COMMISSION STAFF WORKING PAPER ANALYTICAL REPORT
Date: 2011-10-12
Institutions: European Commission
Subjects: Kosovo question, Serbia, accession criteria, accession negotiations, pre-accession strategy

EUROPEAN COMMISSION 

Brussels, 12.10.2011 
SEC(2011) 1208 final 

COMMISSION STAFF WORKING PAPER 

ANALYTICAL REPORT  

Accompanying the document 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT AND THE COUNCIL 

Commission Opinion on Serbia's application for membership of the European Union 

{COM(2011) 668 final} 

 
 
 
 
  
 
TABLE OF CONTENTS 

A. 

a) 

b) 

c) 

B. 

1. 

Introduction .................................................................................................................. 3 

Application for membership ........................................................................................ 3 

Relations between the EU and Serbia .......................................................................... 4 

Contents of the Analytical Report................................................................................ 7 

Criteria for membership ............................................................................................... 8 

Political criteria ............................................................................................................ 8 

1.1. 

Democracy and the rule of law .................................................................................... 8 

1.1.1.  Parliament .................................................................................................................... 9 

1.1.2.  The executive ............................................................................................................. 11 

1.1.3.  Public administration ................................................................................................. 14 

1.1.4. 

Judicial system ........................................................................................................... 16 

1.1.5.  Anti-corruption policy................................................................................................ 20 

1.1.6.  Civilian oversight of security forces .......................................................................... 22 

1.2. 

1.3. 

1.4. 

2. 

2.1. 

2.2. 

Human rights and the protection of minorities .......................................................... 23 

Regional issues and international obligations ............................................................ 33 

General evaluation ..................................................................................................... 37 

Economic criteria ....................................................................................................... 40 

Economic developments ............................................................................................ 40 

Assessment in terms of the Copenhagen Criteria ...................................................... 43 

2.2.1.  The existence of a functioning market economy ....................................................... 43 

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

.................................................................................................................................... 51 

2.3. 

General evaluation ..................................................................................................... 54 

3. 

3.1. 

3.2. 

3.3. 

3.4. 

3.5. 

Ability to assume the obligations of membership...................................................... 54 

Chapter 1: Free movement of goods .......................................................................... 55 

Chapter 2: Freedom of movement for workers .......................................................... 58 

Chapter 3: Right of establishment and freedom to provide services ......................... 60 

Chapter 4: Free movement of capital ......................................................................... 62 

Chapter 5: Public procurement................................................................................... 64 

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3.6. 

3.7. 

3.8. 

3.9. 

Chapter 6: Company law............................................................................................ 65 

Chapter 7: Intellectual property law........................................................................... 67 

Chapter 8: Competition Policy................................................................................... 68 

Chapter 9: Financial Services..................................................................................... 70 

3.10.  Chapter 10: Information society and media ............................................................... 72 

3.11.  Chapter 11: Agriculture and rural development......................................................... 75 

3.12.  Chapter 12: Food safety, veterinary and phytosanitary policy .................................. 77 

3.13.  Chapter 13: Fisheries.................................................................................................. 79 

3.14.  Chapter 14: Transport policy ..................................................................................... 80 

3.15.  Chapter 15: Energy .................................................................................................... 82 

3.16.  Chapter 16: Taxation.................................................................................................. 86 

3.17.  Chapter 17: Economic and Monetary Policy ............................................................. 88 

3.18.  Chapter 18: Statistics.................................................................................................. 89 

3.19.  Chapter 19: Social Policy and employment ............................................................... 91 

3.20.  Chapter 20: Enterprise and industrial policy.............................................................. 95 

3.21.  Chapter 21: Trans European Networks ...................................................................... 97 

3.22.  Chapter 22: Regional policy and coordination of structural instruments .................. 99 

3.23.  Chapter 23: Judiciary and fundamental rights ......................................................... 101 

3.24.  Chapter 24: Justice, freedom and security ............................................................... 106 

3.25.  Chapter 25: Science and research ............................................................................ 112 

3.26.  Chapter 26: Education and Culture .......................................................................... 113 

3.27.  Chapter 27: Environment ......................................................................................... 115 

3.28.  Chapter 28: Consumer and health protection........................................................... 121 

3.29.  Chapter 29: Customs Union ..................................................................................... 123 

3.30.  Chapter 30: External relations.................................................................................. 126 

3.31.  Chapter 31: Foreign, Security and Defence Policy.................................................. 128 

3.32.  Chapter 32: Financial Control.................................................................................. 130 

3.33.  Chapter 33: Financial and budgetary provisions...................................................... 132 

3.34.  General evaluation ................................................................................................... 133 

Statistical Annex .................................................................................................................... 136 

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A. 

a) 

INTRODUCTION 

Application for membership 

Serbia  presented  its  application  for  membership  of  the  European  Union  on  22  December 
2009.  Subsequently,  on  25  October  2010,  the  Council  of  the  European  Union  requested  the 
Commission to submit its opinion on this application, in line with the procedure laid down in 
Article  49  of  the  Treaty  on  European  Union,  which  states:  'Any  European  State  which 
respects the values referred to in Article 2 and is committed to promoting them may apply to 
become a member of the Union. The European Parliament and national Parliaments shall be 
notified of this application. The applicant State shall address its application to the Council, 
which shall act unanimously after consulting the Commission and after receiving the consent 
of  the  European  Parliament,  which  shall  act  by  a  majority  of  its  component  members.  The 
conditions of eligibility agreed upon by the European Council shall be taken into account.' 

Article 2 states that 'the Union is founded on the values of respect for human dignity, freedom, 
democracy,  equality,  the  rule  of  law  and  respect  for  human  rights,  including  the  rights  of 
persons belonging to minorities. These values are common to the Member States in a society 
in  which  pluralism,  non-discrimination,  tolerance,  justice,  solidarity  and  equality  between 
women and men prevail.' 

This is the legal framework within which the Commission submits its Opinion and the present 
analytical report. 

The Feira European Council in June 2000 had acknowledged that Western Balkan countries 
participating  in  the  Stabilisation  and  Association  Process  were  'potential  candidates'  for  EU 
membership.  The  European  perspective  of  these  countries  was  further  confirmed  by  the 
Thessaloniki European Council in June 2003, which endorsed the "Thessaloniki Agenda for 
the  Western  Balkans”.  This  agenda  remains  the  cornerstone  of  the  EU  policy  towards  the 
region. 

The European Council of December 2006 renewed the EU's commitment "that the future of 
the Western Balkans lies in the European Union" and reiterated that "each country's progress 
towards the European Union depends on its individual efforts to comply with the Copenhagen 
criteria  and  the  conditionality  of  the  Stabilisation  and  Association  Process.  A  country's 
satisfactory  track-record  in  implementing  its  obligations  under  a  Stabilisation  and 
Association Agreement (SAA), including trade related provisions, is an essential element for 
the  EU  to  consider  any  membership  application".  At  the  Sarajevo  EU-Western  Balkans 
ministerial  meeting  on  2  June  2010,  the  EU  reiterated  its  unequivocal  commitment  to  the 
European perspective of the Western Balkans and that the future of these countries lies in the 
European Union. 

In line with the Treaty requirements, the current assessment is made in terms of the conditions 
of eligibility laid down by the European Council. In Copenhagen in June 1993, the European 
Council concluded that: 

"Accession  will  take  place  as  soon  as  a  country  is  able  to  assume  the  obligations  of 
membership by satisfying the economic and political conditions required. 

Membership requires: 

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that the candidate country has achieved stability of institutions guaranteeing democracy, the 
rule  of  law,  human  rights  and  respect  for  and  protection  of  minorities;  the  existence  of  a 
functioning  market  economy,  as  well  as  the  capacity  to  cope  with  competitive  pressure  and 
market forces within the Union; the ability to take on the obligations of membership including 
adherence to the aims of political, economic and monetary union".  

The Union's capacity to absorb new members, while maintaining the momentum of European 
integration, is also an important consideration in the general interest of both the Union and the 
candidate countries. 

In  December  1995,  in  Madrid,  the  European  Council  referred  to  the  need  "to  create  the 
conditions for the gradual, harmonious integration of [the applicant] countries, particularly 
through  the  development  of  the  market  economy,  the  adjustment  of  their  administrative 
structures and the creation of a stable economic and monetary environment". 

The Stabilisation and Association Process (SAP) conditionalities were defined by the Council 
on 31 May 1999. They include co-operation with the International Criminal Tribunal for the 
Former Yugoslavia (ICTY) and regional co-operation. As a fundamental element of the SAP, 
these conditions are integrated into the Stabilisation and Association Agreement (SAA) with 
Serbia,  currently  under  ratification,  as  well  as  in  the  Interim  Agreement  (IA)  on  trade  and 
trade-related matters, which entered into force on 1 February 2010. 

In  December  2006,  the  European  Council  agreed  that  "the  enlargement  strategy  based  on 
consolidation,  conditionality  and  communication,  combined  with  the  EU's  capacity  to 
integrate new members, forms the basis for a renewed consensus on enlargement". 

In  the  present  Opinion,  the  Commission  analyses  Serbia's  application  on  the  basis  of  the 
country's capacity to meet the criteria set by the Copenhagen European Council of 1993 and 
the  conditionality  of  the  Stabilisation  and  Association  process.  Serbia's  track-record  in 
implementing  its  obligations  under  the  Stabilisation  and  Association  Agreement  and  the 
Interim Agreement on trade and trade-related matters, is also being examined.  

In  line  with  the  renewed  consensus  on  enlargement,  this  Opinion  also  identifies  key  policy 
areas likely to require particular attention in the event of the accession of Serbia and provides 
initial  impact  estimates  with  regard  to  the  policies  and  sectors  concerned.  The  Commission 
will provide more detailed impact assessments for these key policy areas at later stages of the 
pre-accession  process.  In  addition,  an  accession  treaty  for  Serbia  would  involve  a  technical 
adaptation of the EU institutions in the light of the Treaty on the European Union. 

b) 

Relations between the EU and Serbia 

Relations between the EU and Serbia have developed since the democratic changes of 2000, 
initially  with  the  Federal  Republic  of  Yugoslavia  and  from  2003  onwards  with  the  State 
Union of Serbia and Montenegro. The EU continued its relations with the Republic of Serbia 
as the successor state of the State Union when Montenegro became independent in 2006.  

Serbia  is  participating  in  the  Stabilisation  and  Association  Process.  The  Stabilisation  and 
Association  Agreement  provides  a  framework  of  mutual  commitments  on  a  wide  range  of 
political,  trade  and  economic  issues.  It  was  signed,  along  with  the  Interim  Agreement  on 
trade and trade-related matters, in April 2008. EU ministers agreed to submit the SAA to their 
parliaments  for  ratification  and  to  implement  the  Interim  Agreement  as  soon  as  the  Council 

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decided  that  Serbia  was  fully  cooperating  with  the  International  Criminal  Tribunal  for  the 
former  Yugoslavia.  Serbia  started  on  1  January  2009  to  implement  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. The process is ongoing.  

A  European  Partnership  with  Serbia  was  adopted  by  the  Council  in  2004  and  updated  in 
2006 and 2008. 

Political  dialogue  meetings  at  ministerial  level  have  been  held  since  2003.  Policy  dialogue 
between  the  European  Commission  and  the  Serbian  authorities  has  been  taking  place  in  the 
framework  of  the  Enhanced  Permanent  Dialogue  (EPD)  since  2003.  Inter-parliamentary 
meetings between representatives of the European Parliament and of the Serbian parliament 
have been held annually since 2006.  

Serbia  has  built  a  positive  track  record  in  implementing  the  obligations  of  the  Stabilisation 
and Association Agreement and the Interim Agreement on trade and trade-related matters. An 
interim committee and a number of sub-committees meet annually, including on the internal 
market, competition, transit traffic, trade, customs, taxation, agriculture and fisheries. Several 
sub-EPD  meetings  are  covering  all  sectors  of  the  SAA  that  are  not  included  in  the  Interim 
Agreement,  such  as  energy,  environment,  social  policy,  justice,  freedom  and  security.  In 
general  terms,  Serbia  does  respect  its  SAA  commitments  in  these  areas  and  cooperation  is 
progressing well.  

Serbia  participates  in  the  economic  dialogue  with  the  Commission  and  the  EU  Member 
States.  The  aim  of  this  dialogue  is  to  prepare  Serbia  for  participation  in  the  multilateral 
surveillance  and  economic  policy  co-ordination  currently  in  place  in  the  EU  as  part  of  the 
Economic  and  Monetary  Union.  In  this  framework,  Serbia  presented  in  January  2011  an 
update of its annual Economic and Fiscal Programme (EFP). 

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.  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. The rules 
for  visa-free  travel  have  been  respected  by  the  vast  majority  of  travellers.  To  ensure  the 
continued  implementation  of  the  commitments,  a  post  visa  liberalisation  monitoring 
mechanism was established in view of increased numbers of asylum seekers from the region. 
The  Commission  presented  its  first  monitoring  report  to  the  European  Parliament  and  the 
Council in June 2011. An agreement on readmission between the European Union and Serbia 
has been in force since January 2008. 

Serbia continued to be an active participant in regional initiatives, including the South East 
European Cooperation Process (SEECP) of which it has assumed the chairmanship in 2011, 
and  the  Regional  Cooperation  Council  (RCC).  Serbia  held  the  Chairmanship  of  CEFTA  in 
2010. 

Serbia  signed  the  Energy  Community  Treaty  in  October  2005  and  the  European  Common 
Aviation Area (ECAA) agreement in June 2006.  

In  October  2008,  the  Government  of  Serbia  adopted  the  National  Programme  for  the 
Integration of Serbia in the European Union for the period 2008-2012. A revised and updated 

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version of this document was adopted in December 2009. In December 2010, the Government 
adopted an Action Plan on the fulfilment of priorities under the European Commission 2010 
Progress  Report,  with  the  aim  of  increasing  focus  and  achieving  additional  results  on  the 
reform agenda, ahead of the present Opinion.  

As regards trade, Serbia has been a member of CEFTA since May 2007 and the negotiations 
for  its  accession  to  WTO  are  in  a  final  stage.  The  EU  is,  with  CEFTA,  the  main  trading 
partner  of  Serbia.  Trade  integration  with  the  EU  is  high.  In  2010,  56%  of  Serbian  imports 
worth €7.1 billion came from the EU (8.5% from CEFTA), mostly consisting of mineral fuels, 
chemicals,  machinery  and  transport  equipment,  and  manufactured  goods.  57%  of  Serbian 
exports, or goods worth €4.2 billion, went to the EU (29% to CEFTA), consisting mainly of 
food products, cereals, basic metals, machinery and transport equipment. Serbia's trade deficit 
with the EU amounted to €2.9 billion in 2010. 

The share of EU investments to Serbia is high, reaching in a peak of almost 88% of total FDI 
in 2010. 

Serbia  has  been  receiving  EU  financial  assistance  since  2001.  Overall,  between  2001  and 
2011, the EU committed over €2 billion to Serbia in the form of grants and €5.8 billion in the 
form of soft loans. From 2001 to 2006, Serbia benefited from EU CARDS assistance worth 
€1,045 million. Since 2007, CARDS has been replaced by the Instrument for Pre-Accession 
Assistance (IPA), under which Serbia received assistance worth €974 million between 2007 
and 2011. 

The  assistance  under  IPA  is  designed  to  support  the  reforms  undertaken  as  part  of  the 
European  integration  process,  with  a  focus  on  the  rule  of  law,  institution  building, 
approximation with the EU acquis, sustainable economic and social development, and support 
to civil society. 

The Commission adopted in June 2011 a Multi-Annual Indicative Planning Document for the 
IPA  programme  in  Serbia  for  the  period  2011-2013.  It  introduces  a  new  sector-based 
approach, focusing assistance on the following seven sectors: justice and home affairs; public 
administration 
transport; 
environment, climate change and energy; agriculture and rural development.  

reform;  social  development;  private  sector  development; 

Financial  aid  under  IPA  is  structured  under  two  components.  Component  I  focuses  on 
political and socio-economic development (rule of law, alignment with the acquis, education, 
transport, energy, environment, agriculture etc.), while Component II focuses on cross-border 
cooperation (environment, culture, research, security etc.). Serbia received €100 million in the 
form  of  budgetary  support  under  the  2009  IPA  programme,  to  help  it  alleviate  the  socio-
economic  impact  of  the  economic  downturn.  An  Agreement  on  Macro  Financial  Assistance 
was  signed  in  July  2010  between  EU  and  Serbia  and  €100  million  were  disbursed  in  July 
2011.  

IPA  assistance  is  currently  managed  centrally  by  the  EU  Delegation  in  Belgrade.  Serbia  is 
preparing for decentralised management of IPA funds. Further extensive efforts, including the 
strengthening of administrative capacities, remain necessary before Serbia is in a position to 
take over responsibility.  

Serbia participates fully in a number of EU programmes: the 7th Framework Programme for 
research  and  technological  development,  PROGRESS,  the  Competitiveness  and  Innovation 

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Programme,  the  Information  and  Communication  Technologies  Policy  Support  Programme, 
the Culture Programme, the Customs Programme and the Fiscalis Programme. IPA funds are 
used to meet part of the costs of participation in these programmes.  

c) 

Contents of the Analytical Report 

The  analytical  report  takes  account  of  the  conclusions  of  the  European  Council  in 
Copenhagen in 1993 and subsequent European Council conclusions. The report: 

Describes the relations between Serbia and the Union;  
Analyses  the  situation  in  respect  of  the  political  conditions  established  by  the  European 
Council (democracy, rule of law, human rights, protection of minorities; regional issues and 
international obligations);  
Assesses  the  country's  situation  and  prospects  in  respect  of  the  economic  conditions 
established  by  the  European  Council  (functioning  market  economy,  capacity  to  cope  with 
competitive pressure);  
Addresses the question of the capacity of the country to adopt the obligations of membership, 
i.e. the total body of EU legislation as expressed in the Treaty, the secondary legislation, and 
also the policies of the Union (acquis of the European Union); 
Provides,  in  line  with  the  December  2006  European  Council  conclusions,  initial  impact 
estimates in the fields of freedom of movement for workers (chapter 2), agriculture and rural 
development (chapter 11), regional policy and coordination of structural instruments (chapter 
22),  and  financial  and  budgetary  provisions  (chapter  33).  These  have  been  identified  as  the 
main policy areas likely to require particular attention in the case of Serbian accession. 

In assessing Serbia's situation with regard to the economic criteria and its capacity to assume 
the  obligations  of  the  acquis,  the  Commission  has  also  estimated  the  progress  which  could 
reasonably  be  expected  in  the  years  ahead,  before  possible  accession,  taking  account  of  the 
fact that the acquis itself will continue to develop. 

The  Commission  has  drawn  on  a  number  of  sources  of  information:  answers  given  by  the 
to  a  detailed  questionnaire  and  additional  follow-up  questions, 
Serbian  authorities 
consultations with the EU Delegation in Serbia, reports of expert missions, reporting by the 
Member  States'  Embassies  in  Belgrade,  European  Parliament  reports1,  assessments  by 
international  organisations  (including  the  Council  of  Europe,  OECD,  OSCE,  IMF,  World 
Bank), as well as local and international non-governmental organisations. 

This  Opinion  has  been  prepared  following  a  methodology  similar  to  that  used  in  previous 
Opinions.  The  Commission  organised  a  number  of  expert  missions  in  Serbia,  which  were 
concentrated mainly in the fields covered by the political criteria. This methodology allowed a 
sound assessment to be made of the administrative capacities of Serbian institutions and of the 
way legislation is implemented, and it helped to better identify the remaining challenges and 
priorities for future action. The Commission has analysed both the present situation and the 
medium-term prospects. For the purpose of this Opinion, and without prejudging any future 
date of accession, the medium-term perspective has been defined as a period of five years. 

1 

The rapporteur for Serbia is Mr Jelko Kacin. 

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B. 

CRITERIA FOR MEMBERSHIP 

1. 

POLITICAL CRITERIA 

The European Council in Copenhagen in 1993 set a number of political criteria for accession 
to  be  met  by  applicant  countries.  A  country  must  have  achieved  'stability  of  institutions 
guaranteeing  democracy,  the  rule  of  law,  human  rights  and  respect  for  and  protection  of 
minorities'. In the case of the Western Balkans the conditions defined by the Stabilisation and 
Association Process are also a fundamental element of EU policy, which will be assessed in 
this  report.  These  include  regional  cooperation,  good  neighbourly  relations  and  compliance 
with international obligations, such as cooperation with the UN International Tribunal for the 
former Yugoslavia (ICTY). 

The political criteria established in Copenhagen derive from the fundamental values on which 
the EU is founded, as set out in Article 2 of the Treaty on European Union. These principles 
are emphasised in the Charter of Fundamental Rights of the European Union. Article 6(1) of 
the Treaty states that: 'The Union recognises the rights, freedoms and principles set out in the 
Charter  of  Fundamental  Rights  of  the  European  Union  of  7  December  2000,  as  adapted  at 
Strasbourg, on 12 December 2007, which shall have the same legal value as the Treaties'. 

The  assessment  set  out  below  examines  the  main  ways  in  which  public  authorities  are 
organised and operate, and the situation with regard to protection of fundamental rights. It is 
not confined to a formal description, but seeks to ascertain the way in which democracy and 
the rule of law actually function in practice. 

1.1. 

Democracy and the rule of law 

The Republic of Serbia continued as a successor state of the former State Union of Serbia and 
Montenegro, following Montenegro's proclamation of independence in June 2006. 

A  new  Constitution  was  adopted  by  an  overwhelming  majority  in  parliament  and  in  a 
subsequent  referendum,  and  entered  into  force  in  November  2006.  The  Constitution  lays 
down  the  rules  of  parliamentary  democracy,  separation  of  powers  and  independence  of  the 
judiciary. It defines the fundamental principles of rule of law, social justice, respect for human 
and  minority  rights,  and  prohibits  capital  punishment  and  discrimination  of  any  kind.  The 
Constitution establishes the right to constitutional appeal and the Ombudsman. It sets out the 
principle  of  democratic  and  civilian  control  of  the  armed  forces.  It  provides  that  Serbia  can 
only  conclude  international  treaties  that  are  compatible  with  the  Constitution2.  A  two-thirds 
majority  vote  is  required  in  parliament  to  both  launch  and  approve  a  revision  of  the 
Constitution. The process of aligning the legal framework with the new Constitution has been 
almost completed. 

2 

According to Article 182 of the Constitution 'Kosovo and Metohija' is an Autonomous Province ("In the 
Republic of Serbia, there are the Autonomous Province of Vojvodina and the Autonomous Province of 
Kosovo and Metohija") and is referred to as a constituent part of Serbia's territory in Article 114 (as part 
of the presidential oath). Serbia is prevented from exercising administrative authority over the territory 
of Kosovo since UNSCR 1244/1999 placed Kosovo under interim administration. Kosovo declared its 
independence  on  17  February  2008.  The  Council  noted  in  its  conclusions  on  18  February  2008  "that 
Member  States  will  decide,  in  accordance  with  national  practice  and  international  law,  on  their 
relations with Kosovo".  

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The Constitution is largely in line with European standards. However, some provisions would 
still  need  to  fully  reflect  the  recommendations  of  the  Venice  Commission  in  its  Opinion  of 
March  2007,  in  particular  those  allowing  control  by  political  parties  over  parliamentary 
mandates (See also section infra) and those providing for an excessive role of parliament in 
appointments and dismissals, in particular in the judicial system.  

Overall,  the  Constitution  lays  down  the  necessary  principles  for  a  parliamentary  democracy 
based  on  the  rule  of  law  and  the  separation  of  powers.  It  is  largely  in  line  with  European 
standards. 

1.1.1.  Parliament 

The Serbian Parliament is unicameral, with 250 members elected by direct universal suffrage 
for a four-year term. The Constitution guarantees the right to vote to all Serbian citizens over 
the age of 18. The Law on the Election of Members of Parliament provides for proportional 
representation,  according  to  the  D'Hondt  method,  of  candidate  lists  which  have  achieved  a 
five  per  cent  threshold  of  votes;  in  order  to  facilitate  their  representation,  no  threshold  is 
applied to lists representing national minorities. Serbia is regarded as a single constituency. 

The  parliamentary  elections,  held  in  May  2008,  were  assessed  by  OSCE/ODIHR  as  being 
overall in line with international standards. The work of the election administration was good 
and  transparent.  However,  significant  shortcomings  of  the  electoral  legislation  against  EU 
standards  were  noted,  particularly  provisions  that  allowed  political  parties  to  appoint 
Members  of  Parliament  (MPs)  after  the  vote  without  adhering  to  the  order  of  the  lists  of 
candidates  presented  to  the  voters.  In  April  2010,  the  Constitutional  Court  ruled  similar 
provisions in the Law on Local Elections to be unconstitutional. 

The electoral legislation has since been brought into line with European standards. The 2000 
Law on the Election of Members of Parliament was amended in May 2011 and now requires 
that  the  appointment  of  MPs  should  follow  the  order  of  the  lists.  It  also  puts  an  end  to  the 
practice  of  'blank  resignations',  by  which  MPs  were  tendering  resignation  letters  to  their 
parties. Similar changes were also introduced in the Law on local elections in July 2011. The 
2009  Law  on  a  Single  Voters  Register  will  also  improve  the  accuracy  and  security  of  data 
when  it  enters  into  force  in  December  2011.  The  Law  on  Financing  of  Political  Activities 
adopted  in  June  2011  covers  the  financing  of  electoral  campaigns  with  provisions  on 
transparency of funding sources, allocation of state funding and enhanced control prerogatives 
for the Anti-Corruption Agency.  

The  Speaker  of  Parliament  is  elected  for  a  four-year  term.  Among  the  six  deputy  speakers, 
four  are  currently  from  the  opposition.  There  are  30  standing  committees,  12  of  which  are 
chaired  by  MPs  from  the  opposition.  Debates  in  committees  are  open  to  the  media  and 
plenary  sessions  are  broadcast.  The  President  of  the  Republic  can  dissolve  parliament  on  a 
proposal  from  the  government  and  shall  dissolve  parliament  when  it  fails  to  elect  a  new 
government following its resignation or a motion of non-confidence. Women account for 22% 
of  the  number  of  MPs,  a  proportion  which  will  be  increased  to  at  least  30%  in  the  next 
legislature,  in  accordance  with  the  May  2011  amendments  to  the  electoral  law.  Requests  to 
waive the immunity of an MP in cases involving criminal offences have recently begun to be 
processed. 

Legislative  proposals  can  be  tabled  by  each  MP,  the  government,  the  Assembly  of  the 
Autonomous Province, an initiative supported by 30,000 voters and, in their respective areas 

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of  competence,  by  the  Ombudsman  and  the  National  Bank  of  Serbia.  Laws  are  normally 
adopted after four readings: two in the relevant committees, followed by two readings in the 
plenary  comprising,  respectively,  a  general  debate  on  the  rationale,  objectives  and  essential 
elements of the proposed legislation and a detailed debate on those articles that are the subject 
of amendments, before final adoption. A single debate may be organised for a number of bills 
that are related. An urgent procedure, which shortens the deadlines of readings and the length 
of  debates,  may  be  used  under  exceptional  circumstances,  including  for  the  purpose  of 
alignment with the EU acquis. A fast-track procedure, with similarly abbreviated stages, can 
be  applied  to  legislation  aimed  at  achieving  harmonisation  with  the  EU  acquis.  Laws  are 
generally adopted by a simple majority vote and with the proviso that a majority of MPs are 
present. 

The 2010 Law on the National Assembly established the budgetary autonomy of parliament, a 
"collegium"  composed  of  the  bureau  of  parliament  and  the  heads  of political groups, which 
meets  occasionally,  and  rules  on  the  transparency  of  parliamentary  bodies.  The  first 
autonomous  budget  was  approved  in  December  2010;  an  office  for  budget  planning  and 
analysis  was  established  and  an  internal  auditor  was  appointed  in  April  2011.  The  rules  of 
procedure adopted in 2010 clarified the legislative procedures, introduced public hearings and 
enhanced the existing instruments of control over the executive. Under these rules the number 
of  standing  parliamentary  committees  will  be  reduced  to  19  as  from  the  next  legislature. 
Amendments  adopted  in  2010  allowing  MPs  to  hold  other  public  functions  were  deemed 
invalid by the Constitutional Court in July 2011 and concerned MPs had to choose between 
their mandates in September 2011. 

Twenty-one political parties are currently represented in parliament; four parties representing 
national  minorities  have  constituted  a  parliamentary  group.  They  took  part  in  the 
parliamentary  elections  of  May  2008,  either  individually  or  as  part  of  coalition  lists.  The 
largest opposition party split after the elections into two separate political groups. The 2009 
Law  on  Political  Parties  established  stricter  rules  for  party  registration,  including  the 
obligation  to  collect  10,000  signatures  (1,000  for  parties  representing  national  minorities). 
Following its entry into force, a total of 81 parties have been registered, of which 45 represent 
national minorities.  

Parliamentary  business  has  run  more  smoothly  and  effectively  under  the  current  legislature 
than  previously.  Since  2008,  parliament  engaged  in  extensive  legislative  activity  aimed  at 
establishing  a  systemic  legal  framework  in  line  with  European  standards.  New  procedural 
rules  have  streamlined  the  parliamentary  agenda  and  reduced  the  previously  widespread 
practices of parliamentary obstruction. There was also an intense mobilisation in 2011 on the 
priorities  of  the  government's  Action  Plan  aimed  to  address  the  challenges  identified  in  the 
2010  Commission  Progress  report.  Nevertheless,  urgent  and  other  abbreviated  procedures 
were  applied  in  many  instances,  including  for  key  pieces  of  legislation,  thereby  limiting 
parliamentary  and  public  debate.  Stricter  criteria  should  be  applied  to  urgent  and  fast-track 
procedures  aimed  at  harmonisation  with  the  EU  acquis  in  order  to  limit  their  application  to 
measures of technical alignment with the EU acquis. There is no consistent approach to the 
consultation of stakeholders. Not  enough attention  is  paid  to  the  quality  of legislation. As a 
result,  the  Constitutional  court  invalidated  parts  of  several  important  pieces  of  legislation. 
Appointments  that  fall  under  the  competence  of  parliament  are  often  late  and  in  some 
instances based on unclear criteria.  

A Committee for European Integration has been in place since May 2004 and is tasked with 
verifying  the  compatibility  of  proposed  legislation  and  other  measures  with  European 

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standards. Since 2009 it has held regular hearings of the government on the implementation of 
the National Plan for European Integration.  

There  has  been  a  gradual  improvement  in  parliament's  role  of  oversight  and  control  of  the 
government.  It  is  exercised  mainly  by  means  of  parliamentary  questions  addressed  to  the 
government,  to  one  or  more  ministers  and  to  the  Prime  Minister,  during  sessions  held  on  a 
monthly  basis.  There  is  provision  for  interpellations,  votes  of  confidence  and  the 
establishment  of  committees  of  inquiry.  The  Government  presents  an  annual  report. 
Individual ministers provide specific reports and attend hearings of the relevant committees. 
Although  the  use  of  oversight  tools  has  developed,  it  remains  largely  formal.  Parliament 
adopted amendments to its rules of procedure in February 2011 that clarified its relations with 
independent regulatory bodies. It still needs to develop the use of their findings to enhance its 
own oversight over the executive. 

The  work  of  committees  remains  weak  and  largely  reactive  due  to  limited  resources  and 
expert  staff.  This  hampers  the  ability  of  parliament  to  scrutinise  draft  legislation  in  depth, 
including  its  financial  implications,  and  to  monitor  the  implementation  of  legislation.  A 
European  Integration  Department,  with  some  initial  capabilities,  was  established  in  the 
parliamentary service to support the work of the Committee for European Integration.  

Overall,  elections  have  been  consistently  conducted  in  accordance  with  international 
standards  for  democratic  elections  since  2001.  The  electoral  legislation  has  recently  been 
brought into line with European standards and consolidates the free exercise of parliamentary 
mandates,  a  principle  which  also  needs  to  be  fully  enshrined,  in  due  course,  in  the 
Constitution.  

There  has  been  a  marked  improvement  in  the  functioning  and  the  legislative  activity  of 
parliament  in  the  current  legislature.  There  was  a  striking  mobilisation  of  efforts  in  the  last 
year,  which  led  to  substantial  results.  Improved  rules  of  procedure  helped  to  streamline  the 
debates,  while  at  the  same  time  reducing  obstruction.  Further  efforts  are  needed  in  order  to 
enhance  the  legislative  process,  including  the  conduct  of  proper  impact  assessments  and  a 
consistent  approach  to  the  consultation  of  stakeholders.  Oversight  of  the  government, 
including the monitoring of the implementation of legislation, has still to be strengthened.  

1.1.2.  The executive  

The President of Serbia is elected by direct, universal suffrage for a five-year term of office, 
which  is  renewable  once.  The  unity  of  the  State  is  vested  in  the  President.  The  President 
represents  Serbia  nationally  and  abroad,  promulgates  laws  and  may  exercise  a  suspensive 
veto. He proposes a Prime Minister-designate to the Parliament. He appoints one third of the 
members  of  the  Constitutional  Court.  The  President  may  dissolve  the  Parliament  upon  a 
proposal from the Government. The President appoints and dismisses ambassadors and other 
diplomatic  representatives  upon  a  proposal  from  the  Government,  and  grants  amnesty  and 
performs other duties laid down in the Constitution. He is the commander of the armed forces 
and  has  the  power  to  appoint,  promote  and  dismiss  military  officers.  The  President  enjoys 
equivalent immunity to that of Members of Parliament and may not perform any other public 
function  or  professional  activity.  The  President  may  be  impeached  for  violation  of  the 
Constitution  under  a  parliamentary  procedure  initiated  by  at  least  one  third  of  MPs  and 
confirmed by a two-thirds majority vote, following an opinion of the Constitutional Court.  

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The  current  President  is  Boris  Tadic,  who  was  elected  in  June  2004  as  President  of  the 
Republic of Serbia within the State Union of Serbia and Montenegro, and elected in February 
2008 as President of the Republic of Serbia.  

The  decision  to  appoint  the  Prime  Minister  is  taken  by  parliament  on  a  proposal  by  the 
President. Parliament approves the composition of the government and its programme by an 
absolute majority, on a proposal by the Prime Minister-designate. All government members, 
including  the  Prime  Minister,  enjoy  immunity  due  to  their  function,  but  are  accountable  to 
parliament.  Their  position  is  incompatible  with  being  an  MP  or  holding  executive  or 
representational functions at the level of an autonomous province or local self-government.  

The current government is led by Prime Minister Mirko Cvetkovic and was appointed in July 
2008. It was restructured and downsized in March 2011. It has 21 members, of whom three 
are women, and it includes a Vice Prime Minister and three Deputy Prime Ministers, one of 
whom is in charge of EU integration. The Prime Minister currently also assumes the functions 
of Minister of Finance. 

The government's powers, internal organisation and working procedures are regulated by the 
Constitution,  the  Law  on  Government,  the  Law  on  Ministries,  the  Law  on  Public 
Administration  and  its  rules  of  procedure.  The  government  is  supported  by  a  General 
Secretariat.  There  are  rules  on  the  coordination  of  public  appearances  and  statements  of 
ministers relating to the work and decisions of the government. The government, as well as all 
other public administration bodies, are bound to provide public access to information on their 
work,  pursuant  to  the  Law  on  free  access  to  public  information.  Transparency  of  decision-
making  and  access  to  sensitive  information,  such  as  appointments  and  salaries  in  public 
companies, have yet to be improved.  

The government conducts Serbia's domestic and foreign policies and implements legislation. 
It  steers  the  country's  reforms,  coordinates  the  work  of  public  administration  bodies,  and 
adopts policy guidelines and strategies. The government meets and takes decisions in regular 
weekly sessions. It works on the basis of an annual work programme, including a legislative 
programme and a budget memorandum defining the fundamental objectives of public finances 
and of macroeconomic policy.  

The government's rules of procedure were strengthened in June 2010 as regards the practice 
of  drawing  up  for  each  legislative  proposal  a  statement  of  compliance  with  the  EU  acquis, 
which  is  now  mandatory  and  must  also  include  a  table  of  concordance.  Such  legislative 
proposals  must  also  include  an  impact  assessment  with  an  estimate  of  their  financial 
implications.  Government  is  supported  by  a  Legislative  Secretariat,  which  checks  the 
constitutionality  and  legality  of  draft  measures,  and  an  Office  for  Regulatory  Reform  and 
Regulatory  Impact  Analysis,  established  in  November  2010,  to  assist  in  developing  impact 
assessment. The Ministry of Finance reviews the financial implications of draft legislation.  

In spite of those recent improvements, the government's capacity for strategic policy planning 
has yet to be developed. Inter-ministerial and inter-agency coordination need to be improved 
and compartmentalisation reduced. The quality of legislation prepared by government remains 
uneven. A more consistent and fully transparent approach to the consultation of stakeholders 
is  needed  for  the  preparation  of  draft  legislation,  as  well  as  sufficient  consideration  of  its 
enforceability. There is room for improvement of the consideration given to suggestions made 
by relevant state institutions and independent regulatory bodies.  

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The  Serbian  European  Integration  Office  (SEIO)  was  established  in  2004  and  has  since 
developed its capacities and demonstrated great ability to coordinate government activity in 
relation to the EU agenda of reforms. A structure comprising a high-level coordination body 
supported  by  an  expert  group  and  35  expert  sub-groups  covering  all  chapters  of  the  acquis 
was established in 2007. The government adopted a National Programme for EU Integration 
(NPI)  in  2008  and  revised  it  in  2009.  It  is  a  comprehensive  planning  document  that 
encompasses the legislative and administrative reforms that are considered necessary in order 
to prepare for EU membership. In December 2010, the government adopted an Action Plan 
aimed to address the challenges identified in the 2010 Commission Progress report. The SEIO 
monitors the implementation of commitments identified in the NPI and the Action Plan, and 
reports on them on a quarterly basis. The rules of procedure of the government were adapted 
in  May  2010  to  step  up  the  process  of  harmonisation  of  legislation  with  the  acquis,  in  line 
with  the  stated  priority  attached  by  the  government  to  the  European  integration  process.  A 
robust  network  of  EU  integration  correspondents  and  departments  in  line  ministries  will  be 
needed to help Serbia progress in its EU integration process.  

Serbia has two main levels of government – central and local self-government – as well as 
the autonomous province of Vojvodina. A Law on Territorial Organisation, the Law on Local 
Government and the Law on the Capital City were adopted in 2007. Serbia encompasses 122 
municipalities, 22 towns and the city of Belgrade, as a special territorial unit. As regards the 
Province of Vojvodina, a new Statute was adopted by the Provincial Assembly in 2008; the 
Statute  and  the  Law  determining  the  competences  of  Vojvodina  were  approved  in  the 
National Assembly in 2009. A Law on public property which entails transfers of competences 
to the Province of Vojvodina, as well as to municipalities, was adopted in September 2011. 
(See also political criteria – Human Rights and the protection of minorities – property rights.)  

Central authorities have delegated competences to units of local self government in areas such 
as building permits, utilities, culture, education, health, social and child welfare, protection of 
the environment and agricultural land. A law on fiscal decentralisation was adopted in June 
2011  which  aims  at  providing  municipalities  with  additional  funding  through  allocations 
stemming from the income tax. However, a complete overview and inventory of the functions 
delegated  to  municipalities  remain  to  be  established.  Transfers  have  been  made  without 
ensuring sufficient capacity and resources at local level, in part because of the impact of the 
economic crisis on public finances which meant that municipalities' own revenues were also 
shrinking.  The  National  Council  for  Decentralisation  was  established  in  2009,  but  has  been 
mostly  inactive  since.  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. 

Overall, Serbia has a well-established functioning system of executive power. Serbia attaches 
high  priority  to  the  European  integration  process  and  the  government  has  adapted  its 
procedures accordingly. The Serbian European Integration Office plays a central and valuable 
role  in  the  coordination  of  the  EU  reform  agenda.  Serbia  has  established  a  Statute  for  the 
province of Vojvodina and has taken steps to increase competencies at municipal level. The 
government's capacities for policy planning and coordination need to be seriously overhauled. 
Further efforts are needed in order to make effective use of the regulatory impact assessment 
and  improve  public  consultation  in  the  legislative  process,  particularly  with  regard  to  civil 
society  and  local  self-government.  Implementation  of  laws  needs  to  be  better  prepared  and 
monitored.  Transfers  of  competences  at  local  level  should  be  backed  up  by  corresponding 
resources and appropriate attention paid to sound financial management.  

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1.1.3.  Public administration 

The legal framework providing for public administration reform (PAR) is largely in place in 
Serbia  and  administrative  capacities  are  generally  well  developed,  in  particular  at  central 
level. A Strategy for PAR was adopted by the Government in 2004 and supplemented by an 
Action  Plan  covering  the  period  2009-2012.  The  aim  of  the  Strategy  and  Action  Plan  is  to 
create  a  public  administration  oriented  towards  the  citizens  and  based  on  the  principles  of 
depoliticisation,  professionalisation,  rationalisation,  modernisation  and  decentralisation.  The 
two main actors involved in coordinating and monitoring the reform are the Council for PAR, 
established in 2002, and the Ministry for Human and Minority Rights, Public Administration 
and  Local  Self-Government.  The  PAR  Council  is  chaired  by  the  Prime  Minister  and  brings 
together the ministers holding the main responsibilities in the reform program. It ensures the 
strategic  coordination  of  the  PAR  strategy.  The  Ministry  is  entrusted  with  the  day-to-day 
coordination  and  monitoring  of  reforms.  In  order  to  ensure  the  coordination  of  all  actors, 
reform  coordinators/teams  have  been  appointed  in  each  relevant  body  of  the  public 
administration. 

The  implementation  of  the  Strategy  is  making  slow  progress.  The  PAR  Council  has  met 
several times since April 2009, but mainly to consider administrative and technical issues. A 
stronger  political  commitment  and  a  strengthened  strategic  approach  to  reform  are  needed. 
Enhanced  coordination  is  necessary  because  responsibilities  are  divided  between  several 
actors,  and  the  monitoring  of  PAR  implementation  needs  to  be  improved.  Sufficient  human 
and financial resources have to be allocated to the Ministry in order for it to efficiently carry 
out its PAR coordination tasks.  

The Law on Civil Servants (LCS), adopted in 2005, regulates the position of employees in the 
public  administration.  The  Law  was  subsequently  amended  to  establish  educational 
requirements for civil servant posts, aimed at increasing professionalism and reducing the risk 
of political influence and nepotism. However, the LCS exclusively regulates the legal regime 
of civil servants in state authorities and does not apply to local self-government employees. A 
significant  number  of  appointments  for  senior  civil  servant  positions  are  still  pending. 
Selection  procedures  are  not  applied  uniformly  and,  in  the  absence  of  criteria  for  final 
recruitment  decisions,  managers  still  have  excessive  discretionary  powers  when  choosing 
candidates  from  lists  prepared  by  the  competitions'  selection  panels.  Competence  and 
professionalism in appointments at management and lower levels in the administration need 
to become the rule. Temporary employees are not recruited according to competitive criteria 
and contracts are allocated without internal or public competition.  

A  Human  Resources  Management  Service  was  established  in  2006,  in  charge  of:  internal 
advertising  and  public  competitions  for  non-management  jobs;  checking  staffing  plans  for 
Government  bodies;  keeping  records  of  the  central  public  administration  personnel  and 
overseeing the general professional training programme for civil servants. A Strategy for the 
professional  training  of  civil  servants  for  the  period  2011-  2013  was  adopted  in  July  2011. 
The Strategy aims at creating a new system of training, through the establishment of a central 
institution in charge of the implementation of training programmes for civil servants. A fifth 
annual  training  programme  was  adopted  in  January  2011.  The  programme  embraces  a  wide 
range of topics, including development of senior management and EU integration. However, 
only  a  small  percentage  of  civil  servants,  and  in  particular  a  very  small  percentage  of 
managers, takes part in this training. Induction training is not provided. 

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The Law on Administrative Disputes, regulating the judicial control of administrative acts and 
the  competences  of  the  Administrative  court,  was  adopted  in  December  2009.  The 
Administrative  court,  as  a  court  of  special  jurisdiction,  became  operational  as  of  1  January 
2010.  The  adoption  of  a  new  Law  on  Administrative  Procedures,  aimed  at  introducing 
simplified  procedures  in  order  to  reduce  the  caseload,  is  still  pending.  The  Law  on 
Administrative Disputes allows only individual administrative acts to be challenged before the 
administrative  court,  which  is  not  in  line  with  European  standards  on  the  judicial  review  of 
administrative acts. 

In  recent  years,  Serbia  created  all  of  the  necessary  independent  regulatory  bodies  (IRBs). 
Rules  governing  relations  between  parliament  and  IRBs  were  clarified  in  February  2011  to 
better acknowledge the role and independence of IRBs. It provides for a parliamentary review 
of the regular annual reports of the Ombudsman, the Commissioner for Free Access to Public 
Information and for Data Protection, the State Audit Institution, the Anti-corruption Agency 
and  the  Equality  Protection  Commissioner.  Such  reviews  were  held  in  July  2011  on  the 
bodies'  2010  reports  and  provided  valuable  information  for  parliament  to  exercise  its 
oversight  powers  over  the  executive.  IRBs  have  slowly  but  surely  been  given  additional 
resources  to  exercise  their  mandate.  They  have  overall  a  clear  basis  for  their  funding  and  a 
satisfactory  degree  of  autonomy  for  planning  and  implementing  the  budget.  Despite  recent 
improvements, Parliament has given only limited attention to legislative proposals tabled by 
IRBs, including in cases when they are making use of a statutory right of initiative. There is 
room  for  improving  the  transparency  and  timeliness  of  appointments  of  heads  of  IRBs, 
members of boards or executive directors. Several IRBs continue to be faced with logistical 
constraints,  such  as  limited  available  space  in  current  premises  which  slows  down 
recruitment, and rigidities in the application of the law on civil service which does not allow 
remuneration that is commensurate with the expertise and qualifications required. Auditing of 
expenditure of IRBs needs to be ensured. 

The first State Ombudsman was appointed by parliament in 2007 for a period of five years. 
There is also a specific ombudsman for Vojvodina and several others at municipal level with 
whom the State Ombudsman has established cooperation. A local field office was opened in 
Southern  Serbia  in  June  2010.  The  public  have  demonstrated  increasing  interest  and 
confidence  in  the  Ombudsman.  Ombudsman  offices  at  both  state  and  provincial  level  were 
very  active  and  led  to  a  greater  awareness  among  the  general  public,  which  resulted  in  an 
increase in the number of complaints. The number of complaints has significantly increased 
each year. So far, the State Ombudsman has received almost 6,000 complaints from citizens, 
two third of which were resolved. The majority of complaints relate to social and economic 
rights and to the lack of responsiveness on the part of the administration. Since 2007, the State 
Ombudsman  issued  some  270  individual  and  50  general  recommendations,  of  which  nearly 
80%  were  satisfactorily  followed  up.  He  also  proposed  legislative  changes,  issued  general 
recommendations,  visited  various  institutions  and  was  active  in  promoting  the  protection  of 
human rights and minority rights.  

The Commissioner for Free Access to Information of Public Interest was established in 2004. 
The  Commissioner  was  appointed  by  parliament  for  a  seven-year  term.  The  2008  Personal 
Data Protection Act extended its powers, and further amendments adopted in 2010 introduced 
a  mechanism  for  enforcing  its  decisions.  From  the  outset,  the  Commissioner  has  been  very 
active and has enjoyed the confidence of the public. However, his recommendations are still 
not being followed up sufficiently. 

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The State Audit Institution (SAI) is the body in charge of auditing public funds in Serbia. It 
was established by the 2005 Law on the State Audit Institution and has been a member of the 
International  Organisation  of  Supreme  Audit  Institutions  (INTOSAI)  since  November  2008. 
The SAI performed its first audit in 2008, which was the first time the state budget had been 
audited since 2001. Since then, the SAI has steadily improved its performance; its cooperation 
with  other  independent  regulatory  bodies  and  the  status  of  the  auditors  have  improved, 
although its recruitment plan needs to be completed in order for the SAI to perform its tasks 
fully.  

Overall, administrative capacity is in general well developed at central level and a strategy for 
public administration reform is in place under the auspices of a Council reporting to the Prime 
Minister.  There  is  a  need  for  further  alignment  of  legislation  and  more  effective 
implementation  of  the  existing  legal  framework  and  strategy.  Progress  remains  slow  and  is 
affected by a lack of coordination among stakeholders and insufficient managerial capacities. 
The  establishment  of  a  merit-based  recruitment  and  career  system  is  not  yet  complete  and 
appointments  remain  vulnerable  to  politicisation.  Public  administration  is  weak  at  the  local 
level. Independent regulatory bodies have been established in all important areas. The follow-
up of their findings and decisions should be strengthened.  

1.1.4. 

Judicial system (See also Chapter 23 – Judiciary and fundamental rights) 

The Serbian judiciary is organised in a three-tier court system, which broadly respects the key 
requirements  of  independence,  impartiality,  accountability  and  efficiency.  In  2010,  the 
judicial  budget  amounted  to  182  M  €  (0.61  %  of  the  GDP).  There  are  34  Basic  Courts,  26 
Higher  Courts,  4  Appellate  Courts  and  the  Supreme  Court  of  Cassation.  Courts  of  special 
jurisdiction are the 16 Commercial Courts and the Appellate Commercial Court, as well as 45 
Misdemeanour  Courts  and  the  Higher  Misdemeanour  Court.  An  administrative  court  was 
established recently. The organisation of the public prosecution is hierarchical and reflects the 
structure of the general court system. The Republic Prosecutor's Office is the highest public 
prosecutor's office. Public prosecutor's offices of special jurisdiction have been established for 
war crimes and for organised crime and corruption.  

The  Constitutional  Court  was  established  in  2008,  following  the  adoption  of  the  2006 
Constitution.  It  has  15  judges  with  a  renewable  nine-year  term  of  office;  five  of  them  are 
appointed by parliament, five by the President of the Republic and five by the general session 
of the Supreme Court of Cassation. The latter five judges were appointed as recently as April 
2010. The Court rules on the constitutionality of legislation and on constitutional appeals for 
violation of human rights by individual acts or actions of state authorities. The Court faces a 
large backlog of cases. On 15 September 2011, the Court had 8,549 pending cases compared 
to some 7,000 in September 2010. Given the limited efficiency of the Court, urgent measures 
are needed to handle the increasing inflow of cases.  

The independence of the judiciary is guaranteed by the Constitution and is generally ensured. 
Serbia launched an ambitious reform of the judiciary based on a national strategy adopted in 
2006  and  a  package  of  judicial  laws  in  2008.  The  High  Judicial  Council  and  the  State 
Prosecutorial  Council  were  established  as  the  key  bodies  for  stronger  self-administration  of 
the  judiciary  and  were  set  up  in  their  transitional  composition  in  June  2009  and  in  their 
permanent composition in April 2011. The High Judicial Council and the State Prosecutorial 
Council consist of eleven members, of whom three are ex officio members: respectively the 
President of the Supreme Court of Cassation or the Republic Public Prosecutor, the Minister 
of  Justice  and  the  President  of  the  Parliamentary  Committee  for  Judicial  Affairs.  The  other 

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eight  members  are  appointed  for  five  years  by  parliament:  six  of  them  are  proposed  after  a 
secret ballot respectively among judges and public prosecutors; two are prominent lawyers – 
one representative of the bar and one professor of law selected by the relevant parliamentary 
committee. The Councils are responsible for defining the total number of positions and for the 
selection,  appointment,  promotion,  dismissal  and  disciplinary  measures  concerning  judges 
and  deputy  prosecutors  respectively.  They  are  also  responsible  for  the  administration  of  the 
budget for courts and prosecution offices. However, in the absence of sufficient capacities, the 
handing  over  of  the  management  of  the  budget  from  the  Ministry  of  Justice  has  been 
postponed.  

Amendments of 2011 to the Law on Judicial Academy strengthened the merit based approach 
to  recruitments,  making  the  completion  of  a  vocational  training  programme  a  general 
precondition  for  the  appointment  of  basic  court  and  misdemeanour  judges,  as  well  as  for 
deputy basic prosecutors. The Judicial Academy is competent for the vocational training and 
continued  professional  development  of  judges,  prosecutors  and  judicial  staff.  A  first 
vocational training course started in September 2010. A proper merit-based career system for 
judges  and  prosecutors  needs  to  be  fully  developed.  It  is  still  possible  to  enter  the  judicial 
profession, in particular at higher levels, on the basis of unclear criteria without having passed 
the  Judicial  Academy.  Regular  performance  evaluations  are  only  starting  to  be  introduced. 
The Judicial Academy operates on scarce resources and has not yet finalised its curricula.  

The  constitutional  and  legislative  framework  still  leaves  some  room  for  undue  political 
influence  on  the  judiciary.  Parliament  appoints  and  dismisses  the  President  of  the  Supreme 
Court, who is also ex officio president of the High Judicial Council, and the Republic Public 
Prosecutor for a renewable six-year term of office, upon a proposal from the government and 
the opinion of the relevant parliamentary committee. Parliament also appoints court presidents 
and public prosecutors for a renewable six-year term on the basis of non-binding proposals by 
the  respective  Councils,  as  well  as  first  time  judges  and  deputy  prosecutors  for  a  probation 
period  of  three  years.  The  prosecution  service  is  vulnerable  to  political  influence  due  to  its 
hierarchical  organisation  and  the  ongoing  practice  of  issuing  oral  instructions,  despite  the 
legal obligation for written instructions.  

A re-appointment procedure for all judges and prosecutors, aimed at raising professional and 
integrity standards and removing unsuitable persons from the system, was carried out during 
the  second  half  of  2009  and  took  effect  as  of  January  2010.  As  part  of  this  systematic 
exercise, the number of judges was reduced from 2,686 in 2009 to 1,972, out of which 1,802 
posts  were  initially  filled.  Previous  misdemeanour  judges  were  integrated  into  the  normal 
court  system,  which  led  to  an  overall  number  of  2,587  judges'  posts.  A  total  of  871  new 
judges entered the system, 292 of whom were first time judges with a three-year mandate and 
579  were  previous  misdemeanour  judges.  In  July  2011,  2.405  judges'  positions  were  filled. 
The number of clerical staff in courts was reduced to some 12,900 positions. The number of 
prosecutors was reduced from 129 to 67 and the number of deputy prosecutors from 670 to 
586. The prosecution service has some 1,400 clerical staff. Significant shortcomings affected 
the re-appointment procedure, which was carried out in a very short period of time. Both the 
High Judicial Council and the State Prosecutorial Council acted in their transitory forms and 
not all members had been appointed, which did not ensure adequate self-representation of the 
profession. Judges and prosecutors, as well as first time candidates, were not heard during the 
procedure. Criteria were applied in a non-transparent manner and reasoned decisions were not 
issued  in  a  timely  manner.  Problems  arose  with  the  calculation  of  the  number  of  necessary 
posts, which were reduced in the first stage and increased again at later stages. The right for 
non  re-appointed  judges  and  prosecutors  to  appeal  was  limited  to  taking  their  case  to  the 

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Constitutional Court. Some 1,500 appeals were filed, but the Court lacked the capacity to deal 
with the large number of cases within a reasonable time.  

Given the initial shortcomings, the Serbian authorities launched a review of the procedure at 
the  end  of  2010.  Legislative  amendments  were  adopted  in  December  2010,  transferring  the 
cases  back  from  the  Constitutional  Court  to  the  High  Judicial  Council  and  the  State 
Prosecutorial  Council.  Respective  guidelines  for  the  review  procedure  for  non  re-appointed 
judges and prosecutors were adopted in May 2011 by the High Judicial Council and the State 
Prosecutorial  Council  in  their  permanent  form.  Broad  consultation  of  all  stakeholders  was 
conducted  on  the  guidelines.  These  guidelines  include  clear  and  transparent  criteria  and 
provided a sound basis for the review procedure which was launched at the end of June. In the 
837  cases  concerning  non  re-appointed  judges,  375  hearings  had  been  conducted  and  155 
cases decided by mid September. As regards the 157 cases of prosecutors, 127 decisions had 
been  made.  While  written  justifications  yet  have  to  be  issued  for  most  cases,  the  review  on 
judges  has  been  so  far  conducted  in  a  satisfactory  manner.  Despite  some  procedural 
shortcomings, the majority of decisions were generally taken in line with the guidelines. As 
regards  prosecutors,  certain  procedural  shortcomings  occurred  and  remaining  doubts  on  the 
observance of the guidelines will have to be dispelled by the written decisions. The review for 
newly elected judges and prosecutors and for those re-appointed despite ongoing disciplinary 
procedures  is  under  preparation.  The  review  process  of  re-appointment  of  judges  and 
prosecutors still needs to be brought to a satisfactory conclusion. 

The impartiality of judges is broadly ensured. Legal provisions on conflict of interest are in 
place. Cases are generally allocated on a random basis, which is more difficult in small courts 
or court units with only a few judges.  

The  regulatory  and  institutional  framework  ensuring  the  accountability  of  the  judiciary  is 
generally in place. A code of ethics for judges was adopted in 2010. Internal inspections on 
technical  and  administrative  matters  are  carried  out  by  the  Ministry  of  Justice,  based  on 
reports  from  the  court  president  and  on  the  spot  visits.  Presidents  of  higher  courts  are  also 
entitled to inspect lower courts. The Republic Public Prosecutor is accountable for the work of 
the prosecution service to parliament, which also decides on his re-election for another (six-
year) term and on termination of office. A track record of effective inspections still needs to 
be established. 

There  is  a  twin-track  procedure  for  ordinary  disciplinary  offences  (leading  to  disciplinary 
sanctions)  and  serious  disciplinary  offences  (which  can  result  in  dismissal).  The  competent 
bodies  are  the  Disciplinary  Prosecutors  and  Disciplinary  Commissions,  established  by  the 
respective  Councils.  Procedures  for  ordinary  offences  are  launched  by  the  Disciplinary 
Prosecutors, decided by the Disciplinary Commissions and can be appealed against before the 
Councils. Dismissal procedures are conducted by the respective Councils, which also decide 
in the case of judges and deputy prosecutors. For court presidents and public prosecutors, the 
final decision is taken by the parliament upon recommendation of the respective Council. The 
High  Judicial  Council  set  up  the  disciplinary  authorities  in  December  2010.  Until  15 
September, 104 complaints were examined and one disciplinary case was opened, but has not 
yet been finalised. The State Prosecutorial Council has not yet set up the relevant disciplinary 
bodies. The double-track procedure for disciplinary offences should be streamlined in order to 
avoid  possible  gaps  between  the  proceedings.  Disciplinary  authorities  for  the  prosecution 
service need to be set up and a track record of effective disciplinary procedures developed. 

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Judges and prosecutors, as well as the elected members of the two Councils, enjoy functional 
immunity. Procedures for lifting immunity are in the hands of parliament, and prior approval 
of the High Judicial Council is needed for judges. In practice there were only five cases, two 
concerning  judges  and  three  concerning  prosecutors,  in  which  the  immunity  has  been  lifted 
since the entry in force of the new Constitution in 2006. This low number raises concerns over 
too high protection for judges and prosecutors from criminal investigations.  

Another key step in the judicial reform process was the overhaul of the court network in order 
to rationalise the system and increase its efficiency. The previous 138 municipal courts were 
replaced  by  34  basic  courts  as  of  January  2010.  District  courts  were  abolished  and  their 
competences  divided  between  Higher  Courts  and  Appellate  Courts.  Competences  of  the 
previous Supreme Court were divided between the Appellate Courts and the Supreme Court 
of Cassation. The reduction of the number of courts had positive effects towards a more equal 
distribution  of  work  between  the  courts.  New  laws  on  enforcement  of  judgements  – 
introducing  private  bailiffs  –  and  on  public  notaries  were  adopted  in  May  2011.  Additional 
measures included the launch of a programme to reduce the number of old cases in five pilot 
courts,  as  well  as  improvements  to  the  infrastructure  and  equipment.  The  newly-established 
Administrative  Court  with  33  judges  took  over  the  entire  backlog  from  the  previous 
administrative section of the Supreme Court and succeeded in processing a large number of 
cases, despite the continuously high inflow of new cases.  

New Civil and Criminal Procedure Codes have been  adopted in September  2011.  The Civil 
Procedure Code aims at streamlining civil procedures and is generally a good basis to increase 
the  efficiency  of  the  Serbian  judiciary.  The  Criminal  Procedure  Code  profoundly  changes 
criminal  proceedings  by  giving  the  lead  of  investigations  to  the  prosecution  service  and 
introducing  an  adversarial  system.  In  a  first  stage,  it  will  only  be  applied  to  proceedings 
carried  out  by  the  special  prosecutors  for  organised  crime  and  for  war  crimes,  before 
extending it to the whole system. There are concerns over insufficient procedural safeguards 
in the new Code. 

Serbia  continues  to  face  a  large  backlog  of  old  cases.  On  30  June  2011,  some  1.9  million 
pending cases were older than 9 months. Many of these relate to the enforcement of both civil 
and criminal decisions, with an average duration of over 600 days for civil cases. The present 
system of enforcement of civil cases relies on an insufficient number of court agents. Serbia 
needs  to  pursue  the  establishment  of  public  notaries  and  private  bailiffs,  foreseen  under  the 
new laws, without further delays. The impact of the rationalisation of the court network has 
not yet reached its full potential. There continue to be significant differences in the workload 
between courts, with a particularly high influx of cases in the Belgrade  courts. Basic courts 
maintained  court  units  dealing  with  civil  cases  in  the  locations  of  the  previous  municipal 
courts. Continued operation of court units still creates maintenance costs for the buildings and 
travelling  expenses  of  judicial  staff  and  can  entail  some  risks  to  the  security  of  the 
proceedings,  in  particular  in  view  of  the  need  to  transport  files  and  to  secure  the  court  unit 
buildings. The IT based case management system is not fully operational for the entire court 
network.  

Overall, substantial reforms of the judiciary have been pursued in Serbia since the adoption of 
the national strategy in 2006, and were intensified in 2009 and 2010. Independence and self-
administration  were strengthened with the establishment of the new High Judicial and  State 
Prosecutorial  Councils.  The  restructuring  of  the  court  network,  including  the  creation  of  an 
administrative court, and a new law on enforcement of court decisions were appropriate steps 
for increasing the efficiency of the judiciary. The initial significant shortcomings identified in 

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the re-appointment procedure are in the course of being addressed through a review process, 
for  which  there  are  clear  guidelines.  The  review  process  remains  to  be  satisfactorily 
completed  in  a  transparent  manner,  in  line  with  these  guidelines.  At  the  same  time,  the 
Serbian  judiciary  still  faces  a  number  of  challenges.  Constitutional  and  legal  provisions  on 
appointments, promotion and dismissals in the judiciary will need in due course to be brought 
into  line  with  European  standards.  Further  efforts  are  needed  in  order  to  increase  public 
confidence  in  the  judiciary,  improve  the  effectiveness  of  disciplinary  proceedings,  reinforce 
the execution of judgements and further reduce the large backlog of pending cases. 

1.1.5.  Anti-corruption policy (See also Chapter 23 – Judiciary and fundamental rights) 

Serbia has established the relevant institutional and legal framework to combat corruption. Its 
main  components  are  the  2008  Law  on  the  Anti-Corruption  Agency,  the  2009  Law  on  the 
Organisation  and  Competence  of  the  State  Authorities  in  Suppressing  Organised  Crime, 
Corruption  and  other  especially  serious  criminal  offences,  the  2008  Law  on  Seizure  and 
Confiscation  of  the  Proceeds  from  Crime,  amendments  of  2007  to  the  Criminal  Procedure 
Code  regarding  special  investigative  measures,  the  Law  of  2005  on  Civil  Servants,  and  the 
amendments  of  2009  to  the  Law  on  Free  Access  to  Information  of  Public  Importance. 
However, implementation of legislation and practical results are still lagging behind.  

The government adopted a National Anti-Corruption Strategy and a respective Action Plan in 
2005. The Strategy and Action plan have been implemented slowly and need to be updated. 
The current Strategy does not cover the education and health sectors, which are areas prone to 
corruption.  The  Action  Plan  does  not  precisely  define  activities  and  does  not  set  clear 
indicators. The Strategy and the Action Plan are in the process of being revised. The Minister 
of  Justice  was  appointed  anti-corruption  coordinator  in  May  2011  to  improve  the  so  far 
inadequate cooperation between the stakeholders involved in the fight against corruption.  

The Anti-Corruption Agency became operational as the central anti-corruption body in 2010. 
It is managed by a Director, who is appointed by an Anti-Corruption Board whose members 
are appointed by parliament. The Agency reports annually to parliament. The powers of the 
Agency  are  focused  on  the  prevention  of  corruption.  They  include  supervision  of  the 
implementation  of  the  National  Anti-Corruption  Strategy  and  Action  Plan,  conflicts  of 
interest,  declarations  of  assets  and  gifts,  financing  of  political  parties,  revision  of  draft 
legislation  to  identify  and  eliminate  corruption  risks,  integrity  plans,  and  education  on 
corruption.  The  Agency  took  over  the  responsibilities  of  the  Republic  Board  for  the 
Resolution of Conflicts of Interest, which was phased out from that point. The Agency has no 
mechanism to ensure the enforcement of its decisions. Currently, the Agency lacks capacity 
with only 60 employees, when its organisation chart has provision for 96 posts. The Agency 
was  allocated  adequate  premises  in  September  2011,  which  will  enable  it  to  complete  its 
recruitment plan.  

The  Agency  has  been  very  active  in  some  of  its  areas  of  responsibility,  particularly  in  the 
verification of asset declarations. By the end of 2010, over 18,000 asset declarations had been 
received  from  the  25,000  public  officials  who  are  required  to  fulfil  that  obligation.  The 
Agency  processed  3,500  of  these.  Between  October  2010  and  September  2011,  the  Agency 
initiated misdemeanor procedures in 8 cases and criminal procedures in 2 cases; 2 cases were 
transferred  to  the  prosecution  service.  In  the  area  of  conflict  of  interest,  the  Agency  issued 
some 800 decisions and received over 4,000 requests from officials asking to retain their dual 
functions.  However,  the  capacity  and  powers  to  investigate  fraudulent  declarations  and 
discrepancies between income and assets are lacking. Not all relevant data have been entered 

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into the Assets Registry on the Agency's website, thus preventing the public from gaining full 
insight into the property disclosure reports of public officials.  

A new Law on the Financing of Political Activities was adopted in June 2011. It covers both 
the  regular  financing  of  political  parties  and  the  funding  of  electoral  campaigns.  The  law 
enhanced  the  transparency  of  funding  sources  and  the  allocation  of  state  funding.  It 
considerably strengthened the investigative powers of the Anti-Corruption Agency. The Anti-
Corruption  Agency  had  previously  carried  out  controls  on  the  electoral  campaigns  of  five 
parties or coalitions and submitted six misdemeanour complaints due to the failure to report 
funds collected and spent in election campaigns. In March 2010, the Agency issued rules on 
the  content  of  the  records  and  financial  reports  of  political  parties.  It  still  has  to  establish  a 
track record of effective control of party funding.  

The Anti-Corruption Council, an advisory body to the government, was established in 2001 
with  the  task  of  proposing  legislative  changes  and  other  measures  aimed  at  combating 
corruption  and  assessing  on-going  anti-corruption  activities.  The  Council  continued  to  raise 
public awareness of high-profile cases of corruption, mostly in the media and in public events. 
It filed two criminal charges against high profile politicians and well-known businessmen. It 
has also identified a number of, mainly large, privatisation transactions in which there were 
suggestions of corruption, but only a few were investigated and even fewer were prosecuted. 
The State Audit Institution performed the second partial audit of state finances in 2010, which 
widened the scope of the audited entities, and also included some public enterprises. Internal 
control  systems  need  to  be  strengthened  and  the  capacities  of  the  State  Audit  Institution 
significantly increased. 

The  law  enforcement  bodies  and  the  judiciary  have  enhanced  their  specialisation  on 
corruption  cases.  The  competences  of  the  prosecutor  for  organised  crime  were  extended  to 
higher  level  corruption  cases  in  January  2010.  In  2011,  its  office  significantly  increased  its 
activities;  until  mid  September,  it  launched  investigations  in  some  330  corruption  cases. 
These include several medium to high level cases. The police have the means and the ability 
to carry out basic investigations. Its capacities for proactive investigation of such cases have 
yet to be developed. An internal control sector has been established in the police with some 
initial  results  and  an  increasing  number  of  cases  of  corruption  being  detected  within  the 
police. The Head of the Directorate for internal control and the Head of the Sector for internal 
control were appointed in June 2011. The customs authority has been increasingly active in 
combating  corruption  amongst  customs  officials  and  has  taken  a  number  of  disciplinary 
measures against wrongdoers. Preventive measures against corruption need to be strengthened 
in the judiciary. Further efforts are needed overall in order to establish a track record of pro-
active  prosecutions  and  final  convictions,  in  particular  in  high-level  cases  resulting  in 
significant harm to state funds. The capacities of law enforcement bodies to conduct financial 
investigations need to be strengthened. 

Corruption  continuous  to  affect  many  areas,  particularly  public  procurement,  privatisation 
procedures  and  public  expenditure,  as  well  as  the  health  and  education  sectors.  While  the 
2008  Public  Procurement  Law  contains  specific  anti-corruption  rules,  the  coordination 
between all stakeholders needs to be strengthened in order to ensure effective prevention and 
processing of corruption cases in the area of public procurement. Stronger political will and 
further  efforts  are  needed  in  order  to  process  corruption  cases  more  effectively,  from 
investigations to final convictions, in particular in relation to the spending of public money. 

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Integrity plans are envisaged for a number of State institutions, public bodies and State-owned 
companies on the basis of guidelines issued in 2010 by the Anti-Corruption Agency. In spite 
of the legal obligation and in the absence of a legal deadline, the majority of bodies failed to 
appoint a person in charge of the preparation and implementation of the integrity plans.  

Amendments in 2010 to the Law on the Anti-Corruption Agency and the Law on Free Access 
to  Information  of  Public  Importance  have  strengthened  the  legal  basis  for  the  protection  of 
whistleblowers.  A  rulebook  on  whistleblowers,  produced  by  the  Anti-Corruption  Agency, 
entered  into  force  in  August  2011.  However,  whistleblower  protection  is  only  applicable  in 
cases  where  no  classified  information  has  been  disclosed.  Practical  implementation  remains 
weak.  

Overall, Serbia has put in place the legal and institutional framework to combat corruption, 
including  an  Anti-Corruption  Agency  and  a  new  law  on  funding  of  political  parties  in  line 
with European standards. The Minister of Justice was appointed anti-corruption coordinator. 
The authorities have launched a review of the outdated strategy and action plan for the fight 
against  corruption.  Steps  have  been  taken  towards  specialisation  of  the  law  enforcement 
agencies and a greater number of cases have been prosecuted. Corruption remains prevalent in 
many areas and continues to be a serious problem. Stronger political will is needed in order to 
significantly  improve  the  performance  in  combating  corruption.  The  competences  and 
capacities  of  the  Anti-Corruption  Agency  need  to  be  strengthened.  Law  enforcement 
authorities  need  to  adopt  a  more  pro-active  approach  in  investigating  and  prosecuting 
corruption  and  the  judiciary  needs  to  gradually  and  significantly  build  up  a  track  record  of 
final convictions, including in high level cases.  

1.1.6.  Civilian oversight of security forces  

Civilian  control  of  the  security  forces  is  regulated  by  an  extensive  legal  framework. 
According to the Constitution, the armed forces are under democratic and civilian control and 
parliament  must  authorise  their  use  outside  Serbian  borders.  As  part  of  the  constitutional 
adjustments, a Law on the Army of Serbia, a Defence Law and a Law on Basic Principles of 
Establishment  of Security  Services  were  adopted  in  December  2007.  The  Defence  Strategy, 
the National Security Strategy and the Law on the Military Security Agency and the Military 
Intelligence Agency were adopted in October 2009. The legislative framework also includes 
the Law on the Military, Labour and Material Obligations, the Law on Civilian Service, the 
Law on the Use of the Army and other Defence  Forces in Multinational Operations outside 
Serbia and the Decision abolishing compulsory military service.  

Security forces are divided into three main categories: the armed forces, the police forces and 
the security services. Security services  are  civilian,  the Security-Information Agency (BIA), 
and military, the Military Security Agency (VBA) and Military Intelligence Agency (VOA). 
The Defence Inspectorate is the administrative body in the Ministry of Defence which inter 
alia  inspects  the  implementation  of  public  procurement  rules  and  deals  with  citizens' 
complaints.  The  armed  forces  assist  civilian  authorities  in  countering  security  threats, 
including terrorism, organised crime, natural and man-made disasters.  

The police, including the gendarmerie, is in charge of internal security and the prevention and 
suppression  of  all  forms  of  crime.  It  is  organised  through  the  general  police  directorate  at 
central  level,  the  City  of  Belgrade  police  directorate,  regional  police  directorates  and  police 
stations at municipal level. The reform of the police is based on the 2005 Law on Police and 

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the development strategy for the Ministry of Interior for the period 2011-2016. It includes a 
border  police  that  is  responsible  for  the  protection  and  control  of  the  state  border.  The 
accountability  of  the  police  is  enforced  through  the  work  of  the  sector  for  internal  control, 
which has established close working relations with the State Ombudsman. 

The  Security-Information  Agency  is  a  separate  state  agency  in  charge  of  the  protection  of 
Serbia's  internal  security  and  constitutional  order.  It  is  accountable  to  the  government  and 
parliament  and  provides  regular  reports  at  least  twice  a  year.  The  government  appoints  and 
dismisses its Director. In 2010, the State Ombudsman reviewed the legality of the Agency's 
activities and their implications in the area of human rights and protection of minorities. Its 
overall assessment was that the Agency abided by the legal order, but that further legislative 
and procedural improvements were needed in order to better regulate the agency's procedures 
related  to  the  protection  of  the  guaranteed  human  rights.  The  Military  Security  Agency  and 
the  Military  Intelligence  Agency  are  accountable  to  the  government  and  parliament.  An 
Inspector General, in charge of their oversight, was appointed by the government in February 
2011 for a five-year term.  

Parliament has the key role in the oversight of the security forces. The Defence and Security 
Committee  currently  performs  this  function,  reviews  proposed  legislation  and  conducts 
inspection  visits  to  the  three  security  agencies.  Under  the  new  Rules  of  Procedure,  the 
oversight  will  be  performed  by  two  standing  bodies  as  from  the  next  legislature:  the 
Committee for Defence and Internal Affairs and the Committee for the Oversight of Security 
Services. A Council for National Security, chaired by the President of the Republic, reviews 
issues  relevant  to  national  security,  and  steers  and  coordinates  the  work  of  the  security 
services.  

Parliamentary  oversight  remains  weak,  as  the  Committee  does  not  have  the  resources, 
expertise  and  specialised  staff  to  deal  with  the  wide  range  of  jurisdiction  which  currently 
covers defence, internal affairs and security issues. Its work is mainly reactive and limited to 
routine periodic hearings as required by law. A law regulating access to state security files has 
not yet been adopted. The internal control department in the Ministry of Interior needs to be 
reinforced  and  coordination  with  the  department  in  charge  of  prevention  of  corruption 
enhanced.  Unlike  most  EU  intelligence  agencies,  the  Serbian  security  agencies  have 
investigative  powers.  This  raises  serious  concerns,  as  they  are  in  the  position  of  controlling 
intelligence material used in criminal investigations. 

Overall, an extensive constitutional and legal framework for the democratic civilian oversight 
of security forces is in place. Further efforts are needed in order to strengthen parliamentary 
capacity  and  expertise.  The  ability  of  security  agencies  to  carry  out  special  investigative 
measures in criminal investigations gives rise to serious concerns. 

1.2. 

Human rights and the protection of minorities (See also Chapter 23 – Judiciary 
and fundamental rights)  

Observance of international human rights law 

The  legislative  framework  on  human  rights  and  the  protection  of  minorities  is  in  place  and 
generally  in  line  with  EU  standards.  The  Constitution  guarantees  a  wide  range  of  human 
rights and fundamental freedoms. It also provides for the possibility of filing a Constitutional 
appeal as a final remedy for the protection of human rights. A number of laws relating to the 
promotion,  implementation  and  protection  of  human  rights  and  the  prevention  of 

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discrimination  have  also  been  introduced.  Serbia  has  signed  and  ratified  all  significant 
international human rights instruments that are relevant for the protection of human rights.  

Following  the  dissolution  of  the  State  Union  with  Montenegro  in  2006,  Serbia  became  the 
successor  state  in  the  Council  of  Europe  and  took  over  its  obligations  and  commitments, 
including  under  the  European  Convention  for  the  Protection  of  Human  Rights  and 
Fundamental Freedoms. On 1 September 2011, 5,704 allocated applications regarding Serbia 
were  pending  before  the  European  Court  for  Human  Rights  (ECtHR).  Between  October 
2010  and  September  2011,  there  were  five  judgments  finding  violations  of  the  Convention. 
The  largest  numbers  relate  to  the  violation  of  the  right  to  a  fair  trial  and  to  the  length  of 
proceedings, including non-enforcement of judicial decisions.  

Several State bodies and institutions are responsible for the promotion and enforcement of 
human rights. The Ministry for Human and Minority rights was merged with the Ministry for 
Public  Administration  and  Local  Self-Government  in  March  2011.  The  Ministry  is  tasked 
with  the  preparation  and  coordination  of  the  periodic  reports  on  the  implementation  of  the 
main international instruments. Investigations into threats and violence against human rights 
defenders have been slow. Although a number of investigations relating to high profile cases 
were initiated  by  the  police  or  prosecution, only a few resulted in a final conviction and  an 
appropriate sentence. Public officials often refrained from publicly condemning such attacks. 

Besides the Ministry, the institutional framework providing for the promotion, monitoring and 
protection  of  human  rights  includes  other  bodies:  the  various  Ombudsman  offices  –  at  state 
and local level – the Commissioner for the Protection of Equality and parliament's Committee 
on Human and Minority Rights and Gender Equality. Training programmes on human rights 
standards  have  been  organised  for  judges,  prosecutors,  legal  practitioners,  police  and  prison 
officers  and  other  relevant  professionals.  The  direct  enforcement  of  ratified  international 
treaties has still to be improved. Access to information is supervised by the Commissioner for 
Free Access to Information of Public Importance and Personal Data Protection. 

Civil and political rights 

The  Constitution  prohibits  the  death  penalty.  Serbia  has  ratified  Protocol  No  13  to  the 
European  Convention  for  the  Protection  of  Human  Rights  and  Fundamental  Freedoms, 
concerning the abolition of the death penalty in all circumstances.  

The  Constitution  prohibits  torture  and  ill-treatment.  In  July,  the  Parliament  adopted 
legislative amendments establishing a national prevention mechanism for the implementation 
of  the  Optional  Protocol  of  the  Convention  Against  Torture  and  Other  Cruel,  Inhuman  or 
degrading Treatment or Punishment and designating the State Ombudsman to perform these 
prerogatives.  The  national  prevention  mechanism  is  not  yet  operational.  Poor  conditions  in 
police custody facilities are a  matter of  concern. Regular  independent inspections should be 
carried out to ensure prevention of potential ill-treatment. 

Efforts  have  been  made  to  improve  conditions  in  the  prison  system,  but  significant 
challenges  remain  due  to  the  increasing  overcrowding.  A  strategy  on  overcrowding  was 
adopted  in  July  2010.  The  decision  to  establish the  Parliamentary  Commission  in  charge  of 
oversight of prisons was adopted in May 2011 and its members were appointed in September 
2011.  Efforts  have  been  undertaken  to  build  new  prisons,  improve  outdated  prison 
infrastructure and train prison staff, as well as to amend treatment rules, respecting the rights 
of prisoners and improving medical care. Enforcement of alternative sanctions started in 2008 

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and house arrest under electronic surveillance was introduced in 2010 as a new procedure for 
serving prison sentences for minor offences. However, overcrowding of prisons continued to 
increase.  The  actual  prison  population  amounted  to  11,500  persons  in  2010,  while  prison 
capacities  are  between  4,500  and  6,000  places.  Alternative  penalties  are  only  used  in  a  few 
cases,  while  short  term  imprisonment  sentences  of  up  to  six  months  are  still  frequent.  The 
large number of pre-trial detainees, which stands at 3,500, is due to the broad application of 
such  pre-trial  detention  and  to  lengthy  court  proceedings.  The  majority  of  prisons  in  Serbia 
are  outdated  and  lack  adequate  facilities.  Poor  and  deteriorating  living  conditions, 
unsatisfactory healthcare and lack of adequate treatment programmes in prisons are causes of 
serious concern. The prison service is facing problems of ensuring security due to insufficient 
numbers  of  frontline  prison  staff.  An  internal  control  mechanism  for  prisons  has  yet  to  be 
established.  Programmes  for  education  and  rehabilitation  are  only  available  for  a  few 
prisoners.  

The Constitution guarantees access to justice. However, the length of court proceedings and 
the backlog of cases remain issues of concern. Legislation and funding for an effective system 
of free legal aid need to be developed.  

Freedom  of  expression  is  guaranteed  by  the  Constitution  and  broadly  ensured.  The  media 
landscape is diverse and pluralistic. Independent investigative journalism exists. The Law on 
Public Information, amended in 2009, defines the rights of freedom of expression, the right to 
access  public  information  and  to  distribute  information  through  media  and  broadcasting 
agencies.  The  law  prohibits  incitement  to  violence  or  racial,  ethnic  or  religious  hatred.  The 
Law  on  Broadcasting,  adopted  in  2009,  lays  down  broadcasting  standards  and  prohibits 
unauthorised media concentration. A code of ethics for journalists was adopted in 2006 and 
the  establishment  of  a  Press  Council  as  self-regulatory  body  for  print  media  was  agreed  in 
2009 between the representatives of journalists and media associations. Prison sentences for 
libel cases were abolished in 2005.  

Violence and threats against journalists remain a matter for concern. The Serbian authorities 
provided  police  protection  to  journalists  and  media  outlets  which  received  threats,  but 
reactions by the government, including public condemnation, remained weak. Investigations 
into  the  murders  of  journalists  dating  back  to  the  late  1990s/early  2000s  and  into  recurring 
threats  against  journalists  have  been  unable  to  identify  the  perpetrators.  A  more 
comprehensive  and  proactive  approach  by  the  police  and  the  judiciary  are  essential. 
Application of existing legislation in court judgments is not always consistent as regards the 
scope  of  journalistic  freedom  and  the  level  of  sanctions;  civil  and  criminal  libel  cases  are 
sometimes used to exert undue pressure on journalists. Gaps prevail in the supervision carried 
out  by  the  Republican  Broadcasting  Agency,  in  particular  as  regards  the  monitoring  of 
discriminatory  or  hate  speech.  The  procedure  by  which  its  members  are  appointed  raises 
concerns about the independence of this body and creates a risk of politicisation. Advertising 
access to media is under the influence of a few key players, which creates a significant risk of 
political and economic influence on the media and of increasing self-censorship. The lack of 
transparency  in  media  ownership  hampers  effective  monitoring  and  creates  a  risk  of  hidden 
media  concentration.  A  long  awaited  Strategy  for  the  Development  of  the  Media  Sector 
(media strategy) was adopted in September 2011. It aims at increasing editorial independence 
and better protecting  media outlets  from undue influence. It  also lays down the foundations 
for  forthcoming  legislative  changes  which  should  clarify  the  market  environment  in  which 
media outlets are operating.  

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Freedom  of  assembly  and  association  are  guaranteed  by  the  Constitution.  Assemblies  are 
covered  by  the  1992  Law  on  Public  Assembly.  Public  gatherings  in  the  open  are  subject  to 
registration, but do not require authorisation, while gatherings indoors do not even need to be 
registered.  Police  may  only  prohibit  public  gatherings  for  the  purposes  of  protecting  public 
health, morality, security or the rights of others. Provisional prohibition, pending a final court 
decision,  is  possible  in  cases  involving  threats  to  the  constitutional  order  or  violation  of 
human rights. Legislation banning gatherings of far right organisations and prohibiting the use 
of national-socialist and fascist symbols was adopted in 2009. There have been improvements 
in cooperation and action by the Serbian police to provide protection during public gatherings. 
A first Belgrade Pride Parade took place in October 2010, representing a step forward in the 
promotion  of  constitutionally  guaranteed  fundamental  rights.  The  police  took  appropriate 
action,  including  making  a  number  of  arrests,  in  response  to  violent  incidents  by  rioters 
protesting  against  the  Parade.  A  second  parade  which  was  scheduled  to  take  place  on  2 
October  2011  had  to  be  called  off  for  security  reasons.  Rules  regulating  the  prevention  of 
sports related violence have been tightened up and the reaction by law enforcement agencies 
to sports incidents has improved. The trial in connection with the murder of a French football 
fan in September 2009 was concluded in first instance in 2011 and the perpetrators were given 
long prison sentences. The Law on Public Assembly needs to be updated in order to reduce 
the  requirements  for  the  registration  of  assemblies,  to  lessen  restrictions  imposed  regarding 
locations of assemblies and to limit the liabilities of organisers.  

Freedom  of  association  is  respected  on  the  whole.  The  Constitution  prohibits  secret  and 
paramilitary  associations.  A  decision  banning  an  association  may  be  made  by  the 
Constitutional  Court  on  grounds  prescribed  by  the  Constitution.  The  2009  Law  on 
Associations  introduced  rules  regulating  foreign  associations.  Army  and  police  officers, 
judges,  prosecutors  and  the  State  Ombudsman  are  prohibited  from  being  members  of  a 
political  organisation.  Members  of  the  police  are  allowed  to  establish  trade  unions  and 
professional associations. Activities of extreme right-wing organisations and of violent groups 
of so-called sports fans are a major cause of concern. One such organisation was banned in 
June 2011 following a Constitutional Court ruling.  

Civil  society  organisations  are  well  developed  and  play  an  important  role  in  the  social, 
economic  and  political  life  of  Serbia.  Some  8,500  associations  have  so  far  completed  the 
registration  procedure.  NGOs  are  exempted  from  the  2.5%  of  taxes  on  gifts  and  donations 
provided they are performing activities of public interest. An Office for cooperation with civil 
society,  aimed  at  improving  cooperation  between  public  administration  and  civil  society 
organisations was established in April 2010. The first Director of the Office was appointed in 
January  2011.  However,  the  Office  is  still  not  fully  operational.  Cooperation  between  state 
bodies and civil society organisations remains on an ad hoc basis and is unevenly developed 
across  Serbia,  with  civil  society  activities  still  predominantly  Belgrade-centred.  Awareness-
raising  on  human  rights  is  needed  most  at  local  level.  NGO  activists  dealing  with  sensitive 
issues, in particular war crimes and the fight against organised crime, as well as human rights 
defenders, continue to be subjected to threats, verbal abuse and even physical attacks.  

Freedom  of  thought,  conscience  and  religion  is  guaranteed  by  the  Constitution  and  laws, 
and is respected in practice. The number of religiously motivated incidents has decreased over 
the  past  years.  The  Constitution  prescribes  separation  between  the  state  and  the  church  and 
prohibits  a  state  religion.  Conscientious  objection  is  guaranteed  and  the  relevant  law  was 
adopted in October 2009. The Constitution prescribes equality of churches and their freedom 
to organise themselves independently. A decision on a possible ban of a religious organisation 
may be made by the Constitutional Court, on strictly defined grounds. The key systemic act in 

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this  area  is  the  2006  Law  on  Churches  and  Religious  Communities.  However,  the  law 
differentiates between the seven 'traditional' churches, automatically assigned legal status and 
registration by the law, and other religious organisations, which have to apply for registration 
in the procedure regulated by a Ministerial act. The lack of transparency and consistency in 
the registration process is one of the main obstacles preventing some smaller religious groups 
from exercising their rights. The constitutionality of the law is currently being assessed by the 
Constitutional  Court.  Sporadic  graffiti  and  vandalism  on  places  of  worship  or  graveyards 
persist. The response  to  such acts by police and  prosecutors has  been insufficient,  and  such 
cases  continue  to  be  referred  to  as  minor  offences.  Extremist  organisations  and  right-wing 
groups  continued  to  propagate  anti-Semitic  comments  and  publications  and  hate  speech 
against smaller churches. The Republic Broadcasting Authority intervened in early 2011, for 
the first time, in a case of anti-Semitic language on  television and instructed  TV stations to 
cease live broadcasting of certain programmes. 

Overall, the legal and institutional framework for the protection of civil and political rights is 
in  place,  is  broadly  in  line  with  European  standards  and  is  generally  respected.  The 
Ombudsman and the Commissioner for access to information and data protection are playing 
an  increasingly  effective  role  in  oversight  of  the  administration.  Implementation  and  full 
enforcement  of  the  guaranteed  rights  need  to  be  further  developed.  Particular  efforts  are 
needed in order to display public support to journalists and the media in view of threats and 
violence.  A  newly  adopted  media  strategy  aims  to  address  important  shortcomings  in  the 
media sector. Conditions in prisons are a matter of serious concern. 

Economic and social rights (see also Chapter 19 – Social policy and employment) 

As  regards  women's  rights  and  gender  equality,  gender  equality  is  guaranteed  by  the 
Constitution. Serbia is party to the UN Convention on the Political Rights of Women and the 
Convention Concerning Equal Remuneration of Men and Women for Work of Equal Value. 
The National Strategy for Improving the Position of Women and Enhancing Gender Equality 
for 2009-2015, adopted in 2009, identifies six of the most critical areas: improvement of the 
economic position, health, representation in public life, equality in education, suppression of 
violence against women and elimination of gender stereotypes in media. A National Strategy 
for  the  Prevention  and  Suppression  of  Violence  against  Women  in  Families  and  Partner 
Relationships  was  adopted  in  2011.  A  Law  on  Gender  Equality  was  adopted,  providing  for 
measures aimed at preventing and eliminating discrimination based on sex and gender. At the 
level of the Province of Vojvodina, the Strategy for the Protection from Domestic Violence 
and Other Forms of Gender Based Violence for the period 2008 – 2012 was adopted in 2008. 
However,  implementation  of  the  national  strategies  in  this  area  remains  slow.  Disabled 
women,  single  mothers,  older  women  and  those  living  in  rural  areas  are  most  affected  by 
discrimination. Women's average wages are generally lower than those of men on the labour 
market,  although  the  extent  of  the  pay  gap  varies  significantly  between  sectors.  Domestic 
violence  often  goes  unreported  and  there  is  insufficient  response  from  the  responsible 
institutions or reliable data.  

Children's rights are explicitly recognised by the Constitution and the legislative framework 
has  been  largely  aligned  with  international  standards.  Serbia  ratified  the  international 
Convention on the Rights of the Child in 2001 and its two optional protocols. The National 
Plan  of  Action  for  Children  covers  the  period  2004-2015  and  defines  the  policy  towards 
children.  The  Law  on  Juvenile  Justice  was  adopted  in  2006.  The  regulatory  framework  to 
prevent  and  protect  children  from  violence  has  been  adopted.  There  are  several  relevant 
institutions to promote and monitor children's rights - the National Council on Child Rights, 

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the  Deputy  Ombudsman  Office,  the  office  of  the  Children's  Ombudsman  in  Vojvodina,  the 
Commissioner  for  Equality,  and  a  Parliamentary  Working  Group  on  Child  Rights.  Training 
programmes  are  being  implemented,  aimed  at  capacity  building  and  awareness  raising  for 
judges, prosecutors and the police. Several shelters for street children were set up. However, 
difficulties  regarding  children's  rights  persist.  Roma  children  remain  the  most  vulnerable. 
Implementation  of  the  legal  framework  remains  insufficient.  Further  efforts  are  needed  in 
order  to  protect  children  from  domestic  violence.  The  level  of  coordination  between  the 
relevant  institutions  and  bodies  included  in  the  system  of  child  protection  needs  to  be 
improved.  

The legislative framework for the protection of socially vulnerable persons and/or persons 
with  disabilities  is  broadly  in  place.  The  rights  of  persons  with  disabilities  in  Serbia  are 
explicitly protected by the Constitution. In 2009, Serbia ratified the Convention of the Rights 
of  Persons  with  Disabilities  and  the  Optional  Protocol.  In  addition  to  the  general  anti-
discrimination  framework,  a  Law  on  preventing  discrimination  against  persons  with 
disabilities was adopted in 2006  and a Law on vocational rehabilitation and employment of 
persons with disabilities in 2009. The 2009 Law on the foundations of the education system 
includes  comprehensive  provisions  for  inclusive  education  for  children  with  disabilities, 
learning  difficulties  and  disadvantages.  The  2010  Law  on  Social  Welfare  fosters 
deinstitutionalisation,  the  development  of  community-based  services,  including  day  care 
services and residence in a supportive environment with an emphasis on independent living. 
However,  implementation  of  the  legislative  framework  remains  a  challenge.  Authorities  do 
not  actively  follow  up  infringements  of  the  rights  of  persons  with  disabilities  and  court 
the  public  administration. 
decisions  are  not  always  adequately 
Institutionalisation  of  persons  with  mental  health  problems  and  elderly  people  remains 
widespread.  3,750  persons  are  placed  in  the  13  institutions  for  adults  with  mental  health 
problems;  there  are  five  large  psychiatric  hospitals  with  3,000  beds.  The  availability  of 
community-based  services  across  the  country  is  still  limited.  Persons  with  disabilities  often 
face  unemployment.  Although  access  to  public  buildings  for  persons  with  disabilities  has 
advanced in urban areas, there are still important shortcomings in rural areas. 

implemented  by 

As  regards  anti-discrimination  policies,  the  legal  and  institutional  framework  is  largely  in 
place. A comprehensive Anti-discrimination Law prohibiting any kind of discrimination was 
adopted in March 2009. A Commissioner for the Protection of Equality was appointed in May 
2010. The Commissioner acts upon complaints of discrimination and may initiate a law suit, 
promote and monitor equality, initiate the adoption and amendments of regulations in the area 
of  discrimination,  and  recommend  measures  aimed  at  ensuring  equality  of  public  bodies. 
Awareness  raising  activities  were  carried  out  in  August  2011.  However,  the  anti-
discrimination law still has to be brought further into line with EU legislation, in particular as 
regards  exceptions  for  religious  communities.  In  practice, 
to 
discrimination  are  Roma,  women,  persons  with  disabilities  and  the  LGBT  population.  They 
are frequently victims of intolerance, hate speech and even physical attacks. Public officials 
have been reluctant to publicly condemn such incidents. 

those  most  exposed 

As regards labour and trade union rights, freedom to join trade unions and any other form 
of association is guaranteed by the Constitution and is further regulated by the Labour Law. 
Serbia  has  ratified  the  major  labour  rights  conventions  of  the  International  Labour 
Organisation (ILO) as well as the revised European Social Charter. Only persons serving in 
the armed forces are not allowed to join trade unions. The issue of the representativeness of 
trade unions at the level of a company, a specific branch of economic activity and nationally, 
is regulated by the Labour Law which defines specific criteria for each level. In the case of 

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labour-related  disputes,  the  Labour  Law  and  the  Law  on  Amicable  Resolution  of  Labour 
Disputes, together with the Law on Mediation, provide the possibility of resolving individual 
and collective industrial disputes through conciliation, arbitration and mediation. The right to 
strike  is  guaranteed  by  the  Serbian  Constitution,  which  provides  for  the  right  to  strike  for 
employees in accordance with the Labour Law and collective agreement. However, the Law 
on strike from 1996 is not in line with the ILO conventions and EU standards, in particular as 
regards  possible  limitations  to  the  right  to  strike;  a  new  law  is  under  preparation.  Several 
registered  trade  unions  are  not  recognised  and  concerns  remain  as  to  the  criteria  for 
employers' organisations. Social dialogue has been limited and needs to be further improved. 
At  national  level,  tripartite  social  dialogue  has  had  to  contend  with  a  lot  of  problems.  Its 
impact  on  the  economy  was  rather  limited,  as  consultations  between  the  partners  have  not 
taken  place  regularly.  At  a  lower  level,  this  dialogue  has  been  non-existent  in  most 
municipalities, as it was not possible to establish local economic and social councils mainly 
owing to the lack of representative social partners, particularly on the employers' side. Even in 
those  municipalities  where  the  councils  have  been  established,  tripartite  dialogue  remains 
very weak.  

Property  rights  are  protected  by  the  Constitution.  Expropriations  are  regulated  by  the  Law 
on  Expropriation,  which  was  amended  in  2009;  they  are  only  allowed  if  there  is  a  public 
interest and if fair compensation is provided. However, nationalisations under the communist 
regime, which have been mainly carried out in the 1940s, 50s and 60s, have been dealt with in 
a fragmented manner. Agricultural land was partially handed back in the 1990s and a law on 
the  restitution  of  church  property  was  adopted  in  2006.  The  2009  Law  on  planning  and 
construction  provides  for  the  transformation  of  usage  rights  into  full  ownership.  This 
transformation  of  usage  rights  constituted  de  facto  restitution  in  kind  in  cases  where  the 
beneficiary  is  the  former  owner,  while  it  pre-empts  such  restitution  in  cases  where  the 
beneficiary is not the former owner. This situation led to uncertainty on ownership rights and 
negatively affected the investment climate. In September 2011, a general Law on restitution 
was adopted. The law establishes the principle of in kind restitution. In cases where in kind 
restitution  is  not  possible  or  excluded,  financial  compensation,  with  an  overall  cap  of  €2 
billion, is foreseen. It needs to be ensured that restitution is carried out without further delays 
and  in  a  non  discriminatory  and  transparent  manner.  Once  properly  implemented,  the  law 
should  address  the  previously  unclear  situation  of  ownership  rights  and  provide  legal 
certainty. It should also end the fragmented manner in which restitution previously had been 
dealt with. A Law on public property, which was adopted in September 2011, provides for the 
transfer of ownership from state to provincial and municipal level and sets the rules for public 
ownership  of  property.  However,  implementation  still  faces  important  challenges.  In  the 
absence  of  a  reliable  overview  on  state  owned  properties,  the  transfer  of  state  property  to 
provincial and municipal level leaves room for potential corruption and fraud.  

Overall, the legal framework for the protection of economic and social rights is in place and 
Serbia has acceded to a number of international conventions in this area. A long awaited law 
on  restitution  as  well  as  a  new  law  on  public  property  were  adopted.  Transparent  and  non 
discriminatory implementation of both laws has to be ensured and further measures taken to 
fully  establish  legal  clarity  over  property  rights  The  Commission  will  monitor  the 
implementation and application of these laws. Combating all kinds of discrimination calls for 
greater efforts in practice.  

Respect for and protection of minorities and cultural rights  

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Respect for and protection of minorities is guaranteed by the Constitution. Serbia ratified the 
framework convention for the protection of national minorities and the European Charter on 
Regional  and  Minority  Languages.  The  2009  Law  on  National  Councils  of  National 
Minorities regulates the election, powers, functioning and funding of the national minorities' 
councils – bodies through which national minorities exercise their right of self-government in 
the  area  of  education,  use  of  language,  information  and  culture.  The  2009  Law  on  Political 
Parties  provides  for  a  smaller  number  of  signatures  for  the  registration  of  minority  political 
parties;  45  minority  parties  have  been  registered.  In  addition,  the  2007  Law  on  Local  Self-
Government  envisages  for  ethnically  mixed  municipalities  the  establishment  of  councils  for 
inter-ethnic relations, to deliberate issues regarding the exercise, protection and promotion of 
ethnic equality. The official use of language and scripts of national minorities on the territory 
of  local  self-government  units  where  national  minority  members  traditionally  live  is 
guaranteed. Also, the conditions for usage of the mother tongue for minority representatives 
in the republic and provincial parliament are provided for.  

Serbia has signed bilateral agreements on the protection of national minorities with Romania, 
Hungary,  Croatia  and  the  former  Yugoslav  Republic  of  Macedonia.  Commissions  with 
Hungary Croatia and Romania have been formed and are operational. 

The  Ministry  for  Human  and  Minority  Rights  and  Public  Administration  and  Local 
Government  is  competent  for  the  protection  and  promotion  of  minorities.  Besides  the 
Ministry, other bodies such as the Ombudsman and the Commissioner for Equality Protection 
are  involved  in  this  area.  A  Republican  Council  for  National  Minorities  was  established  in 
2002 with the task of coordinating cooperation between minority national councils and state 
bodies.  

In line with the Law on National Minority Councils, the first direct elections for the National 
Minority  Councils  were  organised  in  2010.  Nineteen  national  minorities  elected  their 
respective  councils.  All  national  minority  councils  have  been  constituted  and  started  to  be 
operational,  except  the  Bosniak  one.  While  some  irregularities  were  reported  during  the 
elections of the national minority councils, they did not significantly affect the overall results. 
The  inter-ethnic  situation  is  good  overall.  During  the  past  years,  recorded  ethnically-based 
incidents have been decreasing in numbers and were generally minor.  

However, the implementation of the legal framework in this area has still to be improved. The 
Republican  Council  has  met  only  twice  since  it  was  established.  The  functioning  of  the 
national minority councils still has to be strengthened if they are to be able to carry out their 
mandate  effectively  and  ensure  proper  management  of  their  financial  resources.  The 
Ombudsman, the Commissioner for the Protection of Personal Data and the Commissioner for 
Equality  Protection  made  a  number  of  recommendations  with  a  view  to  improving  the 
electoral  framework  for  the  national  minority  councils,  which  remain  to  be  followed  up. 
Information  and  education  in  minority  languages  needs  to  be  further  improved  and 
consistently ensured throughout the country. 

The  inter-ethnic  situation  in  the  Autonomous  Province  of  Vojvodina  is  good  and  there  has 
already  been  a  further  decrease  in  the  limited  number  of  incidents.  In  line  with  the 
Constitution,  the  new  Provincial  Statute  and  other  sectoral  laws,  the  Provincial  authorities 
have  important  powers  for  regulating  the  enforcement  of  human  rights,  including  the 
protection of minorities. The legal and institutional framework for the protection of minorities 
in the areas of culture, education, information and official use of language is secured, but the 

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implementation  of  these  provisions  is  in  some  cases  inconsistent.  The  13  national  minority 
councils which have their seat in Vojvodina are working well. There is a specific Council of 
national  communities  which  acts  as  a  consultative  body  in  the  Provincial  Assembly.  Good 
cooperation has been established between the State and Provincial authorities in activities for 
promoting  tolerance.  Police  investigation  of  inter-ethnic  incidents  and  police  sensitivity  to 
treat them as a criminal offence of incitement to ethnic, racial and religious hatred, as opposed 
to  the  previously  referring  to  them  as  ordinary  incidents,  has  improved.  However,  both  the 
system of monitoring such cases and their legal processing needs to be further improved.  

As  regards  the  municipalities  of  Presevo,  Bujanovac  and  Medvedja,  the  situation  is  overall 
satisfactory, but there are a number of outstanding issues which have not been dealt with for a 
long period that still have to be resolved. The security situation is broadly stable. In general, 
incidents  have  been  infrequent  and  their  number  continues  to  fall.  The  government's 
coordinating body for that area was restructured in 2009. It has yet to become fully effective. 
Bilingual branches of faculties of law and of economics were opened in Medvedja in October 
2009. A Task Force, facilitated by the OSCE High Commissioner for National Minorities, has 
been  working  with  a  view  to  opening  a  multilingual  branch  in  Bujanovac.  Serb  political 
representatives  were  integrated  and  a  multiethnic  municipal  administration  was  set  up  in 
Bujanovac  in  December  2010.  The  Government  adopted  a  decision  on  the  opening  of  a 
maternity ward in Presevo. The office of the State Ombudsman opened local branches in the 
municipalities of Presevo, Bujanovac and Medvedja. There is a well-established local multi-
ethnic  police.  ABC  books  in  Albanian  language  were  delivered  in  September  2011  for 
elementary  schools.  The  decision  of  July  2010  opening  up  additional  vacancies  in  public 
administration  and  bodies  to  contribute  to  the  integration  of  Albanians  remains  to  be  fully 
implemented. A sustainable solution remains to be found and implemented to the issue of the 
acceptance of diplomas issued by the University of Pristina. Although in the 2011 census the 
recruitment of Albanian enumerators and the availability of corresponding linguistic versions 
of census materials have been ensured, some Albanian politicians have called for a boycott of 
the  census.  The  government  needs  to  demonstrate  greater  commitment  to  the  economic 
development of the area, which is one of the poorest in Serbia.  

Regarding  the  Sandzak  area,  the  situation  has  been  tense  and  occasionally  unstable.  While 
inter-ethnic  incidents  are  rare,  the  divisions  among  the  Bosniak  community  have  led  to 
recurring incidents. The police response needs to be improved, as investigations are too rarely 
initiated.  Follow  up  by  the  judiciary  does  not  often  lead  to  final  convictions.  After  the 
minority councils' elections of June 2010, the Bosniak council has still to be established, due 
to a number of open issues related to its constitution. The Ombudsman noted inconsistencies 
in  the  implementation  of  the  right  to  officially  use  the  Bosniak  language  in  certain 
municipalities. The number of educational institutions needs to be further increased. Bosniaks 
remain  underrepresented  in  the  public  administration  bodies  at  local  level,  including  the 
police.  The  area  suffers  from  a  lack  of  basic  infrastructures  which  seriously  hampers  its 
economical  development.  The  unemployment  rate  is  high  and  foreign  investment  is  scarce. 
Government  should  pay  more  attention  to  the  challenges  facing  Sandzakand  a  regional 
strategy development has yet to be established. 

As regards the Roma, Serbia is actively taking part in the Decade of Roma Inclusion 2005 – 
2015.  There  are  several  bodies  competent  for  improvement  of  the  status  of  the  Roma:  the 
Ministry for Human and Minority Rights and Public Administration and Local Government, a 
Roma  Council,  chaired  by  a  Deputy  Prime  Minister,  as  well  as  a  Roma  National  Minority 
Council.  A  Roma  Inclusion  Office  has  been  established  at  the  level  of  Vojvodina  Province 
and has been particularly active in the area of education and employment. A national strategy 

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for the improvement of the Status of Roma and a related action plan were adopted in 2009. 
Education, health and employment policies and measures are largely in place. Infant and child 
mortality  among  children  living  in  Roma  settlements  has  been  halved  during  the  past  five 
years.  A  number  of  measures  in  the  education  sector  have  resulted  in  a  significant 
improvement  in  enrolment  and  completion  of  primary  education,  as  well  as  initial 
encouraging  results  in  higher  education.  Seventy-five  Roma  health  mediators  and  175 
pedagogical assistants have been employed so far and a system of health cards has been put in 
place. Awareness-raising activities for Roma inclusion have continued. A series of measures 
were taken between May and September 2011 aiming at alleviating existing obstacles to the 
registration  of  "legally  invisible  persons"  and  improving  access  to  basic  rights:  the 
administrative  fee  for  subsequent  registration  of  births  was  abolished;  new  possibilities  to 
register under a provisional address were introduced.  

However,  implementation  of  the  legislation  and  policies  currently  in  place  need  to  be 
strengthened  so  that  efforts  can  be  felt  on  the  ground.  Widespread  discrimination  and 
marginalisation  of  the  Roma  continue  in  practice.  Roma  have  been  the  subject  of  several 
ethnically motivated attacks or threats over the past years. The national Roma strategy needs 
further funds for its implementation. The rate of Roma employment is very low, including in 
the  public  administration.  Roma  women  and  children  are  subject  to  exploitation  and  family 
violence,  which  often  goes  unreported.  A  large  number  of  Roma  live  in  illegal  settlements 
under  unacceptable  conditions.  There  is  still  no  systematic  approach  to  the  relocation  of 
illegal  Roma  settlements,  which  is  often  conducted  inappropriately,  resulting  in  serious 
violations and breaches of basic human rights.  

Serbia  hosts  approximately  73,000  refugees  and  210,000  internally  displaced  persons 
(IDPs),  according  to  the  United  Nations  High  Commissioner  for  Refugees.  There  is  a  legal 
and  institutional  framework  in  place  for  refugees  and  internally  displaced  persons.  The 
National Strategy for Resolving Issues of Refugees and IDPs was adopted in 2002 and revised 
in  March  2011.  Amendments  to  the  Law  on  Refugees  have  enabled  refugees  since  2010  to 
buy apartments that were built from donations. The programme to support the municipalities 
which prepared local action plans for the improvement of the status of refuges and IDPs that 
opted  for  local  integration  has  been  implemented  for  several  years,  yielding  positive  results 
including as regards the housing situation. A Housing Agency was established in August 2011 
in order to streamline the management of the funds allocated to social housing. The number of 
collective centres has been gradually reduced, from 388 in 2002 to 29 as of September 2011. 
These  centres  continue  to  provide  accommodation  for  almost  800  refugees  and  over  2,500 
IDPs in poor conditions. Around 97,000 of the IDPs remain in need of assistance for housing, 
employment  and  personal  identification  documents.  Roma  IDPs  are  the  most  disadvantaged 
segment of the IDP population and are facing serious displacement-related needs.  

Overall, the legal and institutional framework on the respect and protection of minorities in 
Serbia  is  in  place.  The  Constitution  guarantees  to  members  of  national  minorities  specific 
rights in addition to the rights guaranteed to all citizens, and introduces the National Minority 
Councils as a constitutional category. At State level, the Ombudsman and the Commissioner 
for Equality are exercising their prerogatives in this area. However, the implementation of the 
legal framework still needs to be improved. The situation in the Sandzak area has been tense 
and  occasionally  unstable.  Further  efforts  are  necessary  in  order  to  improve  the  status  and 
socio-economic  conditions  of  the  Roma,  who  continue  to  be  the  most  vulnerable  and 
marginalised minority. The situation of refugees and IDPs remains particularly worrying. 

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1.3. 

Regional issues and international obligations  

There  are  no  outstanding  issues  in  connection  with  Serbia's  compliance  with  the 
Dayton/Paris  Peace  Agreement.  In  2006,  in  line  with  the  provisions  of  the  Dayton 
Agreement,  Serbia  and  Republika  Srpska  (BiH)  signed  an  Agreement  on  special  parallel 
relations, which established a Cooperation Council at presidential and prime ministerial level, 
as  well  as  cooperation  between  governments  and  parliaments.  Serbia  consistently 
acknowledges the territorial integrity of Bosnia and Herzegovina.  

Cooperation with the International Criminal Tribunal for the former Yugoslavia (ICTY) 
has  greatly  improved  since  2008.  After  the  fall  of  Milosevic,  the  Federal  Republic  of 
Yugoslavia  had  initially  actively  engaged  in  cooperation  with  the  ICTY;  the  search  for 
fugitives was largely ineffective in the years that followed the assassination of Prime Minister 
Djindjic,  although  several  fugitives  gave  themselves  up  voluntarily.  Since  2008,  Serbia 
substantially stepped up its cooperation to a now fully satisfactory level as it responded to a 
total  of  46  requests  from  the  ICTY  for  handing  over  indictees,  including  the  arrests  and 
handovers of Radovan Karadzic in July 2008, Ratko Mladic in May 2011 and Goran Hadzic 
in July 2011. 

A Law on Cooperation with the ICTY was adopted in 2002 and one on the freezing of assets 
of  ICTY  fugitives  in  2006.  Two  main  bodies  were  established:  the  National  council  for 
cooperation with ICTY (NCCI), established in 2002, which has been effectively cooperating 
on access to archives, documents and witnesses; and the Team for the implementation of the 
Action  plan  for  completion  of  cooperation  (Action  team),  formed  in  2006,  responsible  for 
measures aimed at arrests and handovers of the remaining fugitives. An appeal judgment from 
July 2011 ordered a re-trial of an important case against a network of Mladic's aids, who were 
acquitted  in  first  instance  on  the  basis  of  the  statute  of  limitation  and  insufficient  evidence. 
Serbia is advanced in the processing of the cases transferred by the ICTY. Further efforts to 
explain  and  defend  the  role  of  the  ICTY  and  confront  the  past  are  essential  for  a  lasting 
reconciliation. 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  investigative  capacity  of  the  police  in  the  area  of  war  crimes  has  become  increasingly 
professional.  It  would  benefit  from  additional  expert  staff  such  as  military  analysts  and 
intelligence  officers.  Problems  of  extradition  and  recognition  of  sentences  with  some 
countries  of  the  region  continued.  The  activation  by  Serbia  of  indictments  of  war  crimes 
issued by military courts, during the conflicts of the 1990s, against citizens of Croatia and of 
Bosnia and Herzegovina, has occasionally burdened relations with these countries. Serbia has 
initiated a review of these indictments.  

Serbia ratified the Rome Statute establishing the International Criminal Court in 2001 and 
adopted the Law on Cooperation with the International Criminal Court in 2009. In line with 
the EU's guiding principles and EU Common Positions on the integrity of the Rome Statute, 
Serbia does not have any bilateral immunity agreement.  

The Parliamentary Assembly of the Council of Europe has monitored Serbia's fulfilment of 
its  membership  obligations  since  2003.  In  June  2009,  the  Committee  of  Ministers  ended  its 
post-accession  monitoring  in  the  light  of  the  progress  achieved  by  Serbia  in  meeting  its 
membership commitments and obligations. This monitoring was replaced by a lighter regular 
stocktaking of cooperation and progress. Serbia chaired the Committee of Ministers from May 
to November 2007.  

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Serbia does not recognise Kosovo3's unilateral declaration of independence. In July 2010, the 
International Court of Justice (ICJ) issued an advisory opinion on a case initiated by Serbia, 
concluding that the declaration of independence of Kosovo adopted on 17 February 2008 did 
not violate general international law and UN Security Council Resolution 1244/1999. The UN 
General Assembly adopted on 9 September 2010 a resolution tabled jointly by Serbia and the 
27  EU  Member  States  which  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 as a factor for peace, security and stability in the region and to promote cooperation, 
achieve progress on the path to the European Union and improve the lives of the people. The 
dialogue,  which  started  in  March  and  was  conducted  in  a  generally  constructive  spirit  until 
September,  has  led  to  agreements  on  several  issues:  free  movement  of  goods  and  persons, 
civil registry and cadastre.  The  Serbian authorities have started to implement the agreement 
reached on 2 September on the acceptance of the Kosovo customs stamps notified by UNMIK 
to  allow  the  entry  or  transit  in  Serbia  of  goods  from  Kosovo.  But  Serbia  interrupted  its 
participation  in  the  dialogue  at  the  end  of  September,  in  the  light  of  tensions  in  northern 
Kosovo.  Further  results  of  the  dialogue  remain  to  be  achieved,  in  order  to  implement,  as  a 
matter  of  priority,  the  principle  of  inclusive  regional  cooperation  and  to  provide  sustainable 
solutions  on  EU-related  matters  in  sectors  such  as  energy  and  telecoms.  The  agreements 
reached to date need to be implemented in good faith.  

Serbia  generally  cooperates  with  EULEX  at  an  operational  level,  including  with  regard  to 
administrative cooperation, as well as on war crimes related to Kosovo. It needs to improve 
implementation  of  the  police  protocol  and  exchange  of  information  in  the  fight  against 
organised  crime.  Control  and  surveillance  of  the  administrative  boundary  line  with  Kosovo 
needs  to  be  improved,  in  particular  in  view  of  regional  organised  crime  activities.  The 
situation in northern Kosovo and the issue of the control of the administrative boundary line 
have led to tension in the summer and beyond, including several outbreaks of violence which 
resulted in casualties. The situation has also led to more frequent inflammatory rhetoric by the 
Serbian leadership. The EU has called on both parties to defuse tensions and help re-establish 
free  movement  of  persons  and  goods  which  would  benefit  the  lives  of  the  people  in  the 
region. Serbia needs to cooperate actively with EULEX in order for it to exercise its functions 
in all parts of Kosovo.  

Serbia  maintains  its  structures  in  Kosovo  and  organised  parallel  municipal  by-elections  in 
May 2008, which is inconsistent with UNSCR 1244/1999. Serbia failed to play a constructive 
role  in  the  return  of  Kosovo  Serb  and  Kosovo  Albanian  judges  and  prosecutors  to  the 
Mitrovica District Court, which remains staffed only by EULEX personnel. Declarations by 
some  Serbian  government  officials,  in  early  2011,  discouraging  the  participation  of  Kosovo 
Serbs in the census in north Kosovo had a detrimental effect, which contributed to the census 
not  taking  place  in  northern  Kosovo.  Serbian  mobile  operators  maintained  the  activities  of 
unlicensed  branches  in  Kosovo.  Similar  activities  in  the  provision  of  electricity  were  also 
maintained.  There  were  a  number  of  statements  by  high  officials  advocating  partition  of 
Kosovo.  

Serbia  has  restored  its  relations  with  EU  Member  States  and  its  neighbours  that  recognised 
Kosovo's  independence.  The  disagreement  over  Kosovo's  representation  is  undermining 
regional cooperation generally and hampering Kosovo's participation in regional meetings and 

3 

Under UNSCR 1244/1999 

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initiatives.  It  is  holding  up  the  signature  of  the  EU-Western  Balkans  Transport  Community 
Treaty.  

Significant  progress  was  made  with  regard  to  the  Sarajevo  Declaration  Process,  launched 
through  the  Sarajevo  Declaration  of  31  January  2005.  Bosnia  and  Herzegovina,  Croatia, 
Montenegro and Serbia cooperate within this process to find solutions for refugees who were 
displaced  as  a  result  of  the  armed  conflicts  in  ex-Yugoslavia  between  1991  and  1995. 
Countries  have  continued  to  progress  on  a  number  of  outstanding  issues  such  as  data 
exchange,  civil  documentation,  public  information,  pensions  and  trust  fund  mechanisms,  in 
the  framework  of  the  established  regional  working  groups.  Following  the  meetings  of  June 
and September 2011, Bosnia and Herzegovina, Croatia, Montenegro and Serbia agreed on a 
number  of  issues,  including  the  text  of  a  joint  declaration  to  be  signed  at  a  ministerial 
conference  in  November  2011  in  Belgrade.  A  regional  multi-year  programme,  aimed  at 
addressing  the  needs  of  the  most  vulnerable  refugees, has also been  agreed,  together  with a 
donors' conference to be held in the first half of 2012 in Sarajevo.  

As  regards  missing  persons,  as  of  September  2011,  there  were  still  approximately  14,000 
people  missing  from  the  conflicts  in  the  region.  Of  these,  some  10,000  were  related  to  the 
conflict  in  Bosnia  and  Herzegovina,  2,000  to  the  conflict  in  Croatia  and  over  1,800  to  the 
conflict in Kosovo. A working group between Belgrade and Pristina chaired by ICRC meets 
regularly, but progress on resolving cases has been hampered by the lack of information on 
gravesite locations. There has also been recent progress in the cooperation between Serbia and 
Croatia. The lack of information on new gravesites and difficulties in identifying the already 
exhumed remains have considerably slowed down the process of resolving the fate of missing 
persons.  

Regional cooperation and good neighbourly relations form an essential part of the process 
of  Serbia's  moving  towards  the  European  Union.  Serbia  participates  constructively  in  most 
regional  initiatives  and  on  the  whole  plays  a  stabilising  role  in  the  Western  Balkans  but  an 
agreement  remains  to  be  found  on  a  sustainable  solution  for  the  participation  of  Kosovo  in 
regional  fora.  Serbia  needs  to  fully  implement  the  principles  of  inclusive  and  functioning 
regional cooperation.  

In  2011  Serbia  held  the  chairmanship  of  the  South  East  Europe  Cooperation  Process 
(SEECP), the Central European Initiative (CEI), the Adriatic-Ionian Initiative (AII), and the 
Migration,  Asylum,  Refugees  Regional  Initiative  (MARRI).  It  held  the  Presidency  of  the 
Central  European  Free  Trade  Agreement  (CEFTA)  in  2010  and  continues  to  play  an  active 
part  in  the  Regional  Cooperation  Council  (RCC),  the  Energy  Community  Treaty,  the 
European Common Aviation Area Agreement and the EU Strategy for the Danube Region. In 
March  2011,  within  the  framework  of  the  SEECP,  Serbia  endorsed  the  Regional  Strategic 
Document  and  Action  Plan  on  Justice  and  Home  Affairs  2011-2013.  Serbia  supports  the 
RECOM initiative on reconciliation. Serbia will host the 22nd session of the Igman Initiative 
in  October  2011.  Serbia  has  overall  good  bilateral  relations  with  other  enlargement 
countries and with EU neighbouring states Hungary, Romania and Bulgaria. Periodic high-
level  meetings  in  a  trilateral  format  have  been  organised  with  Croatia  and  Slovenia,  with 
Croatia  and  Hungary,  and  with  Bosnia  and  Herzegovina  and  Turkey.  In  recent  years  Serbia 
has  also  taken  significant  initiatives  aimed  at  regional  reconciliation,  including  a  number  of 
landmark  visits  undertaken  by  the  Serbian  President  in  Bosnia  and  Herzegovina  and  in 
Croatia, as well as the adoption by parliament in March 2010 of a declaration condemning the 
crime in Srebrenica and referring to the International Court of Justice ruling on Srebrenica. 

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Relations with Albania have recently improved to a good level. In 2010, during the first visit 
of  the  Albanian  Minister  of  Foreign  Affairs  in  five  years,  an  agreement  on  cooperation  in 
fighting organised crime, international drug trafficking and international terrorism was signed. 
Both countries abolished visas between them in 2010.  

Relations with Bosnia and Herzegovina have steadily improved and are good. President Tadic 
undertook  his  first  official  visit  to  Sarajevo  in  July  2011;  he  had  attended  the  Srebrenica 
commemoration in July 2010. An Ambassador from Bosnia and Herzegovina took office in 
2010  following  three  years  during  which  the  post  was  vacant.  Agreements  are  in  force  in 
several  areas,  including  economic  cooperation,  mutual  legal  assistance  in  criminal  matters, 
police  cooperation,  culture  and  sport,  as  well  as  on  determination  of  border  crossings  with 
Bosnia  and  Herzegovina.  The  Inter-State  Cooperation  Council  has  only  recently  been  re-
activated. The border demarcation remains an open issue. 

Relations with Croatia have recently improved to a good level. Regular contacts and a good 
level  of  cooperation  are  established,  most  notably  at  presidential  and  government  levels.  In 
November 2010 President Tadic made a landmark visit with President Josipovic to Vukovar 
where  they  together  paid  their  respects  to  Croat  victims  in  Ovcara  and  to  Serb  victims  in 
Paulin  Dvor.  A  defence  cooperation  agreement  was  concluded  and  a  good  level  of 
cooperation  was  established  between  war  crimes  prosecutors  and  between  parliaments.  A 
number of sectoral agreements are in force in areas such as protection of national minorities, 
extradition for serious crimes and police cooperation. Croatia handed over its translations of 
the  EU  acquis  to  Serbia.  Border  demarcation  remains  an  outstanding  issue  and  reciprocal 
genocide lawsuits are pending before the ICJ.  

Relations  with  the  former  Yugoslav  Republic  of  Macedonia  are  good.  High-level  visits  take 
place at regular intervals. There are agreements in place on issues such as local cross-border 
traffic  and  the  protection  of  national  minorities.  The  Serbian  authorities  maintained  their 
policy of non-recognition of the border demarcation agreement between the former Yugoslav 
Republic of Macedonia and Kosovo. Unresolved issues remain concerning relations between 
the Orthodox churches in the two countries.  

Relations  with  Montenegro  are  good.  The  dissolution  of  the  former  State  Union  went 
smoothly overall. Reciprocal high level visits have taken place. Agreements were concluded 
in many areas, including defence and police cooperation, extradition and disaster preparation. 
Cooperation  in  the  fight  against  organised  crime  remains  to  be  improved.  Issues  stemming 
from  the  dissolution  of  the  State  Union,  such  as  distribution  of  assets  and  liabilities, 
citizenship rights, border demarcation and relations between the Orthodox churches in the two 
countries, have still to be resolved.  

Relations  with  Turkey  are  good.  Reciprocal  high-level  visits  take  place.  Trilateral  meetings 
are  held  regularly,  together  with  Bosnia  and  Herzegovina,  at  presidential  and  ministerial 
levels.  In  April  2011,  the  President  of  Turkey  attended  a  three-party  meeting  of  Turkey, 
Serbia  and  Bosnia  and  Herzegovina  in  Belgrade.  Agreements  are  in  place  in  areas  such  as 
economic cooperation, free trade, tourism, social security. 

Serbia  continues  to  enjoy  good  relations  and  cooperation  with  Hungary,  Romania  and 
Bulgaria.  There  is  on-going  high-level  political  dialogue  with  these  countries.  Bilateral 
agreements  on  protection  of  national  minorities  were  signed  and  relevant  Joint  Inter-
governmental commissions were established with Hungary and Romania respectively.  

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Overall, Serbia generally complies with its international obligations and the conditions of the 
Stabilisation  and  Association  process.  The  arrest  and  transfer  of  Radovan  Karadzic,  Ratko 
Mladic  and  Goran  Hadzic  to  the  Hague  tribunal  represent  major  successes  for  Serbia's 
cooperation  with  the  ICTY,  which  has  greatly  improved  since  2008  to  reach  a  fully 
satisfactory level. 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. 
A number of outstanding bilateral issues, in particular regarding border demarcation, remain 
to be addressed. Serbia does not recognise Kosovo's unilateral declaration of independence. It 
maintains its structures in Kosovo and organised parallel municipal by-elections in May 2008, 
which  is  inconsistent  with  UNSCR  1244/1999.  On  the  basis  of  the  UN  General  Assembly 
resolution adopted on 9 September 2010, which had been tabled jointly by Serbia and the 27 
EU Member States, a process of dialogue between Belgrade and Pristina started in March. It 
has  been  conducted  in  a  generally  constructive  spirit  until  September  and  it  has  led  to 
agreements  on  several  issues:  free  movement  of  goods  and  persons,  civil  registry  and 
cadastre.  The  agreements  reached  to  date  need  to  be  implemented  in  good  faith.  Further 
results remain to be achieved to implement, as a matter of priority, the principles of inclusive 
and  functioning  regional  cooperation  and  to  provide  sustainable  solutions  on  EU  acquis 
related  matters  in  sectors  such  as  energy  and  telecoms.  All  sides  need  to  play  their  part  in 
defusing the tension in north Kosovo and allow for free movement of persons and goods, for 
the benefit of the people of the region.  

1.4. 

General evaluation  

The  present  assessment  is  based  on  the  Copenhagen  criteria  relating  to  the  stability  of 
institutions  guaranteeing  democracy,  the  rule  of  law,  human  rights  and  respect  for  and 
protection of minorities, as well as on the conditionality of the Stabilisation and Association 
Process. 

Serbia is a parliamentary democracy. Its constitutional and legislative framework is largely in 
line with European principles and standards and its institutions are well developed. Serbia is 
committed  to  its  objective  of  membership  of  the  European  Union  and  since  2008  has 
increasingly  focused  its  efforts  on  the  EU-related  reform  agenda.  The  government  has 
upgraded  some  of  its  procedures  and  parliament  has  become  far  more  effective  in  its 
legislative  activity  under  the  current  legislature.  The  legislative  process  would  benefit  from 
more thorough preparation and greater emphasis on consultation of stakeholders. Capacity for 
parliamentary oversight and governmental policy planning, coordination and implementation 
remains  to  be  further  developed.  Serbia  has  set  up  all  the  necessary  independent  regulatory 
bodies.  The  rules  governing  the  parliamentary  review  of  their  annual  reports  have  been 
clarified  even  though  the  follow-up  of  recommendations  by  independent  and  regulatory 
bodies  needs  to  be  strengthened.  The  public  administration  is  in  general  well  developed,  in 
particular  at  central  level.  The  principle  of  a  merit-based  career  system  needs  to  be  fully 
implemented.  Serbia  has  established  a  Statute  for  the  Province  of  Vojvodina  and  has 
undertaken to transfer some competences to the municipal level.  

Since  2001,  elections  have  been  consistently  conducted  in  Serbia  in  accordance  with 
international standards. The electoral legislation was recently brought into line with European 
standards. It now provides that the appointment of MPs follows the order of the lists presented 
to  the  voters  and  it  puts  an  end  to  the  practice  of  'blank  resignations',  by  which  MPs  were 
tendering  resignation  letters  to  their  parties  at  the  beginning  of  their  mandate.  This 

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consolidates  the  free  exercise  of  parliamentary  mandates,  a  principle  which  needs,  in  due 
course, to be fully enshrined in the Constitution. 

The legal and institutional framework for the rule of law in Serbia, including the fight against 
corruption and organised crime, has been enhanced, particularly following substantial reforms 
in  the  judiciary,  the  setting-up  of  the  Anti-Corruption  Agency  and  the  stepping-up  of 
international  cooperation  in  criminal  matters.  This  has  led  to  initial  results.  The  main 
challenges  remain  in  the  areas  of  the  judiciary,  the  fight  against  corruption  and  the  fight 
against  organised  crime.  In  particular,  a  proactive  approach  in  the  fight  against  corruption 
leading to a credible track record of opened investigations and final convictions remains to be 
built up. An extensive framework for civilian control of the security forces is in place. 

Substantial  reforms  of  the  judiciary  were  pursued  in  Serbia  following  the  adoption  of  the 
national  strategy  in  2006  and  intensified  in  2009  and  2010.  Independence  and  self-
administration  were strengthened with the establishment of the new High Judicial and  State 
Prosecutorial  Councils,  which  have  been  functioning  in  their  permanent  compositions  since 
April  2011.  A  re-appointment  procedure  for  all  judges  and  prosecutors  was  undertaken  in 
December 2009, aiming in particular at raising their professional and integrity standards. The 
initial  significant  shortcomings  identified  in  that  procedure  are  in  the  course  of  being 
addressed  by  a  review  process  for  which  there  are  clear  guidelines.  The  review  process 
remains to be satisfactorily completed in transparent manner in line with these guidelines. A 
revision of the role given by the Constitution to parliament on appointments and dismissals in 
the  judiciary  will  need  to  be  undertaken  in  due  course,  to  further  reduce  the  risk  of  undue 
political  influence.  Several  steps  have  been  taken  to  increase  the  efficiency  of  the  judicial 
system.  The  court  network  was  restructured  and  the  number  of  courts  reduced,  leading  to  a 
better  distribution  of  workload.  An  Administrative  Court  was  set  up  and  a  Law  on 
enforcement  of  court  decisions  adopted  in  May  2011.  Further  efforts  are  still  needed  to 
improve the functioning of the judiciary, reap the full benefits of the restructured network of 
courts  and  ultimately  increase  public  trust.  Efforts  to  strengthen  the  execution  of  judgments 
and further reduce the important backlog of pending cases are to be pursued. 

The legal and institutional framework for fighting corruption is, overall, in place in Serbia. An 
Anti-Corruption Agency was established and is competent in the areas of integrity of public 
officials  and  control  of  party  funding.  Its  resources  were  recently  further  increased.  An 
enhanced  framework  for  controlling  financing  of  political  parties'  activities  and  electoral 
campaigns has been established in line with European standards. The Minister of Justice was 
appointed coordinator for the fight against corruption. The authorities have launched a review 
of  the  outdated  strategy  and  action  plan  for  the  fight  against  corruption.  The  State  Audit 
Institution has started to play a useful role in controlling public expenditure and uncovering 
irregularities.  The  customs  administration  and  the  police  have  stepped  up  their  internal 
controls resulting in a greater number of cases being investigated and sanctioned. Steps have 
also been taken towards specialisation of the law enforcement agencies and a greater number 
of cases have been prosecuted. Corruption remains prevalent in many areas and continues to 
be  a  serious  problem.  Stronger  political  will  is  essential  in  order  to  significantly  improve 
performance  in  combating  corruption.  Enhanced  investigation  capacity  and  coordination  of 
law  enforcement  bodies  are  indispensable.  The  track  record  of  investigations,  prosecutions 
and final convictions in corruption cases at all levels needs to be gradually and significantly 
built up. There are also concerns regarding supervision of public procurement, privatisation, 
spatial planning and construction permits. 

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In  the  fight  against  organised  crime,  the  legal  framework  developed  by  Serbia  is  generally 
adequate and capacity has improved, including on international cooperation. This has led to 
significant  results,  such  as  the  dismantling  of  a  major  international  drug-trafficking  ring. 
Money  laundering  and  drug  smuggling  are  key  areas  of  concern  and  the  track  record  of 
investigations and convictions needs to be built up further. Capacity for proactive and better 
coordinated investigations and enhanced cooperation at regional and international levels also 
remain to be further developed. Technical capacity to carry out special investigative measures 
should  be  developed  within  the  law  enforcement  bodies,  under  the  direct  control  of  the 
judiciary.  

The  legal  and  policy  framework  for  human  rights  and  the  protection  of  minorities  in 
Serbia is, overall, in line with European standards. The Constitution guarantees a wide range 
of  human  rights  and  fundamental  freedoms  and  recognises  the  possibility  of  filing  a 
Constitutional  appeal  as  the  final  remedy  for  protection  of  human  rights.  However, 
implementation  of  the  legislation  needs  to  be  stepped  up.  Advanced  training  of  the 
administration, the police and the judiciary remain to be developed to ensure more active and 
consistent application of standards in this field.  

Human rights are generally respected in Serbia. The Ombudsman and the Commissioner for 
access  to  information  and  data  protection  are  playing  an  increasingly  effective  role  in  the 
oversight  of  the  administration.  The  legal  framework  to  combat  discrimination  has  been 
substantially  improved  and  mechanisms  have  been  set  up  to  oversee  its  implementation, 
which  is  at  an  early  stage.  The  authorities  have  also  been  paying  growing  attention  to 
safeguarding the respect of the freedom of assembly and freedom of association and the role 
of  civil  society.  The  newly  adopted  media  strategy  aims  at  substantially  clarifying  the  legal 
and  market  environment  in  which  media  outlets  are  operating.  More  comprehensive  and 
proactive  action  is  expected  from  the  relevant  institutions  in  cases  of  threats  and  violence 
against  journalists  and  media,  emanating  notably  from  radical  groups.  The  current  prison 
conditions are a matter of serious concern. A long awaited law on restitution as well as a new 
law on public property were adopted. Transparent and non discriminatory implementation of 
both  laws  has  to  be  ensured  and  further  measures  taken  to  fully  establish  legal  clarity  over 
property  rights.  The  Commission  will  monitor  the  implementation  and  application  of  these 
laws. 

The legal and institutional framework for respecting and protecting minorities in Serbia is in 
place.  The  Constitution  guarantees  specific  rights  to  members  of  national  minorities  in 
addition  to  the  rights  guaranteed  to  all  citizens  and  provides  a  legal  basis  for  the  National 
Minority  Councils.  Political  representation  of  minorities  is  ensured.  At  State  level,  the 
Ombudsman and the Commissioner for Equality are exercising their prerogatives in this area. 
Serbia has established a comprehensive strategy for the integration of Roma and is currently 
progressing  in  its  implementation.  Active  social  inclusion  measures  have  been  taken,  in 
particular in the fields of health, education and housing. Measures have recently been taken to 
alleviate  obstacles  to  the  registration  of  'legally  invisible  persons'  which  will  improve  their 
access  to  basic  rights.  Further  serious  efforts,  including  financial  resources,  are  needed  in 
order to improve the status and socio-economic conditions of the Roma, who continue to be 
the  most  vulnerable  and  marginalised  minority,  as  illustrated  by  the  high  number  of  illegal 
settlements.  The  situation  of  refugees  and  internally  displaced  persons  remains  a  concern, 
even  though  significant  progress  was  achieved  in  recent  years  in  reducing  the  number  of 
collective centres. 

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Serbia  generally  fulfils  the  conditions  of  the  Stabilisation  and  Association  Process. 
Cooperation  with  the  International  Criminal  Tribunal  for  the  former  Yugoslavia  has  greatly 
improved  since  2008  to  a  now  fully  satisfactory  level,  as  best  illustrated  by  the  arrests  and 
transfers to the Hague tribunal of Radovan Karadzic in 2008, Ratko Mladic and Goran Hadzic 
in  2011.  Serbia  is  committed  to  pursuing  this  cooperation  at  the  same  level.  It  participates 
actively  in  regional  initiatives  and  has  taken  significant  steps  to  foster  reconciliation.  The 
agreement  reached  with  Bosnia  and  Herzegovina,  Croatia  and  Montenegro  in  the  Sarajevo 
Declaration  Process  on  durable  solutions  for  refugees  and  IDPs  is  a  major  achievement. 
Serbia  has  made  good  progress  in  its  bilateral  relations  with  other  enlargement  countries, 
particularly Croatia, Bosnia and Herzegovina and Montenegro, while continuing to maintain 
good  relations  overall  with  neighbouring  EU  Member  States.  A  number  of  outstanding 
bilateral issues remain with its neighbours, in particular regarding border demarcation.  

Serbia  does  not  recognise  Kosovo's  unilateral  declaration  of  independence.  It  maintains  its 
structures  in  Kosovo  and  organised  parallel  municipal  by-elections  in  May  2008,  which  is 
inconsistent  with  UNSCR  1244/1999.  On  the  basis  of  the  UN  General  Assembly  resolution 
adopted  on  9  September  2010,  which  had  been  tabled  jointly  by  Serbia  and  the  27  EU 
Member States, a process of dialogue between Belgrade and Pristina started in March. It has 
been conducted in a generally constructive spirit until September and it has led to agreements 
on  several  issues:  free  movement  of  goods  and  persons,  civil  registry  and  cadastre.  The 
agreements reached to date need to be implemented in good faith. Further substantial results 
remain  to  be  achieved  to  implement,  as  a  matter  of  priority,  the  principles  of  inclusive  and 
functioning  regional  cooperation  and  to  provide  sustainable  solutions  on  EU  acquis-related 
matters in sectors such as energy and telecommunications. All sides need to play their part in 
defusing the tension in northern Kosovo and allow for free movement of persons and goods, 
for the benefit of the people of the region.  

2. 

ECONOMIC CRITERIA 

In  1993,  the  European  Council  in  Copenhagen  defined  the  following  economic  criteria  for 
accession to the EU: 

- the existence of a functioning market economy, 

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

These  criteria  are  interlinked.  A  functioning  market  economy  will  cope  better  with 
competitive pressure and, in the context of membership of the Union, the market of reference 
is the internal market. 

Following a brief overview of economic developments and policies in a historical perspective, 
the  report  goes  on  to  consider  the  extent  to  which  Serbia  fulfils  the  two  economic  criteria 
established by the Copenhagen European Council. 

2.1. 

Economic developments 

Serbia is a relatively small economy with a population of approximately 7.3 million, living on 
a  territory  of  around  77,500  square  kilometres.  The  country  is  endowed  with  fertile  arable 
land and natural mineral resources, including one of Europe's largest reserves of copper and 
up  to  one  tenth  of  the  world's  stock  of  antimony.  It  has  significant  coal  resources  and  the 
potential for hydroelectric-power generation. 

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Serbia's  gross  domestic  product  (GDP)  at  current  prices  was  close  to  €30  billion  in  2010, 
accounting  for  0.25%  of  EU-27's  GDP.  GDP  per  capita  in  purchasing  power  parity  (PPP) 
terms was 35% of the EU-27 average. The regional disparities in income are very high, with a 
difference of 1:10 between the capital and certain municipalities in the south. 

Macroeconomic background 

Serbia was the largest constituent of the Socialist Federal Republic of Yugoslavia in terms of 
surface and population. It was a medium developed republic. In the wake of the break-up of 
the  former  Yugoslavia  in  1991,  when  moves  had  already  been  made  towards  liberalisation 
and the development of private sector, Serbia began the transition period with higher  living 
standards  than  many  other  transition  economies.  However,  the  result  of  the  loss  of  its 
traditional markets and the breakup of the existing supply chains as well as the imposition of 
international sanctions, against a backdrop of regional conflicts, was a severe recession. Poor 
economic  governance,  which  reversed  many  market-oriented  reforms  from  the  1980s, 
devastated the production capacity of the economy. Workers stayed formally employed, but 
were  de  facto  on  long-term  leave.  The  informal  economy  became  widespread.  During  1992 
and  early  1994,  one  of  the  highest  levels  of  hyperinflation  in  history  paralysed  the  banking 
system and undermined the economic activity. In spite of a monetary reform in 1994, which 
partly stabilized the new dinar, the Deutsche Mark acted as a parallel currency throughout the 
1990s.  In  2000,  GDP  was  less  than  half  of  its  1989  level,  while  other  central  and  eastern 
European countries were making significant progress on the path of transition. 

The  economic  imbalances  began  to  slowly  subside  as  Serbia  re-launched  the  transition 
process as part of the democratic changes in 2000. The reforms included an overhaul of the 
institutional  framework,  liberalisation  of  the  trade  regime  and  privatisation  as  well  as 
adjusting economic policies to a market economy. Starting from a very low base, Serbian real 
GDP  rose  steadily  during  the  period  2001-2008  at  an  average  yearly  rate  of  around  4.5%, 
reaching  a  peak  of  9.3%  in  2004.  Growth  was  lent  impetus  by  the  initiation  of  the 
privatisation  process,  which  attracted  foreign  direct  investment,  and  by  the  rebuilding  of 
confidence in the banking system. 

The  National  Bank  of  Serbia  (NBS)  put  in  place  adequate  prudential  mechanisms  and, 
together  with  the  government,  consolidated  the  banking  sector,  which  led  to  the  closure  of 
four  major  state-owned  banks  and  the  subsequent  establishment  of  new  banks  with  fresh 
capital. Against the background of tight monetary policy, inflation gradually subsided, but in 
regional terms it remained high – at two-digit levels. In 2006, the NBS declared price stability 
to be its main policy objective and to that end started pursuing inflation targeting. 

Post-2000  reforms  were  also  geared  towards  establishing  a  comprehensive,  transparent  and 
accountable public finance management system. A set of new tax laws was introduced with 
the aim of modernising the tax administration and improving tax collection. In particular, the 
replacement of the sales tax by VAT in 2005 boosted tax revenues. Large budgetary deficits, 
which were mainly funded by the International Financial Institutions, began to decline in step 
with favourable economic conditions, and the deficits turned into a surplus in 2005. 

On the other hand, economic growth that was largely fuelled by domestic demand weighed on 
Serbia's  external  balance.  As  imports  rallied,  the  trade  gap  continued  to  widen,  driving  the 
current account deficit to over 20% of GDP by 2008. Given the large gap between domestic 
investment and savings, the private sector increasingly  resorted  to borrowing abroad, which 
led to a rapid rise in Serbia's foreign indebtedness. 

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One of the main concerns was also the weak labour market. The restructuring of companies 
after 2000, which involved rationalisation or closure of facilities, resulted in massive layoffs. 
Low labour activity, with the employment rate barely reaching 50%, became entrenched, as 
insufficient  effort  was  made  to  remove  labour  market  rigidities  and  improve  the  business 
environment. 

The  dependence  of  growth  on  foreign  financial  resources  and  a  number  of  unresolved 
structural shortcomings exposed Serbia's economy to adverse spill-overs of the global crisis in 
2009. Macroeconomic stability has been broadly preserved thanks to the implementation of an 
economic  recovery  programme  agreed  with  the  IMF  under  a  Stand-by  Arrangement  (SBA). 
With further support from the EU and other International Financial Institutions, including the 
World  Bank  and  EBRD,  Serbia  avoided  a  financial  meltdown.  However,  the  recession  that 
followed  a  severe  contraction  of  manufacturing  and  construction  activities,  in  particular, 
substantially eroded public finances and led to a deterioration in living standards. With around 
400,000 jobs lost, an unemployment rate of above 20% and the poverty rate rising above 9% 
in the aftermath of the 2009 crisis, Serbia's economy is faced with the need to tackle urgently 
a number of acute weaknesses if it is to withstand the competitive pressures. 

Structural change 

Serbia  began  the  transition  process  in  the  early  1990's  as  an  industrialised  economy.  The 
manufacturing  sector,  which  included  a  productive  automotive  industry,  collapsed  as  a 
consequence  of  the  trade  shocks  related  to  the  dismantling  of  the  former  Yugoslav  markets 
and  the  international  embargo,  the  war-inflicted  damage  to  infrastructure  and  the 
mismanagement  of  public  assets.  After  2000,  the  economic  revival  was  mainly  based  on 
services, which  now  account  for  almost two thirds of Serbia's output. While agriculture  has 
seen its share of GDP halve to around 10%, the share of industry fell more gradually to less 
than a quarter. Given the prevalence of mostly unskilled labour- and capital-intensive sectors 
at the low-end of the production chain the export base remains shallow, limiting the share of 
exports in GDP to only about 30%. Yet Serbia has been increasingly reorienting its exports 
towards the EU markets, which accounted for around 56 % of total exports in 2010. 

Since 2001, a liberalisation of trade and prices has been underway but the process has been 
occasionally challenged by state interference in dealing with market disturbances. The system 
of administered prices has allowed the state and local authorities to control prices of all major 
utilities, which are often below cost-recovery levels.  

Another privatisation process was initiated in 2002 which covered some 500 state enterprises 
(excluding  public  enterprises  and  banks  which  were  considered  strategic)  and  around  2,500 
socially  owned  companies.  While  in  the  1990s,  insider  shares  were  distributed  among  the 
employees, in the second stage the sale of assets was carried out by public auction and tender 
procedures.  However,  the  process  has  been  slow  and,  with  the  2009  crisis,  it  has  lost 
momentum or even gone backwards as a result of the repeal of numerous sale contracts on the 
grounds  of  breach  of  contract  obligations.  The  share  of  the  private  sector  remains  low,  at 
around 60% of GDP. Progress in the restructuring of enterprises, including the development 
of  modern  corporate  governance,  and  the  improvements  of  the  regulatory  framework  were 
also limited.  

The banking sector underwent major structural changes in the period 2000-2005. The number 
of banks was halved as a result of mergers and acquisitions and revoked licences to insolvent 
and  illiquid  banks.  Further  consolidation  and  privatisation  attracted  international  private 

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banks, which currently hold around three quarters of the total assets of the banking system. In 
keeping  with  sustained  economic  growth,  financial  intermediation  expanded  vigorously  but, 
as  a  legacy  of  the  monetary  instabilities  from  the  1990s,  the  bulk  of  deposits  and  loans 
continued to be in, or indexed to, foreign currency. A high degree of 'euroisation', within the 
framework  of  a  flexible  exchange  rate  regime,  makes  Serbia's  economy  vulnerable  to 
exchange  rate  volatility.  Nevertheless,  the  banking  system  has  emerged  largely  unscathed 
thanks to a  conservative lending  policy and adequate supervision  and prudential regulations 
put in place by the central bank. 

Given  its  limited  domestic  financial  resources,  Serbia  has  had  to  rely  heavily  on  foreign 
capital.  The  liberalisation  of  long-term  capital  movements  and  privatisation  opportunities 
attracted  significant  foreign  direct  investment  (FDI)  in  the  period  to  2006.  After  2008,  FDI 
inflows dried up, partly as a result of the crisis. 

Road  and,  in  particular,  rail  transport  infrastructure  remain  insufficiently  developed. 
Following  the  rehabilitation  of  the  power  production  and  transmission  systems,  the  present 
electricity  demand  has  been  met.  However,  the  existing  capacities  are  far  from  sufficient  in 
the light of future needs. Investment in new infrastructure and production facilities is part of 
Serbia's  new  development  strategy,  which  is  looking  towards  a  shift  to  more  export-driven 
growth, based on higher-tech industries and domestic resources. To that end Serbia needs also 
to enhance its human capital. 

2.2. 

Assessment in terms of the Copenhagen Criteria 

2.2.1.  The existence of a functioning market economy 

The existence of a functioning market economy requires that prices, as well as trade, should 
be  liberalised  and  that  an  enforceable  legal  system,  including  property  rights,  is  in  place. 
Macroeconomic stability and a consensus on economic policy enhance the performance of a 
market economy. A well-developed financial sector and the absence of significant barriers to 
market entry and exit improve the efficiency of the economy. 

Economic policy essentials 

Since  2000,  there  has  been  a  broad  political  consensus  on  the  fundamentals  of  a  market 
economy and economic policies required by EU membership. Serbia has been included in the 
EU's economic and fiscal surveillance arrangements applying to potential candidate countries 
since  2006.  An  appropriate  framework  for  economic  policy  co-ordination  among  national 
stakeholders is in place. The commitment to reforms has been forged by several technical and 
financial agreements with the EU, IMF and the World Bank. Macroeconomic stabilisation and 
recovery  in  the  aftermath  of  the  2009  global  crisis  have  been  anchored  by  the  programmes 
agreed  with  the  IMF:  notably  a  Stand-By  Arrangement  in  the  period  from  January  2009  to 
April 2011 and a new 18-month precautionary programme .  

Serbia has implemented important market-oriented reforms over the past ten years. However, 
structural  rigidities  persist.  The  new  post-crisis  development  strategy  devised  by  the 
authorities for the period up to 2020, which is geared to long-term, sustainable and balanced 
growth,  has  stepped  up  efforts  to  strengthen  the  economic  fundamentals.  In  particular, 
significant strides were made towards improving the framework of public finances. Overall, 
there is consensus on the economic policies required for establishing a market economy, but 
the remaining structural adjustments need to be implemented without delay. 

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Macroeconomic stability 

After  the  political  changes  in  2000,  the  economic  revival  regained  momentum,  with  steady 
and robust average growth of 4.5% per annum in real GDP. Growth was fuelled by domestic 
demand,  which  was  to  a  large  extent  financed  by  foreign  capital.  There  was  a  boom  in 
investment  activity,  in  particular,  leading  to  an  increase  in  the  share  of  gross  fixed  capital 
formation  in  GDP  from  just  above  10%  in  2001  to  close  to  24%  in  2008.  Services,  in 
particular  retail  trade,  telecommunication,  financial  intermediation  and  real  estate,  were  the 
main drivers of growth. The upward trend was interrupted in 2009 as domestic demand failed 
to provide the usual stimulus in the face of the global financial turmoil. Serbia' output shrank 
by  3.5%  in  real  terms.  The  sectors  hardest  hit  by  the  crisis  were  construction  and 
manufacturing. The economy bounced back in 2010, with GDP up by 1%, thanks to vigorous 
export  growth  while  domestic  consumption  and  investment  remained  constrained.  As 
economic  recovery  gradually  got  underway  among  Serbia's  main  trading  partners,  and  the 
dinar  continued  to  depreciate,  exports  rallied.  In  2011,  an  export-led  economic  upturn  was 
continuing,  but  is  poised  to  be  affected  by  the  fragile  international  environment.  Its 
sustainability  will  depend  on  the  strengthening  and  expansion  of  the  tradable  sector  as 
household  consumption  and  investment  have  been  picking  up  only  slowly  given  the 
constraints on disposable incomes. Overall, the global crisis has revealed the vulnerabilities of 
a growth pattern based on domestic demand and financed by foreign capital inflows. In order 
to  enhance  the  economy's  resilience  through  sustainable  export-led  growth,  Serbia  needs  to 
step up its structural reforms. 

Against the background of the pre-crisis growth pattern, which involved a sustained surge in 
imports  to  meet  accelerating  domestic  demand,  Serbia's  balance  of  payments  position 
deteriorated sharply. The current account deficit increased to over 20% of GDP by 2008. The 
trade  gap  widened  to  26%  of  GDP  as  import  growth  continued  to  outpace  export  growth, 
which  was  constrained  by  low  value-added  products  and  low  market  diversification.  The 
current account deficit narrowed to about 7% of GDP in 2009, following a sharp contraction 
in  foreign  trade  in  the  aftermath  of  the  crisis,  and  also  due  to  a  surge  in  current  transfers, 
mainly in the form of higher net inflows of remittances. Since imports fell much more sharply 
than exports, the trade deficit was also significantly lower than previous levels but, at 18% of 
GDP,  it was still considerable.  In 2010, contrary to  expectations that the gradual pick-up in 
activity and trade would widen the current account deficit, the gap was contained at the 2009 
level by strong export growth. As imports have begun to accelerate steadily in 2011 in step 
with buoyant industrial activity based on strong foreign demand, it remains to be seen whether 
the recent rebalancing will last. Overall, substantial external imbalances have been reduced in 
the wake of the crisis, but dependence on external financing remains high. 

Serbia  gained  access  to  international  capital  markets  following  the  agreement  on  debt 
restructuring with the Paris Club in 2001, by which two thirds of the debt accumulated during 
the  1990s  were  redeemed.  Driven  largely  by  privatisation,  FDI  strengthened  steadily  until 
2006, when net inflows amounted to €3.3 billion or 14% of GDP, but diminished thereafter, 
dropping  to  a  mere  €860  million  or  3%  of  GDP  in  2010.  This  was  the  consequence  of  the 
unfavourable conditions abroad, as well as the weak domestic environment, characterised by 
impediments to doing business and limited privatisation opportunities. Nevertheless, in 2011 
FDI has started to pick up.  

Given the underdeveloped domestic capital markets, the Serbian corporate sector had to resort 
to foreign loans to finance its pre-crisis expansion. In the aftermath of the crisis, firms began 
to  deleverage,  while  domestic  commercial  banks  continued  to  borrow  mostly  long  term. 

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Against  a  background  of  sizeable  inflows  of  foreign  resources,  official  foreign  exchange 
reserves have been largely stable at around €10 billion, i.e. one third of GDP or sufficient to 
cover some eight months of merchandise imports. Owing to the increasing private borrowing 
abroad, Serbia's gross external debt grew rapidly. In 2010, it accounted for more than 80% of 
GDP, of which around one quarter was public debt. External sustainability is a point to watch, 
especially in the light of the lately modest financial and capital inflows. Overall, cross-border 
borrowing has led to a substantial increase in Serbia's external indebtedness that will need to 
be curtailed by attracting more foreign investment. 

Despite high levels of economic growth, the labour market remained weak as a result of the 
restructuring of the economy and of a limited response of the private sector in job creation. 
The  employment  rate  stayed  below  50%  and  the  activity  rate  at  just  under  60%.  In  the 
aftermath  of  the  crisis,  the  number  of  employed  persons  dropped  to  a  historic  low  and  the 
unemployment  rate  soared  from  14%  to  above  20%.  Unemployment  is  a  long-term 
phenomenon and reflects substantial regional disparities. It is particularly high among people 
under 35 years of age, who account for half of the unemployed persons. Many of the inactive 
and unemployed are graduates with secondary education or university degrees, which points 
to a major mismatch of skills. Structural unemployment, in particular among educated young 
people, suggests that structural rigidities have been hampering the functioning of the labour 
market.  These  include  a  regressive  labour  tax  system  and  early  retirement  rules.  The  poor 
performance  of  the  labour  market  has  led  to  a  deterioration  in  social  conditions,  which  had 
gradually improved during the boom period as a result inter alia of the rapid rise in wages. 
Since  2009,  wage  moderation  prevailed,  largely  due  to  the  nominal  freeze  in  public  sector 
wages  between  2009-2011.  Overall,  labour  market  weaknesses,  such  as  high  structural 
unemployment,  a  very  low  employment  rate  and  widespread  informal  employment,  are 
exacerbated by persistent structural rigidities. 

The  authorities  used  monetary  policy  as  a  tool  to  support  macroeconomic  and  financial 
stability.  In  particular,  the  timely  response  of  the  National  Bank  of  Serbia  (NBS)  after  the 
outbreak  of  the  global  financial  crisis  was  instrumental  in  quickly  restoring  confidence  in 
Serbia's  banking  system.  The  guaranteed  savings  deposit  was  increased  to  €50,000,  the 
reserve  requirements  were  gradually  relaxed  and  the  tax  on  interest  income  from  foreign 
currency savings was temporarily barred. The NBS has committed itself to price stability and 
since  2009  it  has  pursued  inflation  targeting  by  setting  a  broad  band  around  the  targeted 
consumer  price  index  (CPI)  inflation  instead  of  core  inflation,  as  previously.  Under  this 
framework  inflationary  expectations  became  broadly  anchored  and  inflation  was  gradually 
brought  back  down  to  single  digits.  However,  disinflation  was  interrupted  in  the  middle  of 
2010 due to rising agricultural/food prices and the knock-on effects of the depreciation of the 
dinar. By the end of 2010, inflation soared to 10.3% year-on-year, overshooting the 6%±2% 
target range. The inflation pattern points to major structural shortcomings due to the fact that 
prices persistently over-react to common external shocks, and inflation remains much higher 
than in countries with comparable income levels. Following renewed inflationary tensions, the 
NBS  reversed  its  course  of  gradually  relaxing  monetary  conditions  to  embrace  monetary 
tightening  by  increasing  the  key  reference  interest  rate  to  12.5%  in  April  2011.  However, 
from  mid-2011  the  stance  has  been  somewhat  relaxed  in  view  of  signs  that  inflation  is 
slowing  and  the  dinar  is  strengthening,  with  the  interest  rate  currently  at  11.25%.  Overall, 
achieving the price stability objective is a challenge in the face of volatile global commodity 
prices  and  structural  shortcomings,  in  particular  the  slow  process  of  price  liberalisation  and 
the knock-on effect of the exchange rate fluctuations. 

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In 2010, the NBS was actively engaged in preserving exchange rate stability as the pace of the 
dinar  depreciation  was  deemed  to  be  jeopardising  the  process  of  economic  stabilisation. 
Operations on the foreign exchange market became more frequent, especially from mid-May 
when the pressure on the exchange rate intensified, following the fall out of the Greek dept 
crisis. In spite of a number of foreign exchange operations and substantial selling of currency 
reserves on the foreign exchange market, the dinar was on a depreciating path in both nominal 
and real terms during 2010. Serbia's export competitiveness therefore improved, which led to 
vigorous  export  growth.  A  period  of  strengthening  at  the  end  of  2010  and  early  2011  was 
triggered  by  an  interest  rate  rise  and  an  increased  demand  for  treasury  bills  against  a  lower 
risk  premium.  Overall,  monetary  policy  is  pursuing  exchange  rate  stability  as  an  implicit 
priority. 

Public finances have been characterised by pro-cyclical fiscal policies during most of the last 
decade.  The  overall  fiscal  imbalance  improved  in  the  times  of  economic  prosperity  which 
generated  tax-rich  revenues  and  led  to  a  budget  surplus  of  1%  of  GDP  in  2005.  However, 
since 2006, Serbia's public finances have been continuously eroded by expansionary policies 
and weak tax compliance. A relaxation of the tax burden was allowed as from 2007 as a result 
of  a  new  income  tax  regime  and  adjustments  of  indirect  taxes.  The  structure  of  general 
government  expenditures  remained  heavily  biased  towards  mandatory  current  spending, 
which  accounted  for  over  90%  of  total  public  outlays.  With  a  reduced  fiscal  space  and 
significant  pressures  on  public  finances  stemming  from  the  economic  crisis,  Serbia's  fiscal 
position  deteriorated  significantly  after  2008.  The  expansionary  fiscal  policy  became 
constrained by the SBA programme requirements. Expenditure savings came largely from a 
nominal  freeze  on  public  sector  wages  and  pensions  and  restricted  hiring  in  the  public 
administration. Capital outlays were also reduced in order to buffer the dwindling revenues. In 
addition,  an  ad  hoc  temporary  tax  on  mobile  services  was  introduced  and  excise  duties  on 
cigarettes and on oil products were raised, but key tax rates remained unchanged. However, 
the corrective measures only partly compensated for the sizeable revenue shortfall in the face 
of  a  sharp  economic  downturn,  prompting  the  adoption  of  supplementary  budgets  in  both 
2009 and 2010. In 2010, the fiscal deficit increased to 4.7% as the automatic stabilisers were 
allowed to come fully into play: additional social assistance and subsidies were provided in 
response  to  the  weak  labour  market  performance  and  poor  living  conditions.  In  2011,  the 
budgetary  situation  remained  tense,  as  revenues  underperformed  given  the  slower-than-
expected  economic  upswing.  Overall,  pro-cyclical  fiscal  policy  undermined  public  finances 
and prompted the adoption of emergency fiscal adjustments to mitigate the deterioration in the 
wake of the crisis. 

The widening budgetary gaps have prompted government borrowing in particular in dinars, in 
line with the debt management strategy. Higher borrowing and the depreciation of the dinar 
led to a surge in public debt to almost 43% of GDP in 2010, up by around 8 percentage points 
compared  to  the  previous  year.  However,  budgetary  financing  has  been  difficult  given  the 
lack  of  investor'  interest  in  treasury  bills  with  long-end  maturities,  due  to  the  significant 
exchange rate risk. The first 10-year eurobond was issued in September 2011. Also, the recent 
attempts to raise privatisation proceeds by selling the remaining state owned enterprises were 
unsuccessful. The government resorted to borrowing from domestic commercial banks. At the 
end  of  2010,  foreign  debt  accounted  for  almost  60%  of  total  public  debt  and  was 
predominantly  euro-denominated.  The  issuance  of  dinar-denominated  treasury  bills  since 
2009 has resulted in a steady increase in the share of dinar-denominated debt, as well as the 
share of short-term debt in the debt portfolio. Nevertheless, the repayment profile of the total 
public debt remains largely long-term and evenly distributed over time. Overall, public debt 

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sustainability has become an issue of concern in the light of the recently large fiscal deficit, 
especially given the uncertainties in the macroeconomic outlook, and the budgetary financing 
by largely short-term commercial borrowing. 

Against  the  background  of  a  significant  fiscal  deterioration,  the  authorities  took  steps  to 
address  some  of  the  structural  weaknesses  of  public  finances.  A  multi-annual  budgetary 
process, which is supposed to underpin a more rigorous and efficient medium-term planning, 
has  been  formalised  in  the  revised  Law  on  the  budget  system.  The  amendments  adopted  in 
2010  established  numerical  fiscal  rules  and  procedures,  including  the  setting-up  of  a  fiscal 
council, which determine the path of expenditure-driven fiscal consolidation. A set of general 
and specific fiscal rules commits the policy makers to cutting the fiscal deficit to 1% of GDP 
by  capping  the  outlays  for  public  sector  wages  and  pensions,  at  8  and  10%  of  GDP 
respectively, by 2015 and keeping public debt (without restitution costs) below 45% of GDP. 
The revised law also defined a new indexation formula for public sector wages and pensions, 
with three adjustments in 2011 and bi-annual indexation thereafter. The 2010 pension reform 
will also help in restraining public spending over the long term. The new law, which will be 
phased  in  gradually  over  the  period  2011-2022,  extends  the  working  period  and  age  for 
assuming pension rights, tightens up the rules on early retirement and adjusts the indexation 
mechanism. Although the recent adjustments are an important step forward, further  reforms 
will be necessary in order to enhance the long-term sustainability of public finances. Serbia 
will need to make additional adjustments in the pension and healthcare systems, as well as to 
further  improve  the  cost-effectiveness  of  the  public  sector.  Overall,  the  recent  efforts  to 
strengthen  the  legal  framework  of  public  finances  will  need  to  be  pursued  by  means  of  a 
rigorous implementation of the new fiscal responsibility provisions and backed by additional 
systemic changes over the medium-to-long term.  

Pre-crisis growth based primarily on the non-tradable services sector, an expansionary fiscal 
stance and widening gaps in the current account, largely financed through borrowing abroad, 
have exacerbated the economy's vulnerability to adverse external shocks. The policy mix in 
place has shown itself to be limited in responding to the global crisis. Counter-cyclical fiscal 
policies, which would have been necessary to support a rapid recovery, have been constrained 
by the reduced room for manoeuvre. The effectiveness of monetary policy has been restricted 
as a result of the high level of 'euroisation' and the effective pursuit of dual objectives by the 
NBS,  namely  smoothing  the  exchange  rate  depreciation  while  being  committed  to  inflation 
targeting.  Yet  some  of  the  immediate  negative  effects  have  been  cushioned  by  the  timely 
stabilisation  measures  implemented  under  the  IMF  programme.  The  recent  strengthening  of 
the  fiscal  policy  framework  is  an  important  step  in  improving  the  economic  policy  mix. 
Overall, the crisis has exposed the economic policy shortcomings and highlighted the need for 
fully-fledged structural adjustments to gear the economy towards a more sustainable growth 
path. 

Interplay of market forces  

Price liberalisation has been ongoing since 2000. However, the market formation of prices has 
occasionally  been  challenged  as  the  government  capped  prices  in  the  face  of  shortages  of 
some  basic  food  items  (dairy  products,  cooking  oil,  some  types  of  bread).  The  government 
continues  to  control  prices  of  public  utilities,  either  through  government  bodies  (electricity 
and  gas  transmission,  transport  and  distribution,  oil  pipeline  transport,  railway  passenger 
transport, some postal services) or sectoral regulators (fixed telephony). The government also 
sets the limit on increases in the price of communal and public city transport services, which 
are  under  the  control  of the  local  authorities.  As  of  2011,  oil  derivatives  imports  have  been 

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liberalised.  A  small  number  of  products  remain  subject  to  direct  price  control  (medicines). 
Administered  prices  account  for  more  than  20%  of  the  CPI  inflation  basket,  with  regulated 
energy prices accounting for around half of this share. Overall, the state control over prices is 
substantial, as price liberalisation has been slow and occasionally reversed.  

Due  to  the  slow  progress  of  privatisation,  the  state  influence  in  the  economy  has  remained 
high,  with  the  private  sector  currently  accounting  for  around  60%  of  GDP  and  total 
employment. The privatisation process was given a boost in 2002 by allowing socially owned 
companies  to  be  sold  through  tenders  and  auctions.  The  process  led  to  the  privatisation  of 
more than 2,400 firms with over 340,000 employees, but it has not yet been completed. About 
600  sale  contracts  signed  between  2002-2009  were  later  cancelled  due  to  non-compliance 
with  some  or  all  of  the  five  standard  contract  obligations,  which  brought  the  number  of 
annulled privatisations to almost one quarter of the firms initially earmarked for privatisation. 
Given the unfavourable market conditions in the wake of the crisis, the process has continued 
to  be  delayed  well  beyond  the  official  deadline  for  finalising  privatisation  of  the  socially-
owned  companies  by  31  December  2008.  Privatisation  of  the  state  owned  companies  is 
largely  incomplete;  apart  from  Serbian  Oil  Company  (NIS)  no  major  firm  has  yet  been 
reorganised  or  privatised.  The  state  retains  the  majority  shareholding  in  the  large  network 
industries, such as the national electric power company, the telecoms incumbent operator, the 
airports, and the air carrier. Although the government announced privatisation strategies for a 
number of companies, the planned sales did not materialise, as the tenders did not attract the 
expected demand. To facilitate the privatisation of those enterprises in which the state retains 
a stake, the government decided to distribute free shares worth 15% of the company's equity 
to those citizens who have not benefited from any free share distribution in the past. In 2010, 
the  distribution  of  the  remaining  state  shares  was  carried  out  only  in  the  oil  company  NIS. 
Privatisation of about 500 utilities in the local communities has not yet begun, as the strategy 
for  their  restructuring  and  reorganisation  has  still  to  be  defined.  Overall,  the  unfinished 
privatisation  and/or  liquidation  of  socially  and  state  owned  enterprises  and  local  utilities 
remains a challenge in Serbia's transition to a market economy. 

Market entry and exit 

Since  2005,  new  companies  have  been  registered  centrally  with  the  Business  Registers 
Agency, in line with the uniform registration procedure. For companies dealing with financial 
activities,  prior  approval  and  consent  by  the  competent  authority  are  required.  In  2009,  the 
registration procedure was improved by the introduction of the one-stop shop, which provided 
for simultaneous registration with the tax authorities, the social and health insurance fund and 
the  employment  agency.  The  new  system  has  stimulated  business  start-ups  by  reducing  the 
time  necessary  to  register  a  new  company  from  23  to  5  days,  on  average,  and  by  lowering 
administrative costs. However, the use of different identification numbers in the different state 
bodies remains an administrative obstacle. Further removal of barriers to doing business has 
been  initiated  by  a  comprehensive  regulatory  reform.  Since  its  launch  in  2009,  around  two 
thirds  out  of  304  recommendations  have  been  adopted  and  around  36  recommendations  are 
still  the  subject  of  parliamentary  procedure.  Setting-up  a  new  business  is  hampered  in 
particular  by  the  delays  in  obtaining  construction  permits  due  to  the  slow  and  inconsistent 
implementation of the 2009 Law on planning and construction. Differences in administrative 
costs  across  municipalities  create  additional  distortions.  Overall,  progress  was  made  in 
facilitating  market  entry,  but  the  business  environment  continues  to  be  marred  by  complex 
legislation and red tape, as the implementation of the regulatory reform has been delayed. 

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A new bankruptcy law entered into force in 2010. At that time, many bankruptcy cases that 
were opened under the previous law had not been closed. The new law established automatic 
bankruptcy in cases where the firm's accounts had been blocked for more than 3 years. This 
resulted in a significant increase in the number of opened cases, which totalled over 2,400 at 
end-2010. The authorities have initiated actions to regulate out-of-court settlements in order to 
lower  the  cost  and  speed  up  the  privatisation  process.  Overall,  the  new  bankruptcy  law  has 
improved market exit procedures, but the efficiency of the courts remains an issue of concern 
in view of the considerable backlog of bankruptcy cases. 

Legal system 

A  number  of  steps  have  been  taken  so  far  to  establish  a  legal  system  which  underpins  the 
market economy. Nevertheless, the business environment has continued to be constrained by 
shortcomings in the enforcement of the rule of law and the so far unclear situation in relation 
to  property  rights.  The  reliability  of  land  property  ownership  is  being  improved  since  late 
2004  through  the  gradual  introduction  of  the  digital  real  estate  cadastre  and  registration, 
which is due to be completed by the end of 2011. Amendments to the Law on planning and 
construction  of  March  2011  have  to  some  extent  addressed  these  previous  shortcomings,  in 
particular  by  means  of  simplification  of  procedures  and  easier  legislation  in  the  case  of 
buildings constructed without permits. However, construction activities have been hampered 
by the slow implementation of the law. 

Restitution  of  property  has  been  dealt  with  in  a  fragmented  manner.  Agricultural  land  was 
already  partially  returned  in  the  1990s  and  a  law  on  the  restitution  of  church  property  was 
adopted in 2006. A general law clarifying restitution issues was adopted in September 2011. 
The new law is an important step to overcome legal uncertainty investors face when acquiring 
property under the privatisation process.  

The  scope  of  the  informal  economy  in  Serbia  remains  substantial.  Despite  some  measures 
taken in recent years to strengthen the fight against corruption, informal methods of contract 
enforcement, which  by-pass  the  legal system, continue  to be  widespread.  This  is  abetted  by 
the  lengthy  enforcement  procedures  for  court  decisions  and  the  major  backlog  in  this  area. 
Overall, in spite of the effort to establish legal predictability, the so far existing lack of legal 
clarity in relation to property rights has had a negative impact on business activities. Delays 
and  poor  enforcement  of  court  decisions  and  corruption  undermine  confidence  in  the  legal 
system among economic operators and hinder investment. 

Financial sector development 

Serbia's  financial  intermediation  expanded  rapidly  until  2008,  followed  by  a  marked 
slowdown  in  financial  activities  at  the  onset  of  the  crisis.  In  2010,  banking  sector  assets 
accounted for around 80% of GDP. At the end of 2008, the banking system was challenged by 
a mass withdrawal of household deposits. The run on the banks had limited effects thanks to 
ample  liquidity  and  solvency  reserves,  which  was  a  result  of  prudent  monetary  policy  and 
adequate risk-based supervision by the NBS. After the initial financial stabilisation, the NBS 
adapted  administrative  and  regulatory  measures  and  eased  monetary  policy  to  provide 
additional  liquidity  in  support  of  the  macroeconomic  stability.  Credit  activity  to  households 
and enterprises was also sustained as a result of the European Bank Coordination ('Vienna') 
Initiative, whereby foreign parent banks undertook to maintain their exposure in the Serbian 
subsidiaries at end 2008 level until April 2010, and keep it at least at 80% by the expiry in 
March  2011.  Overall,  the  financial  sector  expansion  has  been  driven  largely  by  the  rapid 

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development of the banking sector, which remained relatively unscathed by the global crisis, 
thanks to a prudent monetary policy. 

Currently,  there  are  33  banks  in  Serbia,  of  which  3  majority  state  owned,  holding  a  2.6% 
market  share,  and  21  are  foreign  owned.  Foreign  banks  account  for  around70%  of  the  total 
assets of the banking sector. Subsidiaries of Austrian, Greek and Italian banks are in the top 
five banks. Among domestic private banks one is the second largest in the market. Overall, 
the  consolidation  and  privatisation  of  the  banking  sector  resulted  in  foreign-dominated 
ownership. 

The banking sector expansion started from a low base and was driven by both the introduction 
of  new  products  and  the  strengthening  of  the  deposit  base.  Deposits,  of  which  70%  are  in 
foreign  currency,  account  for  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. 
Given the high level of 'euroisation' of the economy, the NBS has put forward a 'dinarisation' 
strategy. It has initiated steps, such as tightening of the eligibility criteria for foreign currency 
loans  as  of  mid-2011,  improving  protection  and  diversifying  financial  instruments,  with  the 
aim of encouraging lending in dinars. More than half of the loans are granted to the corporate 
sector (mainly to trade and industry — around 20% each) and about one third to households. 
Since 2009, when dinar-denominated government securities were introduced, the banks have 
been increasing their investment in the treasury bills owing to higher yield. Credit growth for 
the private sector decelerated substantially, but began to pick up after the government put in 
place  a  support  scheme  to  subsidise  commercial  bank  loans  to  companies  and  households. 
Overall, the banks' balance sheets continue to be characterised by high 'euroisation', and the 
monetary authorities have taken steps to rebalance the loan portfolio. 

Capitalisation of the banking sector is high due to intense capital growth prior to the crisis. 
The capital adequacy ratio stands at 20%, well above the 12% threshold imposed by the NBS. 
However,  the  asset  quality  of  the  banking  sector  has  deteriorated  following  the  modest  and 
gradual  rebound  from  the  recession,  high  unemployment,  accelerating  inflation  and  the 
depreciation  of  the  dinar.  Gross  non-performing  loans  (NPL)  as  a  percentage  of  total  loans 
rose to almost 17% at end-2010, largely due to an increase in the corporate NPL ratio. In the 
light of this portfolio  deterioration and the substantial exchange rate risk related to the high 
degree of 'euroisation', the Serbian banks are vulnerable to credit risk. Yet the stress tests of 
the banking system carried out in 2010 concluded that the banks are still sufficiently resilient, 
given that they continued to be adequately capitalised and liquid. Liquid assets accounted for 
some  35%  of  total  assets  in  2010.  Against  the  background  of  high  capital  and  reserve 
requirements,  the  profitability  of  the  Serbian  banking  sector  was  relatively  stable  but 
deteriorated slightly in the wake of the crisis; banks' return on assets (ROA) was around 1% 
and return on equity (ROE) was just below 6%. Despite the rise in NPL, the profitability of 
the  banks  improved  in  2010  owing  largely  to  sizeable  net  interest  income.  Overall,  the 
banking sector is generally sound, but vigilance is required due to the impaired loan portfolio 
of the banks and a considerable exposure to exchange rate risk. 

Non-banking financial institutions account for only a small share of financial intermediation. 
The  insurance  market  has  expanded  gradually,  albeit  from  a  low  base.  The  sector  is 
supervised  by  the  NBS.  At  end-2010,  there  were  26  active  insurance  companies,  22  in 
insurance and 4 in reinsurance. 7 insurance companies rely mainly on domestic capital, while 
19 are in majority foreign ownership and hold the bulk of the market (more than 90% in non-
life insurance and 60% in life insurance). Following a deterioration in performance due to the 

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crisis,  the  sector  saw  a  surge  in  profits  in  2010.  The  market  capitalisation  of  the  Belgrade 
Stock Exchange was below €10 billion, i.e. around one third of GDP at end-2010, and annual 
turnover was at €220 million, down from a peak of over €2 billion in 2007 (90% in shares). 
Overall,  non-banking  financial  institutions  and  capital  markets  play  a  limited  role  in  the 
financing of domestic companies. 

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

The ability to fulfil this criterion depends on the existence of a market economy and a stable 
macroeconomic  framework  which  allows  economic  agents  to  take  decisions  in  a  climate  of 
predictability. It also requires a sufficient amount of human and physical assets. Enterprises 
need  to  invest  to  improve  their  efficiency  and  they  need  to  innovate  in  order  to  adjust  to  a 
globalised and highly competitive external environment. The more an economy is integrated 
with  the  Union  before  accession,  the  better  it  will  be  able  to  assume  the  obligations  of 
membership.  

Existence of a functioning market economy 

Serbia is a small economy with a state owned sector that is still significant and which remains 
to  be  restructured  and  privatised.  Although  foreign  exchange  and  trade  regimes  are 
liberalised, price liberalisation has been slow. A comprehensive legal framework is in place, 
but  its  implementation  is  ineffective  and  inconsistent.  Throughout  the  transition,  the  policy 
mix  has  been  geared  towards  macroeconomic  stability,  but  proved  to  be  rather  limited  in 
responding to adverse external shocks, of the kind experienced during the recent global crisis. 
Serbia's economy gradually regained stability owing to the adoption of timely and adequate 
short-term  corrective  measures  in  agreement  with  the  IMF.  However,  in  the  wake  of  the 
recession,  the  persistent  structural  imbalances  and  weaknesses,  such  as  high  and  volatile 
inflation and a low employment rate, have become more pressing. Market mechanisms remain 
hampered  by  legal  uncertainty,  red  tape,  heavy  state  involvement,  insufficient  competition 
and  sectoral  distortions.  Structural  rigidities  in  the  labour  market,  reflected  in  high 
unemployment and the very low participation rate, further constrain both actual and potential 
growth  of  the  economy.  Overall,  Serbia  has  achieved  a  degree  of  macroeconomic  stability 
which  broadly  allows  economic  operators  to  make  decisions  in  a  climate  of  predictability. 
However, Serbia needs to address the rigidities which are preventing the further development 
of a viable market economy. 

Human and physical capital endowment 

Serbia's  human  capital  has  been  slowly  strengthening,  with  a  growing  participation  in  all 
levels of education over time. In 2010, the number of those with high educational attainment 
stood  at  less  than  9%  of  the  total  population  and  public  spending  on  education  was  around 
3.5%  of  GDP.  Despite  high  unemployment,  the  economy  suffers  from  a  shortage  of  skilled 
labour. The large share of unfilled job vacancies and the persistent structural unemployment 
of  persons  with  secondary  or  higher  levels  of  educational  attainment  point  to  a  major 
mismatch  of  qualifications  and  skills.  The  adoption  of  the  Law  on  Education  System 
Fundamentals in 2009 is poised to narrow the gap between demand for and supply of skilled 
workforce  by  embracing  the  entire  education  system,  including  vocational  education  and 
training (VET). However, supply has been only gradually adjusting to an increasing demand 
for highly skilled workers, especially in manufacturing. Although the employment agency has 
designed  various  programmes 
labour  market 
stakeholders,  self-employment  and  vocational  training  –  along  with  lifelong  learning  – 

to  promote  cooperation  between 

the 

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structural  rigidities  remain  important.  Further  effort  will  be  needed  in  order  to  forge  an 
effective link between the education system and vocational training programmes, on the one 
hand, and the labour market, on the other. Domestic resources devoted to the development of 
a  knowledge-based  economy  remain  marginal;  gross  expenditure  on  science  accounted  for 
0.3% of GDP in 2010. Overall, the ongoing skills mismatch continues to act as a drag on the 
development of new segments of the economy and requires further reforms of the education 
and training system that would respond better to labour market demand. 

Serbia will need to invest significantly given the inadequate and low-quality physical capital 
stock  that  is  hampering  the  productive  capacity  of  the  economy.  After  2001,  gross  fixed 
capital formation accelerated steadily – with the share of GDP more than doubling between 
2001-2007 – but it was largely fuelled by a boom in real estate. Green-field investment was 
modest.  Given  the  large  gap  between  savings  and  investment  of  the  private  sector,  the 
expansion was mainly financed by foreign capital. By end-2010, the FDI inward stock since 
2000  amounted  to  about  €15 billion.  After  2007,  FDI  lost  momentum  while  domestic 
investment  has  been  also  declining  as  a  result  of  scarce  local  source.  However,  since 
beginning  of  2011,  FDI  has  started  to  pick  up.  Investment  was  directed  mainly  to  the  non-
tradable  sectors,  which  also  contributed  to  the  growing  external  imbalances.  In  cumulative 
terms  for  the  period  2001-2009,  one  third  of  total  capital  investment  was  to  banks  (€11.8 
billion), less than one fifth each in the real estate sector (€6.2 billion) and manufacturing (€5.8 
billion) and about one tenth each in trade (€4.5 billion) and transport and telecommunication 
(€4.1  billion).  Overall,  the  previous  orientation  of  investment  to  predominantly  non-traded 
sectors increased the export capacity of the economy to only a limited extent. 

The government has made the reliability of electricity supply through diversified sources of 
power one of  its key priorities.  It  aims to mobilise financial resources for investment in the 
energy  sector  with  the  support  of  International  Financial  Institutions.  However,  energy 
efficiency is low and the electricity capacities are being used at levels close to their maximum 
potential, which is increasingly pushing Serbia to resort to energy imports. The average price 
of electricity, which was last adjusted in April 2011, is still below the cost-recovery level and 
is restraining new investment. Overall, energy infrastructure will need to be modernised and 
extended in order to strengthen industrial activity. 

The telecommunications infrastructure is fairly well developed. Fixed telephony, operated by 
the  telecoms  incumbent  in  majority  state  ownership,  has  been  partly  digitalised.  Mobile 
telephony  density  has  increased,  following  the  market  entry  of  two  foreign  operators. 
However,  access  to  broadband  network  and  internet  use  by  business  remain  low.  Overall, 
telecommunications  are  not  a  constraining  factor  to  doing  business,  but  a  higher  broadband 
penetration is needed in order to develop higher value-added segments in the industry.  

Transport  infrastructure  needs  to  be  further  developed  in  order  to  enhance  the  country's 
economic potential. The construction of new roads has been making very slow progress. The 
rail  network  is  obsolete  due  to  the  lack  of  significant  investment  in  past  decades.  There  are 
plans  for  an  upgrade  of  750  kilometres  of  railroad,  including  the  laying  of  a  second  track, 
along  the  Pan-European  transport  Corridor  X  with  the  support  of  International  Financial 
Institutions. Overall, transport infrastructure has suffered from insufficient investment. 

Sector and enterprise structure 

The  structure  of  Serbia's  economy  has  undergone  significant  changes  during  the  last  two 
decades.  Services  currently  contribute  more  than  60%  of  GDP,  agriculture  approximately 

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10%  and  industry  23%.  While  the  metal,  electronic  and  textile  industries  previously 
dominated, production became diversified during the last decade, especially into the food and 
beverages sector. The global crisis had an adverse impact on manufacturing and construction. 

Public  companies  still  generate  around  40%  of  Serbia's  output.  However,  their  performance 
has been undermined by the crisis, with the erosion of capital and accumulated losses rising to 
over €3 billion, i.e. more than a quarter of their total capital at end-2010. Private companies 
account  for  the  bulk  of  foreign  trade.  Around  75%  of  Serbia's  exports  are  undertaken  by 
companies  that  are  predominantly  under  foreign  ownership.  The  informal  sector,  taking 
advantage  of  weaknesses  in  tax  and  expenditure  policies,  and  also  in  law  enforcement, 
including the fight against corruption, remained significant. Overall, the structural adjustment 
of the economy has been lagging behind due to the very slow pace of the reform process, and 
performance  has  been  marred  by  the  economic  crisis.  The  informal  sector  poses  a  major 
challenge. 

Serbia's  restructuring  process  has  translated  into  a  steady  rise  in  the  share  of  small  and 
medium-sized  enterprises  (SMEs)  in  the  economy.  Currently,  the  majority  of  private 
enterprises are micro companies. SMEs contributed around 57% to the gross value added of 
the non-financial sector and accounted for about two thirds of overall employment. The sector 
has  been  facing  diminishing  demand,  stricter  financing  conditions  and  increasing  payment 
arrears  since  the  crisis  broke.  This  resulted  in  illiquidity  and  indebtedness  which  led  the 
government to adopt measures aimed at facilitating access to financing, although so far this 
has had little effect. Overall, although SMEs have increased their share of the economy, they 
face constraints in both their current activities and in obtaining finance for investment. 

State influence on competitiveness 

State subsidies were cut from 3.3% of GDP in 2005 to 2.3% of GDP by 2009, but they surged 
to  2.6%  of  GDP  in  2010  as  a  result  of  sizeable  stimulus  packages  designed  to  support  the 
economic  recovery.  The  programmes,  inter  alia,  included  direct  subsidies  to  companies  for 
job-creating investment projects as well as financial assistance for concessional borrowing in 
dinars by business and citizens alike. The legislation regulating State aid control was adopted 
in 2009 and needs to be consistently enforced, in particular as regards effective monitoring by 
the  State  aid  authority.  The  state-controlled  monopolistic  structures  remain  in  place  in  a 
number of sectors, particularly in energy, telecommunication and postal services, but also in 
agriculture  and  tourism.  Overall,  state  influence  on  competitiveness  through  legal  and 
financial mechanisms is substantial. 

Economic integration with the EU  

Since  2000,  Serbia  has  been  continuously  strengthening  trade  links  with  the  EU,  which 
accounts  for  almost  56%  of  Serbia's  total  merchandise  trade;  in  2010  the  share  of  exports 
stood  at  60%  and  that  of  imports  at  55%  of  the  respective  totals.  During  the  period  2005-
2010,  two  thirds  of  total  inward  investment  to  Serbia  originated  from  the  EU  and  EFTA 
countries, with the largest FDI inflows coming from Austria, Greece and Norway. The pace of 
integration  with  the  EU  advanced  in  step  with  Serbia's  international  competitiveness.  In  the 
period 2001-2007, real wage growth was broadly in line with labour productivity growth, but 
the appreciation of the dinar against the euro led to rising real unit labour costs. During 2009-
2010,  export  price  competitiveness  improved  thanks  to  a  rapid  depreciation  in  the  real 
effective  exchange  rate.  Overall,  improved  export  competitiveness  since  2009  helped  to 
further Serbia's economic integration with the EU. 

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2.3. 

General evaluation  

The  present  assessment  is  made  on  the  basis  of  the  Copenhagen  criteria  related  to  the 
existence  of  a  functioning  market  economy,  as  well  as  the  capacity  to  cope  with 
competitive pressure and market forces within the Union. 

There is a broad political  consensus  in Serbia on  the fundamentals of a  market economy as 
well as a track record in the implementation of economic reforms. Serbia achieved a degree of 
macroeconomic  stability  that  allows  economic  operators  to  make  decisions  in  a  climate  of 
predictability. The economic policies of the past decade supported steady growth of close to 
5% on average, gradually declining inflation and a general improvement of living standards. 
However,  the  global  financial  and  economic  crisis  exposed  the  vulnerabilities  of  a  growth 
paradigm,  which  was  based  on  domestic  demand  financed  largely  by  borrowing  abroad,  as 
well  as  the  ensuing  limitations  of  the  policy  mix  to  respond  effectively  to  adverse  external 
shocks.  Recently,  substantial  progress  has  been  made  towards  strengthening  the  financial 
framework  and  the  quality  of  public  finances,  which  would  underpin  a  shift  to  more 
sustainable  and  balanced  growth,  driven  by  exports  and  investment.  The  free  interplay  of 
market  forces  has  developed,  albeit  at  a  slow  and  uneven  pace,  through  privatisation  and 
liberalisation of trade and prices. Progress has been achieved in facilitating market entry and 
exit. Economic integration with the EU is high. 

A number of structural weaknesses persist and hamper the economic performance. The state 
influence  in  the  economy  has  remained  high  due  to  the  slow  progress  of  privatisation  and 
price liberalisation. In spite of the steps towards establishing legal predictability and removing 
red tape, the business environment continues to be constrained by legal uncertainty. Lengthy 
enforcement  procedures  for  court  decisions  undermine  trust  in  the  legal  system.  Lack  of 
competition in certain sectors and significant infrastructure bottlenecks are a further drag on 
the  economic  potential.  Foreign  direct  investment  was  relatively  strong  prior  to  2008  and, 
following  a  substantial  drop  during  the  economic  crisis,  has  started  to  slowly  recover,  but 
Serbia needs to further improve the investment climate. Against a modest economic recovery, 
unemployment remains high and the social situation strife. Serbia needs to urgently  address 
structural  rigidities  on  the  labour  market,  including  the  mismatch  between  demand  for  and 
supply of skilled workforce. The informal economy remains an important challenge.  

3. 

ABILITY TO ASSUME THE OBLIGATIONS OF MEMBERSHIP 

The European Council in Copenhagen in June 1993 included among the criteria for accession 
“the  ability  to  take  on  the  obligations  of  membership,  including  adherence  to  the  aims  of 
political, economic and monetary union”.  

In  applying  for  EU  membership,  Serbia  has  accepted  without  reserve  the  basic  aims  of  the 
Union, including its policies and instruments.  

This part of the analytical report analyses Serbia's ability to assume the detailed obligations of 
membership — that is, the EU acquis, as expressed in the Treaties, the secondary legislation 
and the policies of the Union. It follows the structure of the 33 negotiating chapters into which 
the  EU  acquis  has  been  divided  for  the  purpose  of  conducting  accession  negotiations.  Each 
chapter examines the current situation and prospects in Serbia. 

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As  the  European  Union  has  developed,  the  EU  acquis  has  become  progressively  more 
onerous and presents a greater challenge for future accessions than was the case in the past. 
The  ability  of  Serbia  to  implement  the  EU acquis  will  be  central  to  its  capacity  to  function 
successfully within the EU. 

In  this  respect,  alignment  with  the  EU  acquis  is  a  necessary  but  not  sufficient  condition  to 
meet  the  obligations  of  EU  membership.  Serbia  must  also  take  all  necessary  measures  to 
create  the  requisite  implementing  structures,  to  bring  its  administrative  capacity  to  the 
required  level  and  to  ensure  effective  enforcement.  An  analysis  and  assessment  of  the 
country's administrative capacity is therefore included in each of the chapters below.  

For the purpose of this analytical report, and without prejudging any future date of accession, 
the medium-term perspective in the assessments has been defined as a period of five years.  

3.1. 

Chapter 1: Free movement of goods 

The principle of free movement of goods means that products must be traded freely from one 
part of the Union to another. In a number of sectors this general principle is supplemented by 
a harmonised regulatory framework, following either the 'old approach' (laying down precise 
product  specifications)  or  the  'new  approach'  (setting  general  product  requirements). 
Alignment  with  harmonised  European  product  legislation  accounts  for  the  bulk  of  the 
obligations  under  this  chapter.  Smooth  implementation  and  proper  enforcement  of  the  EU 
acquis  require  sufficient  administrative  capacity  to  notify  restrictions  on  trade  and  to  apply 
horizontal and procedural measures in areas such as standardisation, conformity assessment, 
accreditation, metrology and market surveillance.  

Regarding  general  principles,  Serbia  needs  to  ensure  that  its  legislation  is  compatible  with 
Articles 34 to 36 of the Treaty on the Functioning of the European Union and the related case 
law  of  the  European  Court  of  Justice,  with  special  emphasis  on  the  principle  of  mutual 
recognition.  

The  Interim  Agreement  and,  subsequently,  the  Stabilisation  and  Association  Agreement 
(SAA)  create  a  number  of  obligations  in  the  field  of  free  movement  of  goods,  such  as 
establishment  of  a  free-trade  area  after  a  period  of  six  years.  The  SAA  also  provides  for 
gradual alignment with EU technical regulations and standards and metrology, accreditation 
and conformity assessment procedures.  

In the case of horizontal measures, during 2009 and 2010 Serbia adopted new legislation on 
accreditation,  standardisation  and  metrology,  on  general  product  safety  and  on  technical 
requirements  for  products  and  conformity  assessment,  to  harmonise  with  the  EU  principles 
and  with  the  horizontal  EU  acquis.  These  measures  have  brought  Serbian  legislation 
substantially closer to the EU acquis.  

In the area of standardisation, a framework Law was adopted in 2009 and, after a change of 
status,  the  Institute  for  Standardisation  of  Serbia  (ISS)  became  a  public  institution  at  the 
beginning of 2010. The ISS is currently an affiliate member of the European Committee for 
Standardisation  (CEN)  and  of  the  European  Committee  for  Electrotechnical  Standardisation 
(CENELEC).  It  is  also  full  member  of  the  international  standardisation  organisations  ISO, 
IEC  and  IECEE  and  is  a  Codex  Alimentarius  contact  point  for  Serbia.  The  ISS  became  the 
Serbian  'national  standards  body'  in  2011  and  in  now  also  responsible  for  transposing  the 
standards  of  the  European  Telecommunications  Standards  Institute  (ETSI)  as  Serbian 

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standards.  The  current  staff  of  the  ISS  numbers  62  employees.  Its  financial  and  human 
resources  have  been  improved.  The  ISS  has  approximately  250  technical  committees.  The 
Chairman  and  the  Members  of  the  supervisory  board  were  appointed  in  August  2011.  By 
August  2011  a  total  of  12.216  EN  standards  had  been  adopted  as  Serbian  standards.  Serbia 
has repealed all mandatory standards.  

As regards conformity assessment, the Serbian framework Law on technical requirements for 
products and conformity assessment, together with implementing legislation, were adopted in 
2009,  but  some  revision  is  necessary  in  order  to  take  full  account  of  the  latest  (2008) 
horizontal  EU  acquis.  So  far,  five  accredited  conformity  assessment  bodies  have  been 
designated  in  accordance  with  the  EU  directives.  In  line  with  Regulation  (EC)  765/2008, 
accreditation  remains,  in  principle,  voluntary  for  the  designation  of  conformity  assessment 
bodies  unless  prescribed  otherwise  in  the  sectoral  laws.  A  vast  number  of  laboratories  and 
certification and inspection bodies which were authorised to carry out conformity assessment 
activities  under  the  old  legal  framework  were  designated  and  accredited  in  accordance  with 
the new Serbian horizontal legislation and the relevant international and European standards.  

The  accreditation  framework  was  set  by  the  2010  Law  on  accreditation,  aligning  Serbia's 
policy with the EU principles. The Accreditation Body of Serbia (ABS) was set up as a not-
for-profit public body, professionally and financially independent of its clients. It is in charge 
of  accreditation  of  conformity  assessment  bodies.  The  ATS  has  a  full-time  staff  of  32  but 
needs more human resources. It signed a cooperation contract with European Cooperation for 
Accreditation  (EA)  in  2007  and  is  preparing  for  signing  a  bilateral  agreement  with  the  EA 
under the conditions applicable to signatories of the EA Multilateral Agreement in the fields 
of  testing  and  calibration  laboratories  and  inspection  bodies.  It  has  later  broadened  its 
application  to  certification  bodies  for  products,  management  systems  and  environmental 
management  systems  as  well  as  medical  laboratories.  Serbia  has  418  accredited  conformity 
assessment bodies.  

The framework law on Metrology was adopted in 2010. In 2011, Serbia adopted legislation on 
the  control  of  objects  made  of  precious  metals.  The  Directorate  for  Measures  and  Precious 
Metals  in  the  Ministry  of  Economy  and  Regional  Development,  which  also  acts  as  the 
national  metrology  institute,  is  in  charge  of  implementation  of  the  law  and  of  legal  and 
scientific  metrology.  The  Directorate  has  been  restructured  in  order  to  separate  verification 
and market surveillance functions. Two of the laboratories of the Directorate, for calibration 
and for testing, have been accredited. The Directorate has a staff of 120. 

As regards market surveillance, Serbia adopted legislation on general product safety in 2009. 
It has a Market Surveillance Strategy for the period 2010-2014. A national rapid information 
exchange system similar to RAPEX for providing information on dangerous products, known 
as  NEPRO,  was  established  in  2010.  However,  new  legislation  on  market  surveillance  is 
needed in order to align further with the 2008 horizontal EU acquis. 

In  order  to  strengthen  the  capacity  of  the  State  Market  Inspectorate,  new  professional 
examinations for market inspectors have started in 2011. Coordination between the different 
market  surveillance  authorities  was  initiated,  including  a  common  database.  With  this  in 
mind,  the  Ministry  of  Economic  Affairs  and  Regional  Development,  the  Customs 
Administration and the Ministry of Trade signed a Memorandum of Understanding in March 
2011. Serbia needs to make sustained efforts to establish a market surveillance system which 
is fully in line with the EU acquis. 

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Serbia  has  not  yet  aligned  its  legislation  with  the  vast  majority  of  sector-specific  EU 
legislation. In areas covered by the 'Old Approach' product legislation, discrepancies from 
the  EU  acquis  remain  to  be  addressed.  Although  Serbia  has  already  adopted  legislation  on 
motor vehicles, medicinal products for human use, medicinal products for veterinary use and 
chemicals,  the  alignment  is  only  partial  and  further  alignment  is  needed.  Furthermore, 
legislation on cosmetics, pre-packaging, units for measurement, aerosol dispensers, emission 
of pollutants from non-road mobile engines, crystal glass, textiles and footwear also needs to 
be aligned with the EU acquis.  

As regards the 'New and Global Approach' product legislation, Serbia has started to align 
its  legislation  with  the  relevant  directives.  So  far,  it  has  adopted  aligning  legislation  in  the 
fields  of  low-voltage  equipment,  electromagnetic  compatibility,  medical  devices,  machinery 
and lifts. It has not yet aligned its legislation with the EU acquis on recreational craft, non-
automatic  weighing  instruments,  eco-design  requirements  for  energy-related  products,  toys, 
noise  emissions  from  outdoor  equipment,  personal  protective  equipment,  equipment  and 
protective  systems  intended  for  use  in  potentially  explosive  atmospheres,  gas  appliances, 
pressure  equipment,  simple  pressure  vessels,  cableway  installations,  construction  products, 
radio equipment, telecommunications terminal equipment and measuring instruments.  

Regarding  procedural  measures,  Serbia  has  aligned  with  the  Directive  on  provision  of 
information in the field of technical regulations and standards. In order to be fully in line with 
the EU acquis, some amendments are nevertheless required, in particular as regards standstill 
periods. As regards external border checks, the Serbian legislation does not yet meet all the 
requirements of the EU acquis on control of products from third countries. In the case of civil 
firearms, the Law on weapons and ammunition needs further amendment to bring it fully into 
line with the EU acquis. As regards the return of cultural objects unlawfully removed from 
the territory of EU Member States, Serbia has not aligned its legislation with the EU acquis. 

Conclusion 

During the last few years Serbia has taken substantial steps to bring its horizontal legislation 
and  administrative  set-up  into  line  with  the  principle  of  free  movement  of  goods.  New 
framework  laws  have  been  adopted  on  accreditation,  standardisation  and  metrology,  on 
general product safety and on technical requirements for products and conformity assessment. 
Serbia has established administrative infrastructure necessary to implement EU acquis under 
the  chapter  on  free  movement  of  goods.  Standardisation,  accreditation  and  metrology 
functions have been separated. 

However,  sustained  efforts  towards  alignment  with  the  EU  acquis  will  be  necessary.  Major 
elements of the EU acquis are not yet in place. In particular, old and new approach product 
legislation  still  needs  to  be  harmonised  with  the  EU  legislation.  As  regards  horizontal  and 
procedural  measures,  the  framework  legislation  on  technical  requirements  for  products  and 
conformity  assessment  procedures  and  on  market  surveillance  needs  to  be  aligned  with  the 
EU acquis. Procedural measures need to be addressed. Furthermore, administrative capacity 
and coordination need to be strengthened.  

Overall, if Serbia undertakes additional efforts, it should be in a position to align with the EU 
acquis and to implement it effectively in the medium term. 

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3.2. 

Chapter 2: Freedom of movement for workers 

The  EU  acquis  under  this  chapter  provides  that  EU  citizens  of  one  Member  State  have  the 
right to work in another EU Member State, to reside there for that purpose with their family 
and to be treated in the same way as national workers when it comes to working conditions 
and  social  and  tax  advantages.  Furthermore,  the  EU  acquis  includes  instruments  on 
coordination of the different national social security systems. 

The Stabilisation and Association Agreement provides that, subject to the specific conditions 
and procedures applicable, Serbia and EU Member States will ensure that their nationals who 
are  legally  employed  on  the  territory  of  a  partner  country  are  free  from  any  discrimination 
based on nationality in aspects of employment such as  working conditions, remuneration or 
dismissal.  

As regards access to the labour market, the 2009 Law on employment and unemployment 
insurance  (amended  in  2010),  along  with  the  2005  Labour  Law  (last  amended  in  2009), 
prohibit any direct or indirect discrimination against persons seeking employment or already 
employed, on grounds of their place of birth, language, race, skin colour, nationality, religion 
or  other  affiliation.  This  prohibition  of  direct  and  indirect  discrimination  also  applies  to 
migrant  workers  from  the  EU.  In  other  words,  they  are  protected  from  direct  and  indirect 
discrimination with regard to employment, termination of contracts of employment and pay. 
Families of EU migrant workers have the right to reside in Serbia for the same duration as the 
workers, and foreign nationals – including children of EU workers – are entitled to education 
on the same conditions as Serbian nationals. 

The  1978  Law  on  the  conditions  for  the  employment  of  foreign  citizens  (last  amended  in 
2005) and other labour laws draw no distinction between EU nationals and nationals of non-
EU countries. Except in cases of specific agreements between Serbian and EU companies (on 
business and technical cooperation, long-term production cooperation, transfers of technology 
and  foreign  investment),  the  Law  requires  EU  citizens  to  apply  for  a  work  permit.  Upon 
accession to the EU, Serbia's national law will have to ensure that EU citizens will be able to 
look  for  and  take  up  work  in  Serbia  without  any  restrictions  and  without  being  subject  to  a 
work permit scheme.  

The large majority of jobs in state and public administration, in local self-governments units 
as well as political functions, judges and public prosecutors are reserved for Serbian nationals. 
Future legislation will have to take into account the EU acquis in this field, in particular case 
law,  which  allows  EU  Member  States  to  restrict  posts  in  the  public  service  to  their  own 
nationals  only  if  they  are  directly  related  to  the  specific  activities  of  the  public  service,  i.e. 
involve exercising public authority and responsibility for safeguarding the general interests of 
the State.  

Serbia  needs  to  prepare  for  its  future  participation  in  the  EURES  (European  Employment 
Services)  network.  A  national  vacancy  database  will  have  to  be  established  and  also  made 
available  in  English.  The  language  skills  of  potential  EURES  advisors  will  have  to  be 
checked. In order to increase territorial mobility, local and regional offices need to be able to 
share vacancy data not only with the central employment agency but also with each other. 

As regards supplementary pensions, upon accession, Serbia will need to implement measures 
in line with EU legislation to guarantee equal treatment between EU migrants and nationals 
regarding  preservation  of  vested  second-pillar  supplementary  pension  rights  and  payment 

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thereof  in  another  Member  State.  Moreover,  posted  workers  must  have  the  possibility  to 
continue to pay contributions to a supplementary pension scheme in their country of origin for 
the  duration  of  their  posting,  in  which  case  they  are  exempt  from  contributing  to  such  a 
scheme in the host Member State. 

Concerning  coordination  of  social  security  systems,  the  Serbian  social  security  scheme 
includes  all  traditional  branches  of  social  security  which  fall  within  the  scope  of  EU 
coordination  rules.  The  system  is  based  on  the  principle  of  compulsory  insurance  in  the 
country of work. Serbia also has a number of special benefits for war victims. 

Serbia  has  signed  a  number  of  bilateral  social  security  agreements,  including  with  17  EU 
Member  States  (most  recently  with  Slovenia  in  2009).  Agreements  have  also  been  signed 
with,  amongst  others,  the  former  Yugoslav  Republic  of  Macedonia,  Croatia,  Bosnia  and 
Herzegovina and Montenegro.  

In spite of the experience acquired in administering the existing bilateral agreements, the main 
challenge for Serbia will be to build up the administrative capacity necessary in order fully to 
apply the EU rules on coordination of social security systems upon accession. This will entail 
training  staff  from  the  Serbian  Fund  for  Pensions  and  Disability  Insurance,  the  Health 
Insurance  Fund  and  the  National  Employment  Service,  along  with  investment  in  IT 
infrastructure. 

Upon  accession,  and  independently  of  national  health  cards,  Serbia  will  have  to  issue  the 
European health insurance card to persons entitled to healthcare in Serbia.  

Impact 

The estimated impact of Serbia's possible accession on the EU labour market has to be related 
to a number of factors, such as the size of Serbia's working age population, unemployment, 
age structure and migration movements.  

Serbia's  total  population  was  estimated  at  around  7.32  million  in  2009.  Based  on  the 
demographic  projections,  it  is  expected  to  stagnate  or  decrease  slightly  over  the  next  ten 
years. As regards the age structure, the youngest (15 and under) at 15.3% (2009) is very close 
to the EU average of 15.5%.  

Serbia's working age population (aged 15-64) in 2010 was estimated at 4.82 million, of whom 
an estimated 2.84 million were economically active. This is equal to around 1.5% of the EU 
working-age  population  and  1%  of  the  EU  economically  active  population.  In  2010,  the 
employment  rate  was  estimated  at  around  47.2%  (down  from  53.7%  in  2008  due  to  the 
economic  crisis)  compared  with  64.2%  in  the  EU.  Labour  force  survey  data  point  to  an 
unemployment  rate  of  20%  in  October  2010.  Furthermore,  according  to  estimates,  up  to 
1 million people are working in the informal economy.  

Despite strong annual growth in real GDP over the last few years (higher than 5% since 2004 
except  in  2009  due  to  the  economic  crisis),  based  on  2009  data,  large  differences  remain 
between GDP per capita in Serbia and the EU. Expressed in purchasing power parity, Serbia's 
GDP per capita stood at 35% of the EU-27 average in 2010. 

Since the early 1990s large-scale migration movements have taken place from Serbia towards 
other countries, including EU Member States, particularly Germany. However, as a result of 
return migration, the overall number of Serbian nationals living in the EU has decreased since 

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2000. Estimates suggest that around 650,000 Serbian citizens currently (1 January 2010) live 
in  the  EU  (with  the  largest  numbers  in  Germany,  Austria  and  Italy),  making  up  2%  of  the 
foreign population living in the EU (and 0.1% of the total EU population).  

This  preliminary  assessment  indicates  that  Serbia's  membership  of  the  EU  would  have  a 
relatively minor impact on the EU labour market. However, this will need to be monitored 
closely, taking into account developments in Serbia and the EU.  

Conclusion 

By  the  time  of  its  accession  to  the  EU,  Serbia  will  have  to  adapt  its  rules  in  order  to 
implement  fully  the  EU  acquis  on  freedom  of  movement  for  workers.  Its  national  law  will 
have to ensure that EU citizens will be able to look for and take up work in Serbia without any 
restrictions and without being subject to a work permit scheme. Furthermore, restrictions on 
access to jobs in the public sector and language skill requirements in certain professions will 
have to be reviewed. In relation to coordination of social security systems, Serbia already has 
experience  of  applying  the  EU  principles,  stemming  from  the  high  number  of  bilateral 
agreements  in  this  area.  However,  further  efforts  will  be  needed  to  strengthen  its 
administrative capacity in order to adjust it to new tasks in the context of EU accession.  

Overall,  Serbia  will  have  to  make  additional  efforts  to  align  its  legislation  in  the  field  of 
freedom of movement for workers with the EU acquis and to implement it effectively in the 
medium term. 

3.3. 

Chapter 3: Right of establishment and freedom to provide services 

Member States must ensure that the right of establishment of EU nationals and legal persons 
in  any  Member  State  and  the  freedom  to  provide  cross-border  services,  as  provided  for  in 
Articles 49 and 56 of the Treaty on the Functioning of the European Union (TFEU), are not 
hampered by national legislation, subject to the exception stated in the Treaty. The core piece 
of EU acquis in this area is the Services Directive. The EU acquis also harmonises the rules 
concerning regulated professions to ensure mutual recognition of qualifications and diplomas 
between  Member  States.  For  certain  regulated  professions  a  common  minimum  training 
curriculum must be followed in order to have the qualification automatically recognised in an 
EU  Member  State.  The  EU  legislation  on  postal  services  aims  to  ensure  provision  of  a 
universal  postal  service  and  to  establish  an  internal  market  for  postal  services  and  a  high-
quality postal service for end-users.  

The Stabilisation and Association Agreement provides for gradual liberalisation of the right of 
establishment and the freedom to provide services between the EU and Serbia over a period of 
four  years.  It  includes  a  standstill  clause  as  regards  restrictions  on  provision  of  services  by 
suppliers  established  in  a  country  other  than  that  of  the  person  for  whom  the  services  are 
intended.  

In the case of the right of establishment, the Serbian legislation does not discriminate against 
foreign  operators  or  their  subsidiaries  or  branches.  The  procedures  for  registration  in  the 
Register of Business Entities are, with some exceptions, non-discriminatory. Some language, 
residence and reciprocity requirements still exist. Specific authorisation schemes exist for the 
energy  sector,  mining,  inland  waterway  navigation,  postal  services,  insurance,  gambling, 
tourism and attorneys' services. 

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As regards freedom to provide cross-border services, Serbian legislation is not in line with 
the EU acquis, particularly with the Services Directive. Serbian legislation regulates provision 
of  services  with  an  establishment  in  Serbia,  but  not  provision  of  cross-border  services.  A 
comprehensive review of legislation has not started yet and Serbia has yet to establish a point 
of  single  contact.  Full  alignment  with,  and  implementation  of,  the  Services  Directive  will 
require  building  up  and  strengthening  administrative  capacity.  Furthermore,  effective 
compliance with the EU acquis will entail adequate coordination at national level between all 
relevant administrative bodies and, eventually, upon accession, with EU Member States.  

The  2005  Law  on  postal  services,  amended  in  2010,  partially  follow  the  principles  and 
objectives laid down in the EU acquis. However, the development strategy for postal services, 
prepared in 2008 and updated in 2010, has not been fully implemented yet. This in particular 
concerns  the  corporatisation  and  restructuring  of  the  public  postal  operator.  Further  efforts 
have  to  be  made  for  full  alignment  the  Third  Postal  Directive.  In  this  regard  particular 
attention will need to be paid to the universal service obligation, reserved area, authorisation 
system, tariff regulation and complaints procedure.  

The Ministry of Culture, Media and the Information Society is responsible for policymaking 
and  supervises  implementation  of  the  Law.  The  financial  independence  of  the  national 
regulatory authority, the Republic Agency for Postal Services (RAPS), established in 2010, is 
secured  by  proceeds  from  authorisations  and licences.  However,  the  administrative  capacity 
of the Agency needs to be strengthened. 

In  the  field  of  mutual  recognition  of  professional  qualifications,  Serbian  legislation  does 
not  provide  for  mutual  recognition  of  foreign  professional  qualifications  for  regulated 
professions. A legislative framework for recognition and with a view to granting actual access 
to  the  regulated  professions  remains  to  be  adopted.  Furthermore,  training  requirements  for 
automatically-recognised sectors remain to be fine-tuned in order to achieve full compliance 
with  the  EU  acquis.  These  training  requirements  relate  in  particular  to  important  health 
professions,  namely  doctors,  dentists,  pharmacists,  nurses  and  midwives.  Substantial  efforts 
will also be required to establish an adequate institutional framework for mutual recognition 
of all kinds of professional qualifications, including e-government facilities and contact points 
assisting citizens requesting recognition of their qualifications.  

Conclusion 

Serbian legislation allows establishment of operators from the EU, but barriers still remain in 
some areas. Efforts need to be made on alignment of the legislation on the freedom to provide 
services and also on administrative capacity and interinstitutional cooperation. Full alignment 
with EU postal services legislation has yet to be achieved. The Agency for Postal Services is 
not  yet  fully  independent,  nor  does  it  have  sufficient  administrative  capacity.  Relevant 
administrative  structures  and  procedures  need  to  be  established  to  ensure  recognition  of 
professional qualifications.  

Overall, Serbia will have to make additional efforts to align its legislation in the field of right 
of  establishment  and  freedom  to  provide  services  with  the  EU  acquis  and  to  implement  it 
effectively in the medium term. 

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3.4. 

Chapter 4: Free movement of capital 

In the area of free movement of capital, Member States are expected to remove all restrictions 
on capital movements and payments both within the EU and between Member States and non-
EU countries. The EU acquis is based on Articles 63 to 66 of the Treaty on the Functioning of 
the European Union (TFEU). Freedom of capital movements is an essential precondition for 
the functioning of the EU internal market. However, the TFEU allows certain exceptions from 
the general prohibition of any impediments to free movement of capital. The EU acquis also 
includes  rules  on  cross-border  payments  and  execution  of  transfer  orders  concerning 
securities.  The  Directive  on  the  fight  against  money  laundering  and  terrorist  financing 
requires  banks  and  other  economic  operators  to  identify  customers  and  report  certain 
transactions, particularly when dealing with high-value items or large cash transactions. A key 
requirement  in  order  to  combat  financial  crime  is  effective  administrative  and  enforcement 
capacity,  including  cooperation  between  supervisory,  law-enforcement  and  prosecution 
authorities. 

The  Stabilisation  and  Association  Agreement  sets  a  timetable  for  gradual  liberalisation  of 
capital movements over a period of four years.  

With regard to capital movements, Serbia assumed the obligations imposed by Article VIII 
of  the  IMF  Articles  of  Association,  and  hence  full  current  account  convertibility,  in  May 
2002. As a result, foreign direct investment (FDI) has been a key factor in the development of 
the Serbian economy in recent years. 

The  Law  on  foreign  exchange  operations  was  adopted  in  July  2006  and  amended  in  May 
2011.  It  was  followed  by  a  number  of  decisions  adopted  by  the  National  Bank  of  Serbia 
(NBS) over the period 2007-2010 relating to various aspects of foreign exchange operations. 
The Law calls for gradual liberalisation of capital movements. To that end, long-term capital 
operations have been liberalised and resident deposit operations have been partly liberalised, 
but  the  limitations  applicable  to  short-term  capital  operations  have  been  kept  so  far.  With 
effect  from  the  fourth  year  after  entering  into  force  of  the  Stabilisation  and  Association 
Agreement, Serbia will be required to honour its commitment to guarantee the free movement 
of capital related to financial loans and credits with maturity shorter than one year. It will also 
have  to  abolish  any  restrictions  on  portfolio  investment.  The  Foreign  Exchange  Law 
envisages  that,  in  the  event  of  more  serious  disturbances  in  the  balance  of  payments 
(excessive  inflows  or  outflows  of  capital)  that  threaten  to  cause  serious  difficulties  when  it 
comes  to  implementing  monetary  policy  and  foreign  exchange  rate  policy,  the  government 
may adopt protective measures for the duration of the disturbances, but for not longer than six 
months. This is in line with the EU acquis.  

Certain  restrictions  exist  on  acquisition  of  real  estate.  Foreign  nationals,  including  EU 
citizens,  may  acquire  property  rights,  but  only  provided  there  is  reciprocity  with  the 
purchaser's home country. Under the Law on agricultural land, foreigners are not allowed to 
own agricultural land. 

Serbia  has  not  retained  special  rights  in  privatised  companies  and  needs  to  ensure  that 
privatisation of the remaining State-owned enterprises is carried out in a manner compatible 
with the EU acquis in the field of capital movements.  

As  regards  payment  systems,  Serbia's  legislation  concentrates  on  internal  payment 
transactions  in  dinar.  Cross-border  transactions  are  subject  to  prior  authorisation.  However, 

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the  Serbian  legal  framework  for  payments  covers  only  a  very  limited  range  of  issues  in 
comparison with the EU legislation and focuses  on the technical side of transactions. Large 
areas of payment services are not regulated at all. In particular, rules on the transparency of 
conditions and information requirements for payment service-providers are limited to national 
services. No payment institutions and e-money institutions exist in Serbia.  

As regards the fight against money laundering, Serbian legislation is partially in line with 
the  EU  acquis.  The  Serbian  legislation  explicitly  prohibits  opening  or  keeping  anonymous 
accounts  and  provides  for  verification  of  customers'  identity.  Due  diligence  measures  are 
applied  when  establishing  a  business  relationship  with  a  customer,  when  carrying  out  a 
transaction  equivalent  to  € 15,000  or  more,  when  there  are  reasons  to  suspect  money 
laundering or terrorism financing with respect to a customer or transaction and when there are 
doubts  about  the  credibility  of  previously  obtained  data  about  a  customer  or  beneficiary. 
Financial  institutions  –  banks,  exchange  offices,  investment  funds,  voluntary  pension  funds, 
etc.  –  are  under  an  obligation  to  inform  the  Administration  for  the  Prevention  of  Money 
Laundering  (APML,  which  is  the  national  financial  intelligence  unit  –  FIU)  of  any  cash 
transaction exceeding € 15,000 and whenever there are reasons to suspect money laundering 
or terrorism financing with respect to a transaction or customer, regardless of the amount of 
the transaction. Amendments made to the Law on the prevention of money laundering in 2010 
even prohibit sellers of goods or services from accepting cash payments above € 15,000 from 
a  customer  or  third  party.  However,  an  effective  system  for  monitoring  and  analysing  cash 
transactions still needs to be introduced. High level of cash usage influences the effectiveness 
of the fight against money laundering and financing of terrorism.  

Implementation  of  the  Law  on  the  prevention  of  money  laundering  is  supervised  by  the 
APML with the cooperation of the National Bank of Serbia, the Securities Commission, the 
Ministry  of  Trade,  the  Foreign  Currency  Inspectorate,  the  Administration  for  Games  of 
Chance, the Ministry of Culture and Media and the Bar Association. This cooperation needs 
to be strengthened. The APML is part of the Ministry of Finance and was established in 2005. 
It is run by a director appointed for a five-year period by the government. The Administration 
has a staff of 40 working in three departments: Analysis, International cooperation, legal and 
financial  issues  and  suspicious  transactions.  In  order  fully  to  enforce  the  anti-money-
laundering  legislation,  the  capacity  of  the  APML  needs  to  be  increased.  Furthermore,  the 
judiciary and law enforcement services lack expertise in handling money laundering cases and 
financial investigations. Over the past years, there have been few investigations, prosecutions 
or convictions related to terrorist financing or final convictions related to money laundering. 

Conclusion  

Capital movements in Serbia are partly liberalised, but further efforts are necessary in order 
fully  to  align  legislation  with  the  EU  acquis  in  this  area.  Serbia  needs  to  complete  its  legal 
framework  so  that  the  free  movement  of  capital,  as  defined  by  the  European  legislation,  is 
guaranteed. Legislation on payment systems is still at an early stage and needs to be aligned 
with  the  EU  acquis.  Concerning  the  fight  against  money  laundering  and  financing  of 
terrorism, progress has been made with adoption of relevant legislation and establishment of 
the necessary institutional framework. However, implementation needs to be enhanced, as the 
high  level  of  cash  usage  influences  the  effectiveness  of  the  fight  against  money  laundering 
and financing of terrorism.  

Overall, Serbia will have to make additional efforts to align with the EU acquis in this area 
and to implement it effectively in the medium term.  

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3.5. 

Chapter 5: Public procurement 

The EU acquis on public procurement includes the general principles of transparency, equal 
treatment and non-discrimination. In addition, specific EU rules apply to coordination of the 
award  of  public  contracts  for  works,  services  and  supplies,  for  the  classical  sectors,  for 
utilities  and  for  defence  and  security.  Their  scope  is  defined  in  terms  of  the  contracting 
entities  and  contracts  covered  and  application  thresholds  and  specific  exclusions.  The  EU 
acquis  also  lays  down  rules  on  review  procedures  and  the  availability  of  remedies. 
Compliance with the procurement directives will require adequate implementation capacity. 

The  Stabilisation  and  Association  Agreement  (SAA)  stipulates  that,  at  the  latest  five  years 
after the entry into force of the Agreement, EU companies not established in Serbia must be 
granted access to contract award procedures in Serbia on terms no less favourable than those 
accorded to Serbian companies. 

While the general principles applying to public procurement in the internal market have been 
largely introduced in the Serbian legislation consistent implementation and enforcement need 
to be ensured by strengthening administrative capacity at all levels and boldly stepping up the 
policies  to  fight  corruption  in  public  procurement.  The  strategy  for  upgrading  the  public 
procurement system in Serbia was adopted in September 2011.Current provisions of the 2009 
Public  Procurement  Law  that  grant  preferential  treatment  to  Serbian  companies  have  to  be 
gradually aligned with the EU acquis following the entry into force of the SAA. The lack of 
an appropriate regulatory framework on concessions still remains to be addressed.  

The award of public contracts is regulated by the Public Procurement Law that entered into 
force  in  2009  and  was  followed  by  adoption  of  the  relevant  implementing  legislation.  The 
Law  is  largely  based  on  the  current  EU  public  procurement  legislation.  However,  it  still 
displays some discrepancies. In particular, the definitions of exempted and excluded contracts 
are broader than those allowed in the EU directives. Moreover, the scope for using negotiated 
procedures is wider than stipulated by the EU rules, whereas the scope for use of the restricted 
procedure is more limited. Award of public contracts relating to utilities is not fully aligned 
with  the  EU  acquis.  The  ongoing  reforms  of  the  regulatory  framework  on  concessions  and 
public-private  partnerships  (PPPs)  need  to  be  in  line  with  the  applicable  EU  rules  and 
harmonised with the legislative and institutional framework on public procurement.  

In terms of administrative capacity, the Ministry of Finance is in charge of legislative activity 
and  the  Ministry  of  Economy  and  Regional  Development  in  charge  of  concessions.  The 
Public Procurement Office (PPO), set up in 2002, is an executive body designed to create the 
conditions for correct use of public funds. Its Director was appointed in June 2011. 

The  PPO  has  published  a  set  of  standard  forms,  templates  and  models  to  facilitate 
procurement. The PPO continues to provide training seminars for stakeholders throughout the 
country, to promote the public procurement web portal and to provide assistance and advice to 
procurers and bidders. Certification of public procurement officials started in December 2010. 
However, e-procurement has still to be adopted by practitioners, even though the legal basis 
for  introducing  it  exists.  The  Public  Procurement  Unit  in  the  Ministry  of  Finance,  which  is 
responsible  for 
initiatives  and  general  coordination,  remains  persistently 
understaffed.  

legislative 

With regard to  the remedies system, the Commission for Protection of Bidders' Rights was 
set  up  in  October  2010  as  an  independent  body  accountable  directly  to  parliament.  This 

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Commission is a second-instance body in the review procedure with powers to cancel public 
procurement procedures entirely or partially. Members of the Commission were appointed in 
October 2010. The Commission was established as a separate and independent institution with 
its own budget and premises. It still needs to build its credibility by timely handling of cases, 
consistent jurisprudence and a transparent enforcement record. Furthermore, it needs to ensure 
effective  enforcement  by  systematically  monitoring  and  scrutinising  implementation  of  its 
decisions  and  to  notify  cases  of  non-compliance  to  the  State  Audit  Institution,  the  Budget 
Inspectorate, the national parliament and the government of Serbia.  

A coordination mechanism between the main stakeholders in the public procurement system 
still  needs  to  be  established,  especially  with  a  view  to  reducing  the  scope  for  corruption, 
which  is  widespread  in  the  award  of  public  contracts.  Institutional  cooperation  in  this  field 
remains  very  weak.  Sustained  political  will  is  needed  to  ensure  proper  implementation  of 
public procurement legislation.  

Conclusion 

Serbia's legislation on public procurement is partially aligned with the EU acquis. A strategy 
for  upgrading  the  public  procurement  system  in  Serbia  was  adopted  in  September  2011. 
Shortcomings  remain  in  the  legislative  framework,  including  the  lack  of  an  appropriate 
regulatory  framework  on  concessions  and  PPPs.  The  administrative  capacity  of  all  key 
institutions forming part of the public procurement system, especially the Ministry of Finance, 
needs to be significantly strengthened. Decisions adopted by the Commission for Protection 
of  Bidders'  Rights  have  to  be  enforced  effectively.  Mechanisms  need  to  be  instituted  for 
coordination  between  the  main  stakeholders,  including  anti-corruption,  audit  and  judicial 
institutions, notably with a view to reducing corruption in public procurement.  

Overall, Serbia will have to make additional efforts to align with the EU acquis in the area of 
public procurement and to implement it effectively in the medium term.  

3.6. 

Chapter 6: Company law 

The  EU  acquis  on  company  law  includes  rules  on  disclosure  requirements,  formation, 
maintenance  and  alteration  of  capital,  mergers  and  divisions,  takeover  bids,  shareholders' 
rights and corporate governance principles. In the area of financial reporting, the EU acquis 
lays  down  rules  on  presentation  of  annual  and  consolidated  accounts,  including  simplified 
rules for small and medium-sized enterprises. Specific accounting rules apply to banking and 
insurance.  Application  of  International  Accounting  Standards  (IAS)  is  mandatory  for  some 
public-interest entities. In addition, the EU acquis sets out rules for the approval, professional 
integrity and independence of statutory auditors.  

Serbia adopted a new Company Law in May 2011 in order to align further with the EU acquis 
in  this  field.  The  Laws  on  the  business  registers  agency  and  the  registration  entities  are 
broadly  in  line  with  the  EU  acquis.  As  regards  administrative  structures,  the  Ministry  of 
Economy and Regional Development is responsible for policy proposals and performs duties 
of the State administration related to companies and other business entities. The Agency for 
Business Registers was established in 2004 as a central institution keeping the registers and a 
single  centralised  database  of  business  entities.  It  also  manages  other  registers,  notably  the 
register of financial statements and data on solvency of legal entities and entrepreneurs. The 
amendments  to  the  Accounting  and  Auditing  Law  place  an  obligation  on  legal  entities  and 

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entrepreneurs  to  submit  their  regular  annual  financial  statements  to  the  Agency  by  not  later 
than the end of February of the following year.  

Eight  staff  in  the  Ministry  of  Economy  and  Regional  Development,  divided  into  two 
departments, are responsible for company law. The Agency for Business Registers has over 
370 staff. The registration procedure has been successfully reformed, introducing a 'one-stop 
shop'  service  as  of  May  2009,  thus  allowing  business  entities  to  follow  only  one  procedure 
instead  of  submitting  several  registration  applications.  The  Agency  performs  its  tasks 
efficiently. 

Corporate accounting is regulated by the Law on accounting and auditing adopted in June 
2006 and amended in 2009. It is broadly aligned with the Fourth and Seventh Company Law 
Directives  for  issues  not  covered  by  the  international  accounting  standards.  Specific 
derogations  or  special  treatment  are  envisaged  for  small  companies.  A  number  of  pieces  of 
implementing legislation regulate specific areas. The law has incorporated the option included 
in  Article  5  of  the  International  Auditing  Standard  (IAS)  Regulation.  This  gives  Member 
States the possibility to order application of IAS/International Financial Reporting Standards 
(IFRS)  to  legal  entities,  irrespective  whether  securities  are  traded  on  a  regulated  market  or 
not.  Consequently,  all  medium-sized  and  large  Serbian  entities  are  required  to  prepare  their 
financial statements in accordance with the IAS/IFRS international accounting standards.  

Based on the Law on accounting and auditing, the National Commission for Accounting was 
established in 2006 as an advisory authority  

The same law regulates auditing. Statutory auditing of the regular annual financial statements 
and consolidated financial statements complies with the International Auditing Standards and 
the Code of Ethics for Professional Accountants. The following are subject to audit: large and 
medium-sized legal entities including all financial institutions, parent legal entities preparing 
consolidated  financial  statements  and  all  legal  entities  issuing  securities  and  other  financial 
instruments  traded  on  an  organised  market.  However,  the  requirements  of  the  Eighth 
Company Law Directive and the Commission Recommendations of 2008 have only partially 
been  implemented.  The  Serbian  laws  are  not  aligned  in  areas  such  as  independent  public 
oversight,  quality  assurance  and  investigations.  The  Ministry  of  Finance  is  currently 
responsible for supervision over auditing firms, but the scope of this supervision is not in line 
with the directive. The Chamber of Certified Auditors is responsible for quality assurance of 
the statutory audits. However, the Chamber has not yet started this task and its staff needs to 
be reinforced.  

Conclusion 

The new Serbian Company Law of 2011 brings Serbia further into line with the EU acquis. Its 
legislation  on  business  registration  is  largely  in  line  with  the  EU  acquis.  Serbian  rules  on 
corporate accounting and audits are largely aligned with EU rules and international standards. 
However, in general, some challenges remain on effective implementation and enforcement of 
legislation,  in  particular  as  regards  independent  public  oversight,  quality  assurance  and 
investigations.  Progress  in  this  area  should  improve  corporate  culture  and  further  develop 
systems of corporate governance.  

Overall,  Serbia  should,  in  the  medium  term,  have  the  capacity  to  comply  with  the 
requirements of  the EU acquis in the field of company law and to implement it effectively, 
provided it continues its efforts. 

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3.7. 

Chapter 7: Intellectual property law 

The primary objective of the EU acquis in the area of intellectual property rights is to ensure 
the proper functioning of the internal market while striking the appropriate balance between 
the rights of right-holders and the interests of users and adapting the legal framework to the 
changing  technological  environment.  The  EU  acquis  on  copyrights  harmonises  rules  on  the 
legal protection of copyright and related rights. Specific provisions apply to protect databases, 
computer  programs  and  semiconductor  topographies.  The  EU  acquis  on  industrial  property 
rights  sets  out  harmonised  rules  for  legal  protection  of  trademarks  and  designs.  Specific 
provisions apply to biotechnology inventions, pharmaceuticals and plant protection products. 
The  EU  acquis  also  establishes  an  EU  trademark  and  EU  design.  Finally,  the  EU  acquis 
contains  harmonised  rules  for  enforcement  of  copyright  and  related  rights  and  industrial 
property  rights.  It  requires  Member  States  to  set  up  adequate  implementing  mechanisms,  in 
particular effective enforcement capacity. 

In  accordance  with  the  Interim  Agreement  Serbia  has  to  take  the  necessary  measures  to 
guarantee,  no  later  than  January  2014,  a  level  of  protection  of  intellectual,  industrial  and 
commercial  property  rights  similar  to  that  existing  in  the  EU,  including  effective  means  of 
enforcing such rights. The Interim Agreement also requires Serbia to accede to a number of 
multilateral conventions on intellectual, industrial and commercial property rights by the same 
deadline.  

In the area of copyright and neighbouring rights, the Law on optical disks was adopted in 
July 2011. The Law on copyright and related rights was adopted in December 2009 and was 
followed by implementing legislation. The Commission for Copyright and Related Rights was 
established  in  December  2010.  It  is  empowered  to  decide  on  the  tariffs  if  no  agreement  is 
reached  with  collective  rights  management  organisations.  Currently  three  organisations  in 
Serbia are authorised for collective management of copyright and related rights. The National 
Strategy for Intellectual Property Rights was adopted in June 2011. The draft Law amending 
the Law on copyright and related rights is pending adoption in the Parliament. 

The  Intellectual  Property  Office  (IPO),  established  in  2003,  has  asserted  its  role  as  the 
national  coordinator  for  intellectual  property  rights.  It  has  set  up  an  in-house  education  and 
information  centre  and  become  the  leading  promoter  of  reforms  in  this  area.  The 
administrative  and  IT  capacity  of  the  IPO  have  been  significantly  strengthened  over  recent 
years. However, the financial sustainability of the IPO remains unresolved: the Office is still 
financed from the State budget and has not yet been established as a financially autonomous 
agency.  

Serbia's  legislative  framework  on  industrial  property  rights,  including  its  legislation  on 
industrial design and trademarks, is largely aligned with the EU acquis. The Law on patents is 
pending  adoption  in  the  Parliament.  The  2009  Law  on  the  protection  of  topographies  of 
integrated circuits, needs to be further harmonized to the EU acquis. 

Serbia  has  acceded  to  all  the  relevant  multilateral  conventions,  as  required  by  the  Interim 
Agreement,  apart  from  the  TRIPS  Agreement,  which  is  subject  to  Serbia's  accession  to  the 
WTO. Since October 2010, Serbia has been a member of the European Patent Organisation. 

Enforcement  of  intellectual  property  rights  is  specifically  regulated  by  the  Law  on  special 
powers  for  the  purpose  of  efficient  protection  of  intellectual  property  rights,  which  entered 
into  force  in  2006.  A  new  Decree  on  the  terms  and  means  of  enforcement  of  measures  for 

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protection of intellectual property rights at the border, which is aligned with the new Customs 
Law, entered into force in January 2011.  

The  key  enforcement  institutions  are  the  prosecutor  for  high-tech  crime,  two  specialised 
police  units,  the  specialised  customs  department,  the  specialised  tax  inspection  unit,  the  tax 
police,  the  market  inspectorate  and  different  court  panels.  The  administrative  capacity  of 
individual  institutions  is  improving,  albeit  with  varying  speed  and  quality.  Via  its  new 
Education  and  Information  Centre,  the  IPO  coordinates  training  and  awareness-raising 
activities on intellectual property rights.  

However, the distribution of administrative powers, notably inspection powers, is unclear. In 
this  complex  institutional  setting,  there  is  a  lack  of  coordination  mechanisms.  Inter-
institutional  cooperation  takes  place  on  a  bilateral  and  ad  hoc  basis,  rather  than  in  an 
institutionalised and predictable manner. Exchanges of information are not standardised and 
lack  a  solid  IT  platform  that  would  ensure  transparency  and  statistical  tools  for  tracking  a 
comprehensive enforcement record in the area of intellectual property rights. Participation of 
economic  operators  and  consumers  in  preventing  counterfeiting  and  piracy  needs  to  be 
ensured systemically across all enforcement institutions. The issue of inadequate storage and 
destruction facilities for counterfeited and pirated goods still remains to be solved.  

As regards judicial protection of intellectual property rights, the Law on the organisation and 
jurisdiction  of  government  authorities  in  the  fight  against  high-tech  crime  was  adopted  in 
2005 and is being applied since 2007. Special high-tech crime  units were established  in the 
Public Prosecutor's Office, the Higher Court in Belgrade and the Ministry of the Interior, as 
provided  for  by  this  law.  However,  specialisation  of  prosecutors,  judges  and  court  panels 
handling cases in all segments of intellectual property law needs to be ensured.  

Conclusion 

Legislative  alignment  with  the  EU  acquis  in  the  area  of  intellectual  property  law  has  been 
progressing  well.  A  national  strategy  providing  a  comprehensive  framework  for  concerted 
enforcement  by  all  competent  institutions  has  been  in  June  2011adopted.  However, 
enforcement  still  remains  weak.  In  more  general  terms,  the  administrative  capacity  of  all 
enforcement  institutions  needs  to  be  strengthened,  with  the  IPO  taking  the  leading  role  in 
education and awareness-raising activities. Court panels adjudicating on intellectual property 
law require specialisation and intensive judicial training. 

Overall,  Serbia  will  have  to  make  additional  efforts  to  align  with  the  EU  acquis  and  to 
implement intellectual property law effectively in the medium term. 

3.8. 

Chapter 8: Competition Policy 

The EU acquis on competition covers antitrust, merger and State aid policies. It includes rules 
and  procedures  to  fight  anti-competitive  behaviour  by  companies  (restrictive  agreements 
between  undertakings  and  abuses  of  dominant  market  positions),  to  scrutinise  mergers 
between  undertakings  and  to  prevent  governments  from  granting  State  aid  which  distorts 
competition on the internal market. The competition rules are directly applicable in the EU, 
and Member States must cooperate fully with the Commission on enforcing them.  

The Interim Agreement, and subsequently the SAA, include provisions comparable to the EU 
acquis  on  competition,  covering  anti-competitive  agreements,  abuses  of  dominant  market 

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positions and State aid. Moreover, they include special rules applying to public undertakings 
and  undertakings  with  special  and  exclusive  rights  and  prohibit  quantitative  restrictions  on 
imports  from  the  EU  into  Serbia.  The  Agreement  calls  for  operationally  independent 
authorities  to  supervise  application  of  the  competition  rules  in  Serbia.  It  also  includes  a 
separate  protocol  establishing  the  State  aid  rules  which  will  apply  in  the  event  that 
restructuring aid is granted to the Serbian steel industry. 

As  regards  antitrust  and  mergers,  all  fundamental  aspects  of  the  legal  and  institutional 
frameworks are aligned with the EU acquis. A revised Competition Law entered into force on 
1 November 2009 and the necessary implementing legislation has been adopted. Competition 
law applies to all sectors of the economy, to public and private undertakings and to goods and 
services. The principles set out in Article 106(2) of the TFEU regarding services of general 
economic interest are incorporated in the Serbian competition law. 

However, conflicting legislation limiting the scope and effectiveness of the competition law, 
notably  on  mandatory  car  insurance,  has  been  adopted  without  prior  consultation  of  the 
Commission for the Protection of Competition (CPC), the Serbian competition authority, and 
remains  in  force.  Serbia  needs  to  rectify  these  contradictory  provisions  in  its  legislation. 
Furthermore,  to  avoid  this  in  future,  the  CPC  should  be  consulted  on  all  draft  legislation 
which could have an impact on competition in Serbia. 

The CPC, established in 2006, is an independent body accountable to parliament. It is a self-
financing institution. The CPC has substantial investigation powers and may impose fines for 
infringements of the competition rules. The authority's decisions are subject to judicial review 
by the Administrative Court. In addition to the Chairperson and the four other members of the 
CPC's  collegiate  decision-making  body,  the  authority  has  28  employees,  which  is  not 
sufficient  to  fulfil  its  tasks.  The  authority  needs  to  reinforce  its  capacity  for  economic 
analyses,  as  part  of  this  work  is  currently  outsourced.  Following  the  approval  of  the  2011 
Financial Plan for the CPC, the Commission should have the funds needed to hire additional 
economists  as  case-handlers.  The  CPC  has  started  to  build  a  track  record  on  enforcing 
competition rules on the Serbian market. However, further efforts are needed in this respect. 
A series of CPC decisions have been overturned on appeal for procedural reasons, indicating a 
systemic issue. The CPC needs to reinforce its capacity in administrative and procedural law. 

The capacity of the judiciary to assess complex legal and economic evidence in competition 
cases remains weak. Significant efforts are needed to increase this capacity.  

In the field of State aid control, the legal and institutional framework has been put in place. 
The Law on State aid control entered into force in January 2010 and implementing legislation 
in March 2010. The collegiate decision-making body – the Commission for Control of State 
Aid (CCSA) – consists of a President appointed by the Ministry of Finance, a Vice-President 
nominated  by  the  CPC  and  three  members  appointed  by  the  Ministry  of  Economy  and 
Regional Development, the Ministry of Infrastructure and the Ministry of Environment. The 
CCSA  is  supported  by  the  Division  for  Control  of  State  Aid  (DCSA)  in  the  Ministry  of 
Finance, which investigates State aid notifications and drafts decisions. With five permanent 
employees and one person employed on a temporary basis, the DCSA's current staff level is 
inadequate to fulfil its tasks. 

In  accordance  with  the  Interim  Agreement,  the  CCSA  needs  to  establish  a  comprehensive 
State  aid  inventory  and  existing  State  aid  schemes  must  be  aligned  with  the  EU  acquis  by 
January  2013.  The  Serbian  Government  adopted  a  State  aid  inventory  in  September  2011. 

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Any proposed State aid measures need to be consistently notified to the DCSA, which should 
raise awareness of the State aid rules among potential aid granters. More efforts are needed to 
fulfil the obligations imposed by the Interim Agreement.  

Given  the  institutional  set-up  of  the  Serbian  State  aid  authority,  the  de  facto  operational 
independence of the authority must be closely monitored. In this respect, it is crucial that the 
CCSA demonstrates its ability to act independently of aid-granting institutions (in particular 
ministries) and establishes a solid track record of well-reasoned decisions. 

Concerning  liberalisation  of  specific  sectors,  a  number  of  Serbian  undertakings  enjoy,  de 
facto  or  de  jure,  special  or  exclusive  rights,  notably  in  the  fields  of  energy,  transport, 
infrastructure, postal  services,  telecommunication services, broadcasting, agriculture and the 
environment.  Further  efforts  need  to  be  made  towards  market  liberalisation  in  line  with  the 
EU acquis.  

Conclusion 

Serbia  has  established  both  the  legal  and  the  institutional  framework  in  the  area  of 
competition, but additional efforts to increase administrative capacity are necessary. The CPC 
has started to build up enforcement records, but further efforts are needed. Priority needs to be 
given to increasing the judiciary's knowledge of competition law. A  State aid inventory has 
been  adopted  by  the  Government  in  September,  in  line  with  the  Interim  Agreement.  The 
operational independence of the CCSA needs to be demonstrated in practice. The CCSA must 
establish credible and consistent enforcement records. Progress towards market liberalisation 
in reserved economic sectors is needed. .  

Overall, Serbia will have to make additional efforts to align with the EU acquis in the area of 
competition and to implement it effectively in the medium term. This applies, in particular, to 
safeguarding the operational independence of the State aid authority and to the increasing of 
consistent enforcement records of the competition authority. 

3.9. 

Chapter 9: Financial Services 

The main objectives of the EU acquis on financial services are to ensure financial stability, 
the  financial  soundness  of  companies  operating  in  the  financial  sector  and  appropriate 
protection  of  consumers,  investors  and  policy-holders.  The  aim  is  to  build  up  confidence  in 
the financial markets and to provide a level playing-field. The EU acquis on financial services 
includes rules on authorisation, operation and supervision of financial institutions in the areas 
of  banking,  insurance,  supplementary  pensions,  investment  services  and  securities  markets 
and  on  financial  market  infrastructure.  Financial  institutions  can  operate  across  the  EU  in 
accordance  with  the  'single  passport'  and  the  'home  country  control'  principle,  either  by 
establishing branches or by providing cross-border services.  

The SAA provides for gradual opening of establishment of financial services. 

In  the  case  of  banks  and  financial  conglomerates,  there  is  good  alignment  with  the  EU 
acquis and international standards. The Law on banks, adopted in 2005 and amended in 2010, 
regulates the licensing of banks. It gives foreign credit institutions the right to establish banks 
in Serbia and treats these banks as domestic legal entities. Banks may be founded by one or 
more domestic or foreign legal entities or natural persons who provide the bank with equity 

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capital of a minimum value of € 10,000,000. Serbia will need to align with the single passport 
and home country control principles by the time of accession. 

As  regards  capital  adequacy  and  supervision,  Serbia  is  currently  implementing  Basel  I 
requirements and is preparing to implement Basel II. To this end, a regulation was adopted in 
December 2010 on capital requirements, (standardised approach) risk management, disclosure 
and  consolidated  supervision.  Serbia  will  need  to  catch  up  with  implementation  of  Basel  II 
and ensure timely implementation of Basel III, as the Basel standard is the basis for the EU 
capital adequacy legislation. 

The deposit guarantee scheme in Serbia is governed by the Law on deposit insurance, which 
was  adopted  in  2005  and  amended  in  2008  and  2010.  The  institution  in  charge  of  deposit 
insurance  in  Serbia  is  the  Deposit  Insurance  Agency  and  the  minimum  amount  insured  is 
€ 50,000 per bank depositor.  

Responsibility  for  supervision  of  banks  and  financial  conglomerates  lies  with  the  National 
Bank of Serbia (NBS). As the independent regulatory body, it reports directly to parliament. 
The banking supervision section of the NBS has six departments with 102 employees. It has 
two  departments  dealing  with  on-site  and  off-site  inspections  and  one  with  supervision  of 
financial leasing companies. The NBS is fully independent for carrying out supervision in the 
financial  sectors  under  its  responsibility  and  has  cooperation  agreements  with  many  home 
authorities  and  institutions  and  also  with  foreign  supervisory  authorities.  It  has  sufficient 
administrative capacity. 

The Law on bankruptcy and liquidation of banks and insurance companies covers aspects of 
reorganisation and winding-up of banks and financial conglomerates in Serbia.  

The main legislation in the area of insurance and occupational pensions are the 2004 Law 
on  insurance,  amended  in  May  2011,  and  the  2009  Law  on  compulsory  traffic  insurance 
regulating the minimum coverage for compulsory motor vehicle insurance. Some aspects of 
the operation of insurance companies are also dealt with in the Law on the National Bank of 
Serbia  and  the  Law  on  bankruptcy  and  liquidation  of  banks  and  insurance  companies.  The 
Law  on  insurance  grants  insurance  companies  licensed  to  perform  insurance  activities  in 
Serbia  the  status  of  a  domestic  legal  entity  (domestic  insurance  company)  operating  under 
equal conditions to other companies, regardless of whether the owners are domestic or foreign 
entities. Cross-border services are allowed only against risks that are not insured in Serbia or 
for specified risks defined by the government.  

Serbia will need to align with Solvency II directive by providing quality insurance and human 
resources management and developing the internal control system. 

The National Bank of Serbia is empowered to regulate and supervise the insurance sector. In 
this  capacity,  the  NBS  issues  and  revokes  licences  to  conduct  insurance  activities  and 
supervises  and  controls  these  activities.  Its  Insurance  Supervision  Department  employs  42 
staff.  Its  administrative  capacity  is  sufficient.  In  order  to  improve  its  supervisory  functions 
over  the  insurance  sector,  the  NBS  signed  a  number  of  memoranda  of  cooperation,  notably 
with  EU  countries  such  as  Hungary,  Belgium  and  Austria.  Bankruptcy  and  liquidation  of 
insurance  companies  are  regulated  by  the  Law  on  bankruptcy  and  liquidation  of  banks  and 
insurance companies. 

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As regards financial markets infrastructure, the Law on the market for securities and other 
financial  instruments  is  not  aligned  with  the  EU  legislation  on  financial  collateral 
arrangements  and  on  investor  compensation  schemes.  A  newly  adopted  Law  on  capital 
markets aims to bring the Serbian legislation further into line with the EU acquis in the area 
of financial markets infrastructure too.  

As regards securities markets and investment services, the regulatory framework is defined 
by  the  Law  on  capital  markets,  adopted  in  May  2011,  which  aims  at  aligning  with  the  EU 
legislation on markets in financial instruments, on securities prospectuses and on prevention 
of market abuse. It also requires annual and interim reporting, as stipulated by the Directive 
on  transparency.  Broker  dealer  companies,  banks  and  investment  fund  management 
companies  and  voluntary  pension  fund  management  companies  may  be  established  by 
domestic or foreign natural persons and legal entities but need to be licensed in order to be 
registered. There is no possibility for an EU-authorised investment company to provide cross-
border  services  directly  or  to  manage  a  pension  fund  in  Serbia.  Furthermore,  there  is  no 
legislation governing rating agencies.  

The legal framework for investment funds was adopted in 2006 and amended in 2009 and in 
2011.  The  investment  fund  law  only  partially  aligns  the  EU  acquis  on  undertakings  for 
collective investment in transferable securities (UCITS). 

The Serbian Securities Commission is the supervisory authority for the securities sector. The 
Commission has five members, including the president. The president and the members of the 
Commission  are  elected  by  the  national  parliament  for  five  years.  A  new  president  and 
members of the Commission were appointed in July 2011. The Commission employs 42 staff 
all together. It is financially independent (self-financed from fees and taxes from participants 
in the market), and appears to have sufficient administrative capacity. It has been a member of 
IOSCO  since  2002.  The  Securities  Commission  conducts  supervision  by  reviewing  reports, 
documentation and other data that the supervised entities are under an obligation to keep or 
submit to the Commission.  

Conclusion 

The  legislation  on  financial  services  covers  the  requirements  of  the  EU  acquis  to  a 
considerable  extent.  Serbia  is  currently  implementing  Basel  I  and  is  moving  towards 
alignment  with  Basel  II.  The  NBS  carries  out  its  supervisory  role  in  a  satisfactory  manner. 
Further efforts will need to be made to align with Solvency II directive and the EU regulations 
on financial market infrastructure. Alignment with securities markets legislation is needed and 
the  newly  appointed  Securities  Commission  needs  to  make  sure  that  it  carries  out  its 
supervisory functions properly.  

Overall, Serbia will have to make additional efforts to align fully with the EU acquis in this 
field and to implement it effectively in the medium term.  

3.10.  Chapter 10: Information society and media 

The EU acquis on the information society and media aims to eliminate obstacles to effective 
operation of the internal market in electronic communications services and networks, promote 
competition  and  safeguard  consumer  interests  in  the  sector,  including  the  universal 
availability  of  basic  modern  services.  It  also  includes  rules  on  information  society  services 

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and  a  transparent,  predictable  and  effective  regulatory  framework  for  audiovisual  media 
services in line with European standards. 

As regards electronic communications and information technologies, the Stabilisation and 
Association  Agreement  sets  the  ultimate  objective  of  Serbia  adopting  the  EU  acquis  in  the 
sector  of  electronic  communications  networks  and  services  three  years  after  the  entry  into 
force of the SAA. This means that Serbia will have to fully align with a substantial number of 
directives and to ensure their implementation by that date.  

Liberalisation  of  the  electronic  communications  market  has  started.  In  January  2010  Serbia 
granted a fixed telephony licence to a second operator, but kept the market closed for other 
newcomers until the end of 2011. 

The mobile telephony market has been opened to competition, with two additional operators 
licensed  in  2006.  Mobile  number  portability  was  introduced  in  2011.  Internet  services  have 
also been opened to competition. Most of the Internet service-providers have been providing 
ADSL  services  based  on  the  incumbent  operator's  wholesale  offer  and  relying  on  its 
international interconnectivity. However, although 39 VoIP4 licences have been granted since 
2008,  few  of  the  operators  are  functioning  effectively.  Most  of  the  safeguards  necessary  to 
create a competitive market have not yet been introduced. The incentives to open the market 
for liberalisation were further offset in 2011, with the cancellation of the privatisation of the 
incumbent  operator,  Telekom  Srbija.  The  broadband  market  is  underdeveloped  with 
penetration level standing at around 8% in 2010.  

The Law on electronic communications entered into force in July 2010, repealing most of the 
2003  Telecommunications  Law  and  further  aligning  with  the  2002,  and  some  provisions  of 
the  2009,  EU  regulatory  framework.  Implementing  legislation  remains  to  be  adopted.  The 
strategy for the development of electronic communications from 2010 to 2020 was adopted in 
September 2010. 

The  Ministry  for  the  Information  Society  and  Telecommunications  was  merged  with  the 
Ministry of Culture in March 2011. The administrative capacity of the ministerial department 
in charge of electronic communications is not sufficient to meet the tasks at hand.  

The  Republic  Agency  for  Electronic  Communications  (RATEL)  has  been  established  as  an 
autonomous regulatory authority which became operational in 2005. The five members of the 
management  board  are  appointed  by  parliament,  on  a  proposal  from  the  government.  The 
independence of RATEL remains to be fully ensured in order to avoid political influence in its 
decision-making.  RATEL  has  yet  to  introduce  most  of  the  competitive  safeguards  in  the 
market. The administrative capacity of RATEL is good but its expertise on implementation of 
the legislation has to be further improved. Market competitiveness remains limited.  

In  the  field  of  information  society  services,  a  ten-year  strategy  for  the  development  of  the 
information  society  was  adopted  in  July  2010.  A  strategy  for  the  development  of  e-
government  from  2009  to  2013  was  adopted  in  October  2009.  The  Ministry  for  Culture, 
Media and the Information Society is in charge of policies and strategies on the information 
society. The legislation on e-signatures has been aligned with the acquis following adoption 
of  the  2004  Law  on  electronic  signatures  and  the  2009  Law  on  electronic  documents. 

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Voice over the Internet Protocol. 

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However, the administrative capacity of the ministry is limited, in particular in the sector for 
the  information  society.  Implementing  rules  still  remain  to  be  adopted  to  ensure  that  the 
switchover takes place as indicated in the 2009 digital switchover strategy. Protection of the 
conditional  access  equipment  from  piracy  remains  to  be  extended  beyond  the  field  of 
intellectual property.  

As  regards  audiovisual  policy,  the  media  environment  is  regulated  by  a  large  set  of  laws, 
notably the Public Information Law, the Broadcasting Law, the Law on telecommunications, 
the Advertising Law, the Law on copyright and neighbouring rights, the Law on free access to 
information of public importance and the Law on electronic communications. Adoption of the 
draft Law on  unallowable  mergers and the transparency of ownership, which was tabled by 
the  Ministry  of  Culture,  is  still  pending.  A  comprehensive  media  strategy  was  adopted  in 
September  2011.  It  aims  at  increasing  editorial  independence  and  better  protecting  media 
outlets from undue influence. It also lays the foundations for forthcoming legislative changes 
which  should  clarify  the  market  environment  in  which  media  outlets  are  operating.  The 
Ministry for Culture, Media and the Information Society is in charge of policymaking and the 
Republican Broadcasting Agency (RBA) is the regulatory authority monitoring enforcement 
of  the  relevant  legislation.  The  RBA's  administrative  and  technical  capacity  is  sufficient  to 
meet the obligations set under the Audiovisual Media Services Directive. 

However,  Serbia's  legislative  framework  remains  to  be  fully  aligned  with  the  EU  acquis, 
particularly  with  the  Audiovisual  Media  Services  Directive.  The  legislation  also  lacks 
provisions  for  regulating  on-demand  and  online  audiovisual  services.  The  existing  legal 
framework remains to be clarified, as there is a contradiction between the Broadcasting Law 
on the one hand, which does not allow municipal ownership of broadcasters, and the Law on 
local self-governance along with the Law on the City of Belgrade on the other, which allow 
public  establishment  and  ownership  of  the  media.  This  contradiction  was  deepened  in  2009 
when the Law on national minority councils transferred foundation and managerial rights over 
media  to  National  Minority  Councils  too.  This lays  down  conditions  for  political  control  of 
the media in minority languages by the dominant political minority groups. The regulation on 
electing  members  of  the  RBA  needs  to  be  amended  to  guarantee  the  RBA's  independence 
from political influence. The RBA needs to step up its activities and take action in cases of 
breaches of legislation. The transparency of its activities has to be improved.  

In  line  with  the  commitments  under  the  Interim  Agreement,  the  financing  of  certain  media 
from the State budget will have to be brought into line with the EU acquis as it constitutes 
State aid.  

Conclusion 

As regards electronic communications and information technologies, Serbia has partly aligned 
its  legislation  with  the  EU  acquis,  but  implementation  of  the  new  legal  framework  is  at  an 
early stage. Full market liberalisation remains to be ensured. The two regulatory authorities ─ 
RATEL  and  the  RBA  ─  have  relatively  good  capacity,  but  their  independence  and 
enforcement powers need to be strengthened in order to give all market players a competitive 
level  playing-field.  The  legislation  on  media  ownership  has  yet  to  be  aligned  with  the  EU 
legislation on State aid.  

Overall, Serbia will have to make additional efforts to align with the EU acquis in the area of 
the information society and the media and to implement it effectively in the medium term. 

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3.11.  Chapter 11: Agriculture and rural development 

The EU acquis on agriculture and rural development covers a large number of binding rules, 
many  of  which  are  directly  applicable.  Proper  application  of  these  rules,  effective 
enforcement  and  control  of  them  by  an  efficient  public  administration  are  essential  for  the 
functioning of the common agricultural policy (CAP). Running the CAP requires setting up a 
paying agency and management and control systems such as the integrated administration and 
control  system  (IACS)  and  also  the  capacity  to  implement  rural  development  measures. 
Member  States  must  be  able  to  apply  the  EU  legislation  on  direct  support  schemes  and  to 
implement the common market organisation for various agricultural products. 

Pending  the  entry  into  force  of  the  Stabilisation  and  Association  Agreement  (SAA),  the 
Interim Agreement on trade and trade-related matters in force since 1 February 2010 provides 
for  gradual  liberalisation  of  agricultural  trade.  The  SAA  also  includes  provisions  on 
cooperation in the area of agriculture.  

Agriculture  is  one  of  the  most  important  economic  activities  in  Serbia.  The  total  area  of 
agricultural land in Serbia is 5,097,000 hectares, some 80% of which is arable land. In 2009, 
crop  production  accounted  for  around  70%  of  the  value  of  all  agricultural  production  and 
livestock  production  30%.  Primary  production  from  agriculture,  hunting,  forestry  and 
fisheries generated approximately 10% of GDP. Agricultural exports are continuing to expand 
and contributed about 24% of Serbia's total exports in 2009. Serbia has a trade surplus with 
the EU in basic agricultural goods. Approximately 55% of the population lives in rural areas 
and  around  one  third  of  the  active  population  rely  wholly  or  partly  on  agriculture  for  their 
livelihood.  Agriculture  remains  the  prevailing  economic  activity  in  most  rural  areas,  which 
are dominated by smaller farms, low productivity and low farm profits.  

Serbia's agricultural policy is based on the Law on agriculture and rural development adopted 
in  2009.  This  law  sets  the  objectives  of  agricultural  policy  and  provides  the  general 
framework  for  development  of  and  support  for  agriculture  and  rural  areas.  The  policy  is 
implemented by means of the Agricultural and Rural Development Strategy. The strategy for 
the period 2011-2020 has not yet been adopted. Serbia's agricultural budget in 2010 accounted 
for  just  over  2%  of  the  total  budget,  providing  limited  support  for  further  development  of 
Serbian agriculture; direct payments predominated. 

Although there have been improvements over the last few years, the current capacity of the 
Ministry of Agriculture, Trade, Forestry and Water Management needs to be strengthened in 
order to adapt its structures and systems to EU requirements. In addition, agricultural statistics 
need to be developed in line with the EU acquis. The agricultural census, scheduled for 2012, 
should  provide  results  which  will  allow  Serbia  to  advance  in  the  formulation  and 
implementation of agricultural and rural development policies. 

Concerning  horizontal  issues,  Serbia  needs  to  pay  extra  attention  to  establishing  the 
administrative structures required for the common agricultural policy. Since the EU acquis on 
the paying agency and the IACS, central elements for management and control of CAP funds, 
is very demanding, planning and preparation will require investment and institution capacity 
building well in advance of accession. Serbia will need to establish a farm accountancy data 
network (FADN) in line with the EU acquis. 

Direct aid payments are currently granted for Serbia's key production sectors: dairy, meat and 
crops  (per  head  for  livestock  and  per  hectare  of  crop  production  area,  together  with  price 

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support  for  certain  products).  One  prerequisite  for  entitlement  is  insurance  with  a  Pension 
Insurance  Fund  for  Farmers.  In  every  case,  a  yearly  budgetary  ceiling  is  set  which  limits 
individual  payments.  Direct  payments  in  Serbia  gradually  need  to  be  brought  into  line  with 
EU rules, decoupling direct aid payments from production. 

In relation to State aid, apart from market-related subsidies and rural development measures, 
Serbia  applies  a  number  of  additional  measures.  Serbia  will  need  to  bring  all  its  State  aid 
measures into line with EU rules and guidelines adopted in this area. 

Considerable attention has to be paid to strengthening the administrative capacity in order to 
manage common market organisation. 

With regard to arable crops, most of the agricultural land in Serbia is used for the production 
of grain crops (wheat, barley, rye, oats, corn, millet and sorghum), which cover approximately 
60% of the total area sown. Corn is the most important crop with around 1.2 million hectares 
sown annually. Wheat takes second place with approximately 500,000 hectares. Serbia is also 
a  large  producer  of  oil  crops.  Sugar  beet  was  grown  on  just  over  60,000  hectares  in  2009, 
producing about 3 million tonnes. 

Serbia  is  the  largest  producer  of  meat  among  CEFTA  countries.  However,  production  is 
moderate compared with EU  levels. On productivity, livestock production is lower than in 
most  European  countries  in  terms  of  number  of  head  per  hectare  of  agricultural  land.  Milk 
production in Serbia is very important, involving more than 280,000 producers.  

In  terms  of  specialised  crops,  fruit  and  vegetables  production  is  a  significant  agricultural 
activity  in  Serbia,  with  the  most  important  crops being potatoes, cabbage, tomatoes,  apples, 
berries and plums. With an overall annual production of around 80,000 tonnes, Serbia is one 
of  the  major  raspberry  producers  in  the  world.  The  fruit  and  vegetables  processing  and 
preserving industry shows significant potential for development. Serbia applies a per-hectare 
subsidy for planting fruit trees which is not in line with the EU acquis. A basis already exists 
for  producer  groups,  as  in  the  EU,  but  the  administrative  structure  and  legal  provisions  to 
allow  them  to  operate  in  line  with  the  EU  acquis  will  need  to  be  set  up.  A  sound  basis  for 
marketing standards for fresh fruit and vegetables and conformity checks already exists, but 
further harmonisation is needed in order to align with the EU acquis. 

The viniculture and wine-making sector has a long tradition in Serbia. Currently, it has great 
untapped potential but efforts are underway to develop and promote the sector. The Serbian 
Law on wine has many elements in common with the EU wine legislation. Serbia is a member 
of the International Organisation for Vine and Wine (OIV). The policy formulation capacity 
of the Ministry of Agriculture for this area remains limited. Implementing legislation for the 
vineyard register has been adopted. However, the vineyard register remains to be established 
and  the  procedure  for  authorisation  of  oenology  laboratories  needs  to  be  put  in  place.  The 
2009 Law on Rakija and other alcoholic beverages needs to be aligned with the EU acquis in 
the spirits sector. 

As regards rural development, the Law on agriculture and rural development put in place a 
strategic  framework  that  largely  resembles  the  one  established  under  the  current  EU 
legislation.  However,  the  scope  and  provisions  of  the  law  need  to  be  further  elaborated  in 
terms  of  measures  and  scope  of  implementation  with  a  view  to  full  alignment  with  the  EU 
acquis.  The  agri-environmental  orientation  of  Serbia's  rural  development  policy  remains 
weak.  Extension  services  and  advisory  support  exist  but  need  to  be  boosted.  While  the  law 

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establishes  administrative  structures  similar  to  those  implementing  the  current  rural 
development programmes in the EU, the administrative capacity needs to be enhanced. 

Regarding  the  preparations  for  decentralised  management  of  Instrument  for  Pre-Accession 
Assistance  for  Rural  Development  (IPARD  –  component  V),  several  positive  actions  have 
been undertaken, including efforts to establish IPARD structures. A Directorate for Agrarian 
Payments  which  is  planned  to  serve  as  a  future  IPARD  agency,  has  been  set  up.  However, 
progress  needs  to  continue  and  attention  must  be  given  to  ensuring  the  consistency  and 
functioning of resources assigned to these structures. The readiness of the National Fund for 
IPARD must be ensured. 

As  regards  quality  policy,  Serbia  has  legislation  in  place  which  regulates  protection  of 
designations of origin, geographical indications and traditional names. This legislation needs 
to  be  amended  and  updated  to  bring  it  fully  into  line  with  the  EU  acquis.  The  organic 
farming sector in Serbia can be expected to grow in the future, due to domestic support and 
ongoing international trends. A new law, based  on the  EU framework, entered into force in 
2011  and  now  needs  to  be  implemented.  Overall  responsibility  lies  with  the  Ministry  of 
Agriculture, Trade, Forestry and Water Management which authorised eight control bodies in 
2010. At present no precise data are available on the area under organic production, but the 
new  law  calls  for  mandatory  reporting.  Supervisory activities need to be  strongly supported 
and enforced. 

Impact 

The  estimated  impact  of  eventual  EU  accession  by  Serbia  on  the  EU  common  agricultural 
policy is relative to the structure and size of Serbia's agricultural sector, which accounted for 
10.6% of GDP in 2009. If Serbia joins the EU, it would add 5,097,000 hectares of agricultural 
land  to  the  EU.  This  corresponds  to  3%  of  the  utilised  arable  area  (UAA)  in  the  EU-27. 
Overall, Serbia's membership of the EU would therefore be expected to have a limited impact 
on the CAP.  

Conclusion 

Accession to the EU will have a big impact on Serbian agriculture which is a very important 
sector  for  the  country's  economy  and  rural  society.  In  the  field  of  agriculture  and  rural 
development, agricultural policy will require adjustments, moving towards decoupled support 
measures.  Although  good  progress  has  been  made  in  recent  years,  Serbia  will  have  to 
strengthen its administrative capacity and ensure the fundamental instruments and institutions 
for  managing  the  CAP.  Considerable  attention  must  be  paid  to  strengthening  the 
administrative  capacity  in  order  to  manage  the  common  market  organisation  and  rural 
development  activities.  Continuing  to  focus  on  establishing  all  IPARD  structures  for 
implementing pre-accession assistance is essential.  

Overall,  Serbia  will  have  to  make  considerable  and  sustained  efforts  to  align  its  legislation 
with the EU acquis and to effectively implement and enforce it.  

3.12.  Chapter 12: Food safety, veterinary and phytosanitary policy 

The  EU  has  an  integrated  approach  aimed  at  ensuring  a  high  level  of  public  health,  animal 
health,  animal  welfare  and  plant  health  by  means  of  coherent  farm-to-table  measures  and 
adequate  monitoring,  while  ensuring  effective  functioning  of  the  internal  market.  The  EU 

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acquis lays down hygiene rules for food production and veterinary rules, which are essential 
for safeguarding animal health, animal welfare and the safety of food of animal origin in the 
internal  market.  EU  phytosanitary  rules  cover  issues  such  as  seed  quality,  plant  protection 
products,  harmful  organisms  and  animal  nutrition.  Member  States  must  have  appropriate 
administrative  structures  for  inspection  and  control  of  food  products,  including  appropriate 
laboratory capacity. 

The  SAA  includes  provisions  on  cooperation  in  the  field  of  veterinary  and  phytosanitary 
controls. 

In  the  area  of  general  food  safety,  food  safety  rules  and  specific  rules  for  feed,  the 
responsibilities for control of food and animal feed safety have been defined in the 2009 Law 
on food safety. The Veterinary, Phytosanitary and Agricultural Inspections of the Ministry of 
Agriculture,  Trade,  Forestry  and  Water  Management  are  responsible  for  official  controls  of 
food  and  feed  of  animal  and  plant  origin  in  primary  production,  processing,  sale,  import, 
transit  and  export.  The  Sanitary  Inspections  of  the  Ministry  of  Health  is  responsible  for 
control of novel foods, dietetic products, additives, aromas, enzymes of non-animal origin and 
of all types of potable water. The Veterinary Directorate of the Ministry of Agriculture is the 
competent  authority  for  the  safety  of  food  of  animal  origin.  The  current  administrative 
structures are reliable even if staffing needs to be strengthened in several sectors. 

The  Food  Safety  Law  includes  most  of  the  principles  required  in  the  EU  acquis.  However, 
enforcement of the Law needs to be considerably improved. Some of the features introduced 
by  the  Food  Safety  Law  are  not  yet  applied  (e.g.  the  principle  of  risk  analysis).  The 
implementation  by  food  businesses  as  well  as  the  related  official  controls  of  other  key 
principles  (e.g.  hazard  analysis  and  critical  control  points  -  HACCP)  also  need  to  be 
improved.  Both  the  skills  base  and  the  equipment  of  the  authorities  responsible  for  official 
controls  and  policymaking  in  this  area  need  to  be  strengthened.  The  National  Reference 
Laboratories  Directorate  is  severely  understaffed  and,  thus,  unable  to  perform  the  duties 
assigned to it by the Food Safety Law.  

As  regards  genetically  modified  organisms  (GMOs),  the  existing  legislation  is  not 
compatible with the EU acquis. 

The  legislative  framework  in  the  veterinary  sector  consists  of  the  2005  Law  on  veterinary 
matters (amended in 2010) and the 2009 Law on animal welfare. Implementing legislation for 
eradication  of  a  number  of  animal  diseases  and  on  animal  welfare  has  been  approved 
following  adoption  of  the  framework  legislation.  Serbia  has  a  functioning  animal 
identification  and  registration  system.  In  order  to  be  able  to  implement  the  legislation 
properly, the veterinary IT systems need to be upgraded. Official controls of implementation 
of the animal identification and registration system (including control of cattle markets) need 
to be improved.  

With regard to placing on the market of food, feed and animal by-products, access to the 
EU market is improving. Currently five slaughterhouses have been approved to export beef, 
four processing establishments to export beef and pork meat products, two fish establishments 
and two dairy plants to export dairy products to the EU. However, Serbia is not yet on the list 
of  countries  authorised  to  export  fresh  meat  of  pigs  and  poultry.  So  far,  no  establishments 
processing poultry meat products are listed for export to the EU. The national programme for 
upgrading establishments to EU standards has yet to be prepared.  

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The  national  system  for  management  of  animal  by-products  needs  to  be  substantially 
upgraded in order to comply with EU requirements.  

The  framework  acts  regulating  the  phytosanitary  area  consist  of  the  Laws  on  plant  health 
(2009),  registration  of  agricultural  plant  varieties  (2010),  plant  breeders  rights  (2009)  and 
plant  protection  products  (2009).  Progress  has  been  noted  on  adoption  of  implementing 
legislation, for example on maximum residue levels of plant protection products in food and 
on  plant-breeders'  rights.  However,  the  procedure  for  registration  of  new  plant  protection 
products is not harmonised with the EU acquis and an official pesticide residues monitoring 
programme  meeting  EU  requirements  has  yet  to be put in place. The phytosanitary strategy 
for  introduction  of  a  plant  passport  system  has  not  been  formally  adopted  and  the  plant 
passport  system  has  not  yet  been  implemented.  The  capacity  of  both  the  national  reference 
laboratory and the regional laboratories for control of seed and seed material and for pesticide 
residue analysis requires further strengthening to meet EU requirements.  

Conclusion 

Serbia has started the process and made good progress with aligning its legislation with EU 
requirements in the area of food safety, veterinary and phytosanitary policy. However, further 
strengthening  of  the  administrative  capacity  of  the  institutions  involved  in  controlling  food 
chain safety, in particular of the veterinary, phytosanitary and national reference laboratories 
within the Ministry of Agriculture, Forestry and Water Management, is required in order for 
Serbia to be able to comply with EU requirements in this area. 

Overall,  Serbia  will  have  to  make  additional  efforts  to  achieve  full  alignment  with  the  EU 
acquis in the medium term and also with implementation of the harmonised legislation. 

3.13.  Chapter 13: Fisheries 

The EU acquis on fisheries consists of directly applicable Regulations, which do not require 
transposition into national legislation. However, it does require the introduction of measures 
to  prepare  the  administration  and  operators  for  participation  in  the  common  fisheries  policy 
(CFP),  which  covers  aquaculture,  market  provisions  and  State  aid.  Furthermore,  certain 
provisions of the European Fisheries Fund (EFF) Regulation will have to be implemented and 
a severe system established for control of fisheries products, with the aim of ending illegal, 
unreported  and  unregulated  fishing.  However,  the  CFP  does  not  cover  'inland  fishing'. 
Consequently,  CFP  rules  provide  rather  limited  coverage  in  Serbia.  EU  requirement  on 
resource and fleet management and inspection and control do not apply to inland fishing 
and is therefore not applicable for Serbia.  

The  Interim  Agreement  on  trade  and  trade-related  matters  and  subsequently  the  SAA, 
regulates  preferential  trade  in  fish  and  fishery  products  and  encourages  cooperation  in  the 
field of fisheries. The SAA also introduces cooperation on fisheries.  

Serbia has no coastline and, therefore, no marine fisheries. Serbia's very small fishing sector 
(accounting  for  € 6  million  in  2008,  with  around  1,500  people  working  as  professional 
fishermen  or  fish-farm  employees)  consists  of  commercial  inland  fishing  carried  out  on  the 
Rivers Danube, Sava and Tisa. Serbia has approximately 55 natural lakes with a total surface 
area of 5,000 hectares, plus about 150 reservoirs and ponds. Inland fishing in Serbia includes 
warm-water aquaculture, mainly common carp, and cold-water aquaculture, mainly rainbow 
trout.  Since  2003  a  slight  rise  in  catches  has  been  recorded  for  all  fish  species  in  inland 

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waters. Since 2005 a small increase in fisheries exports has been recorded. However, imports 
significantly surpass exports, in terms of both quantity and value. Serbia has been included on 
the list of countries allowed to export fishery products to the EU. 

Serbia  has  no  specific  structural  action  or  State  aid  for  aquaculture  and  small-scale 
commercial  fisheries.  However,  a  limited  number  of  structural  measures  for  inland  fishing 
exist, in line with the EFF Regulation.  

With  regard  to  market  policy,  Serbia  has  established  no  marketing  standards  for  fisheries 
products.  Serbia  will  therefore  have  to  align  its  legislation  with  the  EU  acquis  in  this  area, 
also when it comes to compulsory consumer information when products are offered for retail 
sale to the final consumer.  

As regards aquaculture, Serbia will need to establish a national administrative body with the 
aim  of  preventing,  effectively  controlling  and  eradicating  alien  species  which  threaten 
ecosystems, habitats or species. Serbia will also have to establish a national catch certification 
scheme for imports and exports of fishery products. 

Conclusion 

The Serbian fishing industry is very small and consists of inland fishing, which is not covered 
by the EU acquis. The administrative body for the fisheries sector needs to be adapted to the 
needs  of  the  CFP,  while  the  capacity  of  the  administration  dealing  with  management  and 
control of fishing activities needs to be enhanced and brought into line with CFP obligations.  

Overall,  Serbia  should  be  able  to  align  with  the  EU  acquis  in  the  fisheries  chapter  and  to 
implement it effectively in the medium term.  

3.14.  Chapter 14: Transport policy 

EU  transport  legislation  aims  at  improving  the  functioning  of  the  internal  market  by 
promoting  efficient,  environment  and  user-friendly  transport  services.  The  EU  acquis  on 
transport covers road transport, railways, aviation, maritime transport and inland waterways. 
It  governs  technical  and  safety  standards,  social  standards  and  market  liberalisation  in  the 
context of the single European transport market. 

In  the  field  of  road  transport,  in  line  with  the  Interim  Agreement,  Serbia  has  granted 
unrestricted access to EU transit traffic to cross its territory.  

The new Law on road transport adopted in April 2010 was a step forward towards alignment 
with  the  EU  acquis.  However,  two  issues  are  still  outstanding:  compliance  with  the 
regulations on access to the international road market and to the occupation of road transport 
operator. The Law on road safety was adopted in July 2010. Implementing legislation has yet 
to  be  adopted,  in  particular  on  drivers'  hours,  driving  and  rest  times  and  transport  safety 
conditions for tunnels. The Law on road safety established the Road Traffic Safety Agency, 
which is now operational; 40 of the 65 posts in the Agency were filled until now. 

In the area of the EU social acquis, the legal framework regulating the driving times and rest 
periods of drivers performing international transport operations and introducing tachographs 
was adopted in mid-2010. It is in line with the European Agreement concerning the work of 
crews  of  vehicles  engaged  in  international  road  transport  (AETR).  Serbia  needs  to  step  up 
establishment of a system of digital tachographs.  

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The Law on transport of dangerous substances by road, rail and inland waterways entered into 
force  in  May  2011  and  is  consistent with  EU  legislation.  Serbia  is  a  party  to  the  European 
Agreement  concerning  the  international  carriage  of  dangerous  goods  by  road  (ADR). 
However, Serbia needs to strengthen its mechanisms for monitoring theimplementation of the 
relevant  international  rules  and  EU  legislation,  including  those  on  transportable  pressurised 
equipment,  roadside  checks  on  vehicles  and  safety  advisors.  Legislation  and  organisational 
arrangements  for  roadworthiness  testing  are  in  place.  The  national  limits  on  the  maximum 
weights  and  dimensions  for  road  vehicles  are  harmonised  with  the  EU  requirements.  Serbia 
applies a fee for special transport operations exceeding the permitted vehicle dimensions, total 
mass and axle load. More transparency is needed as far as determination and application of 
this special fee is concerned.  

On  rail  transport,  a  new  law  on  railways  has  been  adopted  by  the  Government  in  August 
2011 and is currently in parliamentary procedure. The draft law is partially harmonised with 
the  relevant  EU  rules  and  will  bring  progress  to  the  opening-up  of  the  rail  market.  Further 
efforts  will  be  needed  to  complete  the  alignment.  Serbian  railways  were  transformed  into  a 
joint  stock  company  in  June  2011.  The  draft  law  on  railways  envisages  its  further 
transformation  into  a  holding  with  different  daughter  companies  for  freight,  passenger  and 
infrastructure  management.  However,  the  holding  structure  of  Serbian  Railways  will  not 
ensure the independence of the infrastructure manager or prevent cross subsidisation. Serbian 
railways have not yet published the network statement of the infrastructure manager needed to 
ensure  transparency  and  non  discriminatory  access  to  rail  infrastructure  for  all  railway 
undertakings.  The  EU  safety  and  interoperability  rules  have  not  been  introduced  into  the 
national legislation. Similarly, there is no contract to compensate public service obligations in 
line  with  the  corresponding  EU  Regulation.  According  to  the  draft  law  on  railways,  the 
Railway  Directorate  which  is  a  legal  entity  under  the  state  administration  shall  perform  the 
role  of  railway  regulatory  body.  The  independence  of  this  body  will  need  to  be  further 
ensured,  and  it  will  need  to  be  given  the  required  competences  and  administrative  capacity. 
Serbia  has  yet  to  establish  an  independent  accident  investigation  body.  Concerning  border 
crossing,  four  Protocols  were  signed  under  the  Border  Crossing  Agreement  between 
Montenegro and Serbia. The Agreement needs to be further aligned with the EU legislation. 
Serbia needs to speed up the implementation of its commitments set in the Addendum for a 
Common South East European Railway Area.  

On inland waterway transport, the 2010 Law on safety of navigation by inland waterways 
contains  provisions  harmonising  with  European  and  international  regulations  in  this  sector. 
The River Information System is being implemented in line with EU requirements. A public 
agency to manage the inland ports has been established in September 2011.  

As regards combined transport, Serbia is in the initial phases of developing its policy.  

The Law on air transport was adopted in 2010. However, more efforts need to be made to 
implement  it  properly.  The  law  was  amended  in  2011.  The  amendments  introduced  the 
establishment of a Centre for investigation of accidents and serious incidents as a separate and 
independent institution and transferred the inspection oversight functions and activities from 
the Ministry of Infrastructure to the Civil Aviation Directorate.  

Serbia  has  made  some  progress  with  implementation  of  the  first  transitional  phase  of  the 
European Common Aviation Area (ECAA) Agreement. Opening of the market has led to an 
increase in the number of carriers operating in Serbia and in passenger traffic. 

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Serbia  has  aligned  partially  with  the  EU  Regulation  on  passengers  rights,  fulfilling  its 
obligation  under  the  ECAA  Agreement.  Passenger  rights  in  the  event  of  denied  boarding, 
cancellation or long delays of flights are regulated by the Law on obligations and basic rights 
in air transport. However, Serbia needs to adopt the rules concerning the protection of rights 
of disabled persons and persons with reduced mobility in accordance with the EU Regulation. 
Specific national bodies for enforcement of these rights have not yet been appointed. Both EU 
and international (Montreal Convention) rules on air carrier liability in the event of accidents 
have been introduced into Serbia's national legislation.  

EU  rules  on  groundhandling  have  been  implemented,  but  further  efforts  are  needed  to 
improve  their  application.  Progress  has  to  be  made  on  implementing  the  Regulation  on 
allocation of slots. In relation to airport charges, further clarification of the rules on disputes 
between airport users and the airport managing body is needed.  

Regarding  regulatory  alignment  within  the  programme  for  implementation  of  the  single 
European  sky  in  South-East  Europe,  Serbia  adopted  implementing  legislation  aligning  with 
the framework and the service provision regulations of the single European sky and with the 
regulations on the software safety assurance system for air navigation service providers and 
safety oversight in air traffic management. Legislation on the organisation and use of airspace, 
interoperability of the European air traffic management network and the regulation on flexible 
use  of  airspace  needs  to  be  adopted  to  ensure  regulatory  convergence  in  the  air  traffic 
management  field.  Serbia  needs  to  comply  with  requirements  concerning  inspections.  The 
security control system has to be overseen by an independent body. 

In  the  area  of  maritime  transport,  no  sea-going  vessels  call  at  inland  waterways  ports  in 
Serbia  and  no  fleet  is  registered  in  the  country.  Progress  on  harmonisation  of  the  national 
legislation  with  the  EU  rules  on  safety  of  maritime  navigation  was  made  in  July  when  the 
government  adopted  the  Law  on  maritime  navigation,  which  is  now  in  parliamentary 
procedure.  

Serbia has stated its intention of taking part in the Galileo satellite navigation programme. 

Conclusion 

Serbia  has  framework  legislation  on  road  transport  and  inland  waterways,  and  is  about  to 
adopt a law on maritime navigation. However, more efforts need to be made to implement it 
properly. A new law on the railway market opening generally in line with the EU legislation 
is  pending  parliamentary  adoption.  Serbia  will  need  to  adopt  appropriate  legislation  for  the 
safety of railways. Serbia has implemented most of the EU aviation legislation, but there is a 
considerable delay in implementation of the single European sky legislation. Administrative 
capacity needs to be strengthened to ensure implementation of the legislation, in particular as 
far  as  enforcement  and  inspection  bodies  for  road  transport,  railways  and  aviation  are 
concerned. 

Overall,  Serbia  will  have  to  make  additional  efforts  to  align  with  the  EU  acquis  and  to 
implement it effectively in the medium term.  

3.15.  Chapter 15: Energy 

The  EU's  energy  policy  objectives  are  to  improve  competitiveness  and  ensure  security  of 
supply,  while  protecting  the  environment  and  combating  climate  change.  The  EU  energy 

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acquis consists of rules and policies covering competition and State aid, the internal energy 
market  (opening  up  electricity  and  gas  markets  in  particular),  promoting  renewable  energy 
sources,  energy  efficiency,  crisis  management  and  oil  stock  security  obligations,  nuclear 
energy, nuclear safety and radiation protection. 

Serbia's overall energy balance comprises coal, oil, gas, firewood, hydroelectricity, and other 
renewable energy sources. There is currently no nuclear energy production. In 2008, the three 
largest  major  energy  sources  for  covering  gross  inland  consumption  were  coal  (51%),  oil 
(27%)  and  natural  gas  (13%).  Domestic  production  covers  60%  of  total  primary  energy 
consumption. Serbia's energy sector accounts for more than 10% of its GDP. As a transit hub 
in  South-East  Europe,  Serbia's  interconnections  with  neighbouring  countries  are  very  often 
congested.  

Serbia's  energy  strategy  is  outlined  in  the  Energy  Sector  Development  Strategy  adopted  in 
2005. An implementing plan was adopted in 2007 and has subsequently been updated, most 
recently  in  2010.  The  development  of  a  new  energy  strategy  for  a  period  of  at  least  fifteen 
years is foreseen under a new Energy Law, adopted in July 2011. As a member of the Energy 
Community, Serbia is legally bound to implement large parts of the EU acquis on energy. The 
new Energy Law represents a substantial step towards full transposition of key provisions of 
the EU acquis on electricity and gas. The new Energy Law foresees a new market model, and 
the  unbundling  of  distribution  and  supply  functions  for  gas  and  electricity.  It  also  foresees 
stronger powers for the Energy Agency of the Republic of Serbia (AERS), notably as regards 
the  definition  of  tariffs,  oversight  of  the  unbundling  process,  market  rules,  allocation  rules, 
and network development plans. 

Under the new Energy Law, the tasks and powers of the AERS are, in principle, in line with 
the  'second  package'  of  the  EU  energy  acquis.  However,  they  are  resource-intensive  and 
implementation  of  the  new  law  will  require  an  increase  in  the  AERS's  staff.  There  are  also 
concerns  about  the  independence  of  the  Agency,  because  the  members  of  the  board  are 
appointed following a non-competitive procedure.  

With respect to security of supply, Serbia's production is dominated by coal and it relies on 
imports for cleaner energy sources. Serbia's dependence on natural gas imports exceeds 80%. 
Gas is mostly imported from Russia through Ukraine and Hungary. Local production and gas 
storage  projects  to  diversify  supply  together  with  construction  of  new  interconnections  are 
planned  in  the  Energy  Sector  Development  Strategy.  The  Nis-Dimitrovgrad  project  linking 
Serbia to Bulgaria is the most advanced, with a feasibility study under way. The underground 
gas storage facility in Banatski Dvor, co-owned by Gazprom (51%) and Srbijagas (49%) is in 
operation  since  2009.  There  are  plans  for  the  development  of  a  second  underground  gas 
storage, in connection with the possible South Stream gas project, which would transport gas 
from Russia through the Black Sea and Bulgaria. 

Concerning electricity, Serbia has given priority to the new interconnection with the former 
Yugoslav Republic of Macedonia. On the Serbian side, section 1 of the line (substation NIS-
Leskovac)  is  in  operation.  Construction  of  section  2  (substation  Leskovac-Vranje-border)  is 
ongoing  and  approaching  completion.  Other  electricity  interconnections  with  Montenegro, 
Bosnia  and  Herzegovina  and  along  the  transmission  corridor  towards  Italy  are  at  the  pre-
feasibility study stage.  

The  level  of  emergency  oil  stock  reserves  is  classified  as  a  state  secret  according  to  the 
Serbian Law on commodity reserves. A new Law on commodity reserves is being prepared. 

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Under the new law, mandatory oil stocks would be reclassified as a mandatory stock rather 
than a commodity reserve, so the level of these stocks would no longer be a State secret. No 
information  has  been  received  so  far  on  the  actual  level  of  oil  stocks,  although  Serbia 
indicates a timeframe of about 10 years for meeting current EU requirements.  

As regards the competitiveness of the internal energy market (opening-up of the electricity 
and gas markets), the new Energy Law is largely in line with the requirements of the Energy 
Community. A remaining shortcoming in the field of electricity is that all eligible customers 
connected to the distribution system will be entitled to be supplied at regulated tariffs until the 
end of 2013. The government will now need to focus on implementing and enforcing the new 
Law correctly. Serbia also needs to start preparing for alignment with the EU's 'third internal 
energy market package', which entered into force in March 2011.  

Electricity consumption totalled 33.7 TWh in 2008. The electricity sector is gradually making 
progress with its process of unbundling. Since 2005, operation of the transmission system and 
the  electricity  market  has  been  under  the  responsibility  of  the  public  enterprise  EMS 
(Elektromreza  Srbije).  The  remaining  functions  (generation,  distribution  and  supply)  are 
performed  by  the  vertically  integrated  public  company  EPS  (Elektroprivreda  Srbije).  In 
accordance with the new Energy Law, EPS needs to, however, complete the legal unbundling 
of distribution and supply. By law, the electricity market has been open since February 2008 
for all non-household consumers which make up 47% of the market. However, in practice, no 
eligible  customers  have  switched  supplier.  EPS  holds  a  de  facto  monopoly,  due  to  the 
persistence of regulated prices, set at levels below the market price. The choice of the market 
model, the move towards tariffs and prices reflecting costs and the independent functioning of 
AERS  will  all  be  crucial  to  achieve  real  opening  of  the  market  and  attract  the  necessary 
investment. The reform of the tariff system must not be postponed any longer. 

Serbia  needs  to  implement  the  Regulation  on  cross-border  allocation  of  capacity.  In 
September  2010,  the  Energy  Community  Secretariat  sent  an  opening  letter  following  a 
complaint  against  Serbia  under  the  Energy  Community  dispute  settlement  mechanism.  The 
complaint  concerned  the  absence  of  compensation  for  electricity  transit  to  the  Kosovo 
electricity  transmission  system  and  market  operator  (KOSTT)  and  the  allocation  of  cross-
border capacities. Serbia is impeding Kosovo's participation in regional mechanisms to plan 
and  be  remunerated  for  electricity  transit.  In  October  2011,  the  Secretariat  stated  in  its 
Reasoned Opinion on this complaint that Serbia has failed to fulfill its obligations under the 
Energy  Community  Treaty.  Furthermore,  the  Serbian  electricity  utility  is  maintaining  an 
unlicensed branch in the north of Kosovo. 

Gas  consumption  in  Serbia  totals  some  3.2  billion  cubic  metres  a  year.  The  State-owned 
Srbijagas is a fully integrated company and is the only wholesale supplier on the market. It 
has  not  been  unbundled.  Srbijagas  purchases  gas  from  Gazprom  via  the  intermediary 
Yugorosgaz  (50%  Gazprom,  25%  Central  ME  Energy  &  Gas  AG,  25%  Srbijagas). 
Yugorosgaz  holds  rights  for  developing  gas  transmission  in  southern  Serbia.  The  difficult 
financial situation of Srbijagas will need to be addressed as a matter of priority.  

The  new  Energy  Law  is  partly  in  line  with  the  Renewable  Energy  Sources  Directive.  The 
main  part  of  the  framework  for  the  promotion  of  renewable  energy  will  be  at  the  level  of 
subsequent  by-laws.  Therefore,  the  development  of  the  Serbian  regulatory  system  for 
renewable  energy  will  require  continuous  monitoring  to  ensure  compliance  with  the  EU 
acquis. In the framework of the Energy Community, Serbia is preparing a binding target for 
the  percentage  of  renewable  energy  in  final  energy  consumption  by  2020.  Serbia  will  also 

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need  to  prepare  a  National  Renewable  Energy  Action  Plan  (NREAP),  which  will  provide  a 
roadmap for achieving this target.  

Serbia  has  significant  potential  for  renewable  energy,  which  remains  largely  untapped.  To 
date,  only  the  hydroelectricity  and  biomass  sectors  have  been  partly  developed.  The  2005 
Energy  Sector  Development  Strategy  aims  at  a  2.2%  increase  in  electricity  produced  from 
renewable  energy  sources  by  2012.  The  share  of  renewable  energy  sources  in  total  primary 
energy  production  in  Serbia  was  8%  in  2008.  Feed-in  tariffs  are  in  place,  but  the 
administrative procedures for authorisation, licensing and network connections are the biggest 
barrier to the uptake of renewables. The current level of biofuel production is negligible.  

Serbia  will  need  to  pay  continued  attention  to  promoting  renewable  energy,  in  particular  in 
transport  and  in  heating/cooling.  The  administrative  capacity  in  his  area  needs  to  be 
strengthened. Further efforts should be undertaken towards creating a regulatory environment 
fostering the increased use of renewable energy sources in all sectors. 

Serbia's  economy  is  highly  energy-intensive,  consuming  2.7  times  more  energy  per  unit  of 
output  than  the  OECD  average.  While  energy  efficiency  is  a  priority  in  Serbia's  energy 
strategy, Serbia has not yet adopted the planned framework law on rational use of energy. A 
draft law has been prepared. It covers energy performance in buildings, labelling of domestic 
appliances  and  energy  services.  The  draft  law also  provides  for  establishing  of  an  energy 
efficiency  fund.  Ensuring  sufficient  administrative  capacity  for  implementation  of  the  new 
legislation will be essential. 

Nuclear safety and radiation protection issues are regulated by the 2009 Law on ionising 
radiation protection and nuclear safety. The Serbian Agency for Ionising Radiation Protection 
and  Nuclear  Safety  (SRPNA)  was  established  as  a  separate  body  in  2009  and  started 
functioning in mid-2010. The Agency implements the international conventions which Serbia 
has signed. The transfer of inspection functions from a variety of ministries to the Agency has 
not  yet  been  achieved,  in  line  with  best  regulatory  practices.  Effective  independence  and 
sufficient  levels  of  staff  and  funding  will  be  essential  to  ensure  proper  functioning  of  the 
Agency,  particularly  for  licensing  of  nuclear  facilities.  Serbia  still  needs  to  accede  to  the 
Convention  on  Nuclear  Safety  and  to  the  Joint  Convention  on  the  Safety  of  Spent  Fuel 
Management  and  on  the  Safety  of  Radioactive  Waste  Management.  Serbia  still  needs  to 
develop  a  national  strategy  for  nuclear  waste  management  and  decommissioning  of  its 
research reactor at Vinča. A Quality Management System for the Agency should be in place. 
Further efforts are required to improve the radiological situation at Vinča. 

Conclusion 

Serbia's energy sector is characterised by the lack of a competitive market and low levels of 
efficiency. By adopting the new Energy Law, Serbia has put itself in a good position to make 
the  necessary  reforms  and  to  foster  the  development  of  its  energy  sector,  in  line  with  the 
requirements of the EU acquis. Adoption of relevant implementing legislation, accompanied 
by adequate enforcement, will be essential.  

Special attention needs to be paid to genuine opening of the electricity market, reforms in the 
gas  sector,  increasing  mandatory  oil  stocks,  meeting  the  objectives  for  improving  energy 
efficiency  and  promoting  renewable  energy  in  electricity  generation,  transport,  heating  and 
cooling. Serbia will need to reinforce its administrative capacity in order to ensure effective 
implementation  and  enforcement  of  its  legal  obligations  in  the  energy  sector.  The  effective 

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independence of regulatory bodies will require particular attention. Serbia needs to develop a 
new  energy  strategy  aligned  with  EU  2020  objectives.  Serbia  also  needs  to  comply  with  its 
Energy Community Treaty obligations. 

Overall, Serbia will have to make additional efforts to align with the EU acquis on energy and 
to implement it effectively in the medium term. 

3.16.  Chapter 16: Taxation 

The  EU  acquis  on  taxation  covers  the  area  of  indirect  taxation  extensively,  as  regards  both 
VAT  (value-added  tax)  and  excise  duties.  It  lays  down  the  definitions  for  and  principles  of 
VAT. Excise duties on mineral oils, tobacco products and alcoholic beverages are subject to 
EU  directives  covering  the  structure  of  the  duties,  the  minimum  rates  and  the  holding  and 
movement  of  excisable  goods.  As  concerns  direct  taxation,  the  EU  acquis  covers  some 
aspects  of  corporate  taxes  and  aims  mainly  at  removing  obstacles  to  cross-border  activities 
between  enterprises.  Finally,  the  EU  legislation  on  administrative  cooperation  and  mutual 
assistance provides tools to avoid evasion of both direct and indirect taxation.  

The Interim Agreement, and subsequently the SAA, prohibit fiscal discrimination. The SAA 
also establishes cooperation between the EU and Serbia in the area of taxation with the aims 
of aligning with the EU acquis, further reforming Serbia's fiscal system, ensuring effective tax 
collection and fighting fiscal fraud. 

With regard to indirect taxation, value-added tax was introduced in 2004 and is regulated by 
the Law on  value-added  tax  (VAT). The  law  introduces all the basic principles and follows 
the  structure  of  the  EU  legislation  on  VAT.  It  stipulates  that  domestically-produced  and 
imported goods are charged the same tax rate – either 18% (general rate) or 8% (specific rate).  

However,  there  are  some  discrepancies  between  the  Serbian  VAT  legislation  and  the  EU 
acquis, notably: the lack of any possibility for non-established taxable persons to register in 
Serbia for VAT purposes despite the fact that they may be taxable in that country. The same 
applies  to  the  place  of  supply  of  services;  the  special  scheme  on  investment  gold;  some 
exemptions; and the general refund procedure  

In  terms  of  territorial scope, VAT on goods which are supplied from Kosovo is not paid in 
Serbia but collected by the branches of the Serbian Tax Administration operating in the north 
of  Kosovo.  The  STA  offices  also  collect  annual  income  taxes  and  certain  other  taxes  in 
northern  Kosovo.  This  is  not  compatible  with  the  fact  that  Kosovo  is  a  separate  customs 
territory. 

The  Law  on  excise  duties  has  been  in  force  since  2001.  Serbia  applies  excises  on  tobacco, 
alcohol, energy products and coffee (an ad valorem duty of 30%). The law provides for equal 
treatment of domestic and imported goods in terms of the excise tax rates applicable. In June 
2011,  Serbia  aligned  its  excise  duties  on  motor  fuels  with  the  requirements  of  the  Interim 
Agreement. However, discriminatory excise duties on imported spirits still exist. They need to 
be  brought  into  line  with  the  duties  on  local  production  in  order  to  comply  fully  with  the 
Interim  Agreement.  Considerable  discrepancies  from  the  EU  acquis  exist  for  harmonised 
excisable goods (tobacco, alcohol and energy products) as regards scope, classification of the 
goods,  exemptions,  structures  and  the  minimum  rates.  Serbia  has  no  duty  suspension  and 
movement system. As storage excise warehouses for importers do not exist, the excise has to 

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be  paid  at  the  moment  of  importation,  thus  putting  importers  at  a  disadvantage  over  local 
producers. Serbia needs to align its law on excise tax fully with the EU acquis.  

As  regards  direct  taxation,  Serbia's  corporate  tax  system  is  generally  in  line  with  the  EU 
acquis.  The  tax  incentives  available  seem  to  include  none  of  the  major  harmful  features 
described in the EU Code of Conduct. Nevertheless, certain aspects of the Serbian direct tax 
system, such as the taxation of dividends and interest received by individual investors or the 
taxation  of  non-resident  artists  and  sportsmen,  could  conflict  with  the  EU  acquis,  as  they 
discriminate  against  non-resident  taxpayers.  Upon  accession,  Serbia  needs  to  implement  the 
Savings Directive and the new Mutual Assistance Directive.  

With  regard  to  administrative  cooperation  or  mutual  assistance,  agreements  with  the  tax 
administrations  of  Bosnia  and  Herzegovina,  Bulgaria,  the  former  Yugoslav  Republic  of 
Macedonia  and  Montenegro  were  signed  in  2006.  Serbia  has  ratified  double  taxation 
agreements with 47 States.  

Concerning  operational  capacity  and  computerisation,  the  Serbian  Tax  Administration 
(STA) establishes, collects and enforces public revenue – in accordance with the 2002 Law on 
tax  procedures  and  tax  administration.  It  has  a  good  level  of  administrative  capacity  and 
practices in terms of tax proceedings, the registration of taxpayers, tax accounting, detection 
of  tax  offences  and  instituting  offence  proceedings.  A  corporate  strategy  for  2011-2015 
defines major future steps needed to modernise it. Preparations are being made to establish a 
single tax registry. The STA has well-qualified staff. However, non-competitive salaries have 
triggered a significant outflow of staff. The inspection department is understaffed, as well as 
the  Large  Taxpayers  Office.  Staff  training  needs  to  be  further  developed  and  become  more 
specialised.  There  is  room  for  further  improvement  in  both  external  and  internal 
communication. Coordination between the different levels of the STA needs to be improved 
and the level of collaboration and cooperation with the Ministry of Finance strengthened.  

Modernisation of IT systems is a priority for the STA, not only to prepare for accession but 
also  to  enhance  collection  and  the  fight  against  the  informal  economy.  The  IT  system  is 
insufficiently  prepared  for  the  introduction  of  electronic  communication  with  taxpayers  and 
has limited possibilities for sound risk analysis or processing tax returns. Manual inputting of 
information  submitted  on  paper  by  taxpayers  burdens  the  allocation  of  staff  for  inspections 
and identification of unregistered taxpayers.  

The  Tax  Administration  of  Serbia  has  a  good  administrative  capacity  to  prepare  for 
interconnectivity  and  interoperability  with  the  Commission's  IT  system.  However,  further 
capacity-building is necessary to develop and operate all the national parts of trans-European 
taxation and excise IT systems. 

Conclusion 

The tax legislation in Serbia is partly aligned with the EU acquis. Further alignment will be 
needed in the area of direct and indirect (VAT and excise duties) taxation. VAT legislation is 
not  yet  fully  compatible  with  all  the  provisions  of  the  VAT  Directive  and  there  are 
considerable  discrepancies  from  the  EU  acquis  for  harmonised  excisable  goods.  Certain 
aspects  of  the  Serbian  direct  taxation  system  concerning  individuals  could  conflict  with  the 
EU acquis as they discriminate against non-resident taxpayers. Some tax relief measures will 
need to be further examined in order to determine whether they are harmful. The Serbian Tax 
Administration  works  well,  overall.  It  has  administrative  structures  and  resources  for 

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implementation  of  the  EU  acquis,  but  will  need  to  be  further  modernised  in  line  with  its 
recently adopted strategy documents. Modernisation of the IT systems is a priority in order to 
facilitate the development of a sound system of risk analysis that would shift the focus from 
control of registered economic entities to detection of non-registered entities. 

Overall, while still facing challenges in the areas of legislative alignment and administrative 
capacity, if it continues its efforts, Serbia should, in the medium term, be able to acquire the 
capacity to comply with the requirements of the EU acquis. 

3.17.  Chapter 17: Economic and Monetary Policy 

The  EU  acquis  in  the  area  of  economic  and  monetary  policy  contains  rules  requiring  the 
independence of central banks in Member States and prohibiting both direct financing of the 
public  sector  by  the  central  banks  and  privileged  access  for  the  public  sector  to  financial 
institutions. Member States are expected to coordinate their economic policies and are subject 
to  the  rules  of  the  excessive  deficit  procedure  and  of  the  Stability  and  Growth  Pact.  The 
national  central  banks  are  subject  to  the  Statute  of  the  European  System  of  Central  Banks 
(ESCB)  and  the  European  Central  Bank  (ECB).  New  Member  States  are  also  committed  to 
complying  with  the  criteria  for  adopting  the  euro.  Until  they  join  the  euro  area,  they  will 
participate in the economic and monetary union (EMU) as Member States with a derogation 
and must treat their exchange rate policy as a matter of common concern. 

The SAA includes provisions on cooperation and exchanges of information, allowing Serbia 
gradually  to  approximate  its  policies  to  the  stability-oriented  policies  of  the  European 
Economic and Monetary Union. 

In  the  area  of  monetary  policy,  Serbia  uses  the  dinar  as  its  sole  legal  tender.  All  financial 
obligations arising from transactions concluded in Serbia are denominated and paid in dinar. 
In  line  with  this,  the  National  Bank  of  Serbia  (NBS)  uses  the  dinar  as  the  official  currency  for 
conducting  its  monetary  policy.  The  euro  is  widely  used  as  a  parallel  currency,  as  most  bank 
loans  are  indexed  in  euro  and  almost  all  savings  are  in  euro.  The  origin  of  Serbia's 
'euroisation' dates back to the 1990s when, during the period of devastating hyperinflation, the 
German  mark  was  used  for  a  time  both  as  a  means  of  payment  and  as  an  instrument  for 
protecting value.  

The National Bank of Serbia is largely independent and performs the tasks set by the 2010 Law on the 
NBS. The law also prescribes that, while performing their duties, the NBS and its bodies and members 
of  the  bodies  are  not  allowed  to  receive  or  request  instructions  from  government  bodies  and 
organisations or any third party. The same law strictly prohibits government bodies, organisations 
and  other  persons  from  jeopardising  the  independence  and  autonomy  of  the  NBS  or 
influencing  the  NBS  while  performing  its  duties.  The  NBS  is  subject  only  to  supervision  by 
parliament,  to  which  it  reports  on  its  performance.  Parliament  appoints  the  Governor,  based  on  a 
proposal by the President of the Republic, for a period of six years. The length of tenure of the Vice-
Governors and of members of the Council of the NBS is the same, i.e. six years, with the right to be 
re-elected. With regard to financial independence, the NBS has its own sources of income that are 
provided in the Bank's financial plan (income and expenditure projections) for the following 
year. The primary objective of the NBS is to maintain price stability. In the field of monetary 
policy,  since  1  January  2009  the  NBS  has  been  implementing  inflation-targeting  as  its 
monetary strategy and a key instrument of monetary policy, using the key policy rate (interest 
reference rate) in monetary policy core operations. However, the high share of credit indexed 
in foreign exchange and the undeveloped domestic financial market restrain the efficiency of 

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the  monetary  policy.  The  NBS  conducts  a  managed  floating  exchange  rate  system  for  the 
dinar, in which the NBS intervenes only in cases of excessive daily fluctuations in the foreign 
exchange  market.  The  dinar  is  not  pegged  to  the  euro.  Regarding  prohibition  of  direct 
financing  of  the  public  sector,  the  Law  on  the  NBS  explicitly  prohibits  extending  credit 
facilities  to  the  central  government,  provincial  authorities  and  municipal  authorities  or  to 
public  enterprises  founded  and  owned  by  them.  The  NBS  stopped  approving  credits  to  the 
public  sector  in  November  2003.  The  legislation  contains  no  provisions  which  give  the 
government  privileged  access  to  financial  institutions.  As  regards  the  excessive  deficit 
procedure, the amendments to the Law on the budget system, introducing fiscal responsibility, 
were adopted in October  2010.  They set the maximum level of public debt at  45% of  GDP 
(excluding property restitution). 

Regarding  economic  policy,  since  2006  Serbia  has  been  participating  in  the  pre-accession 
economic  policy  surveillance  aimed  at  strengthening  the  economic  planning  capacity  of  the 
Serbian government. This mechanism prepares candidate and potential candidate countries for 
their  eventual  participation  in  the  economic  policy  coordination  and  budgetary  surveillance 
mechanism  of  the  EMU.  In  this  context,  Serbia  regularly  submits  economic  and  fiscal 
programmes  (EFP).  The  latest  (2011)  EFP,  submitted  in  January  2011,  covered  the  period 
2011-2013  and  provided  an  overview  of  expected  future  macroeconomic  developments. 
Furthermore,  Serbia  has  adopted  the  new  development  plan  for  the  period  2011-2020  in 
compliance with the Europe 2020 Strategy (see also Economic criteria). Compared with the 
previous  programme,  some  progress  was  made  towards  producing  a  solid  document.  The 
authorities need to strive to make further improvements in order to raise the public profile of 
its development plan, both at home and abroad.  

Conclusion 

Alignment  with  the  EU  acquis  is  relatively  well-advanced  and  Serbia's  preparations  for 
participation in the third stage of EMU as a Member State with a derogation should pose no 
major problems. Important aspects of the legislation related to central bank independence and 
prohibition  of  direct  financing/privileged  access of  the  public  sector  to  financial  institutions 
are already in place. However, particular attention will have to be paid to monetary stability, 
strengthening the NBS's own policy instruments and containing the parallel use of the euro in 
the  economy,  which  limits  the  NBS's  room  for  manoeuvre  to  conduct  monetary  policy. 
Implementation of economic policy also needs to be strengthened. 

Overall, if it pursues its efforts, Serbia will be in a position to implement the EU acquis in the 
area of economic and monetary policy in the medium term. 

3.18.  Chapter 18: Statistics 

The  EU  acquis  on  statistics  consists  almost  exclusively  of  legislation  which  is  directly 
applicable  in  the  Member  States,  such  as  European  Parliament  and  Council  regulations  and 
Commission decisions or regulations. It also includes a range of methodology handbooks and 
manuals. International agreements and gentleman's agreements with the EU Statistical Office 
(Eurostat) provide a further basis for production of statistics. 

The  SAA  establishes  cooperation  in  the  area  of  statistics  with  the  aim  of  developing  an 
efficient and sustainable statistical system in Serbia. 

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In  the  area  of  statistical  infrastructure,  the  Serbian  Statistical  Office  (SORS)  is  the  main 
producer  of  official  statistics  and  responsible  for  coordination  of  the  Serbian  statistical 
system. The SORS has 472 employees, of whom the Director, his Deputy and the Assistant 
Directors (top eight management positions) are appointed by the government. As part of the 
streamlining  of  public  administration,  the  staff  resources  of  the  SORS  decreased  by 
approximately 10% in 2010 compared with 2009. This did not severely affect its functioning. 
However,  in  order  to  implement  the  tasks  required  for  full  compliance  with  the  EU  acquis, 
there is a need to increase the number of qualified staff in the SORS over the next few years.  

The Law on statistics was adopted in 2009 and is broadly aligned with international standards. 
Adoption of the law has considerably accelerated development of the statistical system. The 
law  defines  the  basic  principles  of  impartiality,  reliability  and  professional  independence.  It 
also provides for creation of the Statistical Council which enables more direct involvement of 
end-users  in  defining  the  output  from  the  official  statistical  system.  The  Council  is  an 
advisory body which primarily deals with strategic issues, such as the development strategy 
for  official  statistics  or  drafting  a  five-year  programme  and  annual  plans  for  statistical 
surveys,  censuses,  standards  and  methodologies.  The  draft  programme  for  2011-2015  has 
been prepared in line with the EU principles. It also encompasses the development strategy in 
place for official statistics (adopted in January 2009 for the period 2009-2012).  

The SORS signed a number of cooperation agreements with other Serbian bodies, notably the 
Ministry  of  Finance  and  the  National  Bank.  It  also  signed  a  number  of  memoranda  of 
understanding  with  various  Serbian  ministries  and  with  the  Serbian  tax  and  customs 
administrations. 

In the area of classification and registers, the 2010 classification of activities (CA 2010) is 
based on the European NACE Rev. 2 classification (Nomenclature of Economic Activities). 
Since  1  January  2011,  CA  2010  has  become  the  obligatory  standard  for  all  units  in  the 
statistical  business  register,  legal  entities  and  economic  operators.  Adoption  of  the  new 
classification allowed harmonisation of other related economic classifications. The statistical 
business register was established in 2005 and is used as the frame for surveys in the field of 
business  statistics.  A  regional  statistical  classification  (NUTS)  has  been  proposed  by  Serbia 
but has not been agreed by the European Commission. A revised proposal, in line with the EU 
acquis, is expected.  

In  the  area  of  sectoral  statistics,  the  population  census  was  planned  in  April  2011  but,  for 
budget reasons, was postponed to October 2011 In 2009, two pilot censuses were conducted, 
one on population, household and dwellings in April, the other on education of Roma people 
in  November.  Following  postponement  of  the  population  census,  the  agriculture  census, 
initially planned for October 2011, has also been delayed until November 2012. The quality 
of agricultural statistics has generally been of low quality o far, as they are based on estimates 
by  municipal  assessors.  Agromonetary  statistics  are  in  an  initial  phase  and  currently  being 
improved. Labour force surveys are carried out regularly twice a year – in April and October. 
A number of other surveys are conducted in the area of social statistics, such as on migration 
and  asylum,  earnings  and  labour  costs,  education  and  health,  together  with  the  household 
budget survey.  

Concerning  macroeconomic  statistics,  the  SORS  produces  estimates  of  gross  domestic 
product  (GDP)  and  national  accounts  broadly  in  accordance  with  the  European  System  of 
Accounts (ESA95). The results of the quarterly GDP estimates at constant prices have been 
published since 2005. Government finance statistics are produced by the Ministry of Finance 

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and  follow  the  International  Monetary  Fund  manual  on  government  finance  statistics.  The 
balance  of  payments,  foreign  direct  investment  and  monetary  and  financial  statistics  are 
compiled by the National Bank. With regard to price statistics, the harmonised consumer price 
index  still  has  to  be  developed.  Foreign  trade  statistics  have  been  harmonised  with  the 
standards  and  procedures  applied  in  the  EU  and  data  are  forwarded  to  the  European 
Commission.  Short-term  statistics  on  energy  and  some  transport  statistics  (on  passenger 
mobility, road freight and rail transport) are not yet produced.  

Conclusion 

Production of statistics is at an advanced level. Progress has been made in most areas and the 
range  of  statistics  is  increasing,  though  challenges  remain,  especially  in  the  areas  of 
agricultural  statistics.  Additional  human  and  financial  resources  will  also  need  to  be  made 
available.  The  SORS  is  well-positioned  to  perform  its  role.  Although  certain  progress  has 
been  made  lately,  coordination  with  other  bodies  within  the  administration  needs  to  be 
strengthened. 

Overall,  if  it  continues  its  efforts,  Serbia  should  be  able,  in  the  medium  term,  to  align  fully 
with the EU acquis in the area of statistics. 

3.19.  Chapter 19: Social Policy and employment 

The EU acquis on social policy and employment includes minimum standards in the areas of 
labour  law,  equal  opportunities,  health  and  safety  at  work  and  anti-discrimination.  Member 
States  participate  in  EU  processes  in  the  area  of  employment  policy,  social  inclusion  and 
social  protection.  The  social  partners  of  Member  States  participate  in  social  dialogue  at 
European  level.  The  European  Social  Fund  is  the  main  financial  tool  from  which  the  EU 
supports  implementation  of  its  employment  strategy  and  contributes  to  social  inclusion 
efforts.  

The  SAA  establishes  cooperation  in  the  area  of  social  policy  and  employment  aiming  at 
supporting Serbia's alignment with the EU acquis.  

As  regards  labour  law,  Serbian  legislation  ─  in  particular  the  2005  Labour  Law  (last 
amended  in  2009)  ─  covers  several  basic  principles  laid  down  by  the  EU  labour  law 
directives.  The  Labour  Law  applies  to  all  employees  and  is  implemented  via  a  number  of 
governmental  and  ministerial  regulations  and  collective  agreements.  The  law  guarantees  a 
minimum  level  of  protection  of  basic  rights  of  employees  and  regulates  a  number  of 
conditions of work and pay such as the minimum working age, prohibition of discrimination, 
protection of employees, maximum working hours, daily rest periods, minimum annual leave, 
etc.  It  also  recognises  the  right  to  information  and  consultation  at  national  level  and  to 
protection in case of collective redundancies or transfer of an enterprise. However, a number 
of amendments and additional implementing instruments are still necessary in order to align 
fully with the EU acquis. 

The Labour Department of the Ministry of Labour and Social Policy has 15 staff directly or 
indirectly involved in drafting labour legislation. .  

The central piece of legislation in the area of health and safety at work is the 2005 Law on 
health  and  safety  at  work,  which  is  partly  in  line  with  the  EU  acquis.  A  number  of 
implementing  regulations  have  been  adopted,  in  the  field  of  health  and  safety  at  work, 

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covering  areas  such  as  personal  protective  equipment,  manual  handling  of  loads,  work  on 
construction  sites,  exposure  to  chemical  substances  and  asbestos  and  risk  assessment 
procedures.  Furthermore,  a  number  of  Rulebooks  adopted  in  the  former  Socialist  Federal 
Republic  of  Yugoslavia,  are  still  in  force  in  certain  industries.  However,  their  co-existence 
with the new law raises concerns about the consistency of the applicable legislation and the 
compatibility of certain provisions with the EU acquis.  

In 2009, the government adopted a Strategy on Health and Safety at Work for 2009-2012. Its 
general goal is to improve and preserve the health of the economically active population, by 
improving  working  conditions  and  preventing  and  minimising  work-related  injuries  and 
occupational diseases. The number of injuries has been falling by 10 to 15% per year for the 
last  few  years.  However,  Serbia  still  needs  to  implement  the  EU  acquis  on  compulsory 
insurance  of  all  employees  against  work-related  injuries  and  occupational  and  work-related 
diseases.  There  is  no  single  system  for  registration  of  work-related  injuries  and  no  law,  as 
required  by  the  Law  on  health  and  safety  at  work,  on  employers'  obligation  to  insure  all 
employees  against  work-related  injuries  and  occupational  and  work-related  diseases. 
Currently employees' medical costs are paid by the general Health Insurance Fund to which 
all  employees  contribute.  However,  there  is  no  separate  fund  for  work-related  injuries,  and 
damage compensation has to go through normal court procedures which take a long time. 

In the Labour Department of the Ministry of Labour and Social Policy nine employees deal with occupational 
health  and  safety.  The  Labour  Inspectorate,  an  administrative  body  of  the  same  Ministry,  monitors 
implementation of occupational health and safety laws and deals with labour relations. The number of staff at 
the Labour Inspectorate has been reduced since 2010 and is currently 283, of whom 261 are labour inspectors. 
Overall,  the  Labour  Inspectorate  has  the  adequate  structure,  powers  and  facilities  to  monitor  enforcement  of 
occupational health and safety laws.  Nevertheless, there is room for improvement, notably in planning of the 
Inspectorate's activities, visits by inspectors to actual workplaces (instead of verifying documentation only) and 
the availability of information technology. 

Social  dialogue  at  tripartite  level  takes  place  within  the  Economic  and  Social  Council.  The 
Council was established in 2001 but did not obtain a legal basis for its work until 2004 with 
the  adoption  of  the  Law  on  the  Economic  and  Social  Council.  It  is  an  independent  body 
which,  at  central  level,  consists  of  representatives  of  the  government,  associations  of 
employers  and  trade  unions.  The  Council  considers  a  large  range  of  issues,  notably  labour 
legislation, improvements in collective bargaining, the rights of employers and employees to 
organise  themselves  freely  and  employment,  labour  and  social  rights.  The  Council  has 
established several working groups dealing with economic issues, legislation, negotiation and 
peaceful settlement of labour disputes and occupational health and safety. For several years, 
the  general  level  of  activity  of  the  Council  has  been  hampered  by  discussions  on  the 
representability  of  member  organisations.  This  situation,  which  still  persists,  has  also  had  a 
negative impact on the Council's ability to provide advice on legislation. Furthermore, local 
Economic  and  Social  Councils  have  been  established  in  only  18  municipalities  and  have 
carried out few activities.  

Two  trade  unions  are  recognised  as  representative  at  national  level:  the  Confederation  of 
Autonomous  Trade  Unions  of  Serbia  (CATUS)  and  the  Trade  Union  Confederation 
"Nezavisnost"  (TUC).  Four  more  are  registered,  but  not  yet  recognised.  On  the  employers' 
side,  criteria  for  being  recognised  as  representative  are  set  high  and  the  only  representative 
association is the Union of Employers of Serbia, which is only sporadically present at local 
level.  

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The 2008 General Collective Agreement expired in April 2011. Due to the economic crisis it 
had  not  been  implemented  and  was  replaced  by  a  socio-economic  agreement  between  the 
three parties in April 2011 following a number of protests in the public sector earlier in the 
year.  This  agreement  commits  all  three  signatories  to  respect  rules  aimed  at  maintaining 
macroeconomic stability while simultaneously providing for social cohesion.  

A  number  of  bilateral  collective  agreements  have  been  signed  in  various  sectors  (most 
recently  in  the  areas  of  construction,  agriculture  and  water  management).  Collective 
agreements  have  also  been  signed  in  the  public  administration.  However,  in  general,  social 
dialogue at branch and company level remains underdeveloped. Moreover, in line with ILO 
recommendations, the duration of negotiated agreements need to be set autonomously by the 
signatories by mutual agreement.  

Strikes are strictly regulated and the current legislation needs to be brought fully into line with 
ILO  conventions  and  EU  standards.  Furthermore,  Serbia  has  an  Agency  for  peaceful 
resolution of labour disputes.  

As regards employment policy and the labour market, the aftermath of the economic crisis is 
continuing  to  have  a  deep  impact  on  unemployment.  Unemployment  is  particularly  high 
among  young  people.  It  is  also  pronounced  among  women,  has  a  long-term  character  and 
reflects  substantial  regional  disparities  in economic  development.  Low  and  declining  labour 
market  participation  and  low  employment  rates  as  well  as  a  high  level  of  informal 
employment,  together  with  substantial  skills  mismatch  and  inadequacies  of  human  capital 
development represent considerable challenges for the Serbian labour market as the economic 
restructuring continues.  

Serbia  has  started  developing  employment  strategies  inspired  by  the  EU  objectives  and 
guidelines.  The  National  Employment  Strategy  for  2011-2020  was  adopted  in  May  2011. 
Serbia is implementing a wide range of active labour market programmes (ALMPs) targeting 
the most vulnerable unemployed and is making special efforts to help jobless young people. 
In  addition  to  macroeconomic  measures  and  stimulus  packages,  the  government  reallocated 
funds from the budget to active labour market programmes in 2009 and maintained them at 
the  same  level  in  2010  and  2011.  Nevertheless,  the  budget  spent  on  ALMP  in  2010  was 
equivalent  to  only  0,1%  of  GDP  and  ALMPs  address  only  a  small  share  of  the  jobless  and 
need to be better targeted.  

Employment  policy  falls  under  the  responsibility  of  the  Ministry  of  Economic  Affairs  and 
Regional  Development  which  has  a  specific  department  for  employment  with  16  civil 
servants.  The  Ministry  is  also  responsible  for  supervising  the  work  of  the  National 
Employment Service (NES), which has 1,953 employees. While the NES staff are generally 
competent, its capacity is curbed by its increased workload and limited new recruitment.  

In  terms  of  preparations  for  the  European  Social  Fund,  preparation  of  the  competent 
authorities  for  the  management  of  IPA  component  IV  -  human  resources  development  -  is 
under  way.  In  this  regard,  the  operating  structures  for  managing  and  implementing  the 
Operational  Programmes  have  been  established.  The  Ministry  of  Economic  Affairs  and 
Regional  Development  has  been  designated  as  the  body  responsible  for  the  Operational 
Programme for component IV and the Assistant Minister for Employment has been appointed 
as Head of the Operating Structure. 

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Serbia has shown readiness to prepare for participation in the open method of coordination in 
the areas of social protection and social inclusion.  A team for social inclusion attached to 
the Deputy Prime Minister for EU Integration and a working group for social inclusion have 
been  established.  Monitoring  tools  are  being  developed  and  in  March  2011  the  government 
adopted  the  first  National  Report  on  Social  Inclusion  and  Poverty  Reduction,  covering  the 
period  2008–2010.  Preparations  for  developing  statistics  comparable  to  those  used  in  EU 
policy coordination have started. Additional efforts are necessary to ensure social inclusion of 
vulnerable groups, such as Roma, disabled persons, young people, elderly persons and other 
socially  and  economically  disadvantaged.  As  the  framework  of  legal  provisions  concerning 
persons  with  disabilities  is  increasingly  extensive,  the  focus  of  activities  in  this  area  should 
shift  towards  implementation,  including  the  gathering  of  evidence  for  possible  revisions  of 
legislative  and  implementing  acts.  Presently,  there  is  little  evidence  available  regarding  the 
effects of the Strategy for Improvement of the Position of Persons with Disabilities in Serbia 
2007-2015. 

In 2010, due to the economic crisis, the positive trend in poverty reduction seen in previous 
years  was  reversed  and  the  poverty  rate  increased  by  12%  compared  with  2008,  when  the 
Serbian household budget survey showed 7.9% of the population living beneath the absolute 
poverty  line.  The  rural  population  remains  more  vulnerable  to  poverty  than  the  urban 
population. Many of the employed people living below the poverty line work in the informal 
economy. A new Social Welfare Law was adopted in April 2011, which increases allowances 
for the poorest segment of society. 

Serbia  has  implemented  a  number  of  reforms  in  the  field  of  social  protection,  notably  of 
pensions. The Law on voluntary pension funds and pension plans was adopted in May 2011, 
and  administration  of  the  three  pension  funds  has  been  merged.  Serbia  has  adopted  new 
legislation which gradually raises the minimum pensionable age to 58 years for both women 
and  men.  Normal  pension  age  in  Serbia  65  for  men  and  60  for  women.  Nevertheless,  the 
pension system continues to show a high deficit, especially following the crisis. Many older 
people are exposed to poverty, including those not covered by the system. Further efforts are 
needed to increase employment, to increase the effective exit age from the labour market in 
general  -  and  avoid  unnecessary  early  retirements  in  particular  -  and  to  cover  undeclared 
workers by the pension system. 

A general Anti-Discrimination Law was adopted in March 2009. Certain aspects of the law 
remain to be aligned with the EU acquis, notably the scope of exceptions from the principle of 
equal treatment, which are wider than allowed under the EU acquis, the definition of indirect 
discrimination  and  the  obligation  to  ensure  reasonable  accommodation  for  disabled 
employees.  The  Anti-Discrimination  Law  also  established  the  Commissioner  for  the 
Protection of Equality as an independent State authority, who was elected by the Assembly of 
the  Republic  of  Serbia  in  May  2010.  The  Commissioner  acts  upon  complaints  of 
discrimination and, with the consent of the person discriminated against, may even initiate a 
law  suit.  He  also  promotes  and  monitors  equality,  initiates  adoption  and  amendment  of 
regulations  in  the  area  of  discrimination,  recommends  measures  to  public  bodies  aimed  at 
ensuring  equality,  etc.  If  any  violation  of  rights  guaranteed  by  the  Law  is  proven,  the 
Commissioner  may  submit  misdemeanour  notices.  The  Commissioner  submits  an  annual 
report  to  the  National  Assembly  about  the  situation  concerning  protection  of  equality.  In 
practice,  those  most  exposed  to  discrimination  are  Roma,  women,  adults  and  children  with 
disabilities and the lesbian, gay, bisexual, and transgender population.  

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Serbia  is  party  to  a  number  of  international  conventions  on  equal  opportunities,  including 
the  UN  Convention  on  the  elimination  of  all  forms  of  discrimination  against  women. 
Discrimination  on  grounds  of  gender  in  relation  to  employment  is  prohibited  under  Serbian 
legislation, mainly the Labour Law (2005), the Law on gender equality (2009) and the Anti-
Discrimination Law (2009). These laws also contain provisions on gender equality, covering 
equal  pay,  access  to  employment  and  maternity  protection,  including  maternity  leave. 
Furthermore,  Serbia  has  a  number  of  bodies  dealing  with  gender  equality  (the  Gender 
Equality Committee in the Serbian parliament and the Council for Gender Equality with half 
of its members from the government) plus the Commissioner for Protection of Equality who 
is  also  authorised  to  fight  against  gender  discrimination.  However,  on  average,  women  are 
still  paid  lower  salaries  than  men,  including  for  the  same  job,  their  unemployment  rate  is 
higher  (20.1%  in  April  2010,  against  18.6%  for  men).  In  2009  Serbia  therefore  adopted  a 
Strategy for the enhancement of women's position and gender equality, along with an Action 
Plan  to  implement  it  over  the  period  2010-2015.  In  addition  to  dealing  with  improving  the 
economic  situation  of  women,  the  Action  Plan  aims  to  increase  participation  by  women  in 
decision-making,  enhance  gender  equality  in  the  education  and  health  sectors  and  prevent 
violence against women. At present, although Serbia has both legislation and implementation 
bodies  in  place  as  regards  both  anti-discrimination  and  gender  equality,  effective 
implementation  of  the  existing  legislation  and  further  strengthening  of  the  administrative 
capacity  remain  major  challenges.  In  particular,  the  independence  of  the  bodies  responsible 
for the implementation of the main international instruments should be strengthened. 

Conclusions 

Serbia is in the process of aligning with the EU acquis in the areas of labour law, health and 
safety  at  work,  anti-discrimination  and  equal  opportunities.  However,  further  steps  are 
necessary in order to align completely and correctly with the EU acquis and ensure effective 
implementation  and  enforcement.  There  are  serious  medium-term  challenges  regarding 
employment, poverty and social inclusion. The informal economy continues to be large, social 
dialogue remains weak and measures to increase employment will need time to produce the 
expected  effects.  In  general,  building  capacity  for  policymaking,  implementation  and 
monitoring  is  still  a  major  challenge,  also  in  the  shorter  term  with  a  view  to  preparing  for 
decentralised management of IPA component IV.  

Overall, Serbia will have to make additional efforts to align with the EU acquis in the areas of 
social policy and employment and to implement it effectively in the medium term. It will also 
need  to  prepare  itself  further  for  participation  in  the  cooperation  processes  developed  at 
European level in the fields of employment, social inclusion and social protection. 

3.20.  Chapter 20: Enterprise and industrial policy 

recommendations,  which  are 

The  EU  acquis  under  the  enterprise  and  industrial  policy  chapter  consists  largely  of  policy 
principles  and  policy 
in  communications, 
recommendations  and  Council  conclusions.  The  EU's  enterprise  and  industrial  policy, 
including  its  small  and  medium-sized  enterprises  (SME)  policy,  seeks  to  promote  the 
competitiveness of the economy. It is strongly driven by the Europe 2020 Strategy and by the 
2008  Small  Business  Act  for  Europe.  Enterprise  and  industrial  policy  instruments  include 
financial support and regulatory measures. The acquis also includes sectoral policies, such as 
recommendations for more targeted policy analysis and for new initiatives and consultations 
at sectoral level.  

reflected 

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The SAA establishes cooperation to promote modernisation and restructuring of industry and 
individual sectors, in particular tourism, and to develop and strengthen SMEs. 

With regard to enterprise and industrial policy principles, Serbia is pursuing privatisation 
and restructuring of the formerly socially-owned and to some extent State-owned enterprises 
and, in parallel, is aiming to develop a thriving SME sector (See Economic criteria).  

The  main  component  of  Serbian  industry  is  manufacturing  with  a  share  of  15%  of  GDP  in 
2009.  Manufacturing  in  Serbia  is  well  diversified  with  numerous  sub-sectors.  Among  them, 
food and beverages is the biggest single sub-sector with a share of 4.6% of GDP in 2009, with 
chemicals, rubber and plastics second on 2.7% of GDP and 15% of total exports.  

A  new  industrial  strategy  was  adopted  in  June  2011.  It  is  largely  aligned  with  EU  policy 
principles. The strategic goal of Serbia is to form export-oriented and competitive industry.  

The share of SMEs in employment, GDP and exports has increased in recent years. Serbia has 
taken  the  European  Charter  for  Small  Enterprises,  and  later  the  Small  Business  Act,  as  a 
reference  framework  for  shaping  its  own  SME  policy,  In  October  2008  Serbia  adopted  the 
Strategy for development of competitive and innovative small and medium-sized enterprises 
for the period 2008-2013. This strategy is largely in line with the principles contained in the 
Small  Business  Act  and  focuses  on  five  principles:  promoting  the  spirit  of  enterprise, 
improving human resources, facilitating access to finance, improving the competitiveness of 
SMEs  and  improving  the  general  business  environment.  The  Ministry  of  Economic  Affairs 
and Regional Development and the National Agency for Regional Development are the main 
institutions involved in SME policy, but many  others are included in implementation of the 
strategy,  such  as  the  Development  Fund,  the  National  Employment  Service  (NES)  and  the 
Serbia  Investment  and  Export  Promotion  Agency  (SIEPA).  In  addition,  the  government 
established  the  SME  Council  in  2006,  a  body  in  charge  of  coordination  of  formulation  and 
enforcement of SME policy. Its members are drawn from various ministries and agencies and 
also  from  the  most  important  institutions  representing  the  interests  of  SMEs  such  as  the 
Serbian Chamber of Commerce, the Serbian SME Association and the Union of Employers. 
Furthermore,  a  Business  Council  was  founded 
together 
representatives of SMEs from all over Serbia. Serbia uses a definition of SME which is not 
fully in line with the EU recommendation.  

in  March  2010,  bringing 

Serbia has started to develop an innovation policy. In addition to the Strategy for development 
of competitive and innovative small and medium-sized enterprises for 2008-2013, in 2010 the 
government  adopted  a  Strategy  for  scientific  and  technological  development.  It  is  based  on 
the concept of a national innovation system, which networks enterprises, universities, research 
and  development  institutes,  financial  institutions  and  the  public  research  community. 
Organisational  innovation  in  the  services  sector,  which  includes,  for  example,  tourism, 
logistics  and  knowledge-intensive  business  services,  is  only  marginally  covered  by  this 
strategy.  Private  investment  in  research  and  development  remains  low,  at  around  0.2%  of 
GDP according to unofficial estimates. Public investment is only 0.1% of GDP. Serbia has set 
itself an ambitious target of investing 1.5% of GDP in research and innovation by 2020.  

As  regards  the  European  enterprise  and  industrial  policy  instruments,  Serbia  signed  a 
Memorandum  of  Understanding  allowing  accession 
the  Entrepreneurship  and 
Innovativeness  Programme  (EIP)  under  the  Competitiveness  and  Innovation  Framework 
Programme (CIP). Since the signature, Serbia has been successful in several calls (Play and 
Learn  as  Young  European  Entrepreneur,  European  Network  of  Female  Entrepreneurship 

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Ambassadors, among others) and participates actively in the Enterprise Europe Network, with 
several partnership agreeements signed and the organisation of several events. 

Access to finance is a big obstacle to development of the private sector. On the one hand, the 
procedures for obtaining loans are long and the collateral requirements and interest rates are 
very  high.  On  the  other,  access  to  finance  for  SMEs  is  constrained  by  demand-side 
weaknesses. The government plays an active role in stimulating SMEs' market development 
via credit and guarantee facilities. A first Business Angel network was created at the end of 
2009. Although progress has been achieved, further efforts are needed to improve the design 
and impact of credit guarantee schemes.  

Serbia  will  need  to  align  its  legislation  with  the  Directive  on  combating  late  payment  in 
commercial  transactions.  The  issue  of  late  payment  to  companies  is  not  regulated  by  any 
specific  piece  of  legislation  but,  instead,  by  general  rules  in  several  pieces  of  legislation, 
including the Law on contracts. During the economic crisis, this has recently led to substantial 
delays  in  payments  between  economic  operators  and  resulted  in  chronic  illiquidity  that  is 
hitting suppliers of various goods and services particularly hard. 

Serbia has no specific sectoral policies, except on tourism for which a strategy was adopted 
in  2006,  giving  priority  to  commercialisation  of  a  number  of  tourist  products.  Most  of  the 
remaining specific sectors are covered by the industrial strategy adopted in summer 2011. The 
following sectors have been identified by the Serbian authorities as having growth potential, 
especially  for  exports  and  in  attracting  foreign  investors:  food  production,  production  of 
transport  equipment,  information  and  communication  technologies,  metal  production,  and 
pharmaceutical industries.  

Conclusion 

Serbia has developed key aspects of an industrial policy. Both the industrial strategy and the 
SME strategy are broadly in line with EU principles in this area. As part of its EU obligations, 
Serbia  will  need  to  align  with  the  Directive  on  combating  late  payments,  which  will  also 
benefit its SMEs.  

Overall,  Serbia  should,  in  the  medium  term,  have  the  capacity  to  comply  with  the 
requirements  of  the  EU  acquis  in  the  area  of  enterprise  and  industrial  policy  provided  it 
continues its efforts.  

3.21.  Chapter 21: Trans European Networks 

This  chapter  covers  trans-European  networks  policy  in  the  areas  of  transport  and  energy 
infrastructure,  including  the  EU  guidelines  on  the  development  of  trans-European  networks 
and the support measures for developing projects of common interest. The aim of establishing 
and  developing  trans-European  networks  and  promoting  proper  interconnection  and 
interoperability of national networks is to harness the full potential of the internal market and 
contribute to economic growth and job creation in the European Union. 

The SAA opens up the support for development of multi-modal infrastructure in connection 
with the main trans-European networks.  

As  regards  transport  networks  (TEN-T),  Serbia  activelytakes  part  in  implementing  and 
monitoring  the  multiannual  plan  for  2011-2015  within  the  South-East  Europe  Transport 

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Observatory  (SEETO)  and  in  implementing  the  Memorandum  of  Understanding  on  the 
development of the South-East Europe Core Regional Transport Network. 

The  SEETO  comprehensive  transport  network,  a  priority  transport  network  was  integrated 
into  Serbia's  Strategy  for  development  of  railway,  road,  waterway,  airway  and  intermodal 
transport  from  2009  to  2015.  In  2010  a  general  masterplan  was  adopted  covering 
infrastructure projects for all modes of transport up to 2027.  

Implementation  of  an  action  plan  for  construction  of  corridor  X  is  still  at  a  relatively  early 
stage,  although  work  has  been  completed  on  some  road  sections,  and  is  ongoing  on  others. 
Serbia  needs  to  give  greater  priority  to  the  currently  underinvested  railways  to  improve 
connections,  which  would  considerably  decrease  travelling  time  between  the  main  urban 
centres. Serbia has made considerable investments in the navigation infrastructure and ports 
along  the  River  Danube  and  is  improving  the  airports  in  Niš  and  Belgrade.  In  future  more 
attention needs to be paid to development of the River Sava.  

As  regards  trans-European  energy  networks  (TEN-E),  Serbia  needs  to  strengthen  the 
electricity  network  in  order  to  be  in  a  position  to  place  on  the  market  the  surplus 
hydroelectricity  expected  following  the  construction  of  new  hydroelectricity  plants,  in 
particular reversible plants. By virtue of its central location in South-East Europe, Serbia has 
large  cross-border  electricity  flows  across  its  borders.  As  its  interconnections  are  usually 
congested,  increasing  the  capacity  for  interconnectivity  needs  to  be  a  priority.  Serbia  is 
currently  constructing  a  new  interconnection  with  the  former  Yugoslav  Republic  of 
Macedonia.  On  the  Serbian  side,  section  1  of  the  line  (substation  NIS-Leskovac)  is  in 
operation. Construction of section 2 (substation Leskovac- Vranje border) was completed in 
2011. Project documentation is being prepared for an interconnection project with Romania, 
connecting Pancevo (Serbia) to Resita (Romania). 

Most of Serbia's natural gas (92%) is supplied by Russia, via Ukraine and Hungary, the only 
entry point into the Serbian gas network. The transportation system is also used for gas transit 
bound  for  Bosnia  and  Herzegovina.  A  feasibility  study  on  the  gas  pipeline  link  to  Bulgaria 
(Nis-Dimitrograd) is being prepared. Serbia is supporting implementation of the Gas Ring of 
South-East  Europe,  but  it  will  require  more  tangible  regional  cooperation,  including  steps 
towards  construction  of  gas  transmission  lines  and  interconnectors.  The  capacity  of  the 
Banatski  Dvor  underground  natural  gas  storage  facility  is  currently  5  million  m3  a  day. 
Another storage facility is planned. Serbia needs to implement the regional priority projects in 
the gas sector and further develop the underground natural gas storage facilities.  

Serbia's oil infrastructure is outdated. It forms part of the main Adriatic pipeline (JANAF) that 
has been operational since 1979. Serbia is supporting the planned pan-European oil pipeline.  

Conclusion 

Serbia is centrally placed in South-East Europe and therefore has an important role to play in 
building  the  trans-European  networks  in  the  region.  Progress  on  transport  and  energy 
infrastructure  is  also  crucial  for  Serbia's  economic  development  and  security  of  energy 
supply.  Serbia  has  made  some  progress,  but  major  challenges  remain  in  terms  of 
interconnection of energy and transport networks. 

Overall, Serbia will have to make additional efforts in the field of trans-European networks to 
align with the EU acquis and to implement it effectively in the medium term.  

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3.22.  Chapter 22: Regional policy and coordination of structural instruments 

The EU acquis on regional policy and coordination of structural instruments consists mostly 
of general regulations and fund-specific regulations, which per se do not require transposition 
into  national  legislation.  The  current  EU  acquis  establishing  its  cohesion  policy  is  in  force 
until  the  end  of  2013.  The  cohesion  policy  regulations  lay  down  the  rules  for  drawing  up, 
approving  and  implementing  multiannual  operational  programmes  which,  under  the  shared 
management  delivery  system,  are  negotiated  and  agreed  with 
the  Commission. 
Implementation of cohesion policy is principally the responsibility of the Member States. In 
doing so, Member States must fully comply with the EU acquis, for example in the areas of 
multiannual  budgeting,  public  procurement,  competition,  the  environment,  equality  between 
men  and  women,  non-discrimination  and  sustainable  development,  when  selecting  and 
implementing projects.  

The  SAA  establishes  measures  to  strengthen  regional  and  local  development  cooperation, 
with  the  objective  of  contributing  to  economic  development  and  reducing  regional 
imbalances. 

As regards the legislative framework which impacts regional policy, Serbia has introduced a 
degree  of  multiannual  budgeting  by  adopting  a  law  providing  for  three-year  budget 
projections. In the area of State aid, the legislative framework has been largely put in place, 
but  efforts  are  needed  to  implement  an  effective  competition  policy.  In  the  area  of  public 
procurement and the environment, efforts remain to be made to align with the EU acquis and 
to implement it effectively. 

Serbia has two levels of regional governance: central authorities plus local authorities, which 
are  self-government  units.  Serbia  also  has  an  autonomous  province.  The  architecture  of  the 
future  NUTS  regions  will  require  special  attention  when  considering  future  operational 
programmes. 

With regard to the institutional framework, Serbia is currently preparing for implementation 
of  IPA  components  III  (regional  development)  and  IV  (human  resources  development), 
which,  under  the  current  IPA  Regulation,  would  become  available  once  Serbia  is  granted 
candidate country status. The main aim of IPA components III and IV is to prepare candidate 
countries for management of financial instruments under the Structural and Cohesion Funds 
following  EU  accession.  A  Strategic  Coordinator  has  been  appointed  and  the  Heads  of  the 
Operating Structures have been designated. Yet, the operating structures and the way they will 
work remain to be specified in more detail and to be put in place in time.  

The  2010  Law  on  regional  development  established  a  national  system  for  implementing 
domestic,  non-EU-  funded,  regional  policy  in  Serbia.  This  Law  does  not  apply  to  EU 
programmes.  Under  this  law,  regional  policy  in  Serbia,  covering  both  programming  and 
implementation of projects, falls under the responsibility of the Ministry of Economic Affairs 
and Regional Development.  

However, in the medium term maintaining two parallel systems, one for national policy and 
one for IPA components III and IV, is likely to be less effective, as the procedures set up for 
implementing  the  national  policy  could  divert  already  limited  national  resources  (not  only 
staff  but  also  co-financing  capacity)  away  from  IPA  and  ultimately  slow  down 
implementation of IPA and preparations for Structural and Cohesion Funds.  

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The administrative capacity to deal with the requirements of the EU cohesion policy needs 
to  be  built  up.  To  manage  this  process,  organisational  development  and  training  strategies 
need to be developed. In order to obtain the quality required in programming, implementation, 
sound financial management, control and monitoring mechanisms, adequate human resources 
will  be  needed.  The  Serbian  administration  still  relies  excessively  on  external  consultants. 
Significant efforts need to be made to build up expertise within the national administration, at 
both  central  and  local  levels.  In  order  to  attract  and  retain  qualified  staff,  adequate  career 
planning and salary policies for civil servants involved in management of EU funds must be 
developed. The necessary financial resources need to be allocated.  

With regard to programming, the government of Serbia has developed a number of strategy 
documents  to  promote  and  implement  sectoral  policies  for  regional  development  purposes. 
The  draft  Strategic  Coherence  Framework  (a  precursor  of  the  National  Strategic  Reference 
Framework,  NSRF)  and  the  draft  Operational  Programmes  for  IPA  components  III  and  IV 
were submitted to the Commission. Further improvements remain to be made before they can 
be  adopted.  In  the  context  of  programming,  timely  preparation  of  a  pipeline  of  high-quality 
and mature projects to implement IPA and cohesion policy is of the utmost importance. The 
capacity  of  potential  beneficiaries  to  prepare  and  implement  projects  must  be  significantly 
strengthened. 

Action  under  IPA  components  I  and  II  has  allowed  the  Serbian  authorities  to  familiarise 
themselves  with  the  basic  requirements  for  monitoring  and  evaluating  EU  projects. 
However,  proper  national  systems  and  mechanisms  need  to  be  put  in  place  to  evaluate  and 
monitor  the  quality  and  impact  of  multiannual  development  programmes.  For  decision-
making and reporting purposes, a management information system needs to be introduced for 
EU programmes.  

With regard to financial management and control, the Ministry of Finance is the main body 
responsible.  Within  the  context  of  IPA  components  III  and  IV,  the  National  Authorising 
Officer,  as  the  Head  of  the  National  Fund,  would  be  responsible  for  sound  financial 
management  of  EU  funds  once  the  country  is  accredited  to  manage  IPA  funds  in  a 
decentralised  manner.  This  responsibility  would  be  assumed  by  the  State  Secretary  of  the 
Ministry of Finance. The Central Finance and Contracts Unit (CFCU) within the Ministry of 
Finance should to be in charge of tendering and contracting, since the capacity developed in it 
can serve as basis for implementing future programmes under IAP components III and IV. 

An  Audit  Authority  for  IPA  funds  was  established  in  June  2011.  Its  full  independence  and 
staffing  will  need  to  be  ensured  before  management  of  IPA  funds  can  be  transferred  to  the 
Serbian authorities.  

Conclusion 

Cohesion policy structures and procedures are at an early stage in Serbia. Further efforts are 
needed  in  order  to  build  the  administrative  capacity  necessary  to  allow  successful 
participation in IPA components III and IV and EU cohesion policy. A positive start has been 
made with preparations for IPA components III and IV. However, additional efforts will be 
necessary to  set up sound procedures, ensure competent and stable administrative structures 
and enhance the programming capacity to allow Serbia to implement programmes under IPA 
in the medium term and, further in the future, under the cohesion policy.  

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Overall, Serbia will have to make additional efforts to align with the EU acquis in the field of 
regional policy and to implement this policy effectively in the medium term.  

3.23.  Chapter 23: Judiciary and fundamental rights (see also Political criteria)  

The aim of EU policies in the area of the judiciary and fundamental rights is to maintain and 
further develop the Union as an area of freedom, security and justice. The establishment of an 
independent  and  efficient  judiciary  is  of  paramount  importance.  Impartiality,  integrity  and 
high  standards  of  adjudication  by  the  courts  are  essential  for  safeguarding  the  rule  of  law. 
This requires a firm commitment to eliminating external influences over the judiciary and to 
providing  for  adequate  financial  resources  and  training.  Legal  guarantees  for  fair  trial 
procedures must be in place. Likewise, Member States must fight corruption effectively, as it 
represents a threat to the stability of democratic institutions and the rule of law. A sound legal 
framework  and  reliable  institutions  are  necessary  in  order  to  underpin  a  coherent  policy  of 
prevention and deterrence of corruption. Member States must ensure respect for fundamental 
rights and EU citizens' rights as guaranteed by the acquis and by the Charter of Fundamental 
Rights. 

An ambitious reform of the judiciary in Serbia has already started in 2006 with the adoption 
of the Constitution and the National Reform Strategy. The objectives set out in the Strategy 
are: strengthening of independence, efficiency, accountability and transparency.  

The  principle  of  independence  of  the  judiciary  is  ensured  in  the  Constitution,  including 
through  the  guarantee  of  permanent  tenure  of  judges  and  deputy  prosecutors,  and  further 
specified in the Laws on judges and on prosecutors.  The establishment of the High Judicial 
Council  and  the  State  Prosecutorial  Council  has  improved  the  self  administration  of  the 
judiciary.  The  Law  on  the  Judicial  Academy,  adopted  in  December  2009,  has  reinforced  a 
merit  based  approach  to  recruitments.  As  part  of  the  judicial  reform,  a  re-appointment 
procedure  for  judges  and  prosecutors  was  carried  out  in  the  second  half  of  2009.  The  re-
appointment exercise was affected by a number of shortcomings; in particular, the decisions 
were  not  based  on  a  transparent  application  of  objective  criteria,  candidates  were  not  heard 
during the procedure and initially no written justifications were provided. These shortcomings 
are  in  the  process  of  being  addressed  through  a  review  of  the  process  carried  out  in  2011, 
which  still  needs  to  be  satisfactorily  completed.  However,  Parliament,  in  line  with  the 
Constitution, still decides on the appointments and dismissals of the President of the Supreme 
Court, court presidents and public prosecutors, allowing for the possibility of undue political 
influence.  Also,  first  time  judges  and  deputy  prosecutors  are  appointed  in  Parliament  for  a 
probationary  period  of  three  years.  Legal  clarifications  would  be  needed  in  order  to  ensure 
that elected members of the High Judicial and State Prosecutorial Councils will be appointed 
by Parliament only in a declaratory manner.  

Impartiality of the judiciary is generally ensured. Provisions on the random allocation of cases 
and on conflict of interest are in place. Impartiality is further strengthened though the ongoing 
introduction  of  an  IT  based  case  management  system  and  a  reduced  number  of  courts. 
However,  implementation  of  the  random  allocation  of  cases  is  confronted  by  practical 
difficulties  in  small  courts  with  only  few  judges.  Rules  on  conflicts  of  interest  should  be 
implemented more vigorously. 

The  High  Judicial  Council  and  the  State  Prosecutorial  Council  were  established  as  the  key 
bodies ensuring the accountability of the judiciary. A Code of ethics for judges was adopted 
in  December  2010.  Violation  of  provisions  of  the  Code  of  ethics  is  a  serious  disciplinary 

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offence  for  judges.  The  twin-track  procedure  for  ordinary  disciplinary  offences  (leading  to 
disciplinary  sanctions)  and  serious  disciplinary  offences  (which  can  result  in  dismissal)  can 
lead  to  inefficiency  and,  in  certain  cases,  even  impunity  if  the  tier  chosen  is  not  successful. 
Judges and prosecutors enjoy functional immunity. They may not be held liable or be arrested 
for a criminal offence committed in the performance of their office, unless immunity is lifted 
by the parliament, in the case of judges with prior approval from the High Judicial Council. 
The  President  of  the  Supreme  Court  enjoys  full  immunity,  which  can  only  be  lifted  by  the 
parliament. Since 2006, there have only been very few criminal proceedings against judges or 
prosecutors in which their immunity was lifted. This raises concerns over the efficiency of the 
control mechanisms, as allegations of corruption in the judiciary persist.  

In order to  improve the efficiency of the judicial system,  new  Civil  and Criminal Procedure 
Codes were adopted in September 2011. A new court network was established as of January 
2010.  The  new  network  reduced  the  number  of  courts  and  improved  the  division  of  labour 
between the different courts. However, in the first year of its operation, the backlog continued 
to  grow  by  some  200,000  cases,  reaching  around  1.7  million  cases  at  the  end  of  2010  and 
some  1.9  million  cases  on  30  June  2011.  This  was  partly  due  to  the  transition  phase.  The 
effects of the reduction in the number of courts was weakened as the courts to be closed were 
transformed  into  court  units  of  the  remaining  courts,  thus  creating  inefficiencies  and  giving 
rise  to  security  concerns,  in  particular  involving  travelling  by  judges  and  the  necessary 
transfer of files. Certain inequalities in workload between different courts persist.  

In  relation  to  anti-corruption  policy,  Serbia  has  established  the  relevant  legal  and 
institutional framework. A National Anti-Corruption Strategy and the respective Action Plan 
were  adopted  in  2005.  Serbia  ratified  the  Council  of  Europe  Criminal  Law  Conventions  on 
Corruption  and  its  additional  protocol  in  2002  and  2008  respectively  and  the  Civil  Law 
Conventions on Corruption in 2008. In 2003, Serbia became a member of GRECO, the Group 
of  States  against  Corruption.  Serbia  ratified  the  United  Nations  Convention  Against 
Corruption  in  2005.  However,  Serbia  has  not  signed  the  OECD  Conventions  on  Combating 
Bribery of Foreign Public Officials in International Business Transactions and on Bribery in 
International Business Transactions. 

The Law on the Anti-Corruption Agency was adopted in 2008. The Anti-Corruption Agency 
was established as the central anti-corruption institution and began operation in January 2010. 
It was allocated adequate premises in September 2011. The Agency is mainly responsible for 
prevention  and  awareness-raising  with  regard  to  corruption,  verification  of  declarations  of 
assets,  monitoring  of  political  party  financing  and  the  resolution  of  conflicts  of  interest  for 
those holding state functions. A new Law on financing of political activities was adopted in 
June  2011,  ensuring  a  more  transparent  funding  of  political  parties  and  providing  the  Anti-
Corruption Agency with broader powers in this area. 

Special  departments  within  the  police  and  public  prosecutor's  office  were  established  for 
corruption  offences.  In  2010,  the  powers  for  dealing  with  high  level  corruption  (over 
€ 2 million) and for corruption offences committed by certain state officials were transferred 
to the special prosecutor for organised crime and the special departments for organised crime 
in the Higher and the Appellate Court in Belgrade. In May 2011, the Minister of Justice was 
appointed national coordinator for the fight against corruption.  

However,  implementation  and  tangible  results  are  lagging  behind.  Corruption  continues  to 
affect  many  areas,  notably  public  procurement,  privatisation  procedures  and  public 
expenditure,  as  well  as  the  health  and  education  sectors.  The  National  Anti-Corruption 

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Strategy  and  the  respective  Action  Plan  are  outdated  and  have  only  partially  been 
implemented. The authorities have launched the process of updating both documents. Further 
efforts  are  needed  in  order  to  establish  a  track  record  of  pro-active  prosecutions  and  final 
convictions,  in  particular  in  high-level  cases  resulting  in  major  damage  to  state  funds. 
Protection of whistleblowers needs to be strengthened.  

The  competencies  of  the  Anti-Corruption  Agency  regarding  the  monitoring  of  asset 
declarations are limited. The Agency also needs additional resources to be able to carry out its 
task as the main supervisory authority in the fight against corruption.  

Serbia  has  a  well  advanced  legal  and  institutional  framework  for  the  protection  of 
fundamental  rights.  However,  further  efforts  are  needed  for  the  existing  legislation  to  be 
fully implemented.  

The death penalty has been abolished in Serbia. 

The framework for the prevention of torture and ill-treatment is in place. A decision has been 
taken  to  establish  a  national  prevention  mechanism  for  the  prevention  of  torture,  but  the 
service is not yet operational. Poor conditions in detention facilities are a matter of concern.  

The  prison  system  faces  serious  problems  due  to  overcrowding.  Serbia  has  only  begun  to 
tackle this problem, including through the construction of new prison facilities. Further efforts 
are  needed  in  order  to  improve  living  conditions,  healthcare  and  adequate  treatment 
programmes for prisoners and to extend the use of alternative penalties.  

Access to justice is guaranteed by the Constitution. However, the length of court proceedings 
and the lack of an effective system of free legal aid are matters of concern. 

Freedom of expression is guaranteed by the Constitution and further regulated by the Law on 
Public  Information,  which  was  amended  in  2009.  A  comprehensive  strategy  for  the 
development  of  the  media  sector  was  adopted  in  September  2011  and  now  needs  to  be 
implemented. The media landscape is highly diverse and pluralistic. However, violence and 
threats  against  journalists  are  a  cause  of  concern.  The  lack  of  economic  sustainability  and 
financial strength of media outlets and the dominance of a few key players in the advertising 
market are matters for concern. Independence of the Republican Broadcasting Council and its 
supervisory activities need to be strengthened.  

Freedom  of  assembly  and  association  is  guaranteed  by  the  Constitution  and  generally 
respected. The Government financially supports the work of civil society through a range of 
projects. An office for cooperation with civil society has been set up. However, amendments 
are needed to the Law on public assembly in order to reduce the requirements for registration 
of  assemblies,  reduce  restrictions  on  the  areas  where  assemblies  can  be  held,  limit  the 
liabilities of organisers and ensuring protection also for foreigners.  

Civil  society  organisations  are  well  developed  and  play  an  important  role  in  the  social, 
economic  and  political  life  of  Serbia.  However,  cooperation  between  state  bodies  and  civil 
society organisations needs to be improved. Threats, verbal abuse and even physical attacks 
against  NGO  activists  dealing  with  war  crimes  and  other  sensitive  topics  need  to  be 
addressed.  

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Freedom of thought, conscience and religion is guaranteed by the Constitution and laws, and 
is  respected  in  practice.  However,  there  is  insufficient  transparency  and  consistency  in  the 
registration process for smaller religious groups. 

Concerning women's rights and gender equality, Serbia is party to the UN Convention on the 
Political Rights of Women and the Convention Concerning Equal Remuneration of Men and 
Women  for  Work  of  Equal  Value.  The  legislative  framework  is  in  place.  However,  further 
efforts are needed in order to fully ensure its implementation.  

The Constitution explicitly  recognises children's  rights.  The  legislative  framework  has  been 
largely  aligned  with  international  human  rights  standards.  Several  relevant  institutions  have 
been established to promote and monitor children's rights. However, the insufficient level of 
coordination  of  relevant  institutions  and  bodies  included  in  the  system  for  children's 
protection  is  a  matter  of  concern.  Further  enhancement  of  the  protection  mechanism  is 
needed. 

The  legislative  framework  for  the  protection  of  socially  vulnerable  and/or  persons  with 
disabilities  is  broadly  in  place  and  the  rights  of  persons  with  disabilities  are  explicitly 
protected  by  the  Constitution.  However,  full  implementation  of  the  legislative  framework 
remains  to  be  ensured.  The  high  institutionalisation  rate  of  persons  with  mental  health 
problems and elderly people needs to be addressed.  

As  regards  anti-discrimination  policies,  the  Constitution  as  well  as  several  pieces  of 
legislation prohibit discrimination. However, the mechanisms for prevention, monitoring and 
protection  of  discrimination  cases  are  not  sufficiently  developed  and  should  be  improved. 
Discrimination is most prevalent against Roma, women, persons and children with disabilities 
and the LGBT population.  

As regards labour and trade union rights, freedom to join trade unions and any other form of 
association  as  well  as  the  right  to  strike  are  guaranteed  by  the  Constitution  and  further 
regulated  by  the  Labour  Law.  However,  social  dialogue  has  been  limited  and  needs  to  be 
further improved. The Law on strike needs to be revised. 

Property rights are protected by the Constitution. With the adoption of the Laws on restitution 
and on public property in September 2011, the legal framework was completed. The Law on 
restitution, once implemented, will clarify the so far unclear and fragmented manner in which 
restitution  of  property  nationalised  under  the  communist  regime  has  been  dealt  with. 
However, implementation of both laws still faces important challenges. Restitution needs to 
be carried out in a fair and transparent manner. The transfer of state property to provincial and 
municipal  level  faces  risks  of  corruption  and  fraud,  as  a  reliable  overview  of  state  owned 
properties is missing.  

Respect  for  and  protection  of  minorities  and  cultural  rights  are  guaranteed  by  the  Serbian 
legal and institutional framework. Serbia ratified the framework convention for the protection 
of  national  minorities  and  the  European  Charter  on  Regional  and  Minority  Languages.  The 
Law on National Councils of National Minorities was adopted in August 2009. In line with 
the Law on National Councils of National Minorities, the first direct elections for the National 
Minority  Councils  were  organised  in  2010.  Nineteen  national  minorities  elected  their 
respective  councils.  All  national  minority  councils  have  been  constituted  and  started 
operation,  except  the  Bosniak  Council.  While  some  irregularities  were  reported  during  the 
elections of the national minority councils, they did not significantly affect the overall results. 

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The  inter-ethnic  situation  is  good  overall,  and  the  number  and  intensity  of  ethnically-based 
incidents has decreased in recent years.  

However,  the  Republican  Council  for  National  Minorities,  which  is  responsible  for 
coordinating  cooperation  between  minority  national  councils  and  state  bodies,  is  not 
operational.  The  national  minority  councils  are  highly  politicised  and  their  effective 
functioning still needs to be strengthened. There is no effective control of their funding and 
expenditure.  Regarding  the  Sandjak  area,  the  situation  has  been  tense  and  escalated  further 
over the issue of the constitution of the Bosniak national minority council. Following the June 
2010  elections,  the  constitution  of  the  Council  is  still  affected  by  a  number  of  open  issues. 
Repeat  elections  were  announced,  but  no  final  date  was  set.  Roma  remain  one  of  the  most 
marginalised  groups.  Despite  certain  improvements,  such  as  teaching  assistants  and  female 
health mediators, Roma face poor living conditions and difficulties in exercising their social, 
political and economic rights.  

The legal and institutional framework for the protection of personal data is broadly in place. 
Serbia  has  ratified  the  Council  of  Europe  Convention  for  the  Protection  of  Individuals  with 
regard to Automatic Processing of Personal Data in 2005 and the additional protocol in 2008. 
The Strategy on  personal  data protection was adopted in 2010 along with  several rulebooks 
and regulations concerning collection, storage and protection of data. The Law on Protection 
of  Personal  Data  entered  into  force  in  January  2009  and  implementing  legislation  was 
adopted.  The  Commissioner  for  Free  Access  to  Information  of  Public  Importance  and 
Personal  Data  Protection  is  the  competent  supervisory  authority.  Infringements  of  the  legal 
framework  can  result  in  both  misdemeanour  and  criminal  liability.  However,  several 
provisions of the Law on Protection of Personal Data are not fully in line with EU standards. 
An  action  plan  implementing  the  strategy  has  yet  to  be  adopted.  The  office  of  the 
Commissioner, who is also responsible for ensuring access to information, lacks financial and 
human  resources.  This  raises  concerns  with  regard  to  his  ability  to  adequately  perform  his 
supervisory tasks in both areas. Further efforts are needed in order to ensure the collection and 
processing of personal data in line with the legal provisions.  

To ensure EU citizens' rights to vote and stand as a candidate in municipal and European 
Parliament elections, Serbia will need to harmonise the provisions of the Constitution, laws 
and  other  regulations,  which  regulate  the  exercise  of  the  right  to  vote,  with  the  acquis  and 
especially with Council Directives 94/80/EC and 93/109/EC. As regards residence rights for 
EU citizens, the Serbian system of temporary residence permits is not in line with the acquis 
and  will  need  to  be  amended.  In  order  to  comply  with  the  acquis,  Serbia  will  have  to 
implement  the  Decision  on  diplomatic  and  consular  protection  for  EU  citizens  and  the 
Decision on the establishment of an emergency travel document. 

Conclusion 

Serbia will have to make continuing efforts to fully align with the acquis in this chapter. It has 
made good progress in its ambitious reform of the judiciary, but further efforts are needed in 
order to fully ensure independence, impartiality, accountability and efficiency. The legal and 
institutional framework to fight corruption has been established, but implementation of anti-
corruption  policies  has  to  lead  to  tangible  results,  in  particular  final  convictions  in  criminal 
cases.  Provisions  for  the  protection  of  fundamental  rights  are  in  place,  but  need  to  be  fully 
implemented. 

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Overall,  Serbia  needs  to  undertake  considerable  and  sustained  efforts  to  align  with  the  EU 
acquis in the medium term.  

3.24.  Chapter 24: Justice, freedom and security 

EU policies aim to maintain and further develop the Union as an area of freedom, security and 
justice.  On  issues  such  as  migration,  asylum,  border  control,  visas,  judicial  cooperation  in 
criminal and civil matters, police cooperation, the fight against organised crime and terrorism, 
cooperation in the field of drugs and customs cooperation, Member States need to be properly 
equipped in order to implement the growing framework of common rules adequately. Above 
all, this requires strong and well-integrated capacity within the law enforcement agencies and 
other relevant bodies to attain the necessary standards. A professional, reliable and efficient 
police organisation is of paramount importance. 

The most detailed part of the EU's policies on justice, freedom and security is the Schengen 
acquis,  which  entails  lifting  internal  border  controls  in  the  EU.  For  a  new  Member  State, 
substantial  parts  of  the  Schengen  acquis  are  implemented  following  a  separate  Council 
decision to be taken after accession. 

Cooperation  in  the  area  of  justice,  freedom  and  security  makes  up  an  important  part  of  the 
SAA.  Title  VII  of  the  Agreement  establishes  cooperation  in  a  wide  range  of  areas,  notably 
border  management,  asylum  and  migration,  money  laundering  and  prevention  of  organised 
crime. 

Visa liberalisation for Serbian citizens travelling to the Schengen area was granted with effect 
from  19  December  2009.  This  decision  was  based  on  substantial  progress  in  the  areas  of 
justice, freedom and security, particularly fulfilment of the specific conditions set out in the 
roadmap for visa liberalisation. The rules for visa-free travel have been respected by the vast 
majority  of  travellers.  However,  under  the  visa-free  regime,  increases  in  the  number  of 
unfounded  asylum  applications  by  Serbian  citizens  in  several  EU  Member  States  occurred. 
Following  decisive  measures  by  the  Serbian  authorities,  including  awareness  raising 
campaigns,  investigations  into  illegal  residence changes,  facilitated  by  corrupt  officials,  and 
enhanced  border  checks,  the  numbers  declined  until  September  2011,  but  then  increased 
again. Efforts to address this issue are ongoing. In order to ensure ongoing implementation of 
the commitments taken, a post visa liberalisation monitoring mechanism has been established. 
The  Commission  presented  its  first  monitoring  report  to  the  European  Parliament  and  the 
Council in June 2011. 

Serbia has made efforts to align its migration policy with EU standards by adopting a number 
of strategies on migration management, combating illegal migration, resolving the problems 
of refugees and IDPs and reintegrating returnees. The November 2007 Law on asylum and the 
October 2008 Law on foreigners are broadly in line with the EU acquis, allowing foreigners 
to acquire residence and family reunification under certain conditions. The largest groups of 
persons  that  have  acquired  Serbian  citizenship  over  the  last  few  years  are  from  Croatia  and 
Bosnia and Herzegovina, mainly persons with refugee status or internally displaced persons 
who had been legally residing in Serbia for several years. The total number stood at 19,310 by 
2010, including persons with dual citizenship under the agreement between Serbia and Bosnia 
and Herzegovina.  

Implementation  of  the  migration  related  strategies  needs  to  be  made  more  effective  and 
coherent.  Limited  resources,  overall  lack  of  capacity  and  insufficient  coordination  of  the 

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bodies responsible are the main challenges in this area. An efficient data-sharing mechanism 
between  law  enforcement  bodies  and  competent  authorities  remains  to  be  established. 
Transformation of the Commissariat for Refugees into a Migration Management Agency has 
been  delayed,  due  to  the  lack  of  resources  and  administrative  capacity  combined  with 
inefficient inter-agency coordination and cooperation. Serbia needs to make further efforts to 
ensure  full  alignment  with  EU  acquis  on  legal  migration,  notably  on  the  right  to  family 
reunification, long-term residence and conditions of admission of third-country nationals for 
the purpose of studies. 

An agreement on readmission between the European Union and Serbia has been in force since 
January  2008.The  implementation  of  the  agreement  has  continued  without  significant 
challenges.  Some  4,377  persons  were  returned  in  2009  and  3,979  in  2010.  Under  the 
Agreement,  bilateral  implementing  protocols  have  been  concluded  with  the  following 
Member States: Austria, Bulgaria, France, Germany, United Kingdom, Hungary, Italy, Malta, 
Slovakia  and  Slovenia.  The  main  countries  from  where  returns  take  place  are  Germany, 
Switzerland and Sweden. A more comprehensive database on returnees is being developed by 
the Commissariat for Refugees. 

Serbia's  asylum  legislation  adopted  in  November  2007  is  largely  in  line  with  the  essential 
elements of the EU legislation on eligibility, procedures and reception conditions for asylum-
seekers.  Two  reception  centres  were  established  since  2008  for  an  overall  capacity  of  200 
people. Continuous training has been provided by the UNHCR. However, an Asylum Office 
remains  to  be  established  in  line  with  the  law.  The  number  of  asylum  claims  has  been 
increasing  continuously  since  2008,  but  the  number  and  quality  of  decisions  taken  remains 
very  low.  Out  of  522  claims  in  2010,  only  58  interviews  were  conducted,  resulting  in  28 
rejections. The procedure and sources of verification of safe countries of origin and the list of 
safe third countries are not fully aligned with European standards. Mixed migration flows and 
the  lack  of  an  efficient  mechanism  to  identify  genuine  asylum-seekers,  combined  with  the 
poor  prospects  for  protection  or  integration  in  Serbia,  are  resulting  in  increased  transit  of 
migrants towards the EU. A national database for checking personal data and fingerprints of 
asylum-seekers is not in place. There is a need to improve capacity and practices in this area. 

Serbia has taken steps to align its visa policy and the types of visas issued with EU standards. 
New  visa  stickers  have  been  issued  since  June  2010  and  are  broadly  in  line  with  EU 
standards. Serbia also issues visas on behalf of Montenegro, the former Yugoslav Republic of 
Macedonia  and  Bosnia  and  Herzegovina.  However,  the  list  of  countries  subject  to  a  visa 
obligation is not fully aligned with Regulation 539/2001 and recent liberalisation agreement 
concluded  with  Ukraine  further  widened  the  gap.  A  proper  visa  information  system  has  not 
yet  been  established  and  only  32  out  of  80  Serbian  consular  missions  have  the  capacity  to 
collect biometric data. The validity of the old non-biometric passports has been extended until 
the end of 2011. Upgrading of administrative capacity coupled with enforcement of adequate 
control mechanisms are required in this area. 

Regarding  external  borders  and  Schengen,  the  conditions  and  arrangements  necessary  for 
implementing  efficient  border  control  and  surveillance  are  broadly  in  place.  The  national 
strategy and action plan for integrated border management (IBM) were adopted in 2006 and 
steps  have  been  taken  to  implement  them.  The  new  legal  framework  on  border  control  has 
been aligned with the Schengen Border Code. Legislation and agreements provide for inter-
agency and international cooperation. A coordination body was established in 2009, followed 
by  an  operational-level  working  group  in  2010.  Steps  were  taken  to  improve  infrastructure 
and equipment. Further progress has been made with installation of the TETRA radio signal 

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system  with  a  view  to  full  coverage  of  all  the  major  border  crossing  points  by  2012. 
Cooperation at regional and international levels is improving and agreements on border police 
cooperation  have  been  signed  with  Bulgaria,  Romania,  Bosnia  and  Herzegovina  and 
Montenegro.  Cooperation  with  Frontex  has  continued  to  improve,  including  with  the  aid  of 
regular data exchanges and participation in the Western Balkans Risk Analysis Network.  

However, the IBM strategy needs to be updated. Disparities in infrastructure between border 
crossing points persist. There is no full connection between all border crossing points and the 
central  database  of  the  Ministry  of  the  Interior.  Modernisation  and  upgrading  of  equipment 
and infrastructure are required, both at border crossing points and for surveillance purposes, 
including access to relevant Interpol databases. The number of devices available for detecting 
forgeries at border crossing points needs to be increased. The border police is not fully staffed 
and  needs  to  improve  its  internal  organisation  and  continue  with  its  modernisation  and 
training so as to ensure consistency in implementing policies and rules.  

Surveillance  and  control  along  the  administrative  boundary  line  with  Kosovo  need  to  be 
improved,  especially  in  response  to  security  concerns  and  to  combat  major  international 
trafficking. The administrative boundary line is controlled by normal police and gendarmerie, 
not border police. The lower level of training and the more lenient controls for local residents 
of  Serbian  origin  weaken  the  overall  level  of  controls.  In  this  area,  practical  cross-border 
communication  and  cooperation  need  to  be  organised  and  implemented  efficiently.  Border 
demarcation with Bosnia and Herzegovina and Croatia has not been finalised. 

Regarding  judicial  cooperation  in  civil  and  criminal  matters,  the  relevant  legislative 
framework  is  mostly  in  place.  A  number  of  agreements  on  mutual  legal  assistance  in  civil 
matters and on recognition of foreign judgments are in force. Serbia has adhered to a number 
of  international  conventions.  Foreign  judicial  decisions  are  legally  enforceable  only  if 
recognised by a Serbian court. The statistics on enforcement of foreign judgments remain low 
(the  Higher  Court  in  Belgrade  ruled  in  79  cases  and  the  Commercial  Appellate  Court  in 
Belgrade in 10 in 2010). The number of unsolved requests for international legal assistance in 
civil matters increased significantly in 2010 and 2011, resulting in some 3367 unsolved cases 
as of September 2011. Further improvements are needed in practical enforcement of both the 
national and international legal frameworks.  

In  the  case  of  judicial  cooperation  in  criminal  matters,  Serbia  has  ratified  international 
conventions. In 2009 it also adopted the Law on mutual legal assistance in criminal maters, 
regulating  this  area  in  more  detail,  in  addition  to  certain  general  provisions  of  the  Criminal 
Procedure  Code  and  the  Criminal  Code.  Legislation  on  the  organisation  and  responsibilities 
for suppression of organised crime, corruption and other severe criminal offences and the Law 
on  seizure  and  confiscation  of  the  proceeds  of  crime  further  regulate  assistance. 
Responsibility  for  mutual  legal  assistance  is  shared  between  the  courts,  prosecution  offices 
and the Ministry of Justice. However, implementation remains a major challenge in view of 
the limited capacity, especially in relation to the overall organisation and effectiveness of the 
existing procedures. Steps are also needed to ensure effective cooperation with Eurojust. 

Serbia  has  established  a  good  framework  for  police  cooperation  and  the  fight  against 
organised crime. International police cooperation is carried out via the National Cooperation 
Bureau  (Interpol),  including  exchanges  of  files  via  a  24-7  connection.  An  agreement  on 
strategic cooperation with Europol was signed in 2009. Agreements on police cooperation and 
on cooperation in the fight against organised crime have been signed with Albania, Austria, 
Bosnia and Herzegovina, Bulgaria, the Czech Republic, Croatia, Cyprus, the former Yugoslav 

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Republic  of  Macedonia,  France,  Greece,  Hungary,  Italy,  Montenegro,  Romania,  Slovakia, 
Spain  and  Switzerland.  Agreements  with  Croatia  and  Montenegro  allow  extradition  of  own 
nationals  in  cases  of  organised  crime  and  corruption.  An  agreement  establishing  a  regional 
office in Belgrade for improving cooperation in the fight against organised crime was signed 
in  October  2010.  An  international  law  enforcement  coordination  unit  has  been  established. 
Serbia has launched an initiative for a regional arrest warrant. 

The  national  Strategy  to  fight  organised  crime  and  the  Action  Plan  implementing  it  were 
adopted  in  2009.  The  legal  framework  for  the  fight  against  organised  crime  is  generally  in 
place. The Criminal Code, amended in 2009, classifies organised crime activities as criminal 
offences.  A  new  Criminal  Procedure  Code  (CPC)  was  adopted  in  September  2011.  It 
profoundly  changes  criminal  proceedings  by  transferring  the  leading  role  in  criminal 
investigations  from  the  investigating  judge  to  the  prosecution  service  and  introducing  an 
adversarial  system.  It  provides  law  enforcement  bodies  with  relevant  tools  for  investigating 
organised  crime,  including  special  investigative  measures.  As  preparatory  work  for  its 
implementation  has  been  slow,  notably  on  building  the  expertise  and  infrastructure  for  the 
prosecution service, it will, in a first stage, only be applied to proceedings carried out by the 
special prosecutors for organised crime and for war crimes, before extending it to the whole 
system. There are concerns over insufficient procedural safeguards in the new Code.  

Serbia  has  an  institutional  framework  which  generally  allows  it  to  fight  organised  crime 
effectively.  The  entry  into  force  of  the  Law  on  the  organisation  and  responsibilities  of  the 
State  institutions  in  suppressing  organised  crime,  corruption  and  other  severe  criminal 
offences in January 2010 extended the powers of the Special Prosecutor for Organised Crime. 
The  Prosecutor  is  primarily  responsible  for  cases  of  organised  crime  and  high-level 
corruption. As the court of first instance, the Higher Court in Belgrade deals with organised 
crime  and  high-level  corruption  cases  for  the  whole  of  Serbia.  In  the  second  instance,  such 
cases  are  dealt  with  by  the  Appellate  Court  in  Belgrade.  This  specialisation  increases  the 
expertise  of  the  players  involved.  Police  capacity  for  investigating  financial  crimes  was 
improved  by  setting  up  a  financial  investigation  unit  within  the  Ministry  of  the  Interior. 
Specialised units have been established within the police forces, including on cybercrime and 
drug  smuggling,  allowing  greater  specialisation  and  expertise.  A  Commission  for  Inter-
ministerial Coordination in the field of Justice and Home Affairs was established in 2008 to 
improve coordination between ministries in the fight against organised crime. 

Since  2008,  Serbia  has  successfully  conducted  a  number  of  police  operations  in  close 
cooperation with Interpol, Europol, EU Member States and non-EU countries, leading to the 
arrest and prosecution of members of several organised crime organisations.  

However,  organised  crime  remains  a  serious  concern  in  Serbia.  Although  criminal 
investigations  have  been  launched  in  a  number  of  organised  crime  cases,  final  convictions 
remain rare. Capacity to carry out complex, in particular financial, investigations needs to be 
built  up.  Certain  specialised  services,  in  particular  the  unit  for  witness  protection,  lack 
sufficient  staff,  resources  and  adequate  premises.  The  level  of  inter-agency  cooperation, 
information flow and exchanges between law enforcement agencies needs to be improved. A 
centralised  criminal  intelligence  system  has  not  been  established  and  there  is  a  lack  of 
harmonised  statistical  data.  Risk  assessments  and  crime  mapping  need  to  be  used  more 
broadly and intelligence-led policing needs to be developed. The dependence of the police on 
the security intelligence agency to carry out certain special investigative measures in criminal 
investigations is not in line with EU standards.  

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The Law on seizure and confiscation of proceeds from crime, adopted in 2008, provides the 
basis  for  temporary  freezing  of  assets  and,  conditional  on  a  final  judgment,  permanent 
confiscation.  The  Directorate  for  Managing  Seized  and  Confiscated  Assets  has  been  in 
operation  since  March  2009  and  is  responsible  for  storage  of  temporarily  seized  assets. 
Cooperation between the authorities for discovering, seizing and managing proceeds of crime 
has  gradually  improved.  However,  practical  results  in  the  confiscation  of  assets  remain 
limited and were achieved in only a small number of cases. Sales of temporarily seized assets 
without immediate risk of deterioration are a cause for concern. The Directorate for Managing 
Seized  and  Confiscated  Assets  lacks  storage  space  and  needs  to  improve  the  quality  of  its 
record-keeping  to  satisfy  requirements  on  security,  accessibility  and  protection  of  sensitive 
data. 

The legal and institutional framework for the fight against money laundering is in place. The 
Law on the Prevention of and Fight against Money-Laundering and Terrorist Financing was 
adopted in 2009 and has been consolidated by the adoption of several guidelines. The Council 
of  Europe  Convention  on  laundering,  search,  seizure  and  confiscation  of  the  proceeds  from 
crime  and  on  the  financing  of  terrorism  was  ratified  in  2009.  A  strategy  to  prevent  money 
laundering and terrorism financing was adopted in 2008, followed by an action plan in 2009. 
Training  has  improved  expertise  in  the  Administration  for  the  Prevention  of  Money 
Laundering (APML, the financial intelligence unit) to provide effective support for criminal 
and  financial 
including  with 
MONEYVAL and the Egmont Group. However, practical results in the fight against money 
laundering remain to be improved. There is a need to strengthen the analytical capacity of the 
APML further. The numbers of suspicious transactions identified remain low and reporting, 
especially  from  outside  the  banking  sector,  needs  to  be  improved.  An  effective  system  for 
monitoring  cash  transactions  needs  to  be  established.  With  the  number  of  final  convictions 
remaining  low,  law  enforcement  and  judicial  authorities  need  to  improve  their  capacity  to 
handle money laundering cases (see also Chapter 4 — Free movement of capital). 

investigations.  International  cooperation 

in  place, 

is 

Serbia  ratified  the  Council  of  Europe  Conventions  on  action  against  trafficking  in  human 
beings in 2009 and on protection of children against sexual exploitation and sexual abuse in 
2010.  A  strategy  to  address  human  trafficking  was  adopted  in  2006  and  an  action  plan  to 
implement it in 2009. Law enforcement capacity in this area is generally well-developed. To 
coordinate activities against trafficking in human beings better, the government established a 
ministerial-level  council  and  the  Minister  of  the  Interior  has  been  appointed  coordinator  in 
this area. A Republican team, consisting of representatives of government institutions along 
with  non-governmental  and  international  organisations,  has  been  in  operation  since  2003. 
However, Serbia remains a country of origin, transit and destination for trafficking in human 
beings. Further efforts are needed to ensure full implementation of policies in this area and a 
specific  monitoring  mechanism  has  not  yet  been  set  up.  The  strategy  and  associated  action 
plan  need  to  be  updated  in  order  to  tackle  current  trends  better  and  improve  cooperation 
between  law  enforcement  and  judicial  bodies.  Better  protection  of  victims,  including 
provision  of  assistance  or  shelter  and  reintegration,  is  needed.  An  age-  and  gender-specific 
approach  should  be  developed.  Cooperation  with  and  support  for  civil  society  active  in  this 
field should be improved.  

Serbia  has  taken  steps  to  align  its  legislation  with  the  existing  international  regulatory 
framework  for  the  fight  against  terrorism,  including  on  financing  of  terrorism.  These 
include: international and Council of Europe conventions, specific criminal offences under the 
powers of the Special Prosecutor and a number of bilateral agreements on police cooperation 
which also include terrorism. Two specialised units of the Serbian police have been assigned 

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counter-terrorism  tasks.  However,  a  national  database  and  a  more  efficient  exchange  of 
information  are  lacking,  while  internal  organisation  and  inter-agency  cooperation  also  need 
further improvement.  

With  regard  to  cooperation  in  the  field  of  illicit  drugs,  the  strategic,  legislative  and 
institutional framework is in place. A new Law on drugs was adopted in 2010. The national 
strategy adopted in 2009 is in line with the EU Drug Strategy and covers both drug demand 
and drug supply reduction. Serbia continued its good international and regional cooperation. 
A  new  national  correspondent  to  the  European  Monitoring  Centre  for  Drugs  and  Drug 
Addiction  (EMCDDA)  has  been  formally  appointed  and  cooperation  with  the  Centre  is 
improving. Between October 2010 and August 2011, Serbian authorities seized some 1.9 tons 
of drugs, as compared to 1.1 tons during the previous year. Seizures included some 180 kg of 
heroin, 7 kg of cocaine and 1.4 tons of cannabis. The Ministry of Health is active in the area 
of prevention of drug abuse and addiction. However, Serbia is on one of the main Balkan drug 
trafficking routes. Trafficking of drugs through Serbia remains high and also consumption in 
the country is of concern. Significant weaknesses persist in surveillance of the borders with 
Bosnia  and  Herzegovina,  Croatia,  the  former  Yugoslav  Republic  of  Macedonia  and 
Montenegro  and  of  the  administrative  boundary  line  with  Kosovo.  Police  and  border  police 
need to be fully connected to the central database on drugs. The lack of financial resources is 
having  a  negative  effect  on  effective  implementation  of  preventive  anti-drugs  policies.  A 
national  Commission  serving  as  the  central  inter-service  coordination  body  has  been 
established  but  is  not  working  effectively.  The  legal  framework  for  reducing  demand  for 
drugs  needs  to  be  improved.  Initiatives  on  substitution  treatment  and  other  programmes 
largely remain donor-driven. A large quantity of seized drugs still has not been destroyed due 
to alleged environmental concerns.  

the  customs  administration 

is  established  as  an 
Regarding  customs  cooperation, 
administrative authority within the Ministry of Finance. Serbia is currently implementing 20 
bilateral agreements on mutual administrative assistance in the customs field, including with 
neighbouring  countries. Technical arrangements on  electronic  exchange of customs data via 
the Electronic Exchange of Data System were established with the customs administrations of 
Bosnia  and  Herzegovina,  Montenegro  and  the  former  Yugoslav  Republic  of  Macedonia.  In 
April  2010  Serbia  and  Bulgaria  signed  an  agreement  on  establishing  and  operating  a  joint 
contact  centre  for  police  and  customs  cooperation.  However,  Serbia  needs  to  align  with  the 
EU legislation  on  use of technology for customs purposes and to ratify and then implement 
the 
'Naples  II'  Convention  on  mutual  assistance  and  cooperation  between  customs 
administrations.  

For protection of the euro against counterfeiting, see Chapter 32 – Financial control. 

Conclusion 

Serbia  has  put  in  place  the  overall  legal  and  institutional  framework  in  the  area  of  justice, 
freedom and security. Law enforcement agencies generally have sufficient capacity to carry 
out  standard  investigations.  Serbia  is  actively  involved  in  international  police  and  judicial 
cooperation. However, further continued efforts are needed to increase the capacity to carry 
out complex, in particular financial, investigations. A track record of proactive investigations 
and  final  convictions  in  organised  crime  cases  needs  to  be  built  up.  Sustained  efforts  are 
needed to improve coordination between law enforcement agencies and also law enforcement 
and the judiciary. Management of the administrative boundary line with Kosovo is a cause for 

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concern. Further efforts will be necessary to ratify outstanding international instruments and 
align legislation fully with the EU acquis. 

Overall,  Serbia  needs  to  undertake  considerable  and  sustained  efforts  to  align  with  the  EU 
acquis in the medium term.  

3.25.  Chapter 25: Science and research 

In principle, the EU acquis in the field of science and research does not require transposition 
of EU rules into the national legal order. Successful implementation of the EU acquis in this 
domain  mainly  requires  fulfilling  the  conditions  necessary  to  participate  effectively  in  the 
EU's Research Framework Programmes, to integrate into the European Research Area (ERA) 
and  to  contribute  to  the  Innovation  Union  (IU).  Good  administrative  capacity  (adequate 
staffing  and  knowledge  of  research  cooperation)  is  necessary,  as  is  scientific  excellence,  in 
order  to  carry  out  research  and  innovation  projects  successfully,  together  with  research 
entities  from  the  EU  Member  States  and  international  partners.  This,  in  turn,  requires  well-
developed  research  and  innovation  capacity  to  produce  scientific  excellence  to  support  a 
sustainable economy and knowledge-based society. 

The SAA establishes cooperation in civil scientific research and technological development. 

As a potential candidate country, Serbia has been associated with the Seventh EU Research 
Framework Programme (FP7) since January 2007.  

Science and research policy has been under the authority of the Ministry of Education and 
Science since March 2011. The Ministry is responsible for both policymaking and funding. It 
cooperates  closely  with  other  relevant  ministries,  the  Vojvodina  Provincial  Secretariat  for 
the  National  Council  for  Scientific  and 
Science  and  Technological  Development, 
Technological Development and the Academy of Sciences and Arts.  

The  National  Council  for  Scientific  and  Technological  Development,  reformed  in  2010,  is 
made  up  of  16  members  representing  the  scientific,  academic  and  business  communities.  It 
acts as an independent expert and advisory body. A separate agency for the field of nuclear 
safety was established in 2009.  

A National Strategy for Scientific and Technological Development for the period 2010-2015 
was  adopted  in  February  2010.  The  strategy  is  the  result  of  broad  consultations  with  all 
stakeholders  and  aims  at  turning  Serbia  into  an  innovative  country,  in  order  to  reach  EU 
standards  and  advance  its  technological  development.  The  overall  aim  is  further  integration 
into  the  European  Research  Area  and  alignment  with  the  EU  acquis  on  research  and 
innovation policy. It is built on the principles of focus and partnership. It also establishes the 
strengths  and  weaknesses  of  the  scientific  landscape  in  Serbia  and  prepares  the  ground  for 
action  to  address  the  challenges  which  lie  ahead:  increasing  investment  in  research, 
modernising infrastructure, increasing human capital and building innovative capacity.  

However,  the  Action  plan  implementing  the  2010-2015  Strategy  remains  to  be  adopted. 
Investment in research is very low: only about 0.30% of GDP in 2010. As part of the strategy, 
the aim is to increase the level of investment by 0.15% in each of the next five years, taking it 
up to 1.05% by 2015. The lack of reliable statistics, in particular on investment by the private 
sector, makes it very difficult to monitor the targets set.  

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Human  research  capacity  is  available,  but  suffers  from  an  ageing  population.  Serbia  had 
11,534  full-time  scientists  in  2009  or  0.6  %  of  the  total  workforce.  As  another  part  of  the 
strategy,  Serbia  aims  to  increase  the  number  of  scientists.  It  is  already  taking  a  number  of 
measures to attract young people to science studies and to address the brain drain from which 
it is still suffering. In line with the legislation on scientific and research activities, a Centre for 
Promotion  of  Science  was  established  in  2010.  Investments  have  been  made  in  research 
capacity  to  improve  the  infrastructure,  including  science  centres  and  state-of-the  art 
laboratories.  A  fund  for  innovation  activities  has  been  established  which,  amongst  other 
things, provides early-stage financing and supports transfers of technology. 

Since  Serbia  has  been  participating,  as  an  associated  country,  in  the  Seventh  EU  Research 
Framework  Programme  (FP7),  it  has  created  good  administrative  capacity  and  drawn  up 
measures to promote research cooperation. Serbia has shown a good take-up of FP7 projects 
throughout the programme but further efforts are necessary. In particular efforts are necessary 
to increase participation by SMEs. 

Serbia  has  expressed  interest  in  becoming  associated  with  the  Seventh  Euratom  Research 
Framework Programme (2013-2014). 

Regarding  policy  initiatives  to  facilitate  integration  into  the  European  Research  Area 
(ERA),  the  2010-2015  strategy  is  fully  in  line  with  the  objectives  of  the  ERA.  Serbia  is 
actively participating in the work of all ERA governance bodies. This demonstrates Serbia's 
administrative  capacity  and  determination  to  integrate  into  the  ERA  and  contribute  to  the 
Innovation  Union.  International  cooperation,  particularly  with  EU  partners,  is  high  on  the 
national  agenda.  Serbia  has  concluded  numerous  bilateral  cooperation  agreements  with 
several  neighbouring  countries  and  other  international  partners.  It  is  also  involved  in  key 
international  research  organisations  (COST  and  Eureka)  and  has  started  accession 
negotiations with CERN. However, serious efforts are needed to achieve the targets set in the 
2010-2015  strategy,  in  particular  the  investment  target,  to  integrate  into  the  European 
Research Area as well as regarding the Innovation Union.  

Conclusion 

Serbia has been actively involved in EU research policy through its association to the Seventh 
EU Research Framework Programme. The National Strategy for Scientific and Technological 
Development for the period 2010-2015 is fully in line with the objectives and targets of the 
European Research Area and the Innovation Union. However, consistent implementation and 
close monitoring of the targets set at national level, in particular on investment in research and 
on mobility of researchers are of key importance.  

Overall,  if  it  continues  its  efforts,  Serbia  should,  in  the  medium  term,  have  the  capacity  to 
comply with the requirements of the EU acquis. 

3.26.  Chapter 26: Education and Culture 

The EU acquis on education and culture consists mainly of a cooperation framework made up 
of  programmes  and  of  the  open  method  of  coordination,  which  aims  at  convergence  of 
national policies and attaining shared objectives. In the fields of education and youth, Member 
States  need  to  ensure  sound  management  of  decentralised  EU  programmes.  The  EU  acquis 
also requires Member States to facilitate the education of children of EU migrant workers and 
to  prevent  discrimination  against  EU  nationals.  In  the  field  of  culture,  the  2005  UNESCO 

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Convention on the protection and promotion of the diversity of cultural expressions, ratified 
by  the  EU,  is  a  major  component  of  the  EU  acquis.  The  EU  also  contributes  to  promoting 
European sporting issues. 

The  SAA  provides  for  enhanced  cooperation,  with  the  aim  of  raising  the  level  of  general 
education and vocational education and training in Serbia and of youth policy. 

As regards education and training, Serbia has initiated reforms in all areas of education and 
the  legal  framework  is  largely  in  place,  including  legal  texts  for  pre-school,  primary, 
secondary,  vocational,  higher  and  adult  education.  The  reforms  focus  on  making  education 
more inclusive, training teachers and putting in place quality assurance systems. 

However,  Serbia's  education  sector  in  general  is  reforming  slowly.  There  are  high  drop-out 
rates at all levels of education. Adult education is in the early stages of reform and a law on 
adult education remains to be adopted. Improving quality assurance mechanisms at all levels 
of education and developing a national qualifications framework remain a challenge.  

The  Serbian  vocational  education  and  training  (VET)  system  needs  further  reforms  and 
modernisation.  The  mismatch  between  qualifications  and  the  needs  of  employers  remains  a 
challenge in the fight against unemployment. Certain curricula are failing to respond to labour 
market needs. Drop-out rates are particularly high from three-year VET programmes (see also 
Economic criteria). 

Serbia started to introduce Bologna reforms in higher education in 2003 and has introduced 
the  European  Credit  Trading  System  across  the  entire  higher  education  system.  The  higher 
education  system  has  benefited  greatly  from  Tempus.  Serbia  is  one  of  the  leading  partner 
countries  in  this  programme.  It  hosted  in  March  2011  the  ministerial  conference 
commemorating the 20 years of the establishment of the programme. Serbia's participation to 
Erasmus Mundus programme has allowed for increased student mobility and benefited so far 
to  over  500  students  and  teachers.  However,  higher  education  teaching  methods  need  to 
become  more  student-centred  and  external  quality  assurance  mechanisms  need  to  be 
implemented.  

Serbia  has  been  active  in  the  field  of  youth  policy  since  the  Ministry  for  Youth  and  Sports 
was  established  in  2007.  A  National  Youth  Strategy  was  adopted  in  2008,  followed  by  an 
Action Plan for implementing it in 2009 and a Strategy for career guidance and counselling in 
2010. A Law on youth was adopted in July 2011, providing an appropriate legal framework 
for  the  government's  priorities  and  actions  in  this  area.  So  far,  123  youth  offices  have  been 
established  all  over  Serbia  which,  in  cooperation  with  the  Ministry,  are  adopting  and 
implementing local youth action plans. Serbia has been a leading partner country within the 
Youth  in  Action  programme  framework  and  the  Ministry  has  actively  promoted  its 
opportunities.  Young  people  are  offered  the  possibility  of  obtaining  scholarship  funding, 
support  for  their  initiatives  and  projects  and  career  guidance.  Proper  implementation  and 
monitoring  of  these  measures  need  to  be  ensured,  including  setting  clear  objectives  and 
indicators.  

Serbia's legislation needs to be amended to comply fully with the EU legislation on education 
of children of migrant workers and allow equal access to education for EU citizens.  

As  regards  culture,  Serbia  ratified  the  2005  UNESCO  Convention  on  the  protection  and 
promotion of the diversity of cultural expressions in 2009 and subscribes to the objectives of 

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the  European  Agenda  for  Culture.  In  accordance  with  the  Law  on  culture  adopted  in  2009, 
Serbia  is  supporting  programmes  and  projects  in  all  fields  of  artistic  and  creative  work  by 
organising  public  competitions.  The  Ministry  of  Culture  organises  training  for  artists, 
especially  on  cultural  management.  Serbia  is  actively  participating  in  the  regional  cultural 
initiatives  and  in  the  EU's  Culture  programme  (2007-2013),  where  it  has  taken  the  lead  in 
coordinating some projects. 

Conclusion 

Serbia  is  conducting  reforms  in  order  to  comply  with  the  EU  acquis  and  EU  standards  on 
education and training, culture and youth. The education sector is undergoing reforms in all 
areas,  but  these  efforts  need  to  be  intensified,  especially  in  the  VET  sector,  to  enhance  the 
quality  of  education  and  its  links  with  the  labour  market.  Strengthening  quality  assurance, 
designing  national  qualifications  and  ensuring  social  inclusion  at  all  stages  of  education 
deserves  specific  attention.  Non-discrimination  against  EU  citizens  within  the  Serbian 
education system will need to be ensured.  

Overall,  if  it  continues  its  efforts  Serbia  should,  in  the  medium  term,  have  the  capacity  to 
comply with the requirements of the EU acquis in this area. 

3.27.  Chapter 27: Environment 

Environment 

EU  environment  policy  aims  to  promote  sustainable  development  and  protect  the 
environment  for  present  and  future  generations.  It  is  based  on  integration  of  environmental 
protection  into  other  EU  policies,  preventive  action,  the  polluter  pays  principle,  fighting 
environmental damage at source and shared responsibility. The EU acquis comprises over 200 
major legal acts covering horizontal matters, water and air quality, waste management, nature 
protection,  industrial  pollution  and  risk  management,  chemicals  and  noise.  Ensuring 
compliance  with  the  EU  acquis  requires  significant  investment,  but  also  brings  significant 
benefits. A strong and well-equipped administration at national and local levels is imperative 
for application and enforcement of the EU environmental acquis.  

The SAA establishes cooperation with the aim of strengthening administrative structures and 
procedures  to  ensure  strategic  planning  of  environmental  issues  and  coordination  between 
relevant stakeholders and is  focusing on  aligning  Serbia's  legislation  with the  EU acquis. A 
number  of  articles  relevant  to  other  areas,  such  as  energy,  transport  and  industrial 
development, also underline the environmental aspects of the cooperation. 

The Constitution of the Republic of Serbia establishes the right of every citizen to a healthy 
environment and to timely and full information about the state of the environment. It holds the 
Republic and the Autonomous Province accountable for environmental protection and defines 
the  environmental  management  powers  of  the  three  tiers  of  the  administration,  namely  the 
Republic, the Autonomous Province and the municipalities or local self-government. 

The  basic  legal  framework  for  environmental  protection  is  provided  by  the  2004  Law  on 
environmental  protection,  which  was  amended  in  2009.  Serbia  has  also  established  two 
strategic  environmental  planning  documents,  each  covering  ten  years:  the  Sustainable 
Development  Strategy  was  adopted  in  2008  and  recently  updated  and  the  National 
Programme for Environmental Protection was adopted in March 2010.  

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the 

framework 

institutional  and  administrative 

Regarding 
for  environmental 
management,  the  Ministry  of  the  Environment,  Mining  and  Spatial  Planning  was  set  up  in 
2007.  In  March  2011  it  also  assumed  responsibility  for  mining  and  waste  from  extractive 
industries.  Serbia  has  also  established  an  Environmental  Protection  Agency  (SEPA)  to 
regulate  and  develop  the  national  information  system  for  environmental  protection.  Formal 
coordination,  information  and  joint  decision-making  mechanisms  between  the  governmental 
bodies for effective implementation of the EU acquis are weak. Responsibility for protection 
and management of water resources is shared with the Ministry of Agriculture, the Ministry of 
Health and the Ministry of Infrastructure. Environmental monitoring is ensured by the central 
government, Autonomous Province and municipal authorities, with overlaps and gaps. Efforts 
to  streamline  this  system  have  just  started,  with  the  progressive  transfer  of  environmental 
monitoring tasks to the SEPA, thus significantly increasing its capacity in terms of staff from 
29  to  88  employees  and  monitoring  functions  of  both  air  and  water  quality,  but  the 
fragmentation of responsibility for implementation of the EU's environmental acquis remains 
a challenge. Serbia needs to pursue the consolidation of its public administration in charge of 
environmental policy more vigorously to focus on meeting the requirements of the EU acquis. 
Furthermore,  environmental  management  tasks  at  municipal  level  are  underfunded  and 
require substantial strengthening to justify and sustain decentralisation.  

The  2004  Law  on  environmental  protection  (amended  in  2009)  sets  out  the  principal 
functions, duties and powers of inspectors of the Republic, the Autonomous Province and the 
local self-government. Details of these inspection duties and powers are given in a number of 
other laws, including on environmental impact assessment (EIA) and on integrated pollution 
prevention and control (IPPC). The powers of inspectors are far-reaching, including authority 
to  prohibit,  confiscate  and  order  action  to  fulfil  legal  obligations.  However,  substantial 
restrictions  exist  on  access  to  sites  without  prior  notice  and  on  taking  samples.  Only  courts 
can impose fines.  

The Control and Surveillance Sector in the Ministry of the Environment, Mining and Spatial 
Planning started to apply the minimum criteria for environmental  inspections in early  2007, 
allowing a first assessment of the effectiveness of environmental inspection and prosecution. 
A  more  effective  enforcement  system  is  required.  Cooperation  between  the  various 
inspectorates  (for  the  environment,  water,  health  and  trade)  needs  to  be  streamlined  and 
cooperation  with  police  and  prosecutors  formalised.  Serbia  has  launched  a  programme  to 
address  legislative  and  systemic  weaknesses  impeding  effective  inspection.  This  is  a  long-
term process requiring considerable political will and adequate resources. 

Environmental  investment  planning  is  based  on  the  National  Programme  for  Environmental 
Protection adopted in 2010 and the Sustainable Development Strategy adopted in 2008. Serbia 
needs to adopt also its Environmental Approximation Strategy. It will have to be followed by 
a  more  detailed  audit  to  establish  clearly  the  state  of  environmental  infrastructure  and  of 
utility  service-providers  in  Serbia.  This  will  clarify  the  'starting  position'  with  a  view  to 
preparing detailed implementation plans. An affordability study at national and regional levels 
is also required to provide affordability references and benchmarks.  

Public  awareness  of  environmental  issues  is  increasing,  but  public  participation  in 
environmental decision-making and public access to environmental information remain weak. 
Further  efforts  are  needed  to  build  a  solid  partnership  between  the  government  and  civil 
society. There are some mechanisms for integrating the environment into other policies, but 
application in practice is limited.  

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Regarding  horizontal  legislation,  Serbia  has  achieved  a  high  level  of  alignment.  The 
government  has  adopted  a  Rulebook  on  the  National  List  of  environmental  Indicators, 
including  indicators  and  theme  indicators  units  classified  into  thematic  areas.  Further  efforts  are 
needed  to  align  legislation  relating  to  trans-border  aspects  of  environmental  impact 
assessment (EIA) more closely. Serbia needs to accede to the first and second amendments to 
the Espoo Convention, with its provisions relating to access to environmental information and 
access  to  justice.  Particular  attention  needs  to  be  given  to  enforcing  the  Environmental 
Liability  Directive.  In  particular,  EIAs  need  to  be  properly  carried  out  wherever  legally 
required,  and  proper  coordination  between  different  authorities  and  with  all  stakeholders 
needs to be ensured.  

Serbia has substantially progressed in its alignment with air quality legislation. Its legislation 
is almost fully aligned with the Air Quality Framework Directive. However, some remaining 
provisions  of  the  Directive  covering  arsenic,  cadmium,  mercury,  nickel  and  polycyclic 
aromatic  hydrocarbons  in  ambient  air  remain  to  be  introduced.  Serbia  needs  to  continue  to 
work on alignment with the relevant parts of the National Emission Ceilings Directive and on 
the directives dealing with fuel standards.  

Serbia  has  produced  its  first  preliminary  air  quality  assessment  and  is  proceeding  with 
dividing  its  territory  into  zones  and  conurbations.  It  needs  to  complete  this  exercise  and 
continue  preparing  pilot  clean  air  plans,  starting  with  environmental  hotspots.  Belgrade  and 
other cities suffer from high levels of air pollution.  

Implementing legislation has been adopted on monitoring of the air ambiance quality and on 
establishing agglomeration zones. Air Quality Plans for the cities of Belgrade, Novi Sad and 
Bor are being prepared. The Serbian Environmental Protection Agency (SEPA) has installed 
an  automatic  ambient  air  quality  monitoring  network  that  has  started  to  operate  alongside 
automatic,  semi-automatic  and  manually  operated  measurement  points  managed  by 
municipalities  and  other  public  bodies.  The  integration  of  ambient  air  quality  monitoring 
networks  needs  to  be  further  advanced  and  non-EU-compliant  measuring  methods 
discontinued.  SEPA's  capacity  to  operate  this  network  sustainably  needs  to  be  enhanced, 
possibly with the aid of further transfers of staff and resources from other institutions working 
in the area of the environment.  

As regards waste management, Serbia has aligned its legislation with the key EU policies on 
waste and hazardous  waste management, introducing the principles of waste prevention, re-
use, recycling and recovery. Serbia has substantially aligned its legislation with the EU acquis 
on packaging and packing waste and on specific waste streams. Implementation has started. 
Legislation providing for waste separation is likewise in place. However, law enforcement is 
hampered by low waste collection rates in rural communities, thousands of illegal dumpsites 
and  the  absence  of  treatment  facilities  for  hazardous  waste.  There  is  a  significant  problem 
with stockpiles of hazardous waste in temporary storage and environmental hotspots in need 
of remediation.  

Legislation on sewage sludge and on waste from extractive industries needs to be aligned as a 
matter of priority, given the significance of the extractive industries in Serbia. A number of 
requirements  of  the  new  EU  Waste  Framework  Directive,  notably  application  of  the  best 
available techniques, need to be introduced. The first waste oil collection and processing plant 
in Serbia was opened in September in the port of Kladovo (Danube river), with the capacity to 
annually process between 3,000 and 5,000 tonnes of waste oil and oily water. Implementing 
legislation  on  managing  Polychlorinated  Biphenyls  (PCBs)  waste  was  adopted,  and 

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implementing  legislation  for  persistent  organic  pollutants  (POPs)  management  is  under 
adoption.  

The National Waste Management Strategy adopted in May 2010 provides for increasing the 
number  of  EU-compliant  landfills  and  the  collection  rates  for  municipal  waste.  Whilst 
recycling  of  specific  waste  streams  such  as  car  batteries  is  up  to  80%,  the  overall  rates  of 
recycling of household waste are still low at an estimated 8%. Product charges covering the 
collection and recycling of special waste streams have been introduced and are collected via 
the Ekofund. However, there are no incinerators and only few composting plants. Segregated 
collection of different packaging waste at source, and pre-treatment in regional sorting plants 
to generate marketable recyclable materials, need to be introduced over time. Furthermore, a 
combined  strategy  needs  to  be  developed  to  meet  targets  for  reducing  biodegradable  waste 
going to landfill, for home composting in rural areas, for segregated collection of bio-waste 
and for composting bio-waste in central plants in large cities.  

As  regards  water  quality,  only  10%  of  wastewater  discharged  is  treated.  Sewage  collection 
ranges  from  over  70%  in  urban  areas  to  less  than  10%  in  rural  Serbia.  The  country's  three 
largest  cities  have  no  wastewater  treatment  plants.  Surface  water  quality  is  problematic, 
notably in the tributaries to the big Rivers Danube and Sava. There are quality issues related 
to both the microbiology and physio-chemical properties of drinking water in some parts of 
the country.  

Whilst Serbian drinking water legislation has been largely aligned with EU law, large parts of 
the  Water  Framework  Directive  (WFD)  still  remain  to  be  aligned  with  the  EU  acquis.  This 
includes the principle of cost recovery for water  services, the delineation of water basins to 
replace the current delineation of water districts following administrative/political boundaries 
and the definition and mandate of the competent authority. EU legislation on the protection of 
groundwater  against  pollution  and  deterioration,  groundwater  monitoring,  the  Nitrates 
Directive and Urban Waste Water Treatment Directive still need to be fully introduced into 
Serbian  law.  Implementing  legislation  on  emission  limit  values  of  pollutants  in  water  and 
deadlines  for  its  accomplishment  has  been  adopted.  Complying  with  the  overall  legislative 
framework, organising governance of this sector in line with the principles of the WFD and 
catching  up  with  the  unusually  vast  backlog,  notably  in  development  of  wastewater 
infrastructure, will be major challenges for Serbia.  

Serbia  has  progressed  with  transposing  the  EU  nature  protection  legislation.  The  Law  on 
nature  protection  is  largely  in  line  with  the  Birds  and  Habitats  Directives.  A  Biodiversity 
Strategy with an action plan was adopted in early 2011. Approximately 6% of the country's 
territory is protected under national legislation and international commitments. Implementing 
legislation  on  the  compensation  for  damages  caused  by  illegal  actions  against  the  strictly 
protected and the protected wildlife was adopted in June. The management of protected areas 
needs to be reviewed. In particular, the funding of conservation needs to be made independent 
from resource use. Efforts are under way to establish a preliminary list of Natura 2000 sites. 
Whilst establishment of a preliminary list of specially protected areas in compliance with the 
EU Birds Directive is progressing, identification of habitats sites is hampered by the absence 
of a clear delineation of tasks of key stakeholders.  

As  regards  industrial  pollution  and  risk  management,  alignment  with  both  the  Directive  on 
integrated  pollution  prevention  and  control  (IPPC)  and  the  Directive  on  control  of  major 
accident hazards (Seveso II) has been largely completed and implementation has commenced. 
The most recent update of the EU legislation on IPPC will have to be taken into account to 

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ensure  full  compliance  with  the  EU  acquis  in  the  field  of  industrial  emissions.  Each  of  the 
approximately  180  IPPC  installations  needs  to  hold  a  valid  permit  by  2015.  The  first 
applications  are  now  being  received  and  processed.  The  first  IPPC  integrated  licence  was 
issued to the Titan cement plant in July. However, while the majority of permits will be issued 
by  the  central  and  the  Autonomous  Province  authorities,  permits  for  some  industries  fall 
within  the  remit  of  local  government,  which  lacks  both  the  knowledge  and  the  resources  to 
implement the IPPC Law. 

The  Law  on  environmental  protection  provides  a  basis  for  application  of  voluntary 
instruments  such  as  ISO  standard  14001,  the  eco-management  and  audit  scheme  (EMAS), 
national  ecolabels,  cleaner  production,  management  and  technical  standards.  The  Group  for 
Standards  and  Cleaner  Production  in  the  Ministry  of  the  Environment,  Mining  and  Spatial 
Planning  is  the  body  responsible.  ISO  standard  14001  is  already  widely  applied  in  Serbia. 
Implementation of EMAS, however, awaits completion of the implementing legislation. 

The 2009 Laws on chemicals and on biocidal products, both amended in 2010, adhere to the 
principal concepts of the corresponding EU legislation, notably the REACH Regulation and 
the Regulation on classification, labelling and packaging of substances and mixtures and the 
Directive  concerning  the  placing  of  biocidal  products  on  the  market.  Moreover,  Serbia  has 
also  ratified  the  Rotterdam  Convention  on  the  prior  informed  consent  procedure  for  certain 
hazardous chemicals and pesticides in international trade. Steps have been taken to implement 
the Stockholm Convention on persistent organic pollutants. In relation to the national profile 
for chemical management, a preliminary inventory of discarded persistent organic pollutants, 
has been created. A regulatory and implementation body dealing with biocidal products and 
chemicals  is  now  in  operation.  A  chemicals  register  and  helpdesk  meeting  REACH 
requirements  have  been  installed.  Bans  and  restrictions  on  trade  movements  of  chemical 
substances have entered into force and inspection plans are being drawn up to enforce them. 
Serbia  now  needs  to  enforce  the  provisions  concerning  classification  and  labelling  of 
hazardous substances and mixtures.  

There is essentially no regulatory framework in place for soil protection and soil monitoring, 
though ad hoc soil monitoring is carried out by the relevant research institutes. The provisions 
of the Directive on noise were transposed into Serbia's national legislation by the 2009 Law 
on noise protection, amended in 2010, and the subsequent implementing legislation.  

As  regards  civil  protection,  Serbia  has  made  significant  progress  towards  an  integrated 
emergency management system by establishing the Sector for Emergency Management in the 
Ministry  of  the  Interior,  with  the  aim  of  coordinating  the  activities  of  all  State  institutions 
involved  in  emergency  management.  Serbia  has  also  adopted  the  Law  on  emergency 
situations.  Efforts  are  still  needed  to  allow  proper  implementation  and  enforcement  of  the 
legislation  and  of  the  new  institutional  setting  and  to  adopt  implementing  legislation. 
Coordination  between  ministries  and  bodies  needs  to  be  improved.  Further  efforts  will  be 
needed to fill certain capacity gaps like the lack of modern equipment, early warning systems 
or risk assessment and mapping tools for both disaster prevention and response.  

Climate change 

EU  climate  action  is  a  central  pillar  for  ensuring  sustainable  growth  and  the  shift  to  a  low-
carbon  and  resource-efficient  economy.  The  EU  acquis  on  the  climate  covers  the  EU 
emissions trading system (EU ETS), greenhouse gas (GHG) reductions for non-ETS sectors, 
fluorinated  gases,  ozone-depleting  substances,  vehicle  efficiency  standards,  fuel-quality 

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standards, carbon capture and storage plus monitoring and reporting of GHG emissions. Due 
account  needs  to  be  taken  of  the  climate  dimension  in  all  policies  and  adaptation  measures 
taken to reduce vulnerability to the impact of climate change.  

In  relation  to  policy  development,  the  Serbian  National  Sustainable  Development  Strategy, 
adopted  in  2008  and  recently  updated,  along  with  the  National  Environmental  Protection 
Programme adopted in 2010, identify climate change as a key risk and put forward action to 
adapt to and mitigate it. Other key documents include the Energy Development Strategy until 
2015,  the  Forestry  Development  Strategy  and  the  Strategy  for  Scientific  and  Technological 
Development.  Further  strategies  on  air  protection  and  on  biodiversity,  together  with  the 
relevant action plans, are also being prepared. Significant awareness-raising is required at all 
levels of the country.  

Serbia  is  a  non-Annex-1  Party  to  the  United  Nations  Framework  Convention  on  Climate 
Change (UNFCCC) and has ratified the Kyoto Protocol. The government adopted a national 
Clean  Development  Strategy  in  February  2010.  Serbia  submitted  its  first  national 
communication  in  November  2010,  with  greenhouse  gas  (GHG)  inventories  for  1990  and 
1998, plus projections for 2012 and 2015. The country has also begun preparing the second 
national  communication  (to  cover  GHG  emissions  from  2000  to  2010).  Serbia  is  currently 
assessing  the  financing  needed  for  mitigation,  including  preparing  the  necessary  financial 
plans. Nationally appropriate mitigation action up to 2020 for the energy efficiency sub-sector 
is being developed and should be completed by mid-2013. 

With respect to the EU acquis on climate change, Serbia is still at an early stage. Some sector-
specific laws, such as on energy, waste or air, are contributing to climate change mitigation, 
while  the  legislation  on  forestry  includes  certain  adaptation  measures.  Some  alignment  has 
taken place with the legislation on the quality of petrol and diesel fuels, but this needs to be 
completed, including with respect to GHG emissions. The national airline JAT has prepared a 
monitoring plan. The new Energy Law tightens up the legal provisions for more rational use 
of  energy.  Serbia  is  participating  actively  in  the  climate  work  under  the  Regional 
Environmental Network for Accession (RENA). 

Serbia  is  an  Article  5  Party  to  the  Montreal  Protocol  on  substances  that  deplete  the  ozone 
layer. It has ratified all amendments to it and demonstrates a satisfactory level of compliance 
with the Protocol. Serbia associated itself with the Declaration adopted at the 22nd meeting of 
the  Parties  to  the  Montreal  Protocol  in  November  2010  on  the  global  transition  away  from 
HCFCs and CFCs.  

As far as administrative capacity is concerned, the Ministry of the Environment, Mining and 
Spatial Planning bears main responsibility for formulating and implementing climate change 
policy.  It  cooperates  with  a  number  of  other  ministries  and  authorities  with  climate 
responsibilities. The Serbian Environmental Protection Agency (SEPA) is responsible for data 
collection, processing and reporting on GHG. The Republican Hydro-Meteorological Service 
(RHMS) is in charge of monitoring, research and forecasting. A National Centre for Climate 
Change  was  established  within  the  RHMS  in  2007  to  perform  the  functions  of  the  Sub-
regional South-East European Virtual Climate Change Centre.  

However,  both  administrative  capacity  and  technical  and  financial  resources  need  to  be 
increased considerably for Serbia to be able to align with and implement all the requirements 
of the EU climate change policy and legislation. Significant efforts are needed at all levels of 

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the  country  to  promote  cooperation  and  coordination  between  the  different  ministries  and 
authorities involved. 

Conclusion  

Over the last few years Serbia has progressed well with alignment of its legislation with the 
EU's  environmental  acquis.  A  good  level  of  alignment  has  been  achieved  with  the  EU's 
horizontal  environmental  legislation  and  also  in  the  areas  of  waste  management,  nature 
protection  and  chemicals,  whereas  efforts  are  still  needed  to  align  with  the  EU  acquis  on 
water  quality,  and  climate  change.  Serbia  has  established  an  Environmental  Protection 
Agency  and  a  Chemicals  Agency.  Nevertheless  the  country  faces  big  challenges  in 
implementing  and  enforcing  the  EU  environmental  and  climate  change  acquis.  It  will  be 
particularly  important  to  create  the  conditions  for  building  the  technical  and  administrative 
capacity and resources necessary in this area, including for raising awareness at all levels in 
the country.  

Overall,  Serbia  will  have  to  make  considerable  and  sustained  efforts  to  align  with  and, 
especially,  to  implement  and  enforce  the  EU  environmental  and  climate  acquis.  Effective 
compliance  with  EU  legislation  requiring  a  sustained  high  level  of  investment  and 
considerable administrative efforts can only be achieved in the long term. 

3.28.  Chapter 28: Consumer and health protection 

The EU acquis on consumer protection covers the safety of consumer goods and protection 
of the economic interests of consumers in a number of specific sectors. Member States need 
to transpose the  EU acquis into national law and to put in place independent administrative 
structures and enforcement powers that allow effective market surveillance and enforcement. 
Appropriate  judicial  and  out-of-court  dispute  resolution  mechanisms,  consumer  information 
and education, and a role for consumer organisations should be ensured as well. This chapter 
also covers rules in the area of public health. 

The  SAA  provides  for  enhanced  cooperation  with  the  aim  of  aligning  consumer  protection 
standards in Serbia with those of the European Union, including by means of active consumer 
protection and efficient law enforcement. 

The legal framework for consumer protection is enshrined in the Law on consumer protection 
adopted in 2010, aligning with 15 EU directives. However, implementation of this law is at an 
early  stage.  Overall  responsibility  for  consumer  protection  policy  lies  with  the  Ministry  of 
Agriculture, Trade, Forestry and Water Management. The capacity of the consumer protection 
department  remains  weak,  despite  recent  improvements  in  staff  levels.  There  are  consumer 
protection organisations in Serbia, but they are still  weak and lack adequate resources.  This 
continues to hamper their effectiveness. They have started improving their coordination and 
promoting  public  awareness.  However,  their  development  and  role  are  contingent  upon  the 
new Law concerning the registration of consumer protection organisations, which still needs 
to be implemented fully. 

As regards product-safety-related issues, market surveillance is primarily based on the Law on 
general product safety, but further amendments will be required to achieve full alignment with 
the  EU  acquis.  Other  parts  of  the  EU  product  safety  acquis,  along  with  a  number  of  the 
framework standards set in the General Product Safety Directive, remain to be put in place in 
Serbia. The legal framework is supplemented by a relatively comprehensive system of active 

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coordination  of  market  surveillance  across  different  ministries.  This  includes  a  system  for 
rapid  exchanges  of  information  on  dangerous  products  between  authorities  and  between 
authorities and the public.  

In the area of non-safety-related issues, the Law on protection of users of financial services 
was adopted in May 2010, based on a proposal drafted by the National Bank. However, the 
law  is  not  fully  aligned  with  the  EU  acquis,  especially  as  regards  calculation  of  the  annual 
percentage rate of charge  

Concerning public health, the overall aim of the EU's policy is to improve health and prevent 
human  illness  and  diseases.  The  EU  acquis  consists  of  a  limited  number  of  legally  binding 
instruments  and  a  larger  body  of  non-binding  measures  and  policy  documents,  plus  two 
international commitments on health. 

Overall responsibility for this area in Serbia lies with the Ministry of Health, the authority in 
charge  of  health  policy,  while  the  Public  Health  Institute  is  in  charge  of  preserving  and 
improving  the  health  of  all  citizens,  with  the  National  Health  Insurance  Fund  managing  the 
financing of the system. 

Serbia's health system is based on the 2005 Laws on healthcare and on health insurance, along 
with  the  accompanying  regulations  and  both  amended  in  August  2011.  In  November  2010 
Serbia adopted a Healthcare Development Plan. e-health starts being implemented as a policy 
tool but not yet in a fully integrated manner. Full-scale implementation remains outstanding, 
as does active involvement of patients' and health professionals' associations. 

Legislation on tobacco is partially aligned with the EU acquis. Missing elements include the 
ban of oral tobacco and the completion of the legislation concerning tobacco advertising. A 
national strategy for tobacco control was adopted in 2007 followed by a Law on protection of 
the population from exposure to tobacco smoke adopted by parliament in 2010, providing for 
a  partial  protection  from  environmental  tobacco  smoke.  However,  despite  a  decrease  in 
smoking between 2000 and 2006, smoking remains a persistent problem in Serbia. 

The basic act regulating communicable diseases in Serbia is the Law on the protection of the 
population against communicable diseases adopted in 2004 and the implementing legislation 
on  reporting  such  diseases.  However,  some  case  definitions  for  reporting  communicable 
diseases, including clinical, laboratory and epidemiological criteria, are missing and EU case 
definitions have to be progressively adopted. The legal basis, national structures and resources 
are  generally  in  place  and  are  being  strengthened.  However,  the  surveillance  and  response 
capacity is still limited and requires some modernisation, in particular in the form of human 
and  material  resources.  In  April  2011,  Serbia  adopted  a  National  HIV/AIDS  Response 
Strategy for 2011–2015. Serbia's action in this field corresponds to the broad lines of the EU 
Communication on combating HIV/AIDS. However, further efforts are needed to implement 
the newly adopted Strategy, especially on raising public awareness. 

Serbia's legislation on blood, tissues and cells is broadly aligned with the EU acquis. In 2009 
four  laws  were  adopted  on  biomedicine  and  transfusion  activities.  In  the  field  of  organ 
transplantation, the Directorate for Biomedicine in the Ministry of Health was established in 
mid-2010,  but  further  efforts  are  needed  to  implement  the  Law  on  organ  transplantation. 
Administrative and technical capacity needs to be strengthened. 

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Regarding mental health, Serbia's Strategy for the development of mental healthcare identifies 
a  series  of  efforts  needed,  but  the  administrative  capacity  is  inadequate  to  ensure 
implementation. Further action needs to be taken to promote inclusion of people with mental 
health problems and ensure equal access to basic human rights, employment, education and 
social services. Efforts towards de-institutionalisation need to continue and community-based 
mental health services should be further supported as an alternative to institutions.  

On  cancer  prevention  and  control,  Serbia  adopted  in  2009  a  national  programme  entitled 
'Serbia against Cancer'. However, Council recommendations on cancer screening have yet to 
be  implemented.  Reducing  the  harmful  effects  of  alcohol  and  drugs  is  included  among  the 
specific  goals  of  health  policy  up  to  2020.  A  national  strategy  and  action  plan  on  the 
prevention  of  alcoholism  needs  to  be  adopted  in  line  with  the  EU  alcohol  strategy.  The 
prevention  of  illicit  drug  use  and  the  treatment  of  drug  abuse  problems  is  addressed  in  the 
Strategy and action plan on drugs 2009-2013. 

Conclusion 

Serbia has recently aligned its legislation with a significant part of the EU acquis in the area 
of consumer protection. Efforts are now needed to implement and enforce the legislation.  

On health protection, while the country has taken many steps forward in the recent past and 
the basic administrative and legal infrastructure is in place, efforts are needed for it to be able 
to align with the EU acquis and to implement it effectively in the medium term.  

Overall,  Serbia  will  need  to  make  additional  efforts  to  achieve  full  alignment  with  the  EU 
acquis  on  consumer  and  health  protection  and  to  implement  and  enforce  it  properly  in  the 
medium term. 

3.29.  Chapter 29: Customs Union 

The EU acquis in this sector consists of the Community Customs Code and its implementing 
provisions,  the  EU's  Combined  Nomenclature  (CN),  the  Common  Customs  Tariff  including 
trade  preferences,  tariff  quotas  and  tariff  suspensions  and  other  customs-related  legislation 
outside  the  scope  of  the  Customs  Code.  Member  States  must  ensure  that  the  necessary 
implementing  and  enforcement  capacity,  including  links  to  the  relevant  EU  computerised 
customs  systems  (tariff-related  systems,  NCTS,  ECS,  ICS,  etc.)  are  in  place.  The  customs 
authorities  must  also  ensure  adequate  capacity  to  implement  and  enforce  special  rules  laid 
down in related areas of the EU acquis such as on external trade, health and security.  

The Interim Agreement establishes a free-trade area with the EU and the progressive removal 
of customs duties on a wide range of products. It places an obligation on Serbia to adopt the 
Combined Nomenclature. It also provides for administrative cooperation on customs matters 
and  lays  down  rules  of  origin  which  have  to  be  observed  in  order  for  EU  and  Serbian 
operators  to  benefit  from  the  trade  preferences.  In  addition,  it  paves  the  way  for  gradual 
approximation of the Serbian customs legislation to the EU acquis. 

In  terms  of  customs  legislation,  Serbian  law  is  largely  aligned  with  the  EU  acquis.  The 
Customs Law adopted in March 2010 is basically harmonised with the EU Customs Code. In 
January  2011,  the  relevant  implementing  legislation  entered  into  force.  The  Combined 
Nomenclature  (CN)  is  applied  and  the  classification  rules  are  largely  in  line  with  the  EU 

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acquis. However, classification practice, including decisions on binding tariff information, is 
still to be upgraded to EU standards.  

In June 2011 Serbia also abolished administrative customs fees for regular activities, thereby 
bringing  the  system  into  line  with  the  requirements  of  the  Interim  Agreement  and  the  EU 
acquis. Preferential tariff quotas are managed by the Information System of Customs Services 
(ISCS)  on  a  first-come,  first-served  principle  on  a  daily  basis.  The  country  does  not  apply 
erga  omnes  tariff  quotas  or  tariff  ceilings  and  lacks  an  automated  system  for  collecting 
statistics. The  system of autonomous suspensions and tariff quotas needs to  be  brought into 
line with the provisions applied in the EU. 

Serbia implements preferential rules of origin and methods of administrative cooperation that 
largely  reflect  those  used  by  the  EU  in  its  free-trade  agreements.  Furthermore,  it  applies 
diagonal  cumulation  with  the  EU  and  other  countries  subject  to  the  European  Union 
Stabilisation  and  Association  Process.  The  status  of  approved  exporter  also  exists.  Serbia 
complies with EU law on customs value.  

The  national  legislation  on  duty  relief  is  well  harmonised  with  the  EU  acquis,  but  some 
discrepancies still exist, notably the rules on duty relief for equipment imported by, and for, 
passengers or the monetary threshold for duty relief and the rates for simplified declaration. 

Serbia is observer in the Common Transit Convention and intends to join it once all the legal 
and technical requirements are met. The Customs Administration needs to encourage further 
use of simplified customs procedures in the framework of specific authorisations. 

The  legislation  on  customs-related  security  initiatives,  including  authorised  economic 
operators, has been adopted, but implementing provisions are missing. Post-clearance controls 
and the risk analysis systems have been relatively successful over the last year, but need to be 
used  more  frequently  for  systematic  planning  and  execution  of  ex-post  controls.  The  risk 
analysis capacity is also hampered by an insufficient IT system and lack of strategy. Customs 
perform  a  high  percentage  of  physical  controls  but  is  not  producing  proportionate  findings. 
Risk analysis and management need to be changed to a thematic system targeting risk control, 
similar to the system applied in the EU, supported by an adequate IT application.  

In line with the requirements of the Interim Agreement, the Customs Administration of Serbia 
(CAS)  has  made  efforts  to  reach  the  EU  level  of  protection  of  intellectual  property  rights 
(IPR). It has substantially tightened up the control procedures at the border and should now 
further reinforce effective means of enforcement. On drug precursors, Serbia has put in place 
a  system  for  pre-export  notification,  while  on  cultural  goods  Serbia  still  has  to  adopt 
legislation  and  apply  controls  in  line  with  the  EU  requirements.  The  provisions  on  cash 
control do not meet the requirements of the EU legislation. 

Concerning  administrative  and  operational  capacity,  the  CAS  has  been  continually 
strengthening its administrative capacity for effective enforcement of customs legislation. It is 
well-organised  and  implements  sound  procedures  and  working  methods  allowing  the 
competent staff to enforce the customs and related legislation sufficiently. However, there are 
still  room  for  improvement.  A  properly  equipped  and  functioning  customs  laboratory  is 
missing  and  the  overall  operational  capacity  needs  to  be  strengthened  to  ensure  further 
enforcement  of  legislation  (for  example,  on  IPR  and  safety  The  coordination  between  the 
Ministry  of  Finance  and  the  CAS  needs  to  be  better  streamlined.  In  2010,  the  CAS,  in 
cooperation with the World Customs Organisation, initiated  a pilot project on strengthening 

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the  integrity  of  customs  officials  and  stepping  up  the  fight  against  corruption.  However, 
further  efforts  are  needed  in  fields  such  as  office  management,  the  performance  appraisal 
system,  ethics  and  training.  Moreover,  the  audit  resources  need  to  be  reinforced  and  the 
central customs administration should be allowed to carry out audits.  

In December 2010 the Customs Administration adopted a business strategy for 2011-2015. A 
customs  IT  strategy  was  adopted  in  early  autumn  2011.  The  CAS  currently  uses  the 
Information System of Customs Services (ISCS). There are plans to merge the ISCS with the 
Integrated  Customs  Tariff  TARIS.  Although  around  90%  of  customs  declarations  are 
submitted  electronically,  data  exchange  for  customs  formalities  is  only  partially  processed 
through the IT system. In general, Serbia has progressed on customs computerisation and is 
planning future interconnectivity with EU customs IT systems. However, further upgrading of 
the customs IT systems is needed.  

Serbia  joined  the  Customs  2013  Programme  in  April  2009  and  has  participated  regularly  in 
activities  under  it  ever  since.  Through  the  conclusion  of  agreements  on  international 
cooperation, the customs authorities share information with other foreign institutions. In terms 
of  trade  facilitation,  the  customs  administration  formalised  procedures  for  exchanging  pre-
arrival  information  with  neighbouring  countries.  Implementation  of  the  integrated  border 
management strategy and action plan continued (see also Chapter 24 – Justice, freedom and 
security). 

The  customs  procedures  and  formalities  to  guarantee  correct  application  of  the  EU  acquis 
need to be applied at the administrative boundary line (ABL) between Kosovo and Serbia, in 
particular at gates 1 and 31 to the north of Kosovo. At the ABL, insufficient controls create 
the  risk  of  VAT  carrousels,  fraud  with  excises,  illicit  trade  and  imports  without  paying 
customs duties. Serbia needs to prevent this illicit trade in a way that respects that Kosovo is a 
separate  customs  territory.  Impact  of  the  modifications  to  VAT  refund  rules  adopted  in 
September 2011 in this respect as regards oil and oil derivatives, will have to be assessed. 

The  agreement  on  accepting  the  Kosovo  customs  stamps  needs  to  be  implemented  in  full 
compliance with CEFTA rules. 

Conclusion 

The customs legislation is almost fully aligned with the EU acquis. The obligations stemming 
from the Interim Agreement are being met well. The administrative and operational capacity 
of  the  Serbian  Customs  Administration  is  good.  It  has  the  administrative  structures  and 
adequate  resources  to  implement  and  enforce  the  customs  legislation  and  make  sure  that 
procedures and working methods are implemented effectively. However, in order to be able to 
address the future challenges, the Customs Adminitration will need to be reinforced, notably 
to increase post-clearance controls based on risk analysis, expand use of simplified procedures 
for reliable economic operators, step up use of the guarantee management system and upgrade 
interconnectivity  and  interoperability  with  the  EU  IT  systems.  Customs  procedures  to 
guarantee  correct  application  of  the  EU  acquis  at  the  ABL  with  Kosovo  have  to  be 
introduced. 

Overall, Serbia is already well on the way to meeting the EU acquis and remains committed 
to  reforms  in  the  area  of  customs.  If  it  continues  its  efforts,  Serbia  should,  in  the  medium 
term,  have  the  capacity  to  comply  with  the  requirements  of  the  EU  acquis  in  the  field  of 
customs. 

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3.30.  Chapter 30: External relations 

The  EU  acquis  in  the  field  of  external  relations  consists  mainly  of  directly  applicable  EU 
legislation which does not require transposition into national law.  

The  Interim  Agreement  contains  the  core  trade  part  of  the  Stabilisation  and  Association 
Agreement that establishes a free-trade area between Serbia and the EU. It includes provisions 
requiring the Parties to act in accordance with the rules of the WTO or relevant international 
obligations. Serbia is also required to enhance trade liberalisation within the Western Balkans 
and with other countries involved in the enlargement process. 

Upon accession, Serbia will be bound by the common commercial policy. Serbia will have 
to  apply  all  the  Free-Trade  Agreements,  the  Customs  Union  and  all  the  autonomous 
(preferential  and  non-preferential)  trade  regimes  that  the  EU  grants  to  certain  non-EU 
countries,  including  the  Generalised  System  of  Preferences  (GSP).  Serbia  will  also  have  to 
terminate  all  its  current  preferential  trade  agreements  with  non-EU  countries  and  bring  all 
other agreements, including non-preferential trade agreements, into line with the obligations 
imposed by EU membership. Moreover, Serbia will become party to the European Economic 
Area (EEA) and will have to apply all the EU's international trade agreements. 

Serbia  is  not  yet  a  member  of  the  World  Trade  Organisation  (WTO)  but  the  membership 
negotiations are at a very advanced stage. The bilateral track of negotiations has already been 
completed  with  most  WTO  partners,  while  progress  has  also  been  made  on  the  multilateral 
track.  Finalisation  of  the  process  will  depend  on  the  pace  of  the  remaining  bilateral 
negotiations  and  further  legislative  reforms.  Serbia's  commitments  under  the  General 
Agreement on Trade in Services (GATS) are generally in accordance with those given by the 
EU.  However,  the  final  commitments  will  have  to  be  verified  when  the  last  outstanding 
bilateral  negotiations  are  concluded,  especially  in  the  areas  sensitive  for  the  EU,  such  as 
energy, pipelines and road transport. Depending on the final terms of Serbia's accession to the 
WTO, Serbia might have to modify its WTO commitments upon accession to the EU. 

The average Serbian ad valorem tariff rate applied is 22.16% for agricultural products, 8.72% 
for  fish  and  fishery  products  and  6.31%  for  industrial  goods,  with  an  overall  average  of 
9.72%.  The  EU  average  MFN  ad  valorem  tariff  rate  is  9.74%  for  agricultural  products, 
10.02% for fish and fishery products and 3.75% for industrial goods, with an overall average 
of  4.83%.  Upon  accession  to  the  EU,  Serbia  will  have  to  apply  the  EU  Common  Customs 
Tariff. 

Serbia's  Law  on  foreign  trade  transactions  and  implementing  bylaws  include  provisions  on 
anti-dumping,  countervailing  and  safeguard  measures.  Upon  accession,  Serbia  will  have  to 
repeal national legislation related to its trade defence instruments and measures based on this 
legislation and apply the EU rules and measures. 

Serbia  does  not  apply  any  Generalised  System  of  Preferences  (GSP)  scheme.  Upon 
accession, Serbia will need to apply the EU GSP scheme. 

The  export  credits  scheme  in  Serbia  is  operated  solely  by  the  State-owned  Serbian  Export 
Credit  and  Financing  Agency  (AOFI)  that  covers  both  short-term  and  medium-/long-term 
export credit insurance. The AOFI also provides short-term support for exports to the EU. It 
applies the OECD method and is a member of the Berne Union. Upon accession, Serbia will 
need  to  ensure  full  alignment  of  its  short-term  export  credit  insurance  system  with  the  EU 

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competition rules. As regards medium- and long-term export credits, Serbia will need to align 
its relevant legislation with the relevant EU acquis and EU international obligations. 

Concerning dual-use export controls, Serbia applies legislation adopted in 2005 and amended 
in  2009  that  establishes  an  export  control  system  for  dual-use  goods,  weapons  and  military 
equipment. Serbia is not a member of the Kimberley process and does not control trade with 
rough diamonds. Upon accession it will have to apply the relevant EU regulation. 

As  regards  free-trade  agreements  (FTA)  with  third  countries,  Serbia  has  been  a  member  of 
CEFTA  since  May  2007.  Serbia  signed  an  FTA  with  the  European  Free  Trade  Association 
(EFTA).  Serbia  also  has  bilateral  FTAs  with  Turkey,  the  Russian  Federation,  Belarus  and 
Kazakhstan.  Since  the  customs  union  of  the  Russian  Federation,  Belarus  and  Kazakhstan 
entered  into  force,  Serbia  has  been  renegotiating  the  FTAs  with  the  Russian  Federation  and 
Belarus  in  order  to  harmonise  trade  arrangements  with  all  three  countries  in  this  customs 
union.  

Serbia  has  been  implementing  46  bilateral  investment  treaties  (BIT)  and  is  currently 
negotiating agreements of the same type with several other countries. Some of the provisions 
included  in  Serbia's  BITs  will  need  to  be  aligned  with  the  EU  acquis  in  line  with  the 
obligations of the Treaty on the Functioning of the European Union and the relevant case law. 
Serbia  has  been  implementing  125  agreements  on  trade  and  economic  cooperation  and  is 
currently  negotiating  agreements  of  the  same  type  with  several  other  countries.  These 
agreements  would  also  need  to  be  brought  into  line  with  the  EU  acquis  upon  Serbia's 
accession to the EU. 

With regard to administrative capacity, participation in the EU decision-making mechanisms 
on  trade  and  implementation  and  enforcement  of  the  EU  acquis  will  require  strengthening 
coordination mechanisms between various ministries.  

As regards development policy and humanitarian aid policies, Serbia is an aid recipient and, 
so far, has provided limited ad hoc aid to non-EU countries on a case-by-case basis, notably 
in response to natural disasters. There is no legislation on development policy and dispatching 
humanitarian aid and no relevant administrative structures are in place.  

In relation to setting up an integrated emergency management system, in 2009 Serbia adopted 
a  Law  on  emergency  situations,  establishing  a  Sector  for  Emergency  Management  in  the 
Ministry  of  the  Interior  that  coordinates  the  activities  of  all  institutions  in  emergency 
situations. The National Disaster Response Team coordinates international assistance that can 
be provided upon approval by the government.  

Serbia  needs  to  continue  to  develop  its  legal  framework  to  cover  development  and 
humanitarian  aid,  including  civil  protection,  in  non-EU  countries  in  accordance  with  the 
relevant  EU  policies  and  principles.  Serbia  will  need  to  strengthen  the  administrative 
structures  inside  the  government  and  its  ability  to  participate  in  the  EU  decision-making 
process on development and humanitarian aid policies.  

Conclusion 

In  preparing  for  membership,  Serbia  will  need  to  ensure  that  its  commercial  policy  and 
commitments  to  third  countries  and  international  organisations  are  aligned  and  coordinated 
with those of the EU. It is important that Serbia is aware of the obligations in connection with 

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development  and  humanitarian  policy,  and  it  needs  to  establish  capacity  to  fulfil  the 
obligations of EU membership in this area. 

Overall,  if  it  continues  its  efforts,  Serbia  should,  in  the  medium  term,  have  the  capacity  to 
comply with the EU requirements in the field of external relations. 

3.31.  Chapter 31: Foreign, Security and Defence Policy 

The common foreign and security policy (CFSP) and the common security and defence policy 
(CSDP)  are  based  on  legal  acts,  including  legally  binding  international  agreements,  and  on 
political  documents.  The  EU  acquis  consists  of  EU  statements,  Council  decisions,  political 
declarations, joint actions, common positions and agreements. Member States must be able to 
conduct political dialogue in the framework of CFSP, to align with EU statements, to take part 
in EU actions and to apply any restrictive measures agreed. Applicant countries are required 
to progressively align with EU statements and to apply restrictive measures when and where 
required  (Concerning  relations  with  other  enlargement  countries  and  Member  States,  see 
Political criteria 2.3 – Regional issues and international obligations). 

Serbia  generally  supports  the  efforts  of  the  European  Union  to  strengthen  its  role  as  a 
cohesive  force  in  international  relations  and  its  ability  to  promote  European  interests  and 
values on the international scene. Serbia has declared that it is committed to being ready and 
able to participate fully and actively in the EU's CFSP and CSDP, as defined in the Treaty on 
European Union, by the date of accession. Serbia's Constitution prescribes that international 
treaties ratified must not contravene constitutional norms.  

Serbia's  administrative  structures  are  mostly  adequate,  but  further  strengthening  will  be 
needed. The Ministry of Foreign Affairs bears the main responsibility for conducting foreign 
policy and international relations. An Assistant Minister acts at the same time as Head of the 
Directorate for the European Union. A specialised CSDP Unit has been established within the 
Directorate for Security Policy. There is no specific post of European correspondent but this 
function is performed by the Head of the Unit for EU institutions within the EU Directorate. 
Serbia  has  63  embassies,  7  permanent  missions  and  20  general  consulates.  The  diplomatic 
service consists of 1,078 employees, of whom 536 are in Belgrade. The Ministry of Defence 
is responsible for defence policy. A Unit for European integration and regional initiatives was 
established in 2010. The legislative framework for defence reforms and for democratic control 
over  security  forces  has  been  completed.  The  Ministry  of  Economic  Affairs  and  Regional 
Development  is  in  charge  of  controlling  exports  of  arms,  military  equipment  and  dual-use 
goods.  The  Ministry  needs  more  staff  in  order  to  be  fully  capable  of  implementing  policies 
and adjusting them to the EU legislation.  

As  regards  political  dialogue,  Serbia  has  established  close  political  consultations  with  EU 
Member  States.  The  Stabilisation  and  Association  Agreement  includes  inter  alia  provisions 
for  establishing  a  political  dialogue  on  CFSP  matters.  Serbia  supported  the  adoption  of  the 
UN  resolution  on  EU  participation  in  the  work  of the  UN  General  Assembly.  Serbia  has  in 
most  instances,  when  invited,  aligned  itself  with  Council  decisions,  EU  declarations  and 
démarches.  Serbia  will  progressively  need  to  take  a  more  consistent  approach  on  aligning 
with EU positions. (As regards the International Criminal Court, see Political criteria 2.3 — 
Regional issues and international obligations.) 

Serbia's  relations  with  other  countries  are  good,  overall.  It  has  established  a  foreign  policy 
based on four pillars – the EU, the USA, Russia and China. Strategic partnerships have been 

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formally  established  with  several  countries,  including  China,  Russia  and  two  EU  Member 
States (Italy and France).  

Serbia  is  playing  a  constructive  role  concerning  regional  cooperation  in  South  East  Europe 
and  participates  in  initiatives  such  as  the  South  East  European  Cooperation  Process,  the 
Central  European  Initiative,  and  the  Adriatic-Ionian  Initiative.  However,  an  agreement 
remains to be found on a sustainable solution for the participation of Kosovo in regional fora. 
(See Political criteria). 

Serbia  implements  United  Nations  Security  Council  restrictive  measures.  However,  there  is 
no  system  for  tracking  its  implementation  of  EU  restrictive  measures.  Serbia  needs  to 
establish a consistent approach and consolidated data in this connection.  

Serbia  is  participating  in  most  international  export  control  regimes  and  instruments 
concerning  the  non-proliferation  of  weapons  of  mass  destruction.  Serbia  has  applied  to 
become a party to the Wassenaar Arrangement on export controls for conventional arms and 
dual-use goods and technologies. The Law on foreign trade in arms, military equipment and 
dual-use  goods  was  adopted  in  2005.  Serbia  incorporated  into  its  national  law  in  2008  the 
criteria  guiding  arms  export  licensing  in  the  EU,  as  laid  down  in  the  1998  EU  Code  of 
Conduct  on  arms  exports.  Serbia  remains  to  fully  align  with  the  EU  acquis  laying  down 
common rules governing exports of military technology and equipment. The national Strategy 
for control of small arms and light weapons was adopted in 2010. A national coordinator for 
the Strategy remains to be appointed. The Ministry of the Interior has been destroying surplus 
weapons  but  additional  efforts  are  needed  to  complete  collection  of  illegal  weapons  and 
destroy them.  

Regarding nuclear safeguards, Serbia is a party to the main non-proliferation treaties.  

With regard to cooperation with international organisations, Serbia is a member of the UN, 
the Council of Europe, the OSCE and other major international organisations and agreements. 
Serbia participates in the NATO Partnership for Peace Programme that it joined in 2006.  

As  regards  security  measures,  Serbia  has  adopted  the  legal  basis  and  introduced  the  basic 
practical  arrangements  necessary  to  comply  with  the  Council  decisions  on  information 
security,  including  on  handling  of  classified  information.  An  agreement  with  the  EU  on 
security procedures for exchanging and protecting classified information was signed in May 
2011.  

As regards the common security and defence policy (CSDP), Serbia is prepared to participate 
actively in the EU civil and military crisis management missions. An agreement establishing a 
framework for participation by Serbia in EU crisis management operations was signed in June 
2011. The Serbian parliament adopted in February 2011 a decision approving the annual plan 
for  participation  by  the  Serbian  army  in  multinational  operations.  This  plan  envisages 
participation  in  two  EU  CSDP  operations:  EUTM  and  EU  NAVFOR  Somalia.  The  Serbian 
military forces are currently participating in five UN peacekeeping operations, MONUSCO, 
UNMIL,  UNOCI,  UNIFIL  and  UNFYCYP.  The  Serbian  police  is  taking  part  in  two  UN 
missions, UNMIL and MINISTAH.  

Conclusion 

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The  legal  and  institutional  framework  covering  the  common  foreign  and  security  policy, 
including the common security and defence policy, is largely in place. Serbia has signed an 
agreement  on  security  procedures  for  exchanging  and  protecting  classified  information  and 
another on participation in CSDP operations with the EU. Serbia needs to align further with 
EU statements and Council decisions.  

Overall,  Serbia  should  be  able  to  fulfil  its  obligations  under  the  CFSP  and  CSDP  in  the 
medium  term,  provided  it  takes  the  necessary  legal  and  administrative  measures  and  makes 
the necessary adjustments.  

3.32.  Chapter 32: Financial Control 

The  EU  acquis  on  financial  control  relates  to  the  following  policy  areas:  public  internal 
financial  control  (PIFC)  -  which  covers  internationally  agreed  standards  and  EU  good 
practice on internal control across the entire public sector - and external audit which covers 
the  operational  and  financial  independence  of  the  external  audit  function  (national  audit 
office).  The  PIFC  is  made  up  of  three  pillars:  managerial  accountability  underpinned  by 
financial  management  and  control  systems;  functionally  independent  internal  audit  systems; 
and a Central Harmonisation Unit for developing methodologies and standards relating to the 
first two pillars.  

Management  and  control  of  EU  funds  are  discussed  in  the  other  relevant  chapters  (e.g.  on 
agriculture  and  rural  development,  regional  policy,  coordination  of  structural  instruments  or 
fisheries). This chapter covers the more general aspects of internal control and external audit 
of  national  funds.  It  also  covers  protection  of  the  EU's  financial  interests,  including 
administrative  cooperation  and  criminal  law  protection  (the  PIF  Convention  and  its 
protocols). Finally, the section on protection of the euro against counterfeiting deals with the 
first-pillar aspects of this issue. 

Serbia is still at a relatively early stage of implementing the public internal financial control 
(PIFC) system. The government adopted a PIFC policy paper for 2009-14 in July 2009. The 
legal  framework  for  PIFC,  which  is  provided  by  the  Budget  System  Law  and  two 
implementing  regulations,  one  on  Financial  Management  and  Control  (FMC),  the  other  on 
internal audit, applies to all users of the national budget. However, the legal framework is not 
yet  fully  in  line  with  international  standards.  The  relevant  provisions  in  the  Budget  System 
Law and implementing regulations need to be revised, especially to ensure better definition of 
managerial  accountability  and  separation  of  the  roles  of  manager  and  accountant.  The 
provisions on centralised budget inspection will need to be amended as well, as inspection is 
not yet PIFC-compatible. The PIFC policy paper for 2009-2014 envisages that the provisions 
will be amended in 2014, once internal control systems have been properly developed.  

A  Central  Harmonisation  Unit  (CHU)  was  formally  established  in  March  2010  as  a 
department in the Ministry of Finance, but has been in place de facto for over three years. The 
CHU has limited staff and so far has focused mainly on training, both for internal auditors and 
on control and risk management. More awareness-raising activities need to be organised with 
the senior management of budget users in order to improve their understanding of their role 
and responsibilities in setting up internal control systems and of the role of an internal auditor 
within an organisation.  

Internal audit has been the main focus of PIFC development in Serbia. A formal framework 
for  internal  audit  at  central  government  level  is  largely  in  place.  By  September  2011  there 

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were  around  40  internal  audit  units.  Three  direct  budget  users  who  are  required  by  law  to 
establish an internal audit unit had not yet done so. Introduction of internal audit at local level 
has  not  started,  except  for  the  City  of  Belgrade.  Around  130  internal  auditors  have  been 
trained  by  the  CHU  and  around  70  of  them  have  been  certified.  An  updated  certification 
programme  with  more  emphasis  on  practical  audit  work  is  being  developed.  Internal  audit 
cannot however grow to its full potential if the public sector internal control as a managerial 
responsibility is not developed in parallel. 

Development  of  FMC  is  currently  focusing  on  the  legality  and  regularity  of  financial 
transactions,  without  any  explicit  consideration  for  economy,  efficiency  and  effectiveness. 
Development of FMC is severely weakened by the fact that there is not yet a well-developed 
understanding  of  managerial  accountability.  Administrative  reforms,  including  proper 
delegation  structures,  would  also  be  required  for  further  development  of  FMC.  The  CHU 
would  therefore  need  to  work  closely  with  organisations  responsible  for  overall  public 
administration and civil service reforms. 

External  audit  is  at  an  early  stage  of  development  in  Serbia.  The  State  Audit  Institution 
(SAI) has been doing audit work since 2009. The independence of the SAI is anchored in the 
Constitution.  The  2005  SAI  Law  (amended  in  2010)  is  broadly  in  line  with  the  INTOSAI 
standards.  It  provides  a  broad  audit  mandate,  including  for  audit  of  EU  funds.  The  law 
empowers the SAI to implement both financial and performance audits and provides that the 
SAI  is  independent  for  planning  and  implementing  audits.  Amendments  to  the  SAI  Law 
should  be  considered  in  order  to  strengthen  both  the  functional  and  the  operational 
independence of the SAI. 

The SAI is in the institution-building phase and is gradually building up its full potential. By 
September 2011, 92 posts had been filled out of the 159 planned, including 34 audit positions. 
Recruitment is continuing.  The SAI was  able to conduct a limited  audit of execution of the 
State  budget  in  2008  and  2009,  but  is  increasing  the  coverage  for  the  audit  of  the  2010 
financial  statements.  The  SAI  does  not  yet  have  a  strategic  development  plan  in  place.  A 
financial  audit  manual  and  associated  methodology  are  being  prepared.  There  are  plans  to 
introduce  performance  audits  from  2013  onwards.  Full  implementation  of  the  INTOSAI 
standards  cannot  be  achieved  until  the  posts  have  been  filled  and  auditors  properly  trained. 
The staff training and certification programme needs to be adopted and implemented. In line 
with  the  SAI  Law,  the  SAI  must  submit  to  competent  authorities  all  evidence  of 
misdemeanours and criminal offences. In view of the time required to prepare evidence, the 
SAI currently spends a lot of time on initiating procedures against officials. It should look for 
alternative approaches to meet this requirement, because it is limiting the capacity for actual 
audit work. 

The  SAI  reports  to  parliament  by  submitting  an  annual  activity  report,  special  reports 
throughout the year and an audit report on budget execution to the Committee on Finance, the 
State  Budget  and  Control  of  Public  Spending.  No  deadline  has  been  set  in  the  law  for 
submission  of  the  budget  execution  report,  but  in  practice  it  is  submitted  in  December, 
allowing  sufficient  time  for  parliament  to  take  the  audit  findings  into  account  during  the 
budget  discharge  procedure.  Even  though  parliament  started  to  discuss  the  SAI  reports  in 
2010, the follow-up is still rather weak.  

With  regard  to  protection  of  the  EU's  financial  interests  (PFI),  Serbia's  national  penal 
legislation  covers  many  elements  of  the  Convention  on  the  protection  of  the  EU's  financial 
interests  and  its  protocols,  such  as  on  the  treatment  of  suspected  fraud  cases,  definitions  of 

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active  and  passive  bribery,  abuse  of  official  status,  the  liability  of  legal  entities,  fraud, 
smuggling,  money  laundering  and  related  penalties.  However,  further  alignment  of  the 
national legislation is needed to provide for full implementation of the PFI instruments upon 
accession. 

Although a solid track record of operational cooperation with the European Commission and 
its  European  Anti-Fraud  Office  (OLAF)  has  yet  to  be  developed,  Serbia  provides  sufficient 
institutional capacity for operational cooperation on protection of the EU's financial interests. 
Serbia now needs to designate an authority as a contact point for cooperation with OLAF. A 
national  anti-fraud  structure  for protecting  the  EU's  financial  interests  involving  all  relevant 
authorities also needs to be set up. 

In the area of protection of the euro against counterfeiting, Serbia has a national law which 
covers the definition of counterfeiting of money and also of value tokens. Serbia would need 
further to develop the legal basis and procedures for transmission of examples of counterfeit 
foreign currency notes and coins. With regard to institutional capacity, cooperation between 
the National Bank of Serbia, the Ministry of the Interior, the Public Prosecutor's Office and 
courts is well-established. By law, the National Bank of Serbia is responsible for establishing 
the  authenticity  of  suspect  money.  The  National  Bank  is  reorganising  the  procedures  for 
technical analysis and processing of information on counterfeit bank notes and coins in order 
to  act  as  a  national  analysis  centre.  The  Serbian  authorities  are  participating  in  relevant  EU 
and international training programmes on regular basis.  

Conclusion 

Serbia has started preparations, but it will have to make considerable and sustained efforts to 
align  with  the  EU  acquis  and  to  implement  it  effectively  in  the  medium  term.  The  national 
legislation in this chapter will need to be further aligned. Implementation of PIFC will require 
better  understanding  of  the  managerial  accountability  principle,  and  considerable  additional 
training  and  awareness-raising  especially  with  the  senior  management  will  be  needed.  With 
regard to external audit, the SAI is still at the institution-building phase and does not yet have 
sufficient staff for full audit coverage in line with the SAI Law. In the areas of protection of 
the  EU's  financial  interests  and  protection  of  the  euro  against  counterfeiting,  the 
implementing structures still need to be set up.  

Overall,  Serbia  needs  to  undertake  sustained  efforts  to  align  with  the  EU  acquis  and  to 
implement it effectively in the medium term. 

3.33.  Chapter 33: Financial and budgetary provisions 

This chapter covers the rules concerning the financial resources necessary for funding the EU 
budget  ('own  resources').  These  own  resources  are  made  up  mainly  of  contributions  from 
Member  States  based  on  traditional  own  resources  derived  mainly  from  customs  duties  and 
sugar  levies,  resources  based  on  VAT  collection  and  resources  based  on  the  level  of  GNI 
(gross national income).  

The  EU  acquis  under  this  chapter  consists  of  EU  legislation  that  is  directly  binding  on  the 
Member States and  does not require  transposition into national law.  However,  all necessary 
steps need to be taken to ensure, from accession, full and correct application of the rules on 
own resources. 

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The basic principles and institutions for  the  underlying  policy  areas  shaping  the traditional 
own resources system are in place in Serbia. A national VAT system is in operation (under 
the Law on VAT), customs duties are levied on imports (under the Customs Tariff Law) and 
national  accounts  and  GDP/GNI  are  harmonised  with  ESA95  standards.  Further  progress  is 
needed for full implementation of ESA 95 standards.  

As regards operational management of the own resources system, Serbia will need to ensure, 
in  due  course,  the  human  and  administrative  resources  necessary  to  apply  the  EU  rules 
concerning  payments  to  the  EU  budget.  As  a  rule,  Member  States  must  have  appropriate 
administrative  capacity  to  coordinate  adequately  and  ensure  correct  forecasting,  calculation, 
accounting, collection, payment and control of own resources.  

Impact  

Given  its  GDP  level,  the  impact  of  Serbia's  accession  on  the  EU  budget  is  expected  to  be 
limited. This applies both to its likely receipts under the various EU expenditure programmes 
and to its expected contribution to the EU budget based on application of the own resources 
rules.  

Conclusion 

There are no significant divergences between the systems in Serbia and the EU in terms of the 
basic  principles  and  institutions  in  the  policy  areas  underlying  application  of  the  own 
resources rules.  

Overall,  if  it  continues  its  efforts,  Serbia  should,  in  the  medium  term,  have  the  capacity  to 
comply fully with the requirements of the EU acquis in this area. 

3.34.  General evaluation  

The ability of Serbia to assume the obligations of membership has been evaluated on the basis 
of the following indicators: 

the obligations set out in the Stabilisation and Association Agreement; 

progress with adoption, implementation and enforcement of the EU acquis. 

Overall, Serbia has smoothly implemented its obligations under the Interim Agreement and is 
generally respecting its commitments under the Stabilisation and Association Agreement.  

In 2008 Serbia adopted a National Programme for Integration into the European Union, which 
is a comprehensive and ambitious plan for the period 2008-2012 providing for approximation 
of  its  national  legislation  to  the  EU  acquis.  Since  then,  significant  progress  has  been  made 
with  adopting  legislation  aligned  with  the  EU  acquis,  particularly  on  the  internal  market, 
statistics,  trade-related  provisions,  customs  and  taxation.  Administrative  capacity  is  overall 
well developed and the judiciary is undergoing a significant overhaul. However, the country 
faces challenges in implementing and enforcing legislation. Particular and continued attention 
to  the  fight  against  corruption  will  be  expected  over  time.  The  country  will  need  to  make 
additional efforts in order to assume the obligations of membership in the medium term. 

If it continues its efforts Serbia should, in the medium term, have the capacity to comply with 
the requirements of the acquis in the following fields:  

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• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

Company law; 

Fisheries; 

Taxation;  

Economic and monetary policy; 

Statistics; 

Enterprise and industrial policy; 

Science and research;  

Education and culture; 

Customs union; 

External relations;  

Foreign, security and defence policy; 

Financial and budgetary provisions. 

Serbia  will  have  to  undertake  additional  efforts  to  align  with  the  acquis  and  to 
implement it effectively in the medium term in the following fields: 

Free movement of goods; 

Freedom of movement for workers; 

Right of establishment and freedom to provide services; 

Free movement of capital; 

Public procurement; 

Intellectual property law; 

Competition policy; 

Financial services; 

Information society and media; 

Food safety, veterinary and phytosanitary policy; 

Transport policy; 

Energy; 

Social policy and employment; 

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• 

• 

• 

• 

• 

• 

• 

• 

• 

Trans-European networks; 

Regional policy and coordination of structural instruments; 

Consumer and health protection. 

Further  adjustments  of  the  legal  and  institutional  framework,  in  particular 
strengthening of administrative and implementation capacity are needed in the above 
areas. 

Serbia  will  have  to  make  considerable  and  sustained  efforts  to  align  with  the  EU 
acquis and to implement it effectively in the medium term in the following fields: 

Agriculture and rural development; 

Judiciary and fundamental rights; 

Justice, freedom and security; 

Financial control. 

Considerable  adjustments  of 
legal  and 
strengthening of administrative and implementation capacity are needed in these areas. 

institutional  framework  and  significant 

the 

Regarding the environment and climate change, further coordinated and sustained efforts will 
be needed to align with the EU acquis and to implement it effectively. These should include 
substantial  investments  and  strengthening  of  the  administrative  capacity  for  enforcement  of 
legislation  in  order  to  achieve  compliance  on  the  most  important  issues,  including  climate 
change, in the medium term. Full compliance with the acquis could be achieved only in the 
long term and would necessitate higher levels of investment. 

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STATISTICAL DATA (as of 30.09.2011) 
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 (2005=100) 

Inflation rate 
Annual average inflation rate (CPI, % change on previous year) 

Balance of payments 
Balance of payments: current account total (million euro) 
Balance of payments current account: trade balance (million euro) 
Balance of payments current account: net services (million euro) 
Balance of payments current account: net income (million euro) 

 1) 
1) 2)

Note

Note

Note

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 

2010 
7 307 
77 474 

Note

2000 

2001 

2002 

2003 

2004 

2005 

2006 

2007 

2008 

2009 

2010 

384 225 762 178 972 580  1 125 840 1 380 712 1 683 483 1 962 073 2 276 886 2 661 387 2 713 206  2986613 
28 985  
25 539  12 821 
: 
1 709 
3 398 
: 
: 
: 
35 
: 
: 

20 306 
2 729 
7 100 
32 

28 468 
3 857 
8 200 
33 

28 883 
3 945 
8 300 
35 

19 026 
2 549 
: 
: 

32 668 
4 445 
9 000 
36 

23 305 
3 144 
7 700 
32 

16 028 
2 137 
: 
: 

17 306 
2 313 
: 
: 

: 
: 

5.6 
: 

: 

19.9 
26.7 
3.8 
51.5 
97.2 
12.7 
-4.6 
11.3 
16.7 

2000 
94.2 

2000 
79.6 

5.3 
2.0 

3.5 
: 

: 

19.8 
25.1 
3.4 
53.5 
104.0 
10.7 
1.0 
25.6 
41.3 

2001 
94.3 

2001 
93.3 

4.3 
-0.4 

4.3 
: 

: 

15.2 
25.0 
3.7 
59.0 
107.0 
12.4 
-1.4 
23.8 
41.8 

2002 
96.0 

2002 
16.6 

2.5 
-4.4 

7.1 
: 

: 

13.3 
23.6 
4.5 
60.3 
103.0 
16.8 
-2.3 
25.9 
43.4 

2003 
93.3 

2003 
9.9 

9.3 
1.1 

7.1 
: 

: 

13.8 
24.6 
5.1 
58.6 
97.1 
19.2 
9.0 
25.5 
50.8 

2004 
99.4 

2004 
11.4 

2000 
-158 
-1 720 
154 
0 

2001 
282 
-2 602 
272 
7 

2002 
-671 
-3 398 
136 
-74 

2003 
-1 347 
-3 538 
179 
-119 

2004 
-2 620 
-5 201 
133 
-173 

5.4 
-5.5 

11.8 
: 

: 

12.1 
24.2 
4.8 
61.1 
95.9 
19.0 
4.7 
28.3 
47.9 

2005 
100.0 

2005 
16.2 

2005 
-1 778 
-4 278 
-5 
-259 

3.6 
7.2 

-1.8 
: 

: 

11.3 
24.1 
4.9 
62.0 
96.0 
21.0 
3.1 
31.4 
51.5 

2006 
104.2 

2006 
11.7 

2006 
-2 356 
-4 981 
-41 
-330 

5.4 
2.3 

4.5 
: 

: 

10.3 
23.0 
5.3 
63.7 
96.9 
24.3 
4.7 
30.6 
56.5 

2007 
108.5 

2007 
7.0 

2007 
-5 053 
-7 069 
-261 
-599 

3.8 
1.0 

4.5 
: 

: 

10.7 
22.5 
5.6 
63.9 
97.1 
23.8 
6.0 
31.4 
58.2 

2008 
110.0 

2008 
13.5 

2008 
-7 054 
-8 501 
-185 
-922 

-3.5 
: 

1.0 
: 

: 
: 

: 

9.7 
23.0 
4.9 
65.5 
99.8 
18.8 
-1.0 
29.5 
47.2 

2009 
96.1 

2009 
8.6 

2009 
-2 084 
-5 118 
18 
-502 

: 
: 

: 

: 
: 
: 
: 
: 
: 
: 
: 
: 

2010 
98.5 

2010 
6.8 

2010 
-2 082 
-4 773 
5 
-670 

EN 

EN 

136 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 (2005=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 (%) 

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) 

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 in employment (%) 

1 409 
303 
54 
-2 
: 
56 
: 

2000 
: 
: 

2000 
131.7 
454.5 
461 
561 
1 111 

4 067 
: 
27.1 
: 

2 605 
652 
184 
-39 
: 
223 
: 

2001 
: 
105.2 

2001 
85.6 
407.3 
975 
1 141 
2 101 

4 866 
: 
16.9 
: 

49.870  59.780 
126.8 
157.3 
: 
: 

2000 
: 
: 
: 
100.2 
: 
: 

2000 
-4.0 
10.6 
68.9 
74.4 

2001 
: 
: 
: 
103.1 
: 
: 

2001 
-2.7 
10.2 
69.6 
75.0 

2 665 
519 
500 
-34 
: 
534 
: 

2002 
: 
72.9 

2002 
58.7 
300.9 
1 525 
1 803 
3 113 

2 131 
423 
1 194 
-140 
1 
1 334 
850 

2003 
: 
66.9 

2003 
55.9 
251.6 
1 454 
1 828 
3 583 

3 519 
: 
15.2 
3.8 
60.660 
126.4 
2 186 

3 949 
: 
14.4 
3.2 
65.130 
123.8 
2 836 

2002 
: 
: 
: 
98.0 
: 
: 

2002 
-3.3 
10.1 
69.7 
75.0 

2003 
: 
: 
: 
101.6 
: 
: 

2003 
-3.3 
9.0 
69.9 
75.1 

Note

Note

Note

3) 

Note

2 621 
391 
770 
2 
2 
772 
477 

2004 
: 
55.3 

2004 
49.8 
211.5 
1 410 
1 853 
4 093 

4 902 
: 
21.3 
3.0 
72.700 
114.2 
3 104 

2004 
: 
: 
: 
108.4b 
: 
: 

2004 
-3.5 
8.1 
70.0 
75.5 

2 764 
268 
1 250 
-18 
4 
1 268 
963 

2005 
1.0 
52.2 

2005 
60.1 
228.9 
1 695 
2 248 
5 367 

6 531 
9.9 
22.2 
6.0 
83.000 
100.0 
4 921 

2005 
8 439.2 
3 148.4 
-5 290.9 
98.4 
60.2 
54.2 

2005 
-4.6 
8.0 
70.2 
75.6 

2 996 
185 
3 323 
70 
4 
3 392 
2 008 

2006 
-1.6 
37.7 

2006 
60.9 
204.1 
2 533 
3 531 
8 031 

8 153 
11.5 
17.0 
11.0 
84.110 
98.5 
9 020 

2 876 
166 
1 821 
-692 
-53 
2 513 
1 813 

2007 
-1.9 
30.92 

2007 
60.2 
197.3 
3 141 
4 928 
11 407 

10 771 
8.3 
12.5 
7.5 
79.960 
105.5 
9 634 

2 554 
163 
1 824 
-193 
-78 
2 018 
1 470 

2008 
-2.6 
29.2 

2008 
64.6 
207.6 
2 717 
4 459 
11 198 

12 926 
18.4 
20.3 
15.3 
81.440 
105.4 
8 162 

3 518 
197 
1 372 
-38 
-28 
1 410 
808 

2009 
-4.5 
34.8 

2009 
77.9 
265.3 
2 695 
4 555 
12 573 

14 863 
9.5 
12.0 
7.0 
93.950 
90.1 
10 602 

3 356 
193 
860 
-143 
-33 
1 003 
776 

2010 
-4.7 
42.9 

2010 
82.6 
236.2 
2 401 
3 891 
12 899 

17 544 
12.0 
14.0 
9.0 
103.040 
81.5 
10 002 

2010 

2009 

2007 

2006 

2008 
10 462.6  13 500.9  15 683.9  11 337.3  11 652.8 
7 066.7 
7 039.2 
4 991.9 
-4 586.1 
-8 644.8 
-5 470.7 
100.1 
97.6 
104.5 
58.7 
56.0 
58.2 
54.3 
53.5 
54.4 

6 615.1 
-6 885.8 
102.6 
58.1 
55.0 

5 631.8 
-5 705.5 
100.9 
54.8 
55.1 

2006 
-4.3 
7.4 
70.8 
76.1 

2007 
-4.7 
7.1 
70.9 
76.5 

2008 
-4.6 
6.7 
71.3 
76.6 

2009 
-4.6 
7.0 
71.4 
76.7 

2010 
: 
6.7 
: 
: 

Note

2000 

2001 

2002 

2003 

2004 

2005 

2006 

2007 

2008 

2009 

2010 

68.2 
59.2 

68.9 
59.7 

68.4 
58.5 

68.9 
57.9 

66.4 
53.4 

65.2 
51.0 

63.6 
49.9 

63.4 
51.5 

62.7 
53.7 

60.6 
50.4 

59.0 
47.2 

EN 

137 

EN 

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

Employment rate of older workers (55-64): share of population aged 55-64 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/HICP) (2000=100) 
* Early school leavers - Share of population aged 18-24 with at most lower 
secondary education and not in further education or training (%) 

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

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

Innovation and research 
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) 

68.2 
50.4 

68.6 
50.8 

67.1 
50.0 

67.0 
48.7 

63.1 
44.0 

61.2 
40.8 

59.2 
40.6 

60.0 
43.0 

62.3 
45.3 

58.1 
43.0 

54.4 
40.1 

43.3 

42.1 

42.0 

44.3 

37.3 

35.4 

32.6 

33.5 

36.7 

35.4 

32.8 

4) 
4) 
4) 
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 
48.9 
18.7 
15.3 
23.1 

23.3 
21.5 
6.1 
49.0 
21.1 
17.0 
26.5 

20.5 
23.3 
6.0 
50.1 
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 

22.2 
21.0 
5.0 
51.7 
19.2 
18.4 
20.2 

50.2 

46.4 

45.3 

44.8 

48.1 

47.7 

47.8 

43.7 

35.2 

41.6 

46.2 

9.9 

9.0 

9.9 

11.0 

14.5 

16.7 

17.0 

14.8 

9.7 

10.5 

13.3 

Note

2000 

2001 

2002 

2003 

2004 

2005 

2006 

2007 

2008 

2009 

2010 

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  47 450.0 

100.0 

118.4 

154.9 

176.5 

196.1 

209.5 

233.3 

266.1 

275.7 

245.4 

246.9 

: 

: 

: 

: 

11.5 

11.4 

12.6 

12.6 

11.6 

9.3 

8.2 

Note
5) 

Note

Note

Note

Note

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 

2000 
49.2 
0.4 

2000 
2.4 
: 
: 

2000 
: 
: 
42.1 
: 

2000 
: 

2001 
49.2 
0.4 

2001 
2.4 
: 
: 

2001 
: 
: 
43.3 
: 

2001 
: 

2002 
49.2 
0.4 

2002 
3.0 
: 
: 

2002 
: 
: 
41.2 
: 

2002 
: 

2003 
49.2 
0.4 

2003 
3.7 
: 
: 

2003 
: 
: 
36.5 
: 

2003 
: 

2004 
49.2 
0.4 

2004 
3.4 
: 
: 

2004 
: 
: 
44.9 
: 

2004 
: 

2005 
198.6 
700.4 

2005 
49.2 
0.4 

2005 
3.1 
: 
: 

2005 
: 
413.1 
46.9 
: 

2005 
7 729 

2006 
203.6 
894.7 

2006 
49.2 
0.4 

2006 
3.3 
: 
18.5 

2006 
: 
413.6 
41.8 
: 

2006 
7 925 

2007 
199.7 
1 142.6 

2008 
201.8 
1 194.2 

2009 
223.2 
1 351.3 

2010 
214.5 
: 

2007 
49.2 
0.4 

2007 
3.5 
: 
26.3 

2007 
: 
660.7 
37.9 
: 

2007 
8 797 

2008 
49.2 
0.5 

2008 
3.6 
: 
33.2 

2008 
: 
: 
35.1 
: 

2009 
49.2 
0.5 

2009 
3.8 
: 
36.7 

2009 
: 
: 
39.3 
: 

2008 
9 441 

2009 
9 487 

2010 
49.2 
0.5 

2010 
: 
: 
39.0 

2010 
: 
: 
: 
: 

2010 
: 

EN 

138 

EN 

 
  
 
 
 
 
  
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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) 

: 
: 
: 
: 
: 
32.0 

: 
: 
: 
: 
: 
31.0 

: 
: 
: 
: 
: 
31.0 

: 
: 
: 
: 
: 
32.0 

: 
: 
: 
: 
: 
34.0 

: 
6 696 
: 
1 431 
8 322 
36.0 

: 
6 966 
: 
1 686 
8 765 
36.0 

654 
7 073 
198 
7 260 
14 996 
37.0 

652 
7 369 
231 
7 477 
15 620 
37.0 

676 
7 330 
232 
5 046 
14 657 
38.0 

: 
: 
: 
: 
: 
: 

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

Note

2000 

2001 

2002 

2003 

2004 

2005 

2006 

2007 

2008 

2009 

2010 

6) 
6) 
6) 
7) 
8) 

87.0 
5 074 
1 162 
3 615 
1 670 
1 585 
5 213 
1 070 
1 043 

118.0 
5 077 
1 128 
3 587 
1 612 
1 594 
9 001 
1 806 
1 283 

97.0 
5 071 
1 112 
3 634 
1 685 
1 596 
8 298 
2 098 
1 340 

93.0 
5 079 
1 102 
3 439 
1 741 
1 590 
5 453 
1 738 
1 172 

120.0 
5 075 
1 079 
3 165 
1 728 
1 593 
9 867 
2 814 
1 340 

95.0 
5 075 
1 096 
3 212 
1 748 
1 616 
9 587 
3 101 
1 289 

100.0 
5 066 
1 106b 
3 999b 
1 718b 
1 602 
8 349 
3 189 
1 348 

92.0e 
5 053 
1 087 
3 832 
1 756 
1 562 
6 212 
3 206 
1 128 

108.0 
5 055 
1 057 
3 594 
1 760 
1 548 
8 833 
2 300 
1 277 

101.0 
5 058 
1 002 
3 631 
1 647 
1 488 
9 111 
2 798 
1 257 

99.4 
5 051 
938 
3 489 
1 604 
1 471 
9 280 
3 325 
1 314 

: = not available 
p = provisional 
e = estimated value 
b = break in series 
* = Europe 2020 indicator 
All data refer to the territory of the Republic of Serbia excluding Kosovo. 
The  balance  of  payments  sign  conventions  are  used  for  FDI.  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. 
Footnotes: 
1) 
2) 
3) 
4) 
5) 
6) 
7) 
8) 

GDP estimations in Euro are based on the average annual exchange rate. 
Mid-year population figures used. 
From 2004 onwards the data are not comparable with the previous years as since January 2004 Uniform Customs Document harmonized with EU regulations has been used. 
2004-2009, data according to NACE Rev. 1.1. 
Ministry of Interior Affaires excluded the vehicles that were not registered before the given deadline (1 month) 
Since 2006, the reference date is 1 December (instead 15 January as it is for the previous years). 
In million litres, includes cows and sheep milk. 
No rice production; since 2005, triticale is included. 

EN 

139 

EN