthen  security  checks  on  persons,  documents  and  goods.  Installation  of  the 
TETRA  system  has  progressed,  but  has  not  yet  been  completed.  Border  police  cooperation 
has  continued,  with  joint  patrols  with  Bosnia  and  Herzegovina,  Hungary  and  Montenegro. 
Efforts  to  further  increase  the  risk  analysis  capacity  of  the  border  police  have  continued. 
Serbia has been involved in joint operations and has regular data exchange with Frontex and 
participates in Western Balkans Risk Analysis Network. The implementation of the working 
arrangement is satisfactory.  

However,  border  police,  customs  and  phytosanitary  services  are  still  lacking  operational 
coordination and cooperation with regional counterparts needs to be improved. Disparities in 
infrastructure  between  border  crossing  points  persist,  with  control  of  the  borders  with  the 
former Yugoslav Republic of Macedonia, Montenegro, Bosnia and Herzegovina and Croatia 
still showing important weaknesses. Not all border crossings are fully connected to the central 
database of the Interior Ministry and to the Interpol system (I-24/7). Surveillance and control 
at  the  Administrative  Boundary  Line  with  Kosovo  need  to  be  further  strengthened  and 
cooperation  and  exchange  of  information  with  EULEX/Kosovo  police  improved.  Border 
police is not yet fully staffed and its risk analysis capacity needs to be further strengthened.  

Overall,  Serbia  started  to  address  its  priorities  regarding  border  control.  Further  efforts  are 
needed to eliminate the disparities between individual border crossing points and to improve 
control at the borders with the former Yugoslav Republic of Macedonia, Montenegro, Bosnia 
and  Herzegovina  and  Croatia  and  in  particular  at  the  Administrative  Boundary  Line  with 
Kosovo. 

Little progress has been achieved in the area of asylum. In the period from October 2009 to 
August 2010, 114 asylum claims have been filed. One final decision granting asylum has been 

EN 

50 

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taken.  The  government  adopted  a  list  of  safe  countries  for  asylum  seekers.  Subsidiary 
protection  status  has  been  granted  in  some  cases.  Reception  of  asylum  seekers,  under  the 
competence  of  the  Commissariat  for  Refugees  as  a  coordination  body  for  integration  of 
asylum seekers, is well organised and functioning.  

However,  the  Asylum  Office,  the  first  instance  body  for  asylum  claims,  has  not  been 
established. Claims continue to be processed by the section for asylum in the Border police, 
which is understaffed. A high percentage of cases are closed before the decision is taken as 
the  applicants  leave  Serbian  territory  or  disappear.  Extension  of  reception  capacities  for 
asylum seekers is currently not planned. 

Overall, Serbia’s asylum system continues to be moderately advanced. 

Serbia  has  made  some  progress  in  migration  management.  Implementation  of  the 
readmission  agreement  between  Serbia  and  the  European  Union  has  continued  without 
significant  problems.  Implementing  protocols  with  Italy,  Hungary,  Norway  and  Switzerland 
have been ratified; a further two, with Austria and Malta, have been signed.  

However,  effective  implementation  of  the  migration  management  strategy  is  lacking  due  to 
poor capacity and insufficient coordination of the responsible bodies. An action plan has not 
yet been adopted. Conditions in reception centres have not improved due to a lack of funding. 
There  are  concerns  in  relation  to  the  standardised  entry,  exchange  and  protection  of  data 
collected in conformity with the law on foreigners. While a central database on foreigners is 
still missing, most of the competent authorities are keeping individual registers. Reintegration 
of returnees needs to be improved. 

Irregular migrants (the majority coming  from  Afghanistan and the Middle East) continue to 
transit  through  Serbia,  following  the  main  routes  from  Turkey.  They  increasingly  affect 
neighbouring  EU  Member  States.  From  October  2009  to  August  2010,  charges  were  filed 
against  some  3400  foreign  citizens  for  illegally  entering  Serbia.  A  significant  number  of 
persons  indicating  their  intent  to  file  an  asylum  request  at  the  border  never  do  so,  but 
disappear after entering Serbia in order to stay as irregular migrants or travel further. 

Overall, migration management in Serbia continues to be moderately advanced. 

4.3.2.  Money laundering 

Some  progress  has  been  made  in  the  area  of  anti-money  laundering.  An  action  plan  for  the 
implementation  of  the  strategy  has  been  adopted  in  October  2009  and  a  coordination  body 
established.  The  Administration  for  Prevention  of  Money  Laundering,  which  acts  as  the 
financial  intelligence  unit,  has  held  further  training  events  for  its  staff  and  carried  out 
awareness-raising  activities  for  reporting  entities.  Efforts 
improve  national  and 
international  cooperation  in  the  investigation  and  processing  of  offences  continued.  In  June 
2010, Serbia acquired observer status in the Eurasian group on combating money laundering 
and financing of terrorism.  

to 

However,  practical  results  in  the  fight  against  money  laundering  have  remained  weak. 
Cooperation  between  competent  authorities  has  continued  to  show  shortcomings.  The 
Administration for Prevention of Money Laundering lacks capacity to systematically identify 
suspicious cases. Guidelines for the identification of suspicious transactions have not yet been 
adopted. Reporting remains poor, in particular outside the banking sector, with the real estate 

EN 

51 

   EN 

 
sector  and  currency  exchange  offices  being  of  most  concern.  An  effective  system  for 
monitoring and analysing cash transactions is not in place. The judiciary and law enforcement 
services lack expertise in handling money laundering cases and financial investigations. Final 
convictions in money laundering cases remain rare. 

Overall,  Serbia  has  started  to  address  its  priorities  in  fighting  money  laundering,  which 
nevertheless continues to be a cause of concern. 

4.3.3.  Drugs 

Good  progress  can  be  reported  in  the  area  of  fighting  drugs.  Serbian  law  enforcement 
agencies have continued investigations into illegal production, trade and smuggling of drugs 
and  improved  international  cooperation.  The  Serbian  intelligence  agency  (BIA)  has 
contributed to the seizure of some 2.7 tonnes of cocaine coming from South America by US 
and  other  authorities.  Several  drug-producing  laboratories  have  been  dismantled  in  Serbia. 
Between October 2009 and August 2010, Serbian authorities seized some 1,150 kg of drugs, 
out  of  which  some  930  kg  of  marihuana  and  155  kg  of  heroin.  Operational  cooperation 
between customs services at regional and international level has improved.  

The  Ministry  of  Health  has  continued  its  awareness-raising  activities.  Efforts  were  taken  to 
reduce  drug  consumption  in  prisons,  including  the  establishment  of  five  ‘drug-free’  units, 
where special measures are taken to prevent drug abuse by inmates.  

However,  Serbia  remains  on  one  of  the  main  Balkan  trafficking  routes  for  heroin  and 
synthetic drugs to the EU, and also became more important as a transit country for cannabis. 
Criminal  groups  from  Serbia  are  involved  in  smuggling  cocaine  from  South  America  to 
Europe.  

A new law on drugs has not yet been adopted. Little progress can be reported in implementing 
the  national  strategy  and  action  plan  to  fight  drugs.  The  National  Commission  for 
implementation  of  the  drug  strategy  has  not  been  established.  This  adversely  affects 
cooperation and coordination on both the preventive and repressive sides. Serious weaknesses 
continue  to  exist  in  surveillance  of  the  borders  with  the  former  Yugoslav  Republic  of 
Macedonia, Montenegro, Bosnia and Herzegovina and Croatia as well as the Administrative 
Boundary  Line  with  Kosovo,  which  is  of  particular  concern  in  view  of  the  level  of  drug 
trafficking  activity  in  Kosovo.  Police  and  border  police  are  not  yet  fully  connected  to  the 
central database on drugs.  

A  large  quantity  of  seized  drugs  has  still  not  been  destroyed  due  to  alleged  environmental 
concerns.  Cooperation  with  the  European  Monitoring  Centre  for  Drugs  and  Drug  Addiction 
needs to be improved.  

Overall, preparations in fighting drugs are moderately advanced. Serbia's contributions to the 
dismantling of international drug trafficking groups and the seizure of important amounts of 
illegal  drugs  show  clear  commitment  and  operational  capacity.  However,  drug  trafficking 
from and through Serbia remains of concern. 

4.3.4.  Police 

Serbia has made some progress in the area of police reform. Capacity building has continued 
primarily within specialised services of the criminal police such as the services for combating 
organised  crime,  financial  investigations  and  high-tech  crime.  Some  measures  have  been 

EN 

52 

   EN 

 
taken  to  improve  the  methodology  and  standards  of  police  work,  including  an  information 
booklet explaining the regulatory framework. Training and education have continued on best 
practice in police work and on work in communities and with minorities.  

Cooperation  between  various  police  structures,  as  well  as  regional  and  international 
cooperation, have improved further, leading to good results in particular in combating drugs 
trafficking  and  organised  crime.  In  June  2010,  Serbia  signed  a  non-binding  roadmap  with 
Europol on the preparations for the conclusion of an operational agreement. Enhanced efforts 
are  necessary  to  meet  the  challenges  of  the  roadmap,  particularly  in  areas  related  to  the 
protection of personal data and classified data.  

However,  at  the  level  of  the  Interior  Ministry,  there  is  no  effective  strategic  planning  and 
human resource management remains weak. This adversely affects prioritising and budgeting. 
Intelligence-led policing and the criminal intelligence system need to be improved. The lack 
of  openness  and  transparency  of  recruitment  procedures  and  career  development  within  the 
police remains of concern.  

Understaffing  and  inadequate  working  conditions  for  some  police  services  need  to  be 
addressed.  Further  steps  have  been  slow  towards  developing  an  efficient  internal  control 
system ensuring proactive investigations and monitoring of the legality and conformity with 
standards of police conduct. Between October 2009 and August 2010, 316 criminal charges 
were filed against police officers. Security of police officers needs to be improved in the light 
of the increased number of incidents and attacks on police officers. 

The work of the large number of private security agencies remains unregulated, representing a 
serious  security  challenge.  Illegal  firearms  and  explosives  continued  to  be  widespread  and 
subject to trafficking throughout the region.  

Overall,  the  police  system  remains  moderately  advanced.  The  Serbian  police  has  shown 
investigative capacities, but further sustained efforts are needed.  

4.3.5.  Fighting organised crime and terrorism 

Good progress has been made in fighting organised crime. The action plan to fight organised 
crime  has  been  adopted  in  September  2009  and  implementation  has  started.  Investigative 
capacities  and  the  use  of  special  investigative  techniques  have  been  further  strengthened. 
Specialised  training  of  the  relevant  police  services  has  continued.  The  work  of  the  unit  for 
financial investigations within the organised crime service has continued under the leadership 
of  the  Special  Organised  Crime  Prosecutor.  Confiscation  of  assets  started  in  a  more 
systematic way and confiscations were carried out in a number of cases. 

Cooperation  between  relevant  agencies  has  improved  within  the  country,  in  the  region  and 
internationally,  leading  to  good  results  in  a  number  of  high-profile  investigations  against 
organised crime groups. In these cases, a number of suspects have been arrested and illegally 
acquired assets  confiscated. In October  2010, an agreement  establishing a  regional office in 
Belgrade  for  improving  cooperation  in  the  fight  against  organised  crime  was  signed  with 
Albania, Bosnia and Herzegovina, Croatia, Montenegro and the former Yugoslav Republic of 
Macedonia. 

Cooperation  with  Eurojust  improved  and  Serbia  established  additional  contact  points.  A 
meeting with Eurojust representatives took place in May 2010 in order to prepare negotiations 

EN 

53 

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for  a  cooperation  agreement.  Protection  of  personal  data  and  of  classified  data  is  key  for 
successful conclusion of such an agreement.  

However, a new and substantially revised Criminal Procedure Code has still not been adopted. 
The Commission for Inter-ministerial Coordination in the field of Justice and Home Affairs 
has shown little activity. The capacity of the specialised police services to conduct proactive 
investigations  and  engage  in  intelligence-led  policing  remains  limited  due  to  understaffing 
and lack of analytical expertise. The number of final convictions remains low.  

The  lack  of  adequate  control  and  surveillance  of  the  administrative  boundary  line  with 
Kosovo  continues  to  be  problematic  in  an  area  which  is  vulnerable  to  organised  crime 
activities.  Cooperation,  implementation  of  the  police  protocol  and  exchange  of  relevant 
information  with  EULEX  need  to  be  further  improved.  A  uniform  database  on  organised 
crime  cases 
tax 
administration,  customs  and  the  Administration  for  the  Prevention  of  Money  Laundering, 
needs further improvement. Witness protection needs to be improved. The limited capacities 
of the agency for the management of seized assets and the fast auctioning of seized assets in 
the absence of a conviction or any risk of immediate deterioration raise some concerns.  

is  still  missing.  Inter-service  cooperation, 

including  between 

the 

Overall, Serbia has started to address its priorities in fighting organised crime. Recent results 
in  investigating  organised  crime  activities  at  national  and  international  level  and  in  the 
confiscation  of  illegally  acquired  assets  are  encouraging,  but  need  to  be  followed  up  by 
transparent,  impartial  and  effective  proceedings  in  the  judiciary.  The  capacities  of  the  law 
enforcement  agencies  to  use  modern  investigative  techniques,  in  particular  in  the  area  of 
financial investigations, need to be further strengthened.  

Serbia  has  made  some  progress  in  fighting  trafficking  of  human  beings.  Procedures  to 
identify  victims  have  been  adopted  and  the  number  of  identified  victims  has  continued  to 
increase,  while  the  regional  trend  points  towards  a  decrease  in  trafficking  of  human  beings. 
Law  enforcement  authorities  remained  active  and  regional  and  international  cooperation 
improved further. From October 2009 to August 2010, 94 victims of human trafficking have 
been  identified,  with  women  representing  the  majority.  These  victims,  mostly  of  Serbian 
origin,  had  been  trafficked  for  sexual  abuse,  begging,  forced  marriages,  and  labour 
exploitation. Awareness-raising activities have continued. 

However,  ratification  of  the  European  Convention  on  Action  against  Trafficking  in  Human 
Beings has not been followed by further measures to guarantee its effective implementation. 
The strategic framework, which includes the strategy and action plan for fighting trafficking 
in  human  beings,  but  also  the  migration  management,  the  irregular  migration  and  the 
organised crime strategies, needs to be amended to allow a better policy response to emerging 
trends  and  improved  cooperation  between  the  police,  prosecution  and  courts.  As  far  as  the 
protection  of  victims  is  concerned,  more  needs  to  be  done  to  provide  them  with 
comprehensive  assistance  and  reintegration.  Although  some  emergency  funds  have  been 
secured  for  two  shelters  run  by  NGOs,  overall  funding  for  NGOs  active  in  the  field  of 
prevention  and  support  to  victims  and  for  the  government’s  protection  agency  remains 
unsatisfactory. NGOs continue to rely heavily on international donor funds.  

Overall, Serbia is moderately advanced in fighting trafficking in human beings.  

Serbia  has  made  some  progress  in  the  fight  against  terrorism.  The  law  regulating  the 
military  intelligence  and  military  security  agencies  was  adopted  in  October  2009,  providing 

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for better cooperation between agencies in the fight against terrorism. Implementation of the 
amended  law  on  the  prevention  of  money  laundering  and  the  financing  of  terrorism  has 
started. Capacities of the law enforcement authorities in this area are generally good.  

However,  following  the  ratification  of  the  relevant  Council  of  Europe  Conventions,  no 
prevention policies or legislative and institutional changes were adopted for further alignment 
with these provisions. A specific list of terrorist suspects has not yet been established.  

Overall, Serbia is moderately advanced in fighting terrorism. 

4.3.6.  Protection of personal data 

There has been little progress on protection of personal data. The Strategy for the Protection 
of Personal Data has been adopted in August 2010. The office of the Commissioner for Free 
Access  to  Information  of  Public  Importance  and  Personal  Data  Protection,  which  acts  inter 
alia as supervisory authority for the protection of personal data, was allocated additional staff.  

However, the Law on the Protection of Personal Data is not fully in line with EU standards 
and  not  all  necessary  implementing  legislation  has  yet  been  adopted.  The  office  of  the 
Commissioner for Information of Public Importance and Personal Data Protection continues 
to  lack  financial  and  human  resources.  This  raises  concerns  over  its  capacity  to  adequately 
carry out its supervisory tasks. 

Overall, the protection of personal data in Serbia remains moderately advanced. Personal data 
protection  is  a  key  precondition  for  Serbia  to  conclude  an  agreement  with  Eurojust  and  an 
operational agreement with Europol. 

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STATISTICAL DATA (as of 14 October 2010) 
Serbia 

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

National accounts 
Gross domestic product (GDP) (million national currency) 
GDP (million euro) 
GDP (euro per capita) 
GDP (in Purchasing Power Standards (PPS) per capita) 
GDP per capita in PPS (EU-27 = 100) 
Real GDP growth rate (growth rate of GDP volume, national currency, % change on previous 
year) 
Employment growth (national accounts, % change on previous year) 
Labour productivity growth: GDP growth per person employed (% change on previous year) 
Real unit labour cost growth (national accounts, % change on previous year) 
Labour productivity per person employed (GDP in PPS per person employed, EU-27 = 100)  
Gross value added by main sectors (%) 

Agriculture and fisheries 
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 
Annual average inflation rate (CPI, % change on previous year) 

Statistical annex 

Note

2000 
2001 
7 505 
7 528 
77 474  77 474 

2002 
7 502 
77 474 

2003 
7 491 
77 474 

2004 
7 470 
77 474 

2005 
7 456 
77 474 

2006 
7 425 
77 474 

2007 
7 398 
77 474 

2008 
7 366 
77 474 

2009 
7 335 
77 474 

Note

2000 

2001 

2002 

2003 

2004 

2005 

2006 

2007 

2008 

384 225 762 178  972 580 1 125 840 1 380 712 1 683 483 1 962 073 2 302 214 2 722 461 
25 539  12 821 
1 709 
3 398 
: 
: 
: 
: 

33 418 
4 547 
9 000.0 
35.9 

28 785 
3 900 
8 300.0 
33.3 

20 306 
2 729 
7 100.0 
31.6 

23 305 
3 144 
7 700.0 
32.5 

17 306 
2 313 
: 
: 

19 026 
2 549 
: 
: 

16 028 
2 137 
: 
: 

5.3 
: 
5.6 
: 
: 

20.1 
26.4 
3.6 
49.9 
97.2 
12.7 
-4.6 
11.3 
16.7 

5.6 
2.0 
3.5 
: 
: 

20.0 
24.7 
3.2 
52.1 
104.0 
10.7 
1.0 
25.6 
41.3 

3.9 
-0.4 
4.3 
: 
: 

15.3 
24.3 
3.5 
56.9 
107.0 
12.4 
-1.4 
23.8 
41.8 

Note

2000 
100.0 

2001 
100.1 

2002 
101.9 

Note

2000 
79.6 

2001 
93.3 

2002 
16.6 

2.4 
-4.4 
7.1 
: 
: 

13.6 
23.1 
4.3 
59.0 
103.0 
16.8 
-2.3 
25.9 
43.4 

2003 
98.8 

2003 
9.9 

8.3 
1.1 
7.1 
: 
: 

14.0 
24.0 
4.9 
57.1 
97.1 
19.2 
9.0 
25.5 
50.8 

2004 
105.9 

2004 
11.4 

5.6 
-5.5 
11.8 
: 
: 

12.2 
23.7 
4.6 
59.5 
95.9 
19.0 
4.7 
28.3 
47.9 

2005 
106.7 

2005 
16.2 

5.2 
7.2 
-1.8 
: 
: 

11.4 
23.5 
4.7 
60.5 
96.0 
21.0 
3.1 
31.4 
51.5 

2006 
111.7 

2006 
11.7 

6.9 
2.3 
4.5 
: 
: 

10.4 
22.7 
5.1 
61.9 
95.8 
24.0 
4.2 
30.3 
54.3 

2007 
115.8 

2007 
7.0 

2009 
: 
: 
: 
8 800.0 
37.3e 

: 
: 
: 
: 
: 

: 
: 
: 
: 
: 
: 
: 
: 
: 

5.5 
1.0 
4.5 
: 
: 

10.5 
22.2 
5.5 
61.8 
94.9 
23.2 
5.4 
30.7 
54.2 

2008 
117.1 

2008 
13.5 

2009 
102.9 

2009 
8.6 

EN 

56 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance of payments 
Balance of payments: current account total (million euro) 
Balance of payments current account: trade balance (million euro) 
Balance of payments current account: 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 (%) 
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) 
Share of exports to EU-27 countries in value of total exports (%) 
Share of imports from EU-27 countries in value of total imports (%) 

Note

1) 

1) 

Note

Note

Note
2) 
2) 
2) 
2) 
2) 
2) 

2000 
-157 
-1 720 
154 
: 
1 409 
293 
54 
-2 
: 
56 
: 

2000 
: 
: 

2000 
: 
: 
544 
662 
1 313 
: 
: 
: 
: 

2001 
282 
-2 602 
272 
7 
2 605 
652 
184 
-14 
: 
198 
: 

2001 
: 
104.8 

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

49.670  59.770 

: 
958 

: 
2 050 

2002 
-671 
-3 398 
136 
-74 
2 665 
519 
500 
-21 
: 
521 
: 

2002 
: 
71.9 

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

2003 
-1 347 
-3 538 
179 
-119 
2 131 
432 
1 194 
-105 
1 
1 300 
850 

2003 
: 
63.3 

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

2004 
-2 620 
-5 201 
133 
-173 
2 621 
381 
774 
2 
2 
772 
477 

2004 
: 
50.7 

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

2005 
-1 778 
-4 278 
-5 
-259 
2 764 
268 
1 250 
-18 
4 
1 268 
963 

2005 
1.0 
50.5 

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

2006 
-2 356 
-4 981 
-41 
-330 
2 996 
185 
3 323 
-70 
4 
3 392 
2 008 

2006 
-1.6 
39.8 

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

2007 
-4 615 
-6 638 
-254 
-599 
2 876 
172 
1 821 
-692 
-53 
2 513 
1 813 

2007 
-1.9 
30.0 

2007 
60.2 
204.8 
3 141 
4 928 
11 407 
10 771 
8.3 
12.5 
7.5 
79.964 
67.0 
9 660 

2008 
-6 089 
-7 549 
-173 
-922 
2 554 
128 
1 824 
-193 
-78 
2 018 
1 470 

2008 
-2.4 
25.3 

2008 
64.7 
214.7 
2 717 
4 459 
11 198 
12 926 
18.4 
20.3 
15.3 
81.441 
67.0 
8 190 

2009 
-1 743 
-4 782 
23 
-502 
3 518 
136 
1 372 
-38 
-28 
1 410 
808 

2009 
-4.1 
31.3 

2009 
: 
: 
2 695 
4 555 
12 573 
14 863 
9.5 
12.0 
7.0 
93.950 
57.3 
10 602 

2002 

2000 

2001 
3 606.4 4 757.9  5 918.6 
1 680.0 1 896.0  2 192.0 
-1 926.4 -2 861.8  -3 726.6
103.1 
58.2 
57.6 

100.2 
54.3 
61.6 

98.0 
59.5 
59.6 

2003 
6 589.3 
2 442.4 
-4 146.9 
101.6 
53.9 
58.3 

2004 
8623.3b 
2831.6b 
-5791.7b 
108.4b 
56.6b 
58.0b 

2005 
7 854.2 
3 428.1 
-4 426.0 
98.4 
60.1 
54.2 

2006 

2007 

2008 

2009 

10 462.6  13 500.9  15 031.3  6 690.9 
5 630.2 
4 991.9 
-1 060.8 
-5 470.7 
100.9 
104.5 
54.9 
58.2 
55.4 
54.4 

6 615.1 
-6 885.8 
102.6 
58.1 
55.0 

6 814.2 
-8 217.2 
97.6 
56.6 
52.7 

EN 

57 

EN 

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

Note

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

Note

Employment rate male (15-64) (%) 
Employment rate female (15-64) (%) 

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 

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 
(%) 
Long-term unemployment rate: share of labour force that is unemployed for 12 months and 
more (%) 

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) 
Early school leavers - Share of population aged 18-24 with at most lower secondary education 
and not in further education or training (%) 

2000 
-4.0 
10.6 
69.7 
74.8 

2000 
68.2 
59.2 
68.2 
50.4 

2001 
-2.7 
10.2 
69.6 
74.8 

2001 
68.9 
59.7 
68.6 
50.8 

2002 
-3.3 
10.1 
69.7 
75.0 

2002 
68.4 
58.5 
67.1 
50.0 

2003 
-3.3 
9.0 
69.9 
75.1 

2003 
68.9 
57.9 
67.0 
48.7 

2004 
-3.5 
8.1 
69.9 
75.4 

2004 
66.4 
53.4 
63.1 
44.0 

2005 
-4.6 
8.0 
70.0 
75.4 

2005 
65.2 
51.0 
61.2 
40.8 

2006 
-4.3 
7.4 
70.6 
75.9 

2006 
63.6 
49.9 
59.2 
40.6 

2007 
-4.7 
7.1 
70.7 
76.2 

2007 
63.4 
51.5 
60.0 
43.0 

2008 
-4.6 
6.7 
71.1 
76.3 

2008 
62.7 
53.7 
62.3 
45.3 

2009 
: 
7.0 
71.1 
76.4 

2009 
60.6 
50.4 
58.1 
43.0 

43.3 

42.1 

42.0 

44.3 

37.3 

35.4 

32.6 

33.5 

36.7 

35.4 

: 
: 
: 
: 
13.3 
11.1 
15.9 

: 
: 
: 
: 
13.3 
11.5 
15.7 

: 
: 
: 
: 
14.5 
12.9 
16.5 

: 
: 
: 
: 
16.0 
15.1 
17.2 

24.0 
21.7 
5.2 
49.1 
18.7 
15.3 
23.1 

23.3 
21.5 
6.1 
49.1 
21.1 
17.0 
26.5 

20.5 
23.2 
6.1 
50.2 
21.0 
18.1 
24.9 

20.8 
23.4 
6.1 
49.7 
18.3 
16.0 
21.2 

25.1 
19.9 
6.3 
48.6 
13.6 
11.9 
15.8 

23.9 
20.1 
5.2 
50.8 
16.1 
14.8 
17.8 

50.2 

46.4 

45.3 

44.8 

48.1 

47.7 

47.8 

43.7 

35.2 

41.6 

9.9 

9.0 

9.9 

11.0 

14.5 

16.7 

17.0 

14.8 

9.7 

10.5 

Note

2000 

2001 

2002 

2003 

2004 

2005 

2006 

2007 

2008 

2009 

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  44 147.0 

100.0 

118.4 

154.9 

176.5 

196.1 

209.5 

233.3 

266.1 

275.7 

245.4 

: 

: 

: 

: 

11.5 

11.4 

12.6 

10.7 

10.0 

9.0 

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

Note
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 

2009 
223.2 
1 351.3 

EN 

58 

EN 

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

Innovation and research 
Spending on human resources (public expenditure on education in % of GDP) 
Gross domestic expenditure on R&D in % of GDP 
Percentage of households who have Internet access at home (%) 

Environment 
Greenhouse gas emissions, CO2 equivalent (tons, 1990=100) 
Energy intensity of the economy (kg of oil equivalent per 1000 euro GDP) 
Electricity generated from renewable sources in % of gross electricity consumption 
Road share of inland freight transport (% of tonne-km)  

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) 

Note

Note

Note

Note

2000 
49.2 
0.4 

2000 
2.4 
: 
: 

2000 
: 
: 
42.1 
: 

2000 
: 
: 
: 
: 
: 
: 
32.0 

2001 
49.2 
0.4 

2001 
2.4 
: 
: 

2001 
: 
: 
43.3 
: 

2001 
: 
: 
: 
: 
: 
: 
31.0 

2002 
49.2 
0.4 

2002 
3.0 
: 
: 

2002 
: 
: 
41.2 
: 

2002 
: 
: 
: 
: 
: 
: 
31.0 

2003 
49.2 
0.4 

2003 
3.7 
: 
: 

2003 
: 
: 
36.5 
: 

2003 
: 
: 
: 
: 
: 
: 
32.0 

2004 
49.2 
0.4 

2004 
3.4 
: 
: 

2004 
: 
: 
44.9 
: 

2004 
: 
: 
: 
: 
: 
: 
34.0 

2005 
49.2 
0.4 

2005 
3.1 
: 
: 

2005 
: 
413.1 
46.9 
: 

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

2006 
49.2 
0.4 

2006 
3.3 
: 
18.5 

2006 
: 
413.6 
41.8 
: 

2006 
7 925 
: 
6 966 
: 
1 686 
8 765 
36.0 

2007 
49.2 
0.4 

2007 
3.4 
: 
26.3 

2007 
: 
660.7 
37.9 
: 

2007 
8 797 
654 
7 073 
198 
7 260 
14 996 
37.0 

2008 
49.2 
0.5 

2008 
3.5 
: 
33.2 

2008 
: 
594.3e 
35.1 
: 

2008 
9 441 
652 
7 369 
231 
7 477 
15 620 
37.0 

Note

2005 

2002 

2004 

2003 

2001 

2000 

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) 
: = not available 
e = estimated value 
b = break in series 
1) The balance of payments sign conventions are used. For FDI abroad a minus sign means investment abroad by the reporting economy exceeded its disinvestment in the period, while an entry without 
sign means disinvestment exceeded investment. For FDI in the reporting economy an entry without sign means that investment into the reporting economy exceeded disinvestment, while a minus sign 
indicates that disinvestment exceeded investment. 
2) 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 used. 
3) Ministery of Interior Affaires excluded the vehicles that were not registered before the given deadline (1 month). 
4) In million liters, includes cows and sheep milk. 
5) Without triticale, buckwheat and millet, which are minor; rice production does not exist in Serbia. 

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 

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

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 

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 

95.0 
5 075 
1 096 
3 212 
1 748 
1 616 
9 510 
3 101 
1 289 

4) 
5) 

2006 

2007 

2008 

2009 
49.2 
0.5 

2009 
: 
: 
36.7 

2009 
: 
: 
: 
: 

2009 
: 
: 
: 
: 
: 
: 
: 

2009 

101.0 
5 097 
1 002 
3 631 
1 647 
1 488 
8 982 
2 798 
1 257 

EN 

59 

EN