COMMISSION STAFF WORKING DOCUMENT SERBIA 2012 PROGRESS REPORT accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Enlargement Strategy and Main Challenges 2012-2013
Date: 2012-10-10
Institutions: European Commission
Subjects: Community acquis, Serbia, accession criteria, accession negotiations, economic reform, political reform

EUROPEAN 
COMMISSION 

Brussels, 10.10.2012  
SWD(2012) 333 final 

COMMISSION STAFF WORKING DOCUMENT 

SERBIA 
2012 PROGRESS REPORT 

accompanying the document 

COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

Enlargement Strategy and Main Challenges 2012-2013 

{COM(2012) 600 final}

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TABLE OF CONTENTS 

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

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

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

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

Political Criteria ........................................................................................................... 6 

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

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

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

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

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

The capacity to cope with competitive pressure and market forces within the Union
.................................................................................................................................... 27 

Ability to take on the obligations of membership...................................................... 29 

Chapter 1: Free movement of goods .......................................................................... 29 

Chapter 2: Freedom of movement for workers .......................................................... 30 

Chapter 3: Right of establishment and freedom to provide services ......................... 31 

Chapter 4: Free movement of capital ......................................................................... 31 

Chapter 5: Public procurement................................................................................... 32 

Chapter 6: Company law............................................................................................ 33 

Chapter 7: Intellectual property law........................................................................... 33 

Chapter 8: Competition .............................................................................................. 34 

Chapter 9: Financial services ..................................................................................... 35 

1. 

1.1. 

1.2. 

1.3. 

2. 

2.1. 

2.2. 

2.3. 

3. 

3.1. 

3.2. 

4. 

4.1. 

4.2. 

4.3. 

4.4. 

4.5. 

4.6. 

4.7. 

4.8. 

4.9. 

4.10.  Chapter 10: Information society and media ............................................................... 36 

4.11.  Chapter 11: Agriculture and rural development......................................................... 37 

4.12.  Chapter 12: Food safety, veterinary and phytosanitary policy .................................. 39 

4.13.  Chapter 13: Fisheries.................................................................................................. 40 

4.14.  Chapter 14: Transport policy ..................................................................................... 40 

4.15.  Chapter 15: Energy .................................................................................................... 42 

4.16.  Chapter 16: Taxation.................................................................................................. 43 

4.17.  Chapter 17: Economic and monetary policy.............................................................. 44 

4.18.  Chapter 18: Statistics.................................................................................................. 44 

4.19.  Chapter 19: Social policy and employment ............................................................... 45 

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4.20.  Chapter 20: Enterprise and industrial policy.............................................................. 47 

4.21.  Chapter 21: Trans-European networks....................................................................... 47 

4.22.  Chapter 22: Regional policy and coordination of structural instruments .................. 48 

4.23.  Chapter 23: Judiciary and fundamental rights ........................................................... 49 

4.24.  Chapter 24: Justice, freedom and security ................................................................. 52 

4.25.  Chapter 25: Science and research .............................................................................. 55 

4.26.  Chapter 26: Education and culture............................................................................. 56 

4.27.  Chapter 27: Environment and climate change ........................................................... 57 

4.28.  Chapter 28: Consumer and health protection............................................................. 60 

4.29.  Chapter 29: Customs union........................................................................................ 61 

4.30.  Chapter 30: External relations.................................................................................... 62 

4.31.  Chapter 31: Foreign, security and defence policy...................................................... 62 

4.32.  Chapter 32: Financial control..................................................................................... 63 

4.33.  Chapter 33: Financial and budgetary provisions........................................................ 64 

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1. 

INTRODUCTION 

1.1. 

Preface 

Since March 2002, the Commission has reported regularly to the Council and the Parliament 
on  progress  made  by  the  countries  of  the  Western  Balkans  region.  This  report  on  progress 
made  by  Serbia  in  preparing  for  EU  membership  largely  follows  the  same  structure  as  in 
previous years. The report:  

– 

– 

– 

briefly describes the relations between Serbia and the Union; 

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

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

reviews  Serbia’s  capacity  to  take  on  the  obligations  of  membership,  i.e.  the  acquis 

– 
expressed in the Treaties, the secondary legislation, and the policies of the Union. 

This report covers the period from October 2011 to September 2012. Progress is measured on 
the  basis  of  decisions  taken,  legislation  adopted  and  measures  implemented.  As  a  rule, 
legislation or measures which are under preparation or awaiting parliamentary approval have 
not  been  taken  into  account.  This  approach  ensures  equal  treatment  across  all  reports  and 
enables an objective assessment.  

The  report  is  based  on  information  gathered  and  analysed  by  the  Commission.  Many  other 
sources have also been used, including contributions from the government of Serbia, the EU 
Member States, European Parliament reports1 and information from various international and 
non-governmental organisations.  

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

1.2. 

Context 

The European Council granted Serbia the status of candidate country on 1 March 2012, on the 
basis of the Commission Opinion on Serbia’s membership application adopted on 12 October 
2011. The Council concluded on 5 December 2011 that the opening of accession negotiations 
will  be  considered  by  the  European  Council,  in  line  with  established  practice,  once  the 
Commission has assessed that Serbia has achieved the necessary degree of compliance with 
the  membership  criteria,  in  particular  the  key  priority  of  taking  steps  towards  a  visible  and 
sustainable  improvement  of  relations  with  Kosovo∗,  in  line  with  the  conditions  of  the 
Stabilisation and Association Process. 

1.3. 

Relations between the EU and Serbia 

Serbia is participating in the Stabilisation and Association Process.  

The  Stabilisation  and  Association  Agreement  was  signed,  along  with  the  Interim 
Agreement  on  trade  and  trade-related  matters,  in  April  2008.  It  provides  a  framework  of 
mutual  commitments  on  a  wide  range  of  political,  trade  and  economic  issues.  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 

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∗ 

The rapporteur for Serbia is Mr Jelko Kacin. 
Enlargement Strategy and Main Challenges 2012-2013, COM(2012) 600.  
This designation is without prejudice to positions on status, and is in line with UNSCR 1244/99 and the 
ICJ Opinion on the Kosovo declaration of independence. 

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parliaments for ratification. The process is close to completion, with ratification still pending 
in only one Member State.  

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, to discuss topics including 
the  internal  market,  competition,  transit  traffic,  trade,  customs,  taxation,  agriculture  and 
fisheries.  In  general  terms,  Serbia  is  meeting  its  SAA/IA  commitments  in  these  areas  and 
cooperation is progressing well. 

In  January  2012,  the  Serbian  government  adopted  a  revised  and  updated  version  of  the 
National Programme for the Integration of Serbia in the European Union for the period 2008–
2012, taking account of the Commission’s Opinion. 

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 as part 
of Enhanced Permanent Dialogue (EPD) since 2003. Inter-parliamentary meetings between 
members of the European Parliament and of the Serbian parliament have been held annually 
since  2006.  Several  EPD  meetings  covered  sectors  of  the  SAA  that  are  not  included  in  the 
Interim  Agreement,  such  as  energy,  the  environment,  social  policy,  justice,  freedom  and 
security.  

Serbia  participates  in  the  multilateral  economic  dialogue  with  the  Commission  and  the  EU 
Member States. The aim of this dialogue is to prepare Serbia for participation in multilateral 
surveillance  and  economic  policy  coordination  under  the  EU’s  Economic  and  Monetary 
Union. In this context, was invited for the first time to the Council meeting on pre-accession 
fiscal surveillance in May 2012.  

Visa  liberalisation  for  citizens  of  Serbia  travelling  to  the  Schengen  area  has  been  in  force 
since  December  2009.  The  Commission  set  up  a  post-visa-liberalisation  monitoring 
mechanism  to  assess  whether  the  implementation  of  reforms  introduced  by  the  country  was 
consistent  with  the  visa  roadmap  and  sustainable.  This  was  complemented  by  an  alert 
mechanism to prevent abuses. The Commission presented its second monitoring report to the 
European  Parliament  and  the  Council  in  December  2011  and  adopted  the  third  in  August 
2012. A readmission agreement between the European Union and Serbia has been in force 
since January 2008. 

Financial assistance is provided through the Instrument for Pre-Accession Assistance (IPA). 
IPA  assistance  is  currently  managed  centrally  by  the  EU  Delegation  in  Belgrade.  Serbia  is 
preparing  for  decentralised  management  of IPA funds.  The Multiannual Indicative Planning 
Document  for  the  period  2011–2013  adopts  a  sector-based  approach  focusing  assistance  on 
the  following  seven  sectors:  justice  and  home  affairs;  public  administration  reform;  social 
development;  private  sector  development;  transport;  the  environment,  climate  change  and 
energy;  and  agriculture  and  rural  development.  In  addition,  the  country  continues  to  benefit 
from  various  regional  and  horizontal  programmes.  Cross-border  cooperation  is  also  used  to 
promote  capacity  building  and  dialogue  between  the  local  and  regional  authorities  of 
neighbouring  countries,  namely  Bulgaria,  Hungary,  Romania,  Bosnia  and  Herzegovina, 
Croatia and Montenegro.  

Overall, between 2001 and 2012, the EU committed over € 2.2 billion to Serbia in the form of 
grants and € 5.8 billion in the form of soft loans. For the period 2007-2012, the Commission 
has earmarked € 1,176 million for IPA projects to be implemented in the country.  

Civil society in Serbia has  received extensive financial  support  from  the  EU  under  the  IPA 
Civil Society Facility and national programmes, as well as through the European Instrument 

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for Democracy and Human Rights. Aid objectives include involving civil society more widely 
in  decision-making  and  increasing  the  capacity  of  independent  civil  society  organisations. 
Support for civil society under 2011 programmes stands at over € 4.2 million. 

Serbia participates in a number of EU programmes: the Seventh Framework Programme for 
research  and  technological  development,  PROGRESS,  the  Competitiveness  and  Innovation 
Programme,  the  Information  and  Communication  Technologies  Policy  Support  Programme, 
the Culture Programme, the Customs Programme and the Fiscalis Programme.  

2. 

POLITICAL CRITERIA  

This section examines the progress made by Serbia towards meeting the Copenhagen political 
criteria, which require stability of institutions guaranteeing democracy, the rule of law, human 
rights and respect for and protection of minorities. It also monitors regional cooperation, good 
neighbourly  relations  with  enlargement  countries  and  Member  States  and  compliance  with 
international obligations, such as cooperation with the International Criminal Tribunal for the 
former Yugoslavia (ICTY). 

2.1. 

Democracy and the rule of law  

Constitution 

The  Constitution  is  largely  in  line  with  European  standards.  However,  some  provisions  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 and 
those  providing  for  an  excessive  parliamentary  role  in  appointments  and  dismissals, 
particularly in the judicial system. 

Parliament  

Serbia held parliamentary and local elections at their normal term in May 2012, together with 
provincial  elections  in  Vojvodina.  Early  presidential  elections  were  also  held  in  May  2012, 
after the incumbent, President Boris Tadic, decided to resign, which streamlined the electoral 
calendar.  Serbia  agreed  to  OSCE  facilitation  in  organising  electoral  operations  for  its 
parliamentary  and  presidential  elections  in  Kosovo.  The  Anti-Corruption  Agency  started  to 
implement  the  2011  legislation  on  the  financing  of  political  parties  and  to  monitor  the 
electoral  campaigns.  The  elections  were  free,  fair  and  peaceful  and  were  described  as 
‘competitive, held in a conducive environment and professionally organised’ by international 
observation  bodies  in  spite  of  a  certain  lack  of  transparency  in  the  proceedings  of  the  State 
Electoral  Commission  and  in  the  administration  of  the  new  single  voters’  registry.  These 
bodies made recommendations to improve the electoral administration. Media reporting was 
also noted as insufficiently balanced and analytical, which pointed to the wider need to clarify 
the  issue  of  media  ownership.  Several  opposition  parties  made  allegations  of  fraud  which 
have not been elucidated by the authorities so far.  

The leader of the Serbian Progressive Party (SNS), Tomislav Nikolic, won in the presidential 
election against the incumbent Boris Tadic, the leader of the Democratic Party (DS). The SNS 
list secured the largest number of MPs, with 73 seats out of 250, followed by the DS list with 
67  seats.  The  list  led  by  the  Socialist  Party  of  Serbia  (SPS)  came  third  with  44  seats.  The 
Democratic  Party  of  Serbia  (DSS)  secured  21  seats,  the  list  led  by  the  Liberal  Democratic 
Party (LDP) 19 seats and the Union of Regions of Serbia (URS) 16 seats. The remaining 10 
seats  were  gained  by  parties  representing  minorities.  Most  of  these  parties  are  in  favour  of 
Serbia’s  joining  the  EU.  The  Serbian  Radical  Party,  which  opposes  Serbia’s  EU  integration 
efforts, did not reach the threshold for entering parliament. 

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The new parliament was constituted in May 2012. In line with the 2011 electoral reform, MPs 
were for the first time appointed in the order in which they appeared on the electoral lists and 
the practice of ‘blank resignations’, by which MPs tendered resignation letters to their parties 
at the beginning of their term of office, is now prohibited. There are 84 women in parliament, 
representing  34%  of  all  MPs.  Members  of  ethnic  minorities  continue  to  be  represented  in 
parliament. In line with the 2010 rules of procedure, working bodies were streamlined, with 
the aim of making the parliament more effective. Opposition chairs a number of committees, 
including the Committee for European Integration, but no longer those covering finance and 
security and internal affairs. 

In the 2011 autumn session, several laws arising from the National Plan for Integration into 
the EU were adopted. Parliamentary activities slowed down in the run-up  to  and  during  the 
electoral  campaign.  Following  the  set-up  of  parliamentary  bodies  end  of  July,  work  has 
resumed; urgent procedures with limited consultation and discussion time have been applied 
to several new pieces of legislation, including problematic changes to the central bank law.  

The  parliament  developed  its  use  of  public  hearings,  including  one  on  its  role  in  the  EU 
integration  process  in  January  2012  and  another  on  access  to  IPA  funds  in  March  2012. 
Parliamentary oversight of the work of the executive remained weak. There were no regular 
sessions  of  questions  to  the  government  from  December  2011  to  July  2012.  The  work  in 
committees remained reactive, with core debates taking place in the plenary.  

Overall, the elections were competitive, professionally administered and peaceful throughout 
the  country.  The  2011  electoral  framework  legislation  was  implemented  but  results  of  the 
monitoring of the financing of political parties are still awaited. Legislative activity was cut 
short by the approach of the elections, but other parliamentary activities continued normally. 
The  authorities  need  to  follow  up  the  recommendations  of  the  OSCE/ODIHR  election 
observation mission.  

Government  

Following the parliamentary elections, a new coalition government took office in July, on the 
basis  of  an  agreement  between  SNS,  SPS,  URS  and  two  smaller  parties,  with  the  leader  of 
SPS  assuming  the  position  of  Prime  Minister.  The  new  Prime  Minister  has  pledged  to 
accelerate the EU agenda of reforms with the aim of opening accession negotiations.  

All  over  the  reporting  period,  the  government  demonstrated  its  commitment  to  EU 
integration,  notably  by  continuing  to  implement  the  relevant  provisions  of  the  Interim 
Agreement, in line with the agreed liberalisation schedule. It undertook, with the support of 
the Serbian European Integration Office (SEIO), the Coordination Body for accession to the 
EU  and  the  European  Integration  Council,  to  follow  up  on  the  recommendations  of  the 
Commission’s  Opinion  and  adopted  a  third  revision  of  its  National  Programme  for  EU 
Integration (NPI) in January 2012. The government has been drafting a number of laws aimed 
at  further  alignment  of  national  legislation  with  European  standards  and  adopted  new 
implementing legislation on regulatory impact assessment. There has been some improvement 
in its monitoring of the annual work programme. However, the drafting process continues to 
lack  transparency,  sufficient  structure  and  time  for  effective  consultation  of  all  interested 
parties, which would also make the legal environment more predictable. The implementation 
and monitoring of adopted legislation needs to be improved. Ministries do not always follow 
up  and  even  in  some  instances  openly  challenge  the  opinions  and  recommendations  of 
independent regulatory bodies, including the State Audit Institution. The General Secretariat 
of  the  Government  needs  to  be  strengthened  to  be  able  to  drive  the  policy  system  towards 
greater effectiveness and high-quality output.  

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As regards local self-government, the legislation on municipal finance needs to be clarified 
and  properly  implemented  to  ensure  that  municipal  funding  is  predictable.  There  is  no 
available  overview  of  the  functions  delegated  to  municipalities.  Responsibilities  have 
continued to be transferred without ensuring sufficient capacity and resources at local level. 
The  National  Council  for  Decentralisation  continues  to  be  inactive.  Consultation  of  local 
authorities  when  deciding  on  new  legislation  or  amendments  to  existing  laws  that  have 
implications at local level needs to be further improved.  

Overall, the outgoing government completed a full term in office and the new government is 
up  and  running  since  July.  Both  were  active  in  pursuing  the  country’s  strategic  goal  of  EU 
integration.  However,  the  government  continues  to  lack  a  consistent,  structured  approach  to 
consulting  stakeholders  and  needs  to  develop  its  monitoring  of  the  preparation  and 
implementation of new legislation. The legal framework for local self-government remains to 
be clarified and properly implemented. 

Public administration  

Little  progress  has  been  achieved  regarding  public  administration  reform.  The  Law  on 
Administrative Inspection, which governs procedures for checking that administrative bodies 
comply with administrative law, was adopted in November 2011. The Public Administration 
Reform  Council  continued  to  address  only  administrative  and  technical  issues  and  did  not 
actively  steer  the  implementation  of  the  Public  Administrative  Reform  Strategy  which 
remains  insufficient.  Greater  political  commitment,  better  coordination,  and  increased 
financial and human resources are needed to bring about administrative reform.  

The  legislative  framework  is  still  incomplete.  New  legislation  on  general  administrative 
procedures and on local government employees and salaries is yet to be adopted. The Law on 
Administrative  Disputes  still  needs  to  be  fully  aligned  with  European  standards  for  judicial 
review of administrative acts.  

The  policy  planning  and  coordination  system  needs  to  be  improved  to  steer  policy 
development and produce consistent work plans for the public administration. Administration 
and  management  capacity  at  local  level  are  weak  and  significant  disparities  between 
municipalities  persist.  The  Law  on  Civil  Servants  does  not  apply  to  local  government 
employees.  

The recruitment and career system is not yet fully merit-based and recruitment is still prone to 
political  influence.  Local  government  does  not  have  a  merit-based  and  professional  human 
resources service. A number of appointments to senior civil service positions are still pending. 
Selection procedures are not applied uniformly and managers still have too much discretion 
when  choosing  candidates  from  lists  drawn  up  by  selection  panels  following  competitions. 
Temporary  employees  are  still  not  recruited  according  to  competitive  criteria  and  contracts 
are allocated without internal or public competition. Changes in the administration envisaged 
by the new government should not be detrimental to its capacity to make further progress in 
the alignment with and implementation of the acquis. 

A new training programme for civil servants was adopted in 2012 and several training courses 
were delivered. However, only a small percentage of civil servants, and in particular a very 
small percentage of managers, took part in training. Induction training is not provided. 

Several  independent  regulatory  bodies  continue  to  face  logistical  constraints.  Parliament 
needs  to  resume  the  review  of  their  annual  reports  and  improve  follow  up  of  legislative 
proposals  tabled  by  such  bodies.  As  regards  restructuring  of  public  agencies,  due 
consideration  has  to  be  given  to  the  need  to  maintain  the  capacities  and  entitlements  to 

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implement  the  acquis.  In  some  cases,  when  prescribed  by  the  acquis,  the  independence  of 
such bodies needs to be preserved. 

The  Ombudsman’s  Offices  continued  to  be  effective  and  have  increased  their  accessibility. 
The term of office of the State Ombudsman was renewed by parliament in August 2012. The 
number  of  citizens’  complaints  has  increased.  The  largest  number  of  reported  violations 
relates  to  governance.  Changes  to  the  Law  on  the  Ombudsman,  which  should  enhance  the 
Ombudsman’s 
still  have  not  been  adopted.  The  Ombudsman’s 
recommendations were not sufficiently followed up.  

independence, 

The  Commissioner  for  Information  of  Public  Importance  and  Personal  Data  and  Protection 
continued to be active and his term of office was renewed by parliament in December 2011. 
Some  progress  has  been  made  in  the  implementation  of  legislation  ensuring  access  to 
information  of  public  importance.  However  the  recommendations  of  the  Commissioner  are 
still  not  sufficiently  followed  up  (See  also,  for  data  protection,  Chapter  23  -  Judiciary  and 
fundamental rights). 

The State Audit Institution (SAI) of Serbia continued to gradually build up its capacities by 
recruiting further auditors and the term of office of its president was renewed by parliament in 
September 2012. The SAI has now approximately 130 staff, including over 100 auditors. The 
SAI  also  continued  to  work  on  improving  audit  methodology  and  increased  audit  coverage 
(See also Chapter 32 — Financial control). 

Amendments to the central bank law adopted in August 2012 have seriously undermined the 
independence of the National Bank of Serbia (See also Chapter 17 – Economic and monetary 
policy). 

Overall,  public  administration  reform  is  proceeding  at  a  slow  pace  and  is  hampered  by 
insufficient political commitment. The legislative framework needs to be completed and fully 
aligned with international standards. Implementation of the existing laws and strategy needs 
to  be  improved.  Merit-based  recruitment  and  promotion  systems  should  be  developed  and 
implemented. The follow-up of the recommendations ofindependent regulatory bodies needs 
to be stepped up.  

Civilian oversight of security forces  

There  was  little  progress  on  civilian  oversight  of  security  forces.  A  specific  parliamentary 
committee for civilian oversight of security services was set up in July, in line with the 2010 
rules of procedure. Parliamentary oversight remained limited in practice. The legal framework 
for the security and intelligence services’ monitoring of communications needs to be clarified. 
Provisions of the Law on Military Security and Military Intelligence Agencies which allowed 
sensitive data related to citizens’ communications to be monitored without a court order were 
ruled unconstitutional by the Constitutional Court in April 2012. There are allegations that the 
unclear legal situation has led to abuses. A law on access to state security files remains to be 
adopted.  

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

Serbia has made little progress on judicial reform.  

Amendments aimed at improving the efficiency of the Constitutional Court were adopted in 
December 2011. Deliberations in panels of eight or three judges are now allowed for certain 
decisions, whilst a full Court session remains the normal format for important cases. In line 
with  the  recommendations  of  the  Venice  Commission,  constitutional  changes  and  further 
measures  need  to  be  adopted  to  reduce  the  growing  backlog.  In  particular,  cases  involving 

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breaches  of  the  right  to  trial  within  a  reasonable  time,  which  account  for  40%  of  the 
Constitutional Court backlog, could be delegated to the Supreme Court of Cassation.  

As  for  the  independence  of  the  judiciary,  the  High  Judicial  Council  (HJC)  and  the  State 
Prosecutorial  Council  (SPC)  took  over  the  administration  of  the  budget  of  courts  and 
prosecution  services  in  March  2012;  the  Ministry  of  Justice  remains  in  charge  of  IT  and 
capital expenditures in the court system and funding of the courts’ administrative staff. The 
HJC  and  the  SPC  have  yet  to  finalise  the  appointments  of  court  presidents  and  public 
prosecutors.  The  HJC  and  the  SPC  have  not  yet  adopted  rules  on  regular  evaluation  of  the 
work  and  performance  of  serving  judges  and  prosecutors.  The  foreseen  evaluation  of  the 
magistrates newly recruited in 2009 for a three year term is in  particular pending. A proper 
merit-based career system for judges and prosecutors remains 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 through the Judicial Academy. The legal framework still leaves 
room  for  undue  political  influence  over  the  judiciary,  in  particular  as  regards  parliament’s 
power to appoint judges and prosecutors — including the President of the Supreme Court of 
Cassation and the Republic Public Prosecutor — and its direct participation in the work of the 
HJC and the SPC.  

The  re-appointment  procedure  carried  out  for  judges  and  prosecutors  in  2009/2010  and  the 
review  process  conducted  to  correct  its  shortcomings  were  overturned  in  July  2012  by  the 
Constitutional  Court  as  not  meeting  the  required  standards.  The  Court  revoked  all  the 
decisions of the HJC and the SPC on the non-re-appointment of judges and prosecutors that 
had been appealed and instructed the Councils to reinstate all of them within 60 days. For the 
judges,  the  Court  considered  inter  alia  that  the  HJC  did  not  apply  the  required  quorum  and 
breached  the  requirement  of  impartiality.  In  this  respect,  the  Court  objected  to  the 
participation  of  ex-officio  members  —  the  President  of  the  Supreme  Court,  the  head  of  the 
parliamentary committee and the Minister of Justice — and the member representative of the 
lawyers to both the first decision on re-appointment and the review process. The Court also 
considered that the presumption of suitability required that judges could only be dismissed by 
the  positive  votes  of  the  majority  of  the  HJC  members,  which  was  not  the  case  as  three  of 
them were in part or fully unavailable to act (one resigned and was replaced 3 months later, 
another faced criminal proceedings and a third one faced a procedure for incompatibility of 
duties as dean of a law faculty). For the prosecutors, similar shortcomings were found which 
invalidated the SPC’s assessment that the petitioners did not fulfil the criteria of worthiness, 
professional qualification  and competence. In particular, the Constitutional Court found that 
the  review  process  unfairly  placed  the  burden  of  proof  on  the  petitioners  and  that  the 
Council’s decisions were often based on facts and assertions that could not be challenged by 
the petitioners. As a results, the Serbian authorities need to evaluate how to the judicial reform 
can  be  further  advanced  after  most  non-reappointed  judges  and  prosecutors  are  to  be 
reintegrated further to the rulings of the Constitutional Court.  

The  impartiality  of  judges  has  continued  to  be  broadly  ensured  thanks  in  particular  to 
automated allocation of court cases, which has now been introduced in all commercial courts 
and general courts. New case management software has been introduced in the Administrative 
and Appellate Courts in Belgrade and the Supreme Court of Cassation in July 2012. 

To  ensure  accountability,  steps  were  taken  to  set  up  a  disciplinary  system.  The  HJC 
introduced a disciplinary prosecutor and commission, which handled a little number of cases 
and took a few final decisions. The SPC adopted Rules on disciplinary procedure and liability 
in July 2012 which remain to be fully aligned with European standards. The SPC has yet to 
set up disciplinary bodies and establish a track record of investigating and imposing penalties 
in  disciplinary  cases.  The  higher  courts  and  the  Ministry  continued  internal  inspections  on 

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technical and administrative matters in the courts, identifying shortcomings in registering and 
handling of court cases. 

A  number  of  laws  came  into  force  aimed  at  improving  the  efficiency  of  the  judiciary  and 
applying  international  standards  in  national  courts.  The  Judicial  Academy  selected  a  new 
generation  of  students  and  provided  a  variety  of  in-service  training  programmes  for  judges, 
prosecutors,  judicial  staff  and  attorneys,  which  still  need  to  be  systematised  and  structured. 
The judicial budget for 2012 remained stable at some € 213 million (around 0.65% of GDP). 
In 2011, the courts received 2.23 million new cases, resolved 2.65 million cases and were left 
with a backlog of 3.34 million cases. The new Civil Procedure Code has been in force since 
February  2012,  aimed  at  increasing  efficiency  in  civil  procedure,  which  accounts  for  two-
thirds of all cases before the Serbian courts. The first private bailiffs were sworn in and first 
notaries selected in May 2012. However, the entry into force of the law on public notaries was 
postponed  to  2013.  Major  imbalances  in  the  workload  of  judges  persist  between  courts, 
particularly  between  those  in  Belgrade  and  other  courts.  A  comprehensive  analysis  of  the 
functioning  of  the  new  court  network  is  needed  in  terms  of  cost,  efficiency  and  access  to 
justice. The quality of judicial statistics needs to be improved.  

The new Criminal Procedure Code has been applied in organised crime and war crimes cases 
since  January  2012  (and  is  to  be  applied  in  all  criminal  cases  as  of  January  2013).  It 
introduces  a  new  model  of  criminal  investigation,  giving  the  prosecution  the  lead  role  in 
collecting  the  evidence  and  presenting  it  before  the  court.  One  aim  is  to  shorten  the 
investigative phase, but this will require that the prosecution services rise to the complexity of 
their new role. The fully adversarial system raises questions regarding procedural safeguards, 
in particular the ability of poorer defendants to finance an effective defence, a concern echoed 
by the Ombudsman and the Commissioner for Free Access to Information of Public Interest. 
At  the  same  time,  the  prosecution  service  still  has  to  demonstrate  its  ability  to  obtain 
convictions in high-level cases against well-funded defence teams. A careful analysis of the 
implementation  of  the  legal  framework  on  abuse  of  office  or  authority  also  needs  to  be 
conducted in order to ensure that it is consistent and proportionate. Generally, Serbia needs to 
ensure that procedural safeguards are applied consistently across the country. 

The Administrative Court continued to increase its activity while the inflow of new cases was 
steady  and  so  managed  to  reduce  the  backlog by some  2,500  cases  to 17,711 by the end of 
2011. However, administrative judges’ expertise needs to be developed, particularly in areas 
such as asylum, consumer protection, state subsidies and competition.  

Overall, little progress was made, mostly in enforcing new legislation aimed at improving the 
efficiency of the judicial system. The review of reappointments of judges and prosecutors did 
not  correct  the  existing  shortcomings  and  was  overturned  by  the  Constitutional  Court  who 
ordered  the  reinstatement  of  all  judges  and  prosecutors  that  had  appealed  their  non-
reappointment. Cases returned by the Constitutional Court will need to be processed diligently 
and  in  accordance  with  the  Constitutional  Court’s  decisions.  A  system  of  professional 
evaluation,  effective  disciplinary  rules  and  stronger  integrity  safeguards  remains  to  be 
established.  In  order  to  restore  the  confidence  of  the  citizens,  the  authorities  will  need  to 
consider  additional  measures  to  strengthen  the  independence,  impartiality,  competence, 
accountability  and  efficiency  of  the  judiciary,  in  particular:  transparent  criteria  for 
appointments  of  judges  and  prosecutors;  initial  and  in-service  training  under  the  Judicial 
Academy’s  responsibility,  together  with  appraisal  of  serving  judges  and  prosecutors, 
including of the newly appointed ones in 2009; integrity safeguards; court rationalisation. To 
meet  these  challenges,  a  new  strategy  on  judicial  reform  is  needed,  together  with  an  action 
plan to implement the strategy, based on a functional review of the judiciary. 

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

the 

Serbia  has  made  little  progress  in  the  fight  against  corruption.  Progress  was  made  mainly 
regarding  enforcement  of 
legislation.  Implementation  of  outstanding  GRECO 
recommendations  continued.  The  amendments  to  the  Law  on  Health  Care  and  the  Law  on 
Advocates include provisions on conflict of interest. The Government has not yet finalised its 
National Anti-Corruption Strategy for 2012–2016 and the corresponding Action Plan. There 
has been little evidence in practice of the coordinating role officially assigned to the Minister 
of Justice under the previous government. A specific responsibility in this area was entrusted 
to the First Deputy Prime Minister in the new Serbian government. 

The Anti-Corruption Agency’s operations, which focus on prevention, increased. The Agency 
started  to  implement  the  2011  Law  on  the  Financing  of  Political  Activities.  It  adopted 
implementing  legislation  on  the  monitoring  of  electoral  campaigns  and  set  up  an  extensive 
network  for  the  monitoring  of  the  2012  elections.  It  also  collected  annual  financial  reports 
from  a  majority  of  political  entities  and  issued  warnings  to  10  of  them  who  had  failed  to 
submit such report by the deadline. The Agency continued to make targeted checks on asset 
declarations it has received. This activity led to misdemeanour judgements in two cases, and 
criminal  charges  in  another.  The  Agency  collected  few  data  for  its  new  registry  of  legal 
entities  involved  in  public  procurement  in  which  public  officials  have  shares  over  20%. 
Regarding cases of dual public functions presenting a risk of conflict of interest, the Agency 
took close to 500 decisions in 2011 that are generally being enforced. However, the Agency 
has still to establish a track record of effective checks on party funding. It has not yet made 
full  use  of  its  powers  and  needs  to  improve  cooperation  with  relevant  stakeholders  to 
investigate declarations of assets effectively.  

The  Anti-Corruption  Council  continued  to  be  active  in  exposing  and  analysing  cases  of 
systemic  corruption.  There  has  been  very  limited  follow-up  to  its  detailed  reports  of  high-
profile corruption cases. 

The  special  prosecutor  for  corruption  and  organised  crime  launched  investigations  into  115 
corruption  cases  in  2011.  These  included  several  medium-  to  high-level  cases.  There  was  a 
marked  increase  in  the  number  of  lower-level  corruption  cases  for  which  the  prosecutor’s 
offices  initiated  investigations  in  2011,  but  in  the  great  majority  of  such  cases  sanctions 
remained  lenient.  Further  efforts  are  needed  to  establish  a  track  record  of  prosecution  and 
conviction, particularly in high-level cases. The law enforcement bodies need to become more 
proactive and develop their ability to conduct financial investigations. There was little action 
to protect whistleblowers.  

Internal  checks  by  the  customs  administration  and  the  police  have  continued  to  result  in  a 
sizeable  number  of  cases  being  investigated  and  penalties  imposed.  Public  procurement, 
management  of  public  enterprises,  privatisation  procedures  and  public  expenditure  remain 
areas  of  serious  concern,  in  which  independent  supervision  and  capacity  for  the  early 
detection of wrongdoing and conflicts of interest are underdeveloped. Health and Education 
remain  particularly  vulnerable  to  corruption.  Comprehensive  risk  analyses  for  areas 
vulnerable  to  corruption  are  needed.  Coordination  between  all  stakeholders  needs  to  be 
strengthened to ensure effective prevention and prosecution of corruption cases.  

Overall, the implementation of the legal framework for fighting corruption has continued. The 
Anti-Corruption Agency’s operations increased, mostly in relation to the financing of political 
parties.  However,  corruption  remains  prevalent  in  many  areas  and  continues  to  be  a  serious 
problem.  A  new  Anti-Corruption  Strategy  and  Action  Plan  are  still  awaited.  The 
implementation of the legal framework and the efficiency of anti-corruption institutions need 
to be significantly improved. Further efforts are needed to adopt a more proactive approach to 

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investigating and prosecuting corruption and the judiciary needs to gradually build up a solid 
track  record  of  convictions,  including  in  high-level  cases,  particularly  in  cases  of  misuse  of 
public  funds.  Stronger  political  direction  and  more  effective  inter-agency  coordination  are 
needed to significantly improve performance in combating corruption.  

2.2. 

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

Observance of international human rights law 

Serbia has already ratified all of the main international human rights instruments. 

During  the  reporting  period,  the  European  Court  of  Human  Rights  (ECtHR)  delivered 
judgments  on  40  applications  finding  that  Serbia  had  violated  rights  guaranteed  by  the 
European Convention on Human Rights (ECHR). The bulk of the judgments so far relate to 
the  excessive  length  of  court  cases  and  to  non-enforcement  of  domestic  judgments.  Due 
enforcement  of  ECtHR’s  rulings  in  cases  of  compensation  of  workers  from  State  owned 
enterprises,  for  which  a  decree  was  taken  by  the  government  in  March  2012,  is  needed.  A 
total  of  4.833  new  applications  have  been  submitted  to  the  ECtHR  since  September  2011, 
bringing the total of pending applications to 9.478. The number of filed applications against 
Serbia is steadily growing and now represents 6% of all filed applications with the Court.  

There  is  some  progress  in  the  promotion  and  enforcement  of  human  rights.  Various 
activities aimed at promoting tolerance, anti-discrimination and respect for human rights were 
carried  out.  Different  occasions  such  as  those  marking  International  Human  Rights  Day, 
International Women’s Day, International Roma Day and Pride Day were used to raise public 
awareness of human rights issues. Various training courses were held for judges, prosecutors, 
legal  practitioners,  prison  officers  and  police  officers.  However,  the  implementation  of 
relevant international instruments needs to be further improved. 

Overall, the legislative and institutional framework for the observance of human rights is in 
place  and  some  active  measures  were  taken  to  ensure  its  implementation.  However,  further 
efforts to implement international instruments are required. 

Civil and political rights 

Some  progress  has  been  made  on  the  prevention  of  torture  and  ill-treatment  of  persons 
deprived of their liberty. The Ombudsman, acting as of January 2012 as National Prevention 
Mechanism  against  torture,  held  its  first  inspections  of  prisons,  psychiatric  hospitals,  police 
stations and social care centres. Poor living conditions, unsatisfactory healthcare and a lack of 
adequate  and  specific  treatment  programmes  are  still  a  matter  of  concern.  There  are  no 
adequate legal safeguards for the placement and treatment of people with mental disabilities 
involuntarily placed in psychiatric or social care institutions. The internal control system for 
the police needs significant strengthening in terms of staff and training and needs to improve 
its response to allegations of ill-treatment. 

Some  progress  has  been  made  regarding  the  prison  system.  The  Action  plan  implementing 
the  Strategy  for  the  reduction  of  prisons’  overcrowding  was  adopted  in  November  2011. 
Some  improvements  were  made  to  prison  infrastructure  and  a  new  prison  facility  with  450 
places was opened near Belgrade in February 2012. However, the prison system continued to 
face serious problems due to overcrowding with a number of prisoners over 11,500 for some 
5  to  6,000  places.  Further  efforts  are  needed  to  improve  living  conditions,  healthcare  and 
provide  adequate  treatment  programmes  for  prisoners.  Alternative  sanctions  need  to  be 
introduced  on  a  larger  scale.  There  are  not  enough  frontline  prison  staff.  An  efficient 
probation system remains to be introduced.  

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Constitutional  guarantees  of  access  to  justice  are  in  place.  However,  the  length  of  court 
proceedings  and  the  backlog  of  cases  continue to  remain  issues  of  concern.  Legislation  and 
funding for an effective system of free legal aid still need to be developed.  

The  legal  framework  to  ensure  freedom  of  expression  is  in  place.  As  regards  the  media, 
several working groups have been set up to implement the Media Strategy adopted in October 
2011  and  its  accompanying  action  plans.  The  Republican  Broadcasting  Agency  (RBA)  has 
improved the transparency of its work and has enhanced its technical capacity for monitoring 
broadcasters.  However,  violence  and  threats  against  journalists  remain  of  concern,  although 
their  frequency  has  decreased  slightly.  The  Serbian  authorities  have  continued  to  provide 
police protection for journalists and media outlets which have received threats. Investigations 
into murders of journalists dating back to the late 1990s/early 2000s and into recurring threats 
against journalists have so far failed to identify the perpetrators. A more comprehensive and 
proactive  approach  by  the  police  and  the  judiciary  remains  essential.  Monitoring  of 
discriminatory  or  hate  speech  by  the  RBA  needs  to  be  improved.  The  procedure  by  which 
RBA members are appointed continues to raise concerns about the independence of this body. 
Access to advertising in the media remains under the control of a few economic and political 
actors,  entailing  a  significant  risk  of  influence  on  the  media  and  of  self-censorship. 
Transparency  of  media  ownership  has  yet  to  be  ensured.  The  implementation  of  the  media 
strategy needs to be speeded up. 

Freedom  of  assembly  and  association  is  constitutionally  guaranteed  and  in  general 
respected.  91  political  parties,  including  53  representing  minorities,  were  registered  as  of 
August 2012. In December 2011 the Constitutional Court ruled that a decision by the Ministry 
of the Interior not to allow the 2009 Pride Parade to take place in the location registered by 
the organisers was a violation of freedom of assembly. However, while a Pride festival could 
take  place  in  Belgrade  from  30  September  to  7  October  2012,  the  Pride  Parade  itself, 
scheduled for 6 October 2012, was banned by the Serbian authorities on security grounds, for 
the  second  year  in  a  row.  The  activities  of  extreme  right-wing  organisations  and  of  violent 
groups  of  so-called  sports  fans  continue  to  be  a  major  cause  of  concern.  The  Constitutional 
Court banned a second such organisation in June 2012. Criminal proceedings were initiated in 
April  2012  against  12  persons  suspected  of  having  taken  part  in  the  attacks  of  foreign 
diplomatic  missions  in  Belgrade,  including  EU  embassies,  in  February  2008.  So  far,  one  of 
the suspects was acquitted in first instance.  

Civil society organisations continue to play an important role in social, economic and political 
life, and in promoting democratic values. The Office for Cooperation with Civil Society has 
been very active in raising awareness both among the public and among state institutions of 
the  importance  of  involving  civil  society  and  citizens  in  decision-making.  It  has  also 
established  cooperation  with  other  countries  in  the  region.  The  Office  has  been  allocated 
sufficient means, including financial resources, and now functions at full capacity.  

Freedom  of  thought,  conscience  and  religion  is  guaranteed  and  generally  respected. 
Religiously  motivated  incidents  declined.  In  addition  to  7  religious  communities  recognised 
as traditional communities under a law passed in 2006, 18 religious organisations have been 
registered. The lack of transparency and consistency in the registration process continues to 
be one of the main obstacles preventing some smaller religious groups from exercising their 
rights,  which  also  led  to  limit  the  access  to  church  services  in  some  minority  language.  A 
Constitutional Court ruling on the 2006 law which differentiate between traditional and other 
religious  organisations  is  still  awaited.  The  Ombudsman’s  2011  annual  report  stressed 
continuing  problems  with  regulating  religious  classes  and  the  status  of  teachers  of  religion, 
particularly  relating  to  the  Islamic  faith.  Some  media  continued  to  propagate  negative 
comments and hate speech against smaller churches. 

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Overall, there has been some progress on civil and political rights. The legal framework for 
freedom  of  expression  is  in  place  but  violence  and  threats  against  journalists  remain  of 
concern.  The  implementation  of  the  media  strategy  needs  to  be  speeded  up.  Freedom  of 
assembly and association are constitutionally guaranteed and in general respected. The Office 
for Cooperation with Civil Society has been very active. Freedom of thought, conscience and 
religion  is  in  general  respected  but  the  registration  process  for  religious  communities 
continues  to  lack  transparency  and  consistency.  The  National  Mechanism  for  Prevention  of 
Torture began work but needs further strengthening. Although one new facility was opened, 
overcrowding in the prison system remains a grave concern. On access to justice, an effective 
system of free legal aid still needs to be developed.  

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

There  has  been  some  progress  relating  to  women’s  rights  and  gender  equality.  Serbia 
signed  the  Council  of  Europe  Convention  on  Preventing  and  Combating  Violence  against 
Women  and  Domestic  Violence  in  April  2012.  A  general  protocol  on  procedures  and 
cooperation  between  institutions,  agencies  and  organisations  in  situations  of  domestic  and 
partner-relationship  violence  was  adopted  in  November  2011.  The  protocol  aims  to  provide 
better  protection  for  victims.  A  telephone  helpline  for  victims  of  domestic  violence  was 
introduced in November 2011. A new shelter for up to 20 victims of domestic violence was 
opened  in  Pancevo  in  January  2012,  bringing  the  number  of  such  centres  to  13.  However, 
violence against women remains an area of concern. The action plan for the implementation 
of the National Strategy for Prevention and Suppression of Violence against Women has yet 
to  be  adopted.  Very  often,  domestic  violence  goes  unreported  and  greater  coordination  is 
needed,  e.g.  on  collecting  and  sharing  data  between  all  actors  in  the  system  for  protecting 
women from violence. Women continue to be discriminated against in the labour market.  

Children’s  rights  are  guaranteed  by  the  Constitution  and  broadly  respected.  Little  further 
progress has been achieved in this area. There has been a steady reduction in the number of 
children  with  disabilities  placed  in  residential  care  institutions  and  an  increase  in  the 
availability of community services for family members with disabilities. A media campaign to 
eradicate  violence  in  schools  has  started  and  a  telephone  helpline  for  victims  of  juvenile 
violence  was  introduced  in  November  2011.  However,  both  juvenile  violence  and  violence 
against children continue to grow and are of great concern. Children’s rights, particularly the 
rights  of  those  belonging  to  vulnerable  groups  such  as  Roma,  poor  children,  children  with 
disabilities, children without parental care and street children, are unevenly protected. There 
are  an  increasing  number  of  children  living  in  poverty.  Inclusive  education  is  still  not  fully 
developed. The school drop-out rate is high among Roma children, children with disabilities 
and  children  living  in  remote  areas.  Too  many  Roma  children  are  still  being  enrolled  in 
special schools.  

Some  progress  has  been  made  concerning  the  socially  vulnerable  and/or  persons  with 
disabilities.  The  overall  legislative  framework  is  in  place  for  the  protection,  inclusion  and 
education of socially vulnerable persons and persons with disabilities. Efforts have been made 
to  promote  their  rights,  education  and  inclusion  in  the  labour  market.  Deinstitutionalisation 
efforts have further continued, in tandem with the development of community-based services. 
However, the number of vulnerable persons registered with the National Employment Service 
remains  extremely  low.  Access  to  public  buildings  for  persons  with  disabilities  needs  to  be 
further  improved,  especially  in  rural  areas.  Overall,  social  integration  of  persons  with 
disabilities  remains  limited  and  as  that  of  other  vulnerable  persons  it  needs  further 
improvement.  

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There  has  been  some  progress  on  anti-discrimination  policies.  Serbia’s  anti-discrimination 
legislation  is  broadly  in  line  with  European  standards  on  combating  racism  and  racial 
discrimination.  The  Equality  Protection  Commissioner’s  office  was  active  in  raising 
awareness on discrimination and existing mechanisms for protection against discrimination. It 
received  450  citizens’  complaints  and  dealt  with  360  cases.  The  number  of  citizens’ 
complaints  has  been  increasing,  indicating  greater  awareness  of  this  problem.  The  groups 
most discriminated against are the Roma, persons with disabilities and sexual minorities, who, 
together with human rights defenders, often face hate speech and threats. Certain aspects of 
the  Serbian  anti-discrimination  law  are  not  in  line  with  the  acquis,  notably  the  scope  of 
exceptions from the principle of equal treatment, the definition of indirect discrimination and 
the obligation of reasonable accommodation for disabled employees. The police response to 
attacks  against  the  lesbian,  gay,  bisexual  and  transgender  (LGBT)  population  has  slightly 
improved. Several physical attacks and threats on members of the LGBT population and those 
promoting LGBT rights continued to occur and the 2011 and 2012 pride parades were banned 
because of security threats. For the first time, a Pride Day was marked in June 2012 by events 
co-sponsored by the government and civil society but so far, the new government has taken 
no  further  initiative  towards  the  better  inclusion  of  the  LGBT  population  and  a  greater 
understanding across society.  

Labour  and  trade  unions  rights  are  guaranteed  by  the  Constitution  and  broadly  respected 
but no further progress has been made. The 1996 law on strike is not in line with the EU and 
ILO standards, in particular as regards possible restrictions to the right to strike. Criteria for 
social partners’ representativeness in social dialogue are still an issue: several registered trade 
unions  are  still  not  recognised  and  concerns  remain  as  to  the  criteria  for  participation  of 
employers’ organisations. Social dialogue remains limited. The Economic and Social Council 
was  not  consulted  regularly  on  draft  laws  and  its  meetings  were  often  not  attended  by 
government officials. At local level, dialogue has generally been non-existent.  

Progress  was  achieved  concerning  property  rights.  Implementation  of  the  2011  Law  on 
Restitution  has  started.  The  Agency  for  Restitution  was  set  up  in  January  2012  and  invited 
former owners of properties nationalised after World War II, or their heirs, to submit claims 
for restitution between 1 March 2012 and 1 March 2014. The Agency has started processing 
the claims and has taken a number of decisions on restitution in kind. Given the ceiling of € 2 
billion available for financial compensation, the corresponding individual decisions will only 
be taken after the  deadline for submissions has  expired,  when the  total  number  of  claims is 
known.  A  Law  on  Rehabilitation  adopted  in  December  2011  clarified  the  procedure  and 
conditions  under  which  members  of  the  occupying  forces  recruited  in  Serbia  during World 
War  II  can  be  rehabilitated,  making  them  and  their  heirs  eligible  under  the  Law  on 
Restitution.  

Overall,  the  legal  framework  for  the  protection  of  social  and  economic  rights  is  in  place. 
However,  discrimination  based  on  race,  ethnicity,  gender,  age  and  sexual  orientation  is 
widespread and further measures to fight all forms of discrimination are needed, together with 
efficient  mechanisms  to  improve  the  protection  of  women  and  children  against  any  form  of 
violence.  Social  dialogue  needs  to  be  improved  and  the  issue  of  social  partners’ 
representativeness  criteria  resolved.  Implementation  of  the  2011  Law  on  Restitution  has 
started.  

Respect for and protection of minorities, cultural rights 

A comprehensive legal framework for the protection of minorities is in place, in line with the 
Framework  Convention  on  National  Minorities  of  which  Serbia  is  party,  and  generally 
respected.  A  Governmental  Office  for  Human  and  Minority  Rights  was  established  as  of 

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August  2012,  taking  over  the  functions  ensured  by  the  previous  Directorate  within  the 
Ministry for Human and Minority Rights, Public Administration and Local Self-Government. 
Regular  financial  reports  by  the  national  minority  councils  to  the  Office  for  Human  and 
Minority  Rights  have  been  introduced.  The  2011  population  census  included  provisions 
facilitating  the  participation  of  minorities  such  as  translation  of  the  questionnaire  in  nine 
languages  and  participation  of  minority  languages  speaking  enumerators.  However, 
implementation of the legislation needs to be further improved. The Republican Council for 
National  Minorities  has  remained  inactive.  The  Bosniak  minority  council  has  not  yet  been 
formally  constituted.  The  recommendations  made  by  the  Serbian  independent  bodies  with  a 
view  to  improving  the  electoral  framework  for  the  national  minority  councils  have  not  yet 
been followed up. The legislation is in place but implementation at field level remains uneven 
throughout the entire territory of Serbia. Generally, Vojvodina is more advanced while South 
and  South-West  Serbia  lag  behind,  due  in  part  to  a  lack  of  available  funding.  Coordination 
between the central and local level needs to be further improved as well as awareness on the 
minority  issues  legal  framework,  including  from  the  minorities  themselves.  Further 
improvements  are  also  needed  regarding  information  and  education  in  minority  languages, 
including the provision of all the necessary textbooks.  

The inter-ethnic situation in the Autonomous Province of Vojvodina remained good. Elections 
for  the  Provincial  Assembly  took  place  in  May  2012.  There  have  been  only  sporadic  inter-
ethnic  incidents.  Reactions  to  such  incidents  by  provincial  officials  and  the  police  were 
adequate but the legal process needs to be improved as the prosecution continued to treat them 
as  misdemeanour  cases  rather  than  criminal  offences.  The  Provincial  Ombudsman’s  2011 
annual report noted that out of 1,237 complaints 65 were related to minority issues (5.25%). 
The law on Vojvodina’s own resources, required by the Constitution, has yet to be adopted. 
The Constitutional Court invalidated in July 2012 some provisions of the law regulating the 
competences of Vojvodina.  

As regards the municipalities of Presevo, Bujanovac and Medvedja, the situation continued to 
be stable overall, although there were sporadic incidents. An Albanian/Serbian Department of 
Economics was opened in Bujanovac in October 2011 as a branch of the Novi Sad Faculty of 
Economics  and  69  students  were  enrolled.  Students  from  Presevo  and  Bujanovac  were 
granted  scholarships  to  study  at  Novi  Sad  University.  Several  textbooks  in  Albanian  were 
provided  for  the  2011  school  year.  In  April  2012  the  government  and  the  municipal 
authorities reached an agreement on state investment in small and medium-sized enterprises 
in  the  three  municipalities.  Following  calls  by  their  political  parties,  Albanians  however 
massively  boycotted  the  October  2011  population  census  and  partially  boycotted  the  May 
2012  parliamentary  elections.  Albanians  continue  to  be  underrepresented  in  the  public 
administration and local public companies. The area remains among the poorest in Serbia and 
requires further commitment from the State authorities for its economic development.  

Regarding  the  Sandzak  area,  the  situation  has  been  stable  overall.  The  campaign  for 
parliamentary and municipal elections was calm and no incidents were recorded. Parties from 
Sandzak  which  participated  in  the  elections  in  April  2012  signed  a  code  of  conduct  for  the 
campaign and largely abided by it. The Bosniak community continued to be underrepresented 
in  the  local  administration,  judiciary  and  police.  A  2011  recommendation  to  a  municipal 
administration by the Equality Commissioner to ensure the use of the Bosniak language and 
Latin alphabet has not been followed. The Ombudsman also issued recommendations in April 
2012 to ensure adequate use of the Bosniak language in four municipalities. No solution was 
found  to  the  outstanding  issue  of  the  election  of  the  Bosniak  national  minority  council,  nor 
has  the  issue  of  the  two  rivalling  Islamic  communities  been  resolved.  The  area  remained 
significantly  underdeveloped,  with  a  high  unemployment  rate  and  a  lack  of  adequate 

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infrastructure and investment. It requires further commitment from the State authorities for its 
economic development.  

There  has  been  some  improvement  in  the  position  of  the  Roma  population.  Serbia  has 
continued  to  take  an  active  part  in  the  Decade  of  Roma  Inclusion  2005–2015  and  has 
undertaken  to  implement  the  operational  conclusions  of  the  June  2011  EU-Serbia  social 
inclusion seminar on Roma issues. The government signed in April 2012 a Memorandum of 
Understanding with the Ombudsman and the UNHCR to provide assistance on the registration 
of  legally  ‘invisible  persons’  and  changes  were  brought  to  the  law  of  non-contentious 
procedures  in  August  2012  aimed  at  facilitating  later  registration  in  the  birth  registry.  The 
measure allowing  undocumented Roma to register using a provisional address has yet to be 
implemented. Active measures to increase social inclusion of the Roma have continued. The 
enrolment rate of Roma children in the education system has increased. 170 Roma teaching 
assistants have been employed together with 75 health mediators. The school drop-out rate for 
Roma children remains however high. The 2012–2014 Action Plan for the implementation of 
the Roma Strategy has not yet been adopted. Most of the Roma population lives in informal 
settlements  under  difficult  conditions.  Some  positive  steps  to  comply  with  international 
standards  were  taken  regarding  the  relocation  of  Roma  evicted  from  such  informal 
settlements. Further sustained efforts are required to fully comply with international standards 
on  forced  evictions.  The  Roma  population,  and  especially  Roma  women,  are  the  most 
discriminated  against  in  the  labour  market.  The  Roma  minority  continues  to  face 
discrimination, social exclusion and high unemployment. Roma women and children are still 
frequently subject to family violence, which often goes unreported.  

According  to  the  UNHCR,  there  are  around  66.000  refugees  and  210.000  internally 
displaced persons in Serbia. The number of collective centres fell further from 29 to 24. The 
programme  for  supporting  municipalities  which  prepare  local  action  plans  for  the 
improvement of the status of refuges and IDPs has continued and some improvement has been 
recorded concerning the displaced persons housing situation. However, the living conditions 
of  many  refugees  and  internally  displaced  persons  are  still  difficult.  Many  are  unemployed 
and live in poverty. Internally displaced persons who do not have personal documents are in a 
particularly difficult position as they are not able to exercise their basic rights.  

Overall,  the  legal  framework  for  the  protection  of  minorities  is  in  place  and  generally 
respected. Some positive steps were taken to improve the situation of minorities, including the 
Roma.  Regular  financial  reporting  by  the  national  minority  councils  has  been  introduced. 
Additional  efforts  are  needed  to  ensure  effective  implementation  of  minority  legislation 
throughout the territory of Serbia and address known shortcomings. Serbia needs to do more 
to  support  the  socio-economic  development  of  Sandzak  and  Presevo,  Bujanovac  and 
Medvedja.  The  Roma,  refugees  and  internally  displaced  persons  continue  to  face  a  difficult 
situation.  

2.3. 

Regional issues and international obligations 

There  are  no  outstanding  issues  in  connection  with  Serbia’s  compliance  with  the 
Dayton/Paris  Peace  Agreement.  In  the  framework  of  the  Special  Parallel  Relations 
Agreement between the Republika Srpska and Serbia, a joint session of the governments of 
Serbia  and  the  Republika  Srpska  took  place  in  Belgrade  in  December  2011,  leading  to  the 
signing of four agreements on internal affairs, IT, the environment and agriculture. 

Cooperation with the International Criminal Tribunal for the former Yugoslavia (ICTY) 
continued  to  be  fully  satisfactory.  Serbia  continued  to  provide  smooth  and  swift  access  to 
documents and witnesses, in support of  ongoing or planned  ICTY trials. The June report of 
ICTY prosecutor Brammertz regretted the lack of action against the network of aid to ICTY 

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fugitives. The War Crimes Prosecutor started criminal proceedings against an aid network in 
June 2012. A new trial against a previously identified group of 10 people suspected of aiding 
Ratko Mladic to evade justice was also restarted. However, Serbia must still further intensify 
its efforts in the conduct of more in-depth investigations into the fugitive networks in order to 
achieve visible results.  

Domestic  processing  of  war  crimes  continued  with  a  number  of  new  indictments,  first-
instance  judgments  and  final  convictions.  Cooperation  and  exchanges  of  information  with 
Croatia and EULEX developed in 2012. However, serious problems with witness protection 
hinder the handling of sensitive cases. A review of the 1990s indictments by military courts in 
the  case  of  Croatia  was  completed  and  findings  shared  with  Croatia.  A  similar  exercise 
involving discussions with EULEX is ongoing in relation to events in Kosovo. An agreement 
with Bosnia and Herzegovina on sharing evidence remains to be concluded. 

Serbia’s policy regarding the International Criminal Court is in line with the EU’s guiding 
principles  and  the  EU  Common  Positions  on  the  integrity  of  the  Rome  Statute.  Serbia  does 
not have any bilateral immunity agreements.  

Serbia made some progress towards a visible and sustainable improvement in relations with 
Kosovo,  the  key  priority  set  out  in  the  Commission’s  Opinion  on  Serbia’s  membership 
application. Serbia continues to contest Kosovo’s declaration of independence and to actively 
oppose  recognition  by  third  parties  but  has  participated  in  a  dialogue  with  Pristina  since 
March  2011.  Additional  agreements  were  reached  in  that  dialogue  in  February  2012  on 
regional  cooperation  and  representation  of  Kosovo  and  on  integrated  management  of 
border/boundary crossing points (IBM), in the run-up to the March European Council which 
granted Serbia candidate status. Implementation of these agreements was long delayed. Serbia 
adopted at first an overly restrictive internal instruction regarding the participation of Serbian 
delegations in regional meetings and conditions to be observed for its acceptance of Kosovo’s 
participation. Soon after formation of a new government, a revised instruction was adopted in 
September  2012  which,  subject  to  continued  implementation,  enables  inclusiveness  of 
regional cooperation. Serbia eventually signed the IBM technical protocol in September 2012 
but it has yet to be implemented. Other agreements reached in this dialogue between March 
and  September  2011  regarding  freedom  of  movement,  civil  registries,  customs  stamps  and 
mutual acceptance of diplomas are being implemented, except for cadastre, on which Kosovo 
still needs to adopt a law. Some areas are facing technical difficulties, e.g. vehicle insurance 
and  car  number  plates  for  the  freedom  of  movement  agreement.  Gates  1  and  31  remained 
mostly  closed  or  only  partially  open,  while  there  has  been  considerable  traffic  using 
unregulated crossing points into and from Serbia.  

Serbia  was  constructive  in  accepting  OSCE  facilitation  in  Kosovo  for  the  holding  of  its 
parliamentary  and  presidential  elections  there  and  in  not  calling  local  elections  in  Kosovo. 
Serbia  continued  to  fund  and  to  maintain  its  structures,  particularly  in  northern  Kosovo, 
including not only hospitals and schools, but municipal administrations, security services and 
judicial  structures.  Cooperation  with  EULEX  has  improved.  Direct  high-level  contacts 
facilitated operational cooperation. Cooperation in combating organised crime has improved 
but needs to be further developed in regard to some specific cases.  

Following  the  elections  and  a  new  leadership  in  Serbia  taking  up  office,  Serbia  needs  to 
continue to engage constructively in the next phase of the dialogue in order to achieve further 
progress towards a visible and sustainable improvement of relations with Kosovo. 

Significant  progress  has  been  made  as  regards  the  Sarajevo  Declaration  Process,  which 
brings together Bosnia and Herzegovina, Croatia, Montenegro and Serbia and aims at finding 
sustainable solutions for the refugees who were displaced as a result of the armed conflicts in 

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ex-Yugoslavia  during  the  1990s.  The  four  countries  signed  a  ministerial  declaration  in 
November 2011 in Belgrade, renewing their political commitment to bringing this chapter to a 
close. They agreed on a Regional Housing Programme assisting some 27,000 households or 
74,000  individuals.  The  programme  was  presented  for  international  donor  support  at  the 
Sarajevo April 2012 donors’ conference, which resulted in some € 265 million being pledged. 
Programme implementation is at an early stage. Good cooperation needs to continue between 
the  four  countries  on  all  outstanding  issues  in  the  process,  including  data  exchange  and 
statistics, civil documentation and pension rights. 

The  unresolved  fate  of  missing  persons  from  the  conflicts  in  the  1990s  remains  a 
humanitarian  concern  in  the  Western  Balkans.  As  of  August  2012,  there  were  still 
approximately 13,250 people missing from the conflicts in the region. Of these, some 9,550 
were related to the conflict in Bosnia and Herzegovina, approximately 1,900 to the conflict in 
Croatia  and  over  1,800  to  the  conflict  in  Kosovo.  In  the  past  year  approximately  1,100 
remains  were  identified  at  regional  level.  The  lack  of  information  on  new  gravesites  and 
difficulties in identifying exhumed human remains continue to be the key obstacles to solving 
the remaining cases of missing persons. The Working Group chaired by the ICRC remained 
the  framework  within  which  the  Belgrade  and  Pristina  authorities  maintained  dialogue  and 
exchanged  information  on  persons  unaccounted  for  in  relation  to  the  1998–1999  events  in 
Kosovo. It met twice since September 2011 and held two briefing sessions for the families of 
the  missing,  while  only  45  cases  were  solved.  Although  modest,  the  progress  was  achieved 
mostly  owing  to  the  information  provided  by  the  Serbian  authorities  and  obtained  from 
international archives. Regarding cooperation between Serbia and Croatia, progress has been 
limited.  No  formal  meetings  of  the  bilateral  Commission  on  Missing  Persons  were  held. 
Sustained  efforts  and  enhanced  political  commitment  are  needed  towards  identifying 
gravesites and clarifying the fate and whereabouts of people still unaccounted for.  

Regional cooperation and good neighbourly relations form an essential part of the process 
of Serbia’s moving towards the European Union. In 2012 Serbia held the chair of the South 
East  Europe  Cooperation  Process  (SEECP),  the  Migration,  Asylum,  Refugees  Regional 
Initiative  (MARRI),  the  Adriatic-Ionian  Initiative  (AII)  and  the  Black  Sea  Economic 
Cooperation (BSEC). It continues to play an active part in the Regional Cooperation Council 
(RCC), the Central European Free Trade Agreement (CEFTA), the Energy Community Treaty 
and the European Common Aviation Area Agreement. The new RCC Secretary General was 
appointed  following  a  proposal  from  Serbia.  Serbia  supports  the  RECOM  initiative  on 
reconciliation  and  the  Igman  Initiative.  However,  the  agreement  reached  on  regional 
cooperation  and  the  representation  of  Kosovo  in  the  framework  of  the  Belgrade/Pristina 
dialogue did not immediately result in either smoother or fully inclusive regional cooperation. 
Between March and August 2012 Serbia chose to walk out of or boycott meetings that did not 
strictly  follow  its  own  interpretation  but  eventually  applied  a  more  flexible  approach  from 
September 2012 onwards. 

Serbia  has  good  bilateral  relations  with  other  enlargement  countries  and  with 
neighbouring  EU  Member  States  overall.  Then  President  Tadic  participated  in  February 
2012  in  a  trilateral  summit  of  Presidents  of  Serbia,  Bosnia  and  Herzegovina  and  Croatia  at 
Jahorina and in the summit of Presidents of Serbia, Croatia, Slovakia and the Czech Republic 
in Prague. A first trilateral meeting of the Ministers of the Interior of Serbia, Montenegro and 
Bosnia and Herzegovina took place in April 2012. However, some unhelpful statements  for 
reconciliation in the region were made by the new Serbian President, Mr Nikolic, at the time 
of  his  election  and  taking  office,  such  as  that  denying  the  qualification  of  genocide  for  the 
crimes  in  Srebrenica.  Several  regional  leaders  decided  not  to  attend  the  inauguration  of  the 

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new  president.  Serbia  needs  to  continue  to  make  a  positive  and  constructive  contribution  to 
regional cooperation and reconciliation.  

Relations with Albania remained good. Several high-profile bilateral meetings took place. An 
agreement on veterinary cooperation was signed in April 2012. A readmission agreement and 
an agreement on reciprocal movement of citizens were also signed. 

Relations  with  Bosnia  and  Herzegovina  remained  good.  The  speaker  of  the  Serbian 
Parliament paid a visit to Bosnia and Herzegovina in December 2011, the Minister of Foreign 
Affairs  of  Bosnia  and  Herzegovina  visited  Belgrade  in  March  2012  and  the  Serbian  Prime 
Minister visited Sarajevo in September 2012. Then President Tadic visited Republika Srpska 
on several occasions. Border demarcation remains an open issue.  

Relations  with  Croatia  are  stable,  regardless  of  a  number  of  outstanding  issues  (e.g.  border 
demarcation and missing persons). The two countries are working on a bilateral agreement on 
war  crimes  prosecution.  There  have  been  no  tangible  results  with  regard  to  border 
demarcation concerning the Danube. The Serbian government submitted its written pleadings 
supporting  its  counter-suit  against  Croatia  before  the  International  Court  of  Justice  on 
genocide allegations in November 2011. A protocol on the return to Croatia of cultural assets 
taken during the war in the 1990s was signed, thus resolving an outstanding bilateral issue.  

Relations with the former Yugoslav Republic of Macedonia continued to be good. There were 
reciprocal  presidential  visits  in  December  2011  and  January  2012,  which  were  held  in  a 
positive  atmosphere.  Agreements  on  travelling  conditions  and  on  compensation  for  health 
protection  were  signed.  There  were  no  developments  regarding  the  dispute  between  the 
Orthodox churches in the two countries. 

Relations with Montenegro remained good, overall. The Serbian Prime Minister led a senior 
delegation on a visit to Podgorica in December 2011. The Montenegrin President attended the 
inauguration of the Serbian President. The two governments signed a number of agreements 
on  sectoral  policies,  an  agreement  on  cooperation  on  air  traffic  control  and  a  protocol  on 
cooperation in resolving the fate of missing persons. There were no developments regarding 
the dispute between the Orthodox churches in the two countries. 

Relations with Turkey remained good. The prime ministers met in November 2011 and there 
were several other reciprocal visits at ministerial level. 

Serbia’s  relations  with  neighbouring  EU  Member  States  Bulgaria,  Hungary  and  Romania 
remained generally good. Serbia and Romania expanded cooperation on the regulation of the 
status of their respective national and religious minorities and agreed in March 2012 to a Joint 
Statement  on  the  Protocol  on  the  second  session  of  the  Inter-Governmental  Commission  on 
National  Minorities.  The  issue  of  protection  of  minorities  in  Serbia  was  raised  in  different 
contexts  by  Romania  as  being  of  particular  concern.  Both  countries  have  started  to  address 
this  bilateral  issue  through  the  mediation  of  the  OSCE  High  Commissioner  on  National 
minorities as well as in the framework of their bilateral joint commission. 

Overall,  Serbia’s  international  obligations  are  generally  complied  with.  Serbia  continued  to 
fully  cooperate  with  the  International  Criminal  Tribunal  for  the  former  Yugoslavia  (ICTY). 
Domestic  processing  of  war  crimes  cases  continued.  Serbia  maintained  a  good  level  of 
relations  with  its  neighbours  and  active  involvement  in  regional  cooperation,  notably  by 
chairing the South East Europe Cooperation Process (SEECP) and a number of other regional 
initiatives.  

Serbia still needs to achieve further progress towards a visible and sustainable improvement in 
relations with Kosovo, the key priority set out in the Opinion. New results were achieved in 
the  dialogue  with  Pristina,  with  agreements  in  the  areas  of  regional  cooperation  and 

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representation  and  integrated  management  of  border/boundary  crossing  points.  However, 
implementation  of  these  agreements  was  long  delayed.  Serbia’s  interpretation  of  the 
agreement on regional cooperation and the representation of Kosovo was eventually clarified 
soon  after  the  formation  of  a  new  government  and,  based  on  initial  implementation,  is  no 
longer hampering the inclusiveness of regional cooperation. Serbia eventually also signed the 
IBM technical protocol in September 2012 which has yet to be implemented. Implementation 
of  other  agreements  on  freedom  of  movement,  the  land  registry,  civil  registries,  customs 
stamps  and  mutual  acceptance  of  diplomas  has  overall  moved  forward.  Serbia’s  new 
leadership has underlined its commitment to implement all agreements already reached in the 
dialogue with Pristina as well as to begin tackling the broader political issues. Fulfilment of 
this commitment is key to moving to the next phase of Serbia’s EU integration.  

3. 

ECONOMIC CRITERIA 

In examining economic developments in Serbia, the Commission’s approach was guided by 
the  conclusions  of  the  European  Council  in  Copenhagen  in  June  1993,  which  stated  that 
membership  of  the  Union  requires  the  existence  of  a  functioning  market  economy  and  the 
capacity to cope with competitive pressure and market forces within the Union. 

3.1. 

The existence of a functioning market economy 

Economic policy essentials 

In  January  2012,  the  government  submitted  to  the  European  Commission  its  Economic  and 
Fiscal  Programme  (EFP)  for  the  period  2012-14.  The  programme’s  growth  projections  are 
optimistic, especially for 2012, and the plausibility of its targets is constrained by an outdated 
macroeconomic  and  fiscal  scenario.  The  programme  would  have  benefited  from  a  more 
detailed description of policy measures to lead towards the declared objectives — sustainable 
growth based on exports and investment. 

Serbia  entered  into  a  precautionary  Stand-By  Arrangement  (SBA)  with  the  International 
Monetary  Fund  (IMF)  in  September  2011.  The  completion  of  the  first  review  has  been 
postponed  because  the  2012  budget  deviated  from  the  agreed  fiscal  programme.  After  the 
elections at all levels in May, the new government is facing the challenge to urgently address 
the increasing fiscal imbalances and present and implement a comprehensive structural reform 
agenda. The independence of the central bank has been seriously challenged by the adoption 
of amendments to the Law on the National Bank of Serbia (NBS) in August. 

Overall, economic reforms have mostly stalled in the election period. The consensus on the 
fundamentals of a market economy has been broadly preserved but needs to be reinvigorated 
in order to improve economic performance and enhance the resilience of the economy. 

Macroeconomic stability 

In 2011, Serbia’s GDP increased by 1.6% in real terms. The pace of recovery slowed down 
significantly  in  the  second  half  of  the  year  and  economic  indicators  point  to  a  further 
deterioration of the economy, which contracted by an estimated 1.3% in the first and 0.6% in 
the second quarter of 2012. Growth in 2011 was rather narrow-based as key sectors stagnated 
and even declined. This was particularly visible in manufacturing, real estate and agriculture, 
which grew by less than one per cent, and in wholesale and retail trade, which fell strongly by 
a real 5.5% compared to the previous year. Average per capita income in purchasing power 
standards rose to 35% of the EU average in 2011 from 34% in 2010. Overall, the economic 
recovery proved fragile and the economy has entered another phase of contraction. 

Serbia’s external position has been affected by the slowdown in the EU economy and in the 
region. After remaining stable at around 7% of GDP for about two years, the current account 

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deficit  increased  to  around  9%  of  GDP  in  2011  and  continued  expanding  to  double-digit 
levels in the first half of 2012. A major drop in current transfers, mainly private remittances, 
was  the  main  factor  driving  the  deterioration  in  2011,  while  trade  and  net  factor  income 
deficits  remained  broadly  unchanged.  After  a  peak  in  2009-2010,  remittances  declined  to 
about  7%  of  GDP,  a  level  closer  to  their  medium–term  average.  In  2011,  both  exports  and 
imports  of  goods  and  services  increased  in  euro  terms  by  double-digit  rates.  Still,  the  trade 
deficit  remained  relatively  high  at  17.2%  of  GDP  and  the  surge  in  exports  of  the  last  two 
years  has  stalled.  Export  growth  decelerated  strongly  in  the  last  months  of  2011  and  even 
turned  negative  in  early  2012,  as  foreign  demand  declined  and  particularly  bad  weather 
reduced  general  economic  activity  in  the  country,  before  rebounding  slightly  in  the  second 
quarter. Imports decelerated too but  continued growing  by  close  to  6%  in  euro  terms  in  the 
first half of the year. As a result, the trade deficit expanded by 15% over that period. 

The inflow of net foreign direct investments was significant in 2011 but turned negative in the 
first half of 2012. Portfolio and other investment inflows increased last year, on the back of 
significant government borrowing, while banks and other sectors reduced their liabilities. In 
September  2011,  the  government  issued  a  USD  1  billion  10-year  Eurobond.  Short-term 
commercial bank debt was reduced by two thirds, pushing the share of total short-term debt to 
below 3% of the external debt stock. This helped reduce Serbia’s total external debt to below 
80%  of  GDP  in  2011.  In  the  first  half  of  2012,  banks  continued  to  reduce  their  foreign 
liabilities.  However,  the  external  debt  rose  to  80%  of  GDP  by  end-July  as  its  valuation 
increased following significant dinar depreciation in this period. In 2011, the central bank was 
able to increase significantly its reserves, but these gains were reversed in 2012 as FDI and 
portfolio investment inflows fell sharply and the bank intervened heavily to support the falling 
dinar.  Nevertheless,  by  the  end  of  August,  foreign  exchange  reserves  remained  at  a 
comfortable  level,  covering  about  seven  months’  worth  of  imports.  Overall,  the  external 
adjustment  remains  unfinished,  with  significant  and  growing  trade  and  current  account 
deficits. External financing has weakened recently but short-term risks are dampened by the 
still ample foreign exchange reserves and the favourable external debt structure, with a strong 
prevalence of long-term debt. 

In 2011 labour market indicators deteriorated for a third year in a row and worsened further in 
2012.  The  unemployment  rate  climbed  to  25.5%  in  April,  from  23%  in  2011  and  19.2%  in 
2010. Both activity and employment rates declined to their lowest levels in a decade. Most of 
the unemployment is structural as around three quarters of all unemployed have been without 
a  job  for  more  than  a  year.  The  economic  growth  of  last  year  has  not  been  conducive  to 
employment  creation  and,  according  to  the  labour  force  survey,  the  number  of  employed 
people  decreased  by  6%.  Employment  declined  even  in  sectors  which  had  positive  growth 
rates,  implying  gains  in  labour  productivity  and  probably  increasing  informalities.  Public 
administration,  education  and  health  care  were  a  notable  exception  to  this  pattern  and 
continued  to  expand.  Employment  continued  to  decline  in  the  first  half  of  2012,  with  the 
number of registered employed falling by 1.5% compared to the same period in the previous 
year. Gross and net wages increased on average by a nominal 11% in 2011 and stagnated in 
real terms. Following the unfreezing of public sector salaries in early 2011, real wages have 
been growing by 2-3% since mid-2011. Their increase accelerated by the end of 2011 and in 
the first half of 2012, mostly due to base effects and rapid deceleration in inflation. Following 
a  13%  increase  in  April,  the  minimum  wage  has  reached  almost  half  of  the  average  wage. 
Overall,  labour  market  conditions  deteriorated  sharply  and  unemployment  and  sustainable 
employment creation represent a major challenge. 

The  monetary  policy  framework  remained  unchanged  and  the  National  Bank  of  Serbia 
maintained  its  commitment  to  price  stability.  The  amendments  to  the  Law  on  the  National 

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Bank  adopted  in  August  2012  seriously  challenged  its  independence,  undermining  the 
confidence  in  the  monetary  policy.  The  central  bank  lowered  its  end-of-the-year  inflation 
target  from  4.5%  in  2011  to  4%  in  2012,  still  within  an  unchanged  tolerance  band  of  ±1.5 
percentage points. The target was missed by a wide margin throughout 2011, notwithstanding 
a  gradual  reduction  of  annual  inflation  to  7.0%  by  end-2011,  compared  to  10.2%  a  year 
before.  Inflation  was  mainly  driven  by  food  prices,  while  energy  and  transport  became  the 
main  sources  of  inflationary  pressure  in  early  2012.  As  food  prices  moderated  strongly  and 
even  declined  for  a  few  months  in  the  spring  of  2012,  inflation  continued  to  fall,  reaching 
2.7%  in  April,  thus  moving  below  the  NBS  target  band.  The  central  bank  reduced  its  key 
interest rate, in several steps in line with falling inflation, from a peak of 12.5% in April 2011 
to 9.5% in April 2012. Since then, on the back of renewed pressure from food prices, affected 
by  a  drought  in  the  summer,  inflation  accelerated  again,  reaching  7.9%  in  August.  The 
exchange  rate  of  the  dinar  vis-à-vis  the  euro  remained  broadly  stable  in  the  second  half  of 
2011.  However,  it  has  come  under  pressure  since  the  beginning  of  2012.  Political 
uncertainties linked to the general elections and the formation of a new government, weaker 
net foreign currency inflows and deteriorating budget performance have led to a depreciation 
of  the  dinar,  and  by  end  September  2012  it  had  lost  about  10%  against  the  euro  since  the 
beginning  of  the  year.  In  view  of  the  high  euroisation  of  the  economy  and  significant 
pass-through  effects  to  inflation,  the  central  bank  intervened  heavily  on  the  market.  It  sold 
more than € 1.3 billion and increased the dinar share in the foreign exchange required reserves 
in an attempt to stem the fall of the dinar. Moreover, since June the bank increased, in three 
steps, its main policy interest rate to 10.5%. Overall, inflation has been volatile and general 
uncertainty,  weaker  net  foreign  currency  inflows,  and  increasing  budget  deficits  have 
weakened the dinar. 

Fiscal performance has deteriorated. The overall budget deficit increased to 5.0% of GDP in 
2011,  up  from  4.7%  a  year  earlier,  and  compared  to  a  deficit  target  of  4.6%  of  GDP  in  the 
revised  budget  adopted  in  October  2011.  The  higher  than  projected  budget  deficit  resulted 
from lower economic growth and underperforming revenues, especially in the second half of 
the  year.  Almost  all  revenue  categories,  with  the  exception  of  excise  duties  (due  to  rises  in 
effective rates) and corporate income tax, have decreased in real terms. Total revenue fell by 
1.5  percentage  points  to  41.0%  of  GDP  in  2011,  while  total  expenditure  decreased  by  1.2 
percentage  points  but  remained  high  at  46.0%  of  GDP.  Most  of  the  expenditure  categories 
have  declined,  with  the  biggest  drops  recorded  in  subsidies,  social  assistance  and  capital 
expenditure.  However,  spending  on  wages  and  pensions  remained  significant,  pointing  to  a 
major  imbalance  in  the  structure  of  public  expenditure.  Following  the  rapid  increase  in 
government debt over the previous few years, interest payments to service the debt went up to 
1.4% of GDP. 

The original 2012 budget law targeted a reduction in the deficit to 4.25% of GDP. However, 
due to a strong acceleration in expenditure in the first half of the year, the deficit target had 
quickly become unattainable. In the first six months, total expenditure grew by a real 8.5%, 
driving the budget deficit to around 3.3% of GDP, more than 50% higher in comparison with 
the same period last year. There were strong real increases in capital expenditure, subsidies, 
purchases  of  goods  and  services  and  interest  payments.  In  September,  the  newly-elected 
government announced a rebalancing of the 2012 budget, targeting an annual deficit of 6.7% 
of  GDP.  Most  of  the  adjustment  is  expected  to  come  from  the  revenue  side,  to  be  coupled 
with  expected  savings  mainly  due  to  lower  indexations  of  wages  and  pensions.  However, 
expenditure  pressures  related  to  additional  spending  on  pensions,  agricultural  subsidies  and 
support for some of the state-owned banks put at risk the achievement of the revised, and not 
very ambitious, 2012 deficit target. 

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Government debt continued to rise rapidly in 2012, driven both by the widening deficit and 
the  depreciation  of  the  dinar.  It  approached  55%  of  GDP  by  the  end  of  July,  far  above  the 
legally  binding  threshold  of  45%  of  GDP,  requiring  the  government  to  present  a  special 
programme  to  bring  the  debt  back  below  45%  of  GDP  over  the  medium  term.  The 
deteriorating  fiscal  performance,  among  other  factors,  triggered  a  downgrade  of  Serbia’s 
long-term sovereign credit rating in August. Overall, the budget deficit in 2011 remained high 
for a third year in a row and continued to increase at a rapid pace in 2012. Government debt 
went above the legally binding threshold already at the end of 2011 and continued to increase 
in  2012.  The  adoption  and  implementation  of  urgent  and  decisive  consolidation  measures, 
backed  by  systemic  reforms  of  the  public  sector  in  order  to  restore  public  finance 
sustainability, remain a key challenge. 

After  several  years  of  loose  fiscal  policy,  fiscal  space  to  cushion  further  shocks  in  the 
economy  has  been  limited  and  fiscal  sustainability  is  increasingly  challenged.  Delays  in 
structural  reforms  are  also  weighing  on  the  budget  and  the  efficiency  of  policy  responses. 
High budget deficits have constrained the effectiveness of the macroeconomic policy mix and 
the main burden of adjustment fell on monetary policy. Moreover, monetary policy continues 
to  be  restricted  by  the  high  degree  of  euroisation  of  the  economy,  which  complicates  the 
attainment  of  official  objectives  of  inflation  targeting  and  preserving  financial  stability. 
Overall,  the  policy  mix  is  relatively  imbalanced.  Loose  fiscal  policy  and  a  number  of 
structural weaknesses overburden monetary policy. 

Interplay of market forces 

Price liberalisation has stalled and has even been partially reversed. The prices of about 22% 
of the goods and services in the consumer price index basket are administered and, for some 
of  the  goods,  are  kept  below  cost-recovery  levels.  The  state  has  introduced  indirect  price 
control for certain groups of goods (basic foodstuffs). A government decree, in place until the 
end  of  2012,  caps  retail  trade  margins  for  these  products  at  10%.  The  government  has 
continued to control prices of public utilities directly, but also indirectly by setting a limit on 
increases  in  the  prices  of  communal  and  public  city  transport  services  which  are  under  the 
control  of  the  local  authorities.  Overall,  the  state  control  over  prices  continues  to  be 
substantial and price liberalisation has stalled. 

State  influence  in  the  economy  remains  high,  due  also  to  the  predominant  share  of  state 
ownership  in  major  sectors  of  the  Serbian  economy  such  as  energy  (electricity  and  gas), 
railway  and  air  transport  and  telecommunications.  State-owned  companies,  which  are 
overstaffed in general, employ more than 10% of all employees in legal entities. They make a 
loss of around € 1 billion a year or about 40% of all losses in the economy. Privatisation of 
socially-owned companies has practically come to a halt. In 2011 only two enterprises were 
sold  through  a  public  tender  (with  sales  receipts  amounting  to  € 1.0  million  and  investment 
commitments of € 4.3 million) and two enterprises were sold through auctions. As a result of 
delayed privatisation, cancellation of contracts or re-nationalisation, the state still has control 
over a number of large companies in the manufacturing sector. Currently, the portfolio of the 
Privatisation  Agency  consists  of  408  companies.  There  are  171  companies  under  a 
restructuring procedure and most of the remaining firms are to be sold through bankruptcy or 
liquidation. 

In early 2012, the majority state-owned Telecom Srbija bought back 20% of its shares from a 
foreign  investor.  With  this  buy-back,  the  1997  privatisation  of  49%  of  Telecom  Srbija  has 
been completely reversed (29% had been bought back already in 2003). In April, the Serbian 
government  decided  to  distribute  6.94%  of  the  shares  in  Telecom  Srbija  to  the  company’s 
current  and  former  employees,  while  another  15%  was  offered  to  all  citizens.  In  another 

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privatisation reversal, in February 2012, the Serbian government bought back from US Steel 
the ailing steel mill in Smederevo for a symbolic USD 1. Later, production at the mill, one of 
Serbia’s  main  exporters  and  employers,  has  been  temporarily  suspended.  The  steel  mill  has 
been  running  up  large  losses  in  the  last  few  years  and,  until  the  government  is  able  to 
re-privatise  the  company,  it  will  have  to  secure  at  least  the  maintenance  costs,  adding  to 
government liabilities. Overall, in a difficult economic environment, the privatisation process 
has been very slow and even partially reversed. Sustaining competitive markets remains a key 
challenge. 

Market entry and exit 

Some  steps  have  been  taken  to  facilitate  market  entry.  The  ‘one-stop  shop’  has  further 
shortened the registration procedure, which now takes only two days on average (five days is 
still the legal maximum, with the principle of ‘silent consent’ in place). The registration fee 
stands  at  € 45  and  the  required  capital  for  setting  up  a  limited  liability  company  has  been 
reduced  from  € 500  to  less  than  € 1.  The  setting-up  of  new  businesses  is  still  seriously 
hampered  by  difficulties  in  obtaining  construction  permits  and  the  process  of  dealing  with 
construction permits and land remains costly and lengthy. Regulatory reform (the ‘regulatory 
guillotine’) is ongoing, although it has slowed lately. In an attempt to revive it, a new Strategy 
for regulatory reform 2011-2014 was adopted in late 2011. 

The Law on Bankruptcy has introduced automatic bankruptcy for companies if their accounts 
are blocked for a certain period and, since the beginning of 2012, this period has been reduced 
from two to one year. Under the Law, the National Bank of Serbia is required to provide the 
commercial  courts  with  information  about  these companies,  so  that  bankruptcy  proceedings 
can be launched. In the first half of 2012, it notified the courts about 11,231 companies with 
blocked  accounts  —  about  50%  more  than  in  the  same  period  the  previous  year.  Overall, 
some  steps  have  been  made  to  simplify  and  speed  up  market  entry,  but  red  tape  and 
difficulties  in  obtaining  construction  permits  remain  important  obstacles.  The  bankruptcy 
procedure for companies that have been over-indebted has speeded up. 

Legal system 

The  establishment  of  a  real  estate  registry  and  a  digital  registration  system  has  been 
completed. The new system will be able to provide quick and accurate information about real 
estate  ownership,  and  this  should  facilitate  contracts  and  investment  decisions.  Restitution 
legislation has been adopted but its enforcement remains to be tested. The Law on Planning 
and  Construction  and  its  amendments  have  led  to  differences  in  interpretation  and  thus  in 
implementation at municipal level, which increases uncertainties for investors. 

The  uneven  execution  of  laws,  slow  or  non-existent  enforcement,  and  proliferation  of 
different  administrative  fees  and  charges  increase  the  uncertainty  and  the  cost  of  doing 
business.  Moreover,  the  informal  economy  remains  strong  and  is  a  major  hindrance  to  fair 
competition and business development. Overall, legal predictability and enforcement of court 
decisions remain weak. Corruption and unclear property rights continue to hamper economic 
activities. 

Financial sector development 

The Serbian financial system is dominated by the banking sector, which had a 92% share of 
total assets in 2011. A total of 33 banks are operating in the country, unchanged from a year 
earlier. By the end of March 2012, foreign ownership had risen to about 74% of the banking 
sector and 21 banks operating in Serbia are owned by foreign entities. The five largest banks 
accounted for 47% of the total assets of the sector. There are nine state-owned banks, holding 
about  a  19%  market  share,  while  the  market  share  of  domestic  private  banks  is  small  at 

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around 7%. Since the end of 2011, banking sector assets increased by 8.5%, accounting for 
approximately 94% of GDP by the end of July. 

Capitalisation  of  the  banking  sector  declined  but  still  remains  high.  The  average  capital 
adequacy ratio stood at 17.3% in March 2012, well above the prescribed minimum of 12%. 
Deposits, of which over 75% are denominated in foreign currency, represent around 57% of 
the total liabilities of the banking sector. Similarly, loans account for some 60% of banking 
sector  assets.  About  70%  of  the  loans  are  denominated  in  or  linked  to  a  foreign  currency, 
predominantly the euro. More than half of all loans are granted to the corporate sector, while 
close  to  a  third  are  extended  to  households.  The  quality  of  bank  assets  worsened,  with  the 
gross  non-performing  loans  ratio  reaching  20.4%,  from  17.1%  a  year  before.  Banks 
profitability deteriorated in the course of 2011 and the return on equity decreased to just 0.2%. 
However, this negative development was mainly caused by the significant loss accumulated 
by  Agrobanka.  The  bank  has  been  put  in  receivership  in  the  end  of  2011,  after  the  central 
bank established that the level of the bank’s capital is not consistent with the degree of risk 
taken  by  the  bank.  The  financial  situation  of  Agrobanka  did  not  improve  and,  in  May,  the 
Central  Bank  revoked  its  licence  and  granted  an  operating  licence  to  the  newly-established 
Nova  Agrobanka,  which  took  over  all  the  liabilities  and  part  of  the  receivables  of  the  old 
bank. The new bank has been partially recapitalised by the Deposit insurance agency and the 
government. Following the failure of Agrobanka, in August the central bank took additional 
measures  to  increase  its  supervision  of  the  banking  system,  focusing  in  particular  on  banks 
with  significant  share  of  custody  accounts  and  state  ownership.  Overall,  the  banking  sector 
remained well-capitalised and liquid, but a weakening economy and depreciating dinar point 
to a growing risk of further deterioration in the quality of the loan portfolio. Bank supervision 
has been tightened, following the discovery of significant losses in one of the small banks. 

The main index BelexLine of the Belgrade stock exchange fell by around 20% in 2011. This 
negative trend continued in the first nine months of 2012 and the index lost a further 10.6%. 
At the end of 2011, there were 28 insurance companies operating in Serbia, up from 26 a year 
earlier.  Altogether  21  of  them  are  in  majority  foreign  ownership,  while  seven  rely  on 
predominantly  domestic  capital.  The  insurance  sector’s  share  in  the  total  financial  sector 
increased slightly, to 4.4% in 2011. The annual growth of premiums stood at a modest 1.4%, 
down  from  a  5.6%  rise  in  2010.  The  market  was  dominated  by  the  non-life  insurance 
segment, which accounted for 83% of the total. Overall, the role of the non-banking financial 
sector remained marginal. 

3.2. 

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

Existence of a functioning market economy 

Economic  recovery  has  stalled  and  macroeconomic  stability  has  weakened  as  domestic  and 
external  imbalances  increased.  Delayed  reforms  and  the  economic  slowdown  have  exposed 
and  aggravated  structural  weaknesses,  such  as  low  employment  and  volatility  in  prices  and 
exchange rates. State presence and influence in the economy remains significant and has even 
increased. The private sector continued facing major obstacles. Key laws are in place, but the 
rule  of  law  remains  weak.  Overall,  the  functioning  of  market  mechanisms  is  hampered  by 
distortions, excessive state involvement and legal uncertainty. 

Human and physical capital 

At present, there is still a large gap between demand for and supply of skilled workforce — 
with  some  professions  oversupplied  and  others  lacking.  Enrolment  in  education  in  both 
primary and secondary schools is high and is increasing over time. The number of people with 

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higher  education  is  low  (currently  6.5  %  of  the  population)  but  is  envisaged  to  increase 
sharply  in  the  course  of  this  decade  according  to  the  draft  education  strategy  for  the  period 
until  2020.  Important  elements  of  the  strategy  are  the  introduction  of  mandatory  secondary 
education  and  the  plans  to  reform  vocational  training,  bringing  it  closer  to  the  needs  of  the 
labour  market.  To  back  the  achievement  of  its  goals,  the  strategy  envisages  an  increase  in 
public spending on education to 6% of GDP in 2020, up from 4.2% in 2011. Overall, further 
steps  remain  to  be  taken  to  implement  a  strategy  of  reforming  the  education  and  training 
system in order to improve its performance and respond better to labour market needs. 

Serbia  continues  to  need  significant  investments  to  improve  and  upgrade  its  physical 
infrastructure.  Government  investments  have  been  constrained  by  a  difficult  budgetary 
situation  and  declined  to  3.5%  of  GDP.  Nevertheless,  works  on  major  transport  corridors 
(such  as  pan-European  Corridor  X)  progressed,  albeit  slowly,  but  investments  outside  the 
main  corridors  are  lagging  behind.  Energy  efficiency  continues  to  be  low  and  energy 
infrastructure, in particular electricity generation and distribution, needs further investments. 
Net  FDI  more  than  doubled  in  2011,  reaching  5.8%  of  GDP.  A  large  share  of  the  inflows 
related  to  a  single  non-greenfield  investment  in  the  retail  sector  and  part  of  the  remaining 
inflow  has  benefited  from  budget  subsidies.  Besides  trade,  the  other  two  sectors  which 
attracted most of the FDI were manufacturing and financial and insurance activities. Overall, 
the  physical  infrastructure  needs  large  investments.  Government  investments  have  been 
constrained  by  an  increasing  budget  deficit  and  FDI  has  been  channelled  mostly  to  non-
tradable sectors. 

Sectoral and enterprise structure 

The shares of agriculture and industry edged up slightly in 2011, reaching 10.4% and 27.7% 
of  total  value  added  respectively,  while  the  share  of  services  fell  from  63.0%  to  61.9%. 
Employment declined across the three sectors but the fall was more marked in agriculture — 
its share in total employment dropped from 21.5% in April 2011 to 20.4% in April 2012. The 
share  of  industry  remained  broadly  unchanged  and  employment  in  services  increased  to 
53.4% of the total. Weak tax and expenditure policies and poor law enforcement, including in 
the  fight  against  corruption,  continue  fuelling  a  sizeable  informal  sector.  Overall,  the 
economy  continued  to  be  dominated  by  services  and  the  share  of  agriculture  remained 
significant. The informal sector is a significant challenge. 

State influence on competitiveness 

State subsidies reported in 2011 were 6% higher than in 2010, representing 2.6% of GDP. Of 
the total State aid granted in 2011, only 16.3% was in the form of horizontal aid, 41.1% was 
for  regional  aid,  22.1%  was  sectoral  aid,  and  20.5%  went  for  agriculture.  There  was  barely 
any aid to training and to research and development. Most of the aid was given in subsidies 
(close  to  60%)  and  as  tax  incentives  (31%  of  total).  The  state-controlled  monopolistic 
structures remain in a number of sectors (e.g. energy, transport, infrastructure, postal services, 
telecommunications, broadcasting, agriculture and the environment) and the state continued to 
subsidise  heavily  the  transport  sector,  which  received  almost  a  fifth  of  all  aid.  Overall,  the 
state  continues  to  substantially  influence  competitiveness  by  providing  significant  and 
wide-ranging forms of State aid. 

Economic integration with the EU 

The  EU  remains  Serbia’s  main  trading  partner,  accounting  for  57.7%  of  the  country’s  total 
exports  and  55.6%  of  its  total  imports  in  2011.  While  the  share  of  exports  to  the  EU  has 
increased  somewhat,  the  share  of  imports  has  decreased  slightly.  The  CEFTA  countries 
accounted for 14% of Serbia’s trade in 2011, having declined from 14.8% in 2010. The share 

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of  net  FDI  inflows  from  the  EU  in  total  net  FDI  inflows  reached  88%  in  2011.  Real  gross 
wage  growth,  at  0.3%  in  2011,  was  considerably  smaller  than  average  labour  productivity 
growth, which translated into a fall in real unit labour costs. In real effective terms (deflated 
by inflation), the dinar appreciated by 4.4% in 2011. However, by end of July 2012, the real 
effective exchange rate of the dinar weakened by 8%. Overall, trade integration with the EU 
remained high. 

4. 

ABILITY TO TAKE ON THE OBLIGATIONS OF MEMBERSHIP 

This section examines Serbia’s ability to take on the obligations of membership — that is, the 
acquis as expressed in the Treaties, the secondary legislation and the policies of the Union. It 
also  analyses  Serbia’s  administrative  capacity  to  implement  the  acquis.  The  analysis  is 
structured in accordance with the list of 33 acquis chapters. In each sector, the Commission’s 
assessment  covers  progress  achieved  during  the  reporting  period  and  summarises  the 
country’s overall level of preparations. 

4.1. 

Chapter 1: Free movement of goods 

No progress can be reported regarding general principles. There was no further alignment of 
Serbia’s legislation with Articles 34 to 36 of the Treaty on the Functioning of the European 
Union and the relevant case law of the European Court of Justice. 

There was little progress in relation to horizontal measures. The legal framework along the 
the EU principles and the horizontal acquis has been adopted. However, the full alignment of 
the  horizontal  legislation  remains  to  be  achieved.  The  overall  framework  also  needs  to  be 
completed  with  the  adoption  of  the  remaining  implementing  legislation  on  metrology.  Two 
implementing  regulations  in  the  metrology  field  were  adopted  in  June  2012:  on  emergency 
measurements and on conditions for performing the verification measuring instruments. The 
administrative capacity needs improvement, especially regarding further training in the field 
of  metrology.  The  long-term  Quality  Infrastructure  Strategy  for  relevant  horizontal 
institutions still needs to be adopted.  

Good progress was achieved in the area of standardisation. By September 2012, the Institute 
for Standardisation of Serbia (ISS) had approximately adopted 80% of the European standards 
(ENs)  required  for  membership  of  the  European  Committee  for  Standardisation  (CEN)  and 
the  European  Committee  for  Electrotechnical  Standardisation  (CENELEC),  which  the 
Institute  will  apply  to  join  in  2013.  The  total  number  of  standards  applied  as  national  ones 
stood at 18.294; the number of CEN standards applied stood at 11.875, CENELEC standards 
at  5.231  and  ETSI  standards  at  260,  in  total  17.366.  The  number  of  withdrawn  conflicting 
Serbian standards was 6.395. The ISS has 250 technical committees. The number of full-time 
employees  has  increased  from  62  to  64.  The  ISS  was  certified  for  information  security 
management systems and for quality management systems to EN ISO standards. The overall 
administrative capacity of the Institute has improved.  

No particular progress can be reported in the area of conformity assessment. 

Good progress can be reported in the field of accreditation. The Accreditation Body of Serbia 
(ABS)  became  a  full  member  of  the  European  cooperation  for  Accreditation  (EA)  in  May 
2012,  of  the  International  Accreditation  Forum  (IAF)  in  December  2011  and  of  the 
International Laboratory Accreditation Cooperation (ILAC) in May 2012. It has received the 
signatory  status  of  the  EA  Multilateral  Agreement  in  the  fields  of  testing  laboratories, 
calibration  laboratories,  medical  laboratories,  inspection  bodies  and  certification  bodies  for 
certifying products. It has also broadened its scope of accreditation. The ABS currently has 35 
full-time  staff  members  but  needs  additional  qualified  human  resources.  At  the  end  of  the 
reporting period Serbia had 473 accredited conformity assessment bodies.  

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Little  progress  can  be  reported  in  the  area  of  metrology.  Serbia  still  needs  to  align  its 
legislation to the EU acquis on pre-packaging and units for measurements. Overall framework 
laws are in place, but implementing legislation remains to be adopted. Pursuant to the Law on 
Metrology,  the  Directorate  for  Measures  and  Precious  Metals  (DMDM)  of  the  Ministry  of 
Economic  Affairs  and  Regional  Development  offers  time  distribution  services  over  the 
internet as Serbia’s national time calibration reference. The Directorate has also increased the 
number  of  calibration  and  measurement  capabilities  services  which  are  published  in  the 
database of the Bureau for Weights and Measurements (BIPM). The Directorate has increased 
the number of its employees from 120 to 126.  

Progress can be reported in the area of market surveillance. The adoption of the framework 
market surveillance law brought this area closer to the 2008 horizontal acquis. A new contact 
point  has  been  designated  for  the  EU’s  rapid  alert  system  RAPEX.  Cooperation  amongst 
different  market  inspectorate  services  progressed  with  the  creation  of  a  joint  body  for  the 
surveillance  of  chemicals,  comprising  representatives  of 
the  Market,  Sanitary  and 
Environmental  Protection  Inspectorates,  and  the  Chemicals  Agency.  The  Product  Safety 
Council  was  established  and  became  fully  operational  as  of  autumn  2011,  comprising 
representatives  of  the  authorities,  chambers  of  commerce  and  consumer  protection  groups. 
However,  market  surveillance  remains  highly  fragmented  and  needs  consolidation. 
Furthermore the Law on General Product Safety needs to be further aligned with the relevant 
EU acquis.  

Little  progress  can  be  reported  in  the  field  of  ‘Old  Approach’  product  legislation.  Serbia 
still  needs  to  align  its  legislation  with  the  acquis  e.g.  on  pre-packaging,  units  for 
measurements  and  emissions  of  pollutants  from  non-road  engines.  The  alignment  of  crystal 
glass  and  textiles  and  footwear  legislation  has  been  postponed  until  2013  and  2014 
respectively.  

Concerning  ‘New  and  Global  Approach’  product  legislation,  progress  was  made.  Serbia 
has to further align its legislation, e.g. in the field of field of measurement instruments, non-
automatic  weighing  instruments,  toy  safety,  construction  products,  cableway  installations, 
recreational craft and noise emissions from outdoor equipment.  

No progress can be reported concerning procedural measures. Serbian legislation remains to 
be aligned with the  acquis in  the field  of civil  firearms and  of the return  of cultural objects 
unlawfully removed from the territory of an EU Member State 

Conclusion 

Some progress was made in the area of free movement of goods. EU standards continue to be 
adopted  and  the  Serbian  accreditation  body  became  a  full  member  of  the  EA.  Serbia  has 
progressed  in  the  adoption  of  product  legislation.  Market  surveillance  remains  highly 
fragmented.  Implementation  of  the  legislation,  administrative  capacity  and  coordination 
among institutions need to be enhanced. Overall, preparations in the area of free movement of 
goods are moderately advanced.  

4.2. 

Chapter 2: Freedom of movement for workers 

There  has  been  no  progress  in  the  area  of  access  to  the  labour  market.  The  Law  on 
Employment of Foreigners remains to be adopted by the parliament.  

Little  progress  can  be  reported  as  regards  future  participation  in  the  EURES  (European 
Employment Services) network. A national vacancy database has not been established yet. 

There  has  been  some  progress  as  regards  coordination  of  social  security  systems.  An 
agreement  with  Bulgaria  was  approved  in  the  parliament  in  December  2011.  Agreements 

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were  signed  with  Austria  in  January  2012  and  with  Slovakia  in  March  2012.  An  electronic 
system  of  exchange  of  information  has  been  established  among  ex-Yugoslav  republics, 
although  for  the  time  being  the  system  operates  with  Slovenia  only.  However,  public 
administration  resources  have  remained  limited  and  prevented  any  development  in 
strengthening the capacity of social security institutions. 

No developments were reported in the area of the European Health Insurance Card. 

Conclusion 

There has been some progress in the area of freedom of movement for workers, specifically 
related to the coordination of social security systems. Further improvements are nevertheless 
needed  and  preparations  for  future  participation  in  EURES  must  be  stepped  up.  Overall, 
preparations in this area are moderately advanced. 

4.3. 

Chapter 3: Right of establishment and freedom to provide services 

With regard to the right of establishment, some progress was made, in particular in relation 
to registration in the Register of business entities. (See Chapter 6 — Company law) 

There has been no progress regarding the freedom to provide cross-border services. Serbia 
needs to align its legislation with the Services Directive. The capacity of the administration in 
charge of the service sector was downsized. 

No progress can be reported in the field of postal services. The public postal operator remains 
to  be  corporatised  and  its  operational  processes  modernised.  The  administrative  capacity  of 
the Regulatory Agency (RAPUS) needs to be reinforced, in particular its ability to supervise 
implementation of the regulatory framework.  

There  was  no  progress  in  the  area  of  mutual  recognition  of  professional  qualifications. 
Serbia  still  needs  to  adopt  legislation  on  the  recognition  of  qualifications  for  regulated 
professions.  

Conclusion 

Little  progress  was  made  in  the  area  of  the  right  of  establishment  and  freedom  to  provide 
services. Efforts need to be made to align the legislation on the freedom to provide services 
and  also  to  boost  administrative  capacity  and  interinstitutional  cooperation.  Full  alignment 
with EU postal services legislation remains to be achieved. Overall, in the area of the right of 
establishment and freedom to provide services, Serbia is moderately advanced.  

4.4. 

Chapter 4: Free movement of capital 

Serbia  made  progress  in  the  area  of  capital  movement,  with  the  adoption  by  the  National 
Bank of Serbia (NBS) of implementing legislation based on the amendments to the May 2011 
Law  on  Foreign  Exchange  Operations.  These  decisions  further  liberalise  several  types  of 
international  transactions.  The  obligation  to  notify  the  Ministry  of  Economic  Affairs  when 
investing abroad was abolished in February 2012.  

However,  several  restrictions  remain,  including  on  short-term  capital  operations  and  the 
acquisition of real estate. Agricultural land cannot be  owned by foreign  individuals or legal 
entities.  Construction  land  —  and  properties  on  such  land  —  can  be  owned  by  foreign 
individuals  or  legal  entities,  but  only  provided  that  there  is  reciprocity  with  the  purchaser’s 
home country.  

There was no progress in the area of payment systems. Serbian legislation largely remains to 
be aligned with the acquis. 

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There  was  some  progress  in  the  fight  against  money  laundering.  The  Administration  for 
Prevention  of  Money  Laundering  (APML)  takes  part  in  the  Egmont  Group  and  Moneyval 
meetings  on  a  regular  basis.  It  signed  a  cooperation  agreement  in  December  2011  with  the 
Securities Commission on the exchange of information in the fight against money laundering 
and  terrorist  financing.  It  also  signed  memoranda  of  understanding  with  the  financial 
intelligence units of Hungary and Estonia in November and December 2011 respectively, and 
with  those  of  Australia,  Belarus,  Finland  and  Columbia  in  July  2012.  The  APML  adopted 
guidelines for assessing the risk of money laundering and terrorist financing. It introduced a 
new internal organisation to optimise its analytical and supervisory capacities in March 2012. 
However, its capacity has not been reinforced. Its staff numbers are stagnating, no adequate 
business premises have been provided and the plan to set up a training centre has not yet been 
implemented.  

Conclusion 

There was some progress in the area of capital movements, albeit focused on the liberalisation 
of capital transactions. Further efforts are needed to align the legislation for short-term capital 
operations, real estate and payment systems with the acquis. There has been some progress in 
the  fight  against  money  laundering.  In  this  area,  implementation  needs  to  be  stepped  up. 
Overall,  Serbia’s  alignment  in  the  area  of  the  free  movement  of  capital  is  moderately 
advanced. 

4.5. 

Chapter 5: Public procurement 

Some  progress  was  achieved  as  regards  the  general  principles.  The  Law  on  Public  Private 
Partnerships (PPPs) and Concessions was adopted in November 2011. It establishes the PPP 
as a legal instrument for the first time in the Serbian legal system. The law also establishes an 
intergovernmental  Commission  for  Public  Private  Partnerships  (CPPP)  as  a  collective 
advisory  body.  However,  the  government  strategy  for  upgrading  the  public  procurement 
system largely remains to be implemented. 

There  was  limited  progress  regarding  the  award  of  public  contracts.  In  fulfilling  its 
supervisory  role,  the  Public  Procurement  Office  (PPO)  detected  irregularities  in  negotiated 
procedures representing a total of more than € 28 million in 2011 and € 68 million in the first 
half  of  2012.  The  CPPP  started  operating  in  March  2012  and  is  supported  by  a  technical 
secretariat consisting of three employees of the Ministry of Finance and Economy. However, 
implementing  legislation  is  still  missing,  and  the  staff  of  the  Ministry  of  Finance  and 
Economy  needs  to  be  trained  on  the  award  of  PPP  contracts.  The  Department  for  Public 
Procurement  in  the  Ministry  of  Economy  and  Finance,  which  is  responsible  for  legislative 
initiatives, had its staff increased from 2 to 6 employees.  

However,  the  administrative  capacity  of  the  Budgetary  Inspectorate  of  the  Ministry  of 
Economy  and  Finance,  in  charge  of  monitoring  application  of  the  public  procurement  law, 
needs  to  be  strengthened  so  that  it  can  effectively  follow  up  on  the  many  irregularities 
detected. In general, tendering authorities do not take appropriate action often enough in cases 
of established misuse of public money. Overall, institutional cooperation in this field remains 
weak and needs to be strengthened.  

Good progress was made with regard to the remedies system. The Republic Commission for 
the Protection of Rights in Public Procurement Procedure (‘Republic Commission’), which is 
the  second-instance  body  in  the  procedure  for  reviewing  the  award  of  public  contracts,  has 
considerably  strengthened  its  administrative  and  enforcement  capacities.  Its  staff  increased 
from 9 to 38 employees and it has moved to new, weel-equipped offices. With the entry into 
force  of  the  Law  on  PPPs  and  Concessions,  the  Republic  Commission  has  been  given 

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additional  responsibility  to  decide  on  complaints  in  relation  to  the  award  of  PPPs  and 
the  Republic 
concessions.  The  monitoring  and  scrutinising  of 
Commission’s decisions and the notification of cases of non-compliance to the relevant state 
institutions  has  stated.  The  Republic  Commission  has  started  to  act  more  transparently  by 
making its decisions public and has set up a new website. However, in general, the work of 
the  Republic  Commission  is  still  at  an  early  stage.  It  needs  to  build  a  solid  enforcement 
record, by further ensuring that its decisions are implemented.  

implementation  of 

Conclusion 

There has been some progress in the field of public procurement, particularly in the area of 
public-private partnerships. Serbia needs to keep up steady efforts to implement its legislative 
framework  on  public  procurement,  and  in  particular  to  avoid  irregularities  in  the  use  of  the 
negotiated procedure. Effective coordination between the main stakeholders, including audit 
and  judicial  institutions,  needs  to  be  ensured.  The  enforcement  record  and  administrative 
capacities of the Budgetary Inspection of the Ministry of Finance in charge of supervision of 
public procurement needs to be substantially strengthened. Overall, alignment in the area of 
public procurement is moderately advanced. 

4.6. 

Chapter 6: Company law 

Good  progress  was  made  in  the  area  of  company  law.  A  package  of  new  laws  and 
amendments adopted in December 2011 regulates the establishment, organisation and closure 
of business entities along with their registration and the procedure followed by the Business 
Registers Agency. These new provisions substantially lower the amounts of capital necessary 
to establish limited liability companies. The new legislation is meant to simplify the business 
environment and to further align with EU legislation, thereby facilitating business start-ups.  

The  Business  Registers  Agency  continues  to  operate  the  Register  of  business  entities 
efficiently.  

There  was  no  progress  reported  in  the  areas  of  corporate  accounting  and  auditing.  Full 
alignment  with  the  Eighth  Company  Law  Directive  and  with  the  acquis  in  the  area  of 
independent public oversight, quality assurance and investigations remains to be achieved.  

Conclusion 

Good progress was made in the area of company law, with the entry into force of the new law 
in  February  2012  and  the  adoption  of  several  amendments  to  this  law.  For  corporate 
accounting  and  auditing,  efforts  should  be  stepped  up  in  the  areas  of  independent  public 
oversight, quality assurance and investigations. Overall, alignment in the area of company law 
is well advanced.  

4.7. 

Chapter 7: Intellectual property law 

Good  progress  was  made  in  the  area  of  copyright  and  neighbouring  rights.  The  Law  on 
Copyright and Related Rights was amended in December 2011 with a view to further aligning 
it  with  the  acquis.  Implementing  legislation  for  the  Law  on  Optical  Discs  was  adopted  in 
March 2012 with the aim of reducing the high piracy rate. The Commission for Copyright and 
Related Rights started taking decisions on tariffs in cases where no agreements were reached 
with collective rights management organisations.  

Good  progress  has  also  been  made  in  relation  to  the  legislative  framework  on  industrial 
property  rights.  The  Law  on  Protection  of  Trade  Secrets  was  adopted  in  September  2011. 
The Law on Protection of Plant Breeders’ Rights was amended in November 2011, allowing 
Serbia  to  start  the  procedure  for  joining  the  International  Union  for  the  Protection  of  New 
Varieties of Plants (UPOV). A new Law on Patents was adopted in December 2011. It further 

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aligns  with  the  acquis.  However,  the  2009  Law  on  the  Protection  of  Topographies  of 
Integrated Circuits remains to be further aligned with the acquis. 

Some  progress  was  registered  in  the  field  of  enforcement.  The  Intellectual  Property  Office 
(IPO) conducted a large number of training events for government enforcement agencies and 
organised promotional activities for stakeholders. No solution has yet been found to the issue 
of  the  long-term  financial  sustainability  of  the  IPO.  The  Customs  Administration  of  Serbia 
developed its IT capacity for use in IPR protection. The level of counterfeit goods that it has 
seized has gone up. The administrative fee for submitting a request for intellectual property 
rights enforcement has been revoked, leading to an increase in requests. In the course of 2011, 
the Tax Administration was involved in launching three registers (of producers, of distributors 
and of software) in collaboration with IPR holders, with a view to facilitating its work and its 
checks.  The  Market  Inspectorate  of  the  Ministry  of  Foreign  and  Domestic  Trade  and 
Telecommunications was given the use of twelve warehouses across Serbia for the storage of 
counterfeit and pirated goods. The number of goods that it confiscated in the first half of 2012 
significantly increased with respect to 2011. 

However, the number of checks carried out by the Tax Administration has declined. A formal 
coordination mechanism between the institutions in charge of IPR protection is still lacking. 
The  participation  of  economic  operators  and  consumers  in  preventing  counterfeiting  and 
piracy remains limited. 

Regarding  judicial  protection  of  intellectual  property  rights,  the  Law  on  Territorial 
Organisation of Courts in Serbia still needs to be amended to allow judges to specialise and 
IPR  cases  to  be  concentrated  in  a  limited  number  of  courts.  Further  specialisation  of 
prosecutors, judges and court panels handling IPR cases remains to be ensured.  

Conclusion 

Good  progress  was  made  in  the  alignment  of  Serbian  intellectual  property  law  with  the 
acquis.  The  national  IPR  strategy  2011-2015  is  being  implemented  and  capacity  has  been 
strengthened.  A  formal  coordination  and  cooperation mechanism between the  institutions in 
charge  of  IPR  protection  still  needs  to  be  established.  Specialisation  of  prosecutors,  judges 
and  court  panels  handling  IPR  cases  needs  to  be  ensured.  Overall,  alignment  in  the  area  of 
intellectual property law is advanced.  

4.8. 

Chapter 8: Competition 

Some  progress  can  be  reported  in  the  area  of  anti-trust  and  mergers.  The  implementing 
legislation was adopted for applying the competition rules to associations of undertakings and 
for  detecting  bid  rigging  in  public  procurement  procedures.  The  Commission  for  the 
Protection of Competition (CPC) started to apply the leniency programme for parties involved 
in  cartels.  The  CPC  adopted  five  decisions  on  restrictive  agreements  and  one  decision  on 
abuse of a dominant position. It took five decisions on fines. It approved 73 mergers under the 
summary procedure and carried out one investigation in which it prohibited a concentration in 
the sugar production sector. This negative merger decision, as well as a decision on abuse of 
dominance  adopted  in  2009,  were  overturned  on  appeal  on  procedural  grounds  and  turned 
back to the CPC in order to take a new decision. The CPC completed a sector analysis of the 
oil market in October 2011 and initiated one in the milk sector in August 2012. 

The CPC improved its competences in administrative and procedural law. It strengthened its 
capacity  by  hiring  three  economists.  International  cooperation  with  a  number  of  peer 
competition  authorities  has  been  established.  The  CPC  has  also  concluded  cooperation 
agreements with sector regulators, such as RATEL and the Energy Agency. 

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However, the Law on Competition still contains shortcomings that need to be addressed in the 
future, not least the short three-year statutory limitation period and the fact that the CPC must 
pay interest on fines overturned on appeal. The timeframe for in-depth merger investigations 
could  also  be  extended.  Also,  sector-specific  decrees  on  price  regulation  adopted  without 
prior  consultation  with  the  CPC  may  undermine  the  effectiveness  of  competition  policy  in 
Serbia. The financial plan of the CPC for 2012 was adopted by the government in November 
2011. The increase in staff; foreseen in this plan, has however not materialised, due to a lack 
of office space. With 31 employees, the CPC’s capacity remains insufficient. The capacity of 
the  judiciary  to  assess  complex  competition  cases  also  needs  to  be  strengthened.  Capacity 
building  and  advocacy  activities  among  the  judiciary  as  well  as  with  other  state  bodies  that 
have limited knowledge and awareness of the benefits of competition policy must be stepped 
up.  

There has been some progress in the area of State aid. A first comprehensive State aid report 
was  adopted  in  September  2011.  In  addition,  the  government  adopted  the  list  of  State  aid 
schemes that need to be aligned with the acquis. A decree on the rules for granting State aid 
was  amended  in  December  2011  to  broaden  its  scope  to  public  enterprises.  The  number  of 
notified  State  aid  measures  increased  substantially,  thanks  to  increased  awareness  among 
relevant State aid grantors at all levels of government. The Commission on State Aid Control 
(CSAC) took 148 decisions, including 78 conclusions in the ex post control procedure. Eight 
ex post control procedures were launched ex officio. 

However, further efforts are needed to make aid grantors notify their projects before State aid 
is  disbursed  and  to  ensure  the  timely  alignment  of  existing  State  aid  schemes.  The 
Commission’s enforcement record needs to be strengthened and its operational independence 
is still to be demonstrated. Cooperation and coordination needs to be stepped up between the 
CSAC and all bodies granting State aid.  

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

Conclusion 

Some progress was made in the area of competition. The competition authority strengthened 
its  capacity  and  the  State  aid  authority  developed  its  enforcement  record.  The  record  in  ex 
ante notifications of State aid measures should be improved. In both the anti-trust and mergers 
and State aid fields, additional advocacy measures are needed. Overall, alignment in the area 
of competition policy is moderately advanced.  

4.9. 

Chapter 9: Financial services 

Some  progress  can  be  reported  in  the  area  of  banks  and  financial  conglomerates.  The 
preparations for full implementation of Basel II standards have advanced. New decisions on 
harmonising  bank  capital  adequacy,  risk  management  rules  and  bank  data  disclosure  with 
Basel  II  were  implemented  by  the  National  Bank  of  Serbia  (NBS)  in  December  2011.  The 
decision  on  the  classification  of  bank  balance  sheet  assets  and  off-balance  sheet  items  was 
also implemented in December 2011; it aims to ease the burden of supervisory provisions and 
align with the Basel II regulatory framework. Strengthening of the supervisory capacity of the 
NBS is ongoing. The amendments to the Law on the NBS adopted in August 2012 will result 
in  the  establishment  of  a  specific  Authority  for  the  Supervision  of  Financial  Institutions 
(which  include  banks,  insurance  companies  and  voluntary  pension  funds),  within  the  NBS. 

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However, the Basel III requirements have not yet been implemented and alignment with the 
latest acquis on deposit guarantees remains to be achieved.  

There  was  little  progress  in  the  area  of  insurances  and  occupational  pensions.  Some 
amendments  to  the  Law  on  Compulsory  Traffic  Insurance,  which  were  adopted  in  October 
and December 2011, have contributed to further alignment. The amendment to the Insurance 
Law, which was adopted in December 2011, postponed the separation of composite insurance 
companies  until  December  2012.  The  administrative  capacity  of  the  NBS’  Insurance 
Supervision Department was reinforced by the hiring of two new employees. The NBS signed 
a  new  memorandum  of  cooperation  with  the  Insurance  Supervision  Agency  of  Slovenia  in 
October 2011. It carried out nine on-site inspections in eight insurance companies in 2011 and 
three in the first half of 2012. Nine measures requiring the elimination of irregularities were 
imposed.  Alignment  with  the  Solvency  II  Directive  and  the  rules  on  occupational  pension 
funds remains to be achieved. 

There  was  no  progress  in  further  aligning  with  the  acquis  in  the  area  of  financial  market 
infrastructure.  

Some  progress  can  be  reported  in  the  area  of  securities  markets  and  investment  services. 
The Securities Commission adopted 22 pieces of implementing legislation in order to regulate 
more precisely the capital market legal framework. Amendments to the Law on Takeovers of 
Joint-stock Companies entered into force in February 2012. They aim to further align the new 
Serbian Capital Market Law and Company Law with the acquis. The Securities Commission 
adopted  a  new  statute  in  September  2011  which  defines  its  organisation,  competences  and 
procedures.  Its  capacity  to  file  criminal  charges  was  extended.  It  signed  a  declaration  of 
cooperation with securities regulatory authorities from Bosnia and Herzegovina, Croatia, the 
former  Yugoslav  Republic  of  Macedonia,  Montenegro  and  Slovenia  in  November  2011. 
However,  there  has  been  no  progress  in  further  aligning  with  the  acquis  on  rating  agencies 
and on undertakings for collective investment in transferable securities (UCITS). 

Conclusion 

Some  progress  was  made  in  the  area  of  financial  services.  Steps  were  taken  towards 
implementation of the Basel II requirements. Serbian legislation must be further aligned with 
the acquis and effectively implemented in the medium term. Overall, alignment in the area of 
financial services is moderately advanced.  

4.10.  Chapter 10: Information society and media 

Some progress can be reported in the areas of electronic communications and information 
and  communications  technology  (ICT).  The  General  Authorisation  Regime  applies  to  all 
types  of  communication  services  since  January  2012.  The  National  Regulatory  Agency 
(RATEL)  completed  the  first  round  of  market  analysis  in  2011  and  adopted  the  specific 
regulatory obligations for operators with significant market power in November 2011. These 
cover  the  seven  markets  listed  in  the  Commission’s  2008  Recommendation  and  two 
additional  retail  markets.  RATEL  acquired  observer  status  at  the  Body  of  European 
Regulators  for  Electronic  Communications  in  April  2012.  At  the  end  of  2011,  the  overall 
broadband penetration per population stood at 13.4% (EU average being 27.7%). Preparations 
for introduction of the emergency number 112 have started. However, the implementation of 
laws  and  competitive  safeguards  generally  lags  behind.  Decision-making  is  often  not 
transparent, creating uncertainty for market players. Specialised expertise of judges handling 
telecom cases needs to be developed. The radio spectrum provisions remain to be aligned with 
the  EU  regulatory  framework.  The  parliament  adopted  in  December  2011  a  Law  on 
Cinematography directing 10% of RATEL’s revenues to ‘national cinematography’, thereby 

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constraining  its  financial  independence.  The  capacity  of  the  units  responsible  for  ICT  and 
digital administration within the Ministry of Culture, Media and Information Society remains 
insufficient.  

In  the  field  of  information  society  services,  little  progress  was  achieved.  A  National 
Broadband Council was set up in April 2012. As regards e-government, in spite of the recent 
improvements, the overall IT capacity in the country needs to be strengthened, especially at 
local level. However, the sequencing of transition to digital phases remains to be determined. 
There  is  a  major  digital  divide  in  electronic  access  and  a  broadband  strategy  needs  to  be 
finalised.  Further  alignment  with  the  conditional  access  and  e-commerce  EU  legislation  is 
needed. 

There was little progress as regards audiovisual policy, particularly in the implementation of 
the  Media  Strategy  which  aims  at  aligning  with  the  EU  acquis  in  this  area.  The  working 
groups  for  drafting  the  new  Law  on  Public  Information  and  Law  on  Public  Service 
Broadcasting  were  set  up.  The  Action  Plan  for  the  implementation  of  the  Media  Strategy, 
covering the issue of State aid to the media and its alignment with the acquis as of 1 January 
2012, remains to be implemented. The government adopted in March 2012 amendments to the 
Strategy  for  switchover  from  analogue  to  digital  broadcasting  of  radio  and  television 
programmes, shifting from a single switchover date, originally scheduled for 4 April 2012, to 
a phased approach so that the final analogue TV switch-off date is set on 17 June 2015. The 
first digital network was launched in April 2012 with a digital test signal accessible to 50% of 
the  territory  across  Serbia,  with  national  broadcasting  without  analogue  signal  switch-off. 
Switchover from analogue to digital signal remains to be fully ensured. Provisions allowing 
for the financing of certain media from the State budget remain to be brought into line with 
the EU acquis as it constitutes State aid.  

Conclusion 

Little  progress  can  be  noted  in  the  area  of  information  society  and  media.  Regarding 
electronic communications, the general authorisation regime for telecom providers came into 
force  in  full  and  some  key  competitive  safeguards  were  introduced.  The  switchover  from 
analogue  to  digital  broadcasting  has  begun.  However,  the  telecom  regulators’  financial 
independence needs to be improved and Serbia’s legislative framework remains to be aligned 
with  the  acquis.  Overall,  alignment  with  the  acquis  in  the  area  of  information  society  and 
media is moderately advanced.  

4.11.  Chapter 11: Agriculture and rural development 

Limited  progress  was  made  regarding  horizontal  issues.  The  2012  agricultural  budget  was 
increased by 19% compared to the previous year. Direct aid payments account for more than 
90% of the support measures. There was an increase in the allocation for rural development 
measures in the budget. The livestock sector continues to benefit from headage payments and 
milk  subsidies.  These  are  linked  to  compliance  by  producers  with  legislation  on  animal 
identification,  registration  and  movement  control and participation in national animal health 
measures.  Direct  payments  will  gradually  need  to  be  brought  into  line  with  EU  rules, 
decoupling direct aid payments from production. Support measures continue to be reviewed 
and revised on an annual and ad hoc basis. This does not provide security and predictability 
for producers and processors to engage in the required investments to modernise and prepare 
for  the  absorption  of  future  EU  assistance  and  competitive  pressures  in  an  increasingly 
liberalised economic environment. The Agricultural and Rural Development Strategy for the 
period 2011–2020 has not yet been adopted.  

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Progress can be reported with regard to establishing  a reliable database for policy decisions 
and  monitoring  policy  impact.  Preparations  for  the  agricultural  census  are  ongoing  and  the 
census is expected to be carried out in the autumn of 2012. Structures to implement the Farm 
Accountancy Data Network (FADN) are being established with key responsibilities assigned, 
core staff appointed and trial data collection under way. Preparations are under way for setting 
up an Integrated Administration and Control System (IACS).  

The  Market  Inspection  Division  of  the  Ministry  of  Agriculture,  Trade,  Forestry  and  Water 
Management carried out a total of 2,507 inspections in the market surveillance area in 2011, 
including compliance with technical regulations and product safety. However, administrative 
capacities in terms of training and material assets remain inadequate. 

Preparations in the area of horizontal issues are on track. 

Some  progress  can  be  reported  with  regard  to  alignment  with  the  common  market 
organisation.  The  adoption  of  legislation  in  line  with  the  acquis  is  continuing,  with  the 
adoption of implementing regulations on fruit juice in October 2011 and coffee and chicory in 
2012. Implementing legislation was also adopted in the wine sector, on a vineyard register in 
September 2011, on quality standards for wine with geographical indication and on labelling 
in November 2011, and on the testing of grape must, wine and other products in December 
2011. Work has begun on viticulture zoning. The vineyard register was opened in June 2012. 
Three  oenological  laboratories  have  been  authorised  to  carry  out  analyses.  However,  the 
capacity  of  the  administration  in  charge  of  the  wine  market  organisation  needs  to  be 
strengthened. A law on spirit drinks is in preparation with a view to aligning with the acquis 
in the spirit sector. Preparations in this area remain at an early stage.  

Regarding rural development, progress can be reported concerning the preparations for the 
management and control system under the Instrument for Pre-Accession Assistance in Rural 
Development  (IPARD).  The  Department  for  Rural  Development  in  the  Ministry  of 
Agriculture,  Trade,  Forestry  and  Water  Management  (MATFWM),  which  is  planned  to 
become  the  future  Managing  Authority,  is  finalising  its  organisational  structure  and 
procedures as provided for in the IPARD programme. The Directorate for Agrarian Payments, 
which  at  present  has  an  allocation  of  105  posts,  needs  to  strengthen  its  capacity  in  order  to 
implement  the  pre-accession  assistance.  The  capacity  of  the  National  Fund  and  the  Audit 
Authority still needs to be supported so that they can fulfil their role in the implementation of 
IPARD. Preparations in the area of rural development are on track. 

Little  progress  can  be  reported  in  the  area  of  quality  policy.  Efforts  have  focused  on 
promoting the opportunities which the Law on Geographical Indications offers to producers 
and processors. Preparations in this area have started. 

Progress  in  organic  farming  is  limited.  The  Ministry  established  a  task  force  to  prepare  a 
national action plan for the development of the organic sector in Serbia over the next 5 years. 
Preparations in the area of organic farming are at an early stage. 

Conclusion 

There  has  been  progress  in  the  area  of  agriculture  and  rural  development,  including  with 
regard  to  agricultural  statistics.  Structures  and  resources  for  the  implementation  of  rural 
development  under  IPARD  have  advanced  well,  but  additional  capacity  building  is  still 
essential. Overall, in the area of agriculture and rural development, alignment with the acquis 
remains at an early stage. 

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

Little  progress  has  been  made  as  regards  general  food  safety  principles.  The  Food  Safety 
Law  already  includes  most  of  the  principles  required  in  the  acquis.  Some  of  the  features 
introduced by the Food Safety Law started to be applied, such as the principle of risk analysis 
and the implementation of hazard analysis and critical control points (HACCP). Both have to 
be improved further and associated IT systems need to be upgraded. Both the skills base and 
the equipment of the authorities responsible for official controls and policymaking have been 
improved  but  further  strengthening  is  needed.  The  process  of  aligning  the  labelling  of 
foodstuffs  with  the  acquis  has  started.  However,  enforcement  of  the  law  needs  to  be 
improved. The National Reference Laboratories Directorate is severely understaffed and thus 
unable to perform the duties assigned to it by the Food Safety Law. Preparations in the area of 
general food safety are moderately advanced. 

Some progress can be reported in the alignment and implementation of the acquis in the field 
of  veterinary  policy.  Implementing  legislation  has  been  adopted  in  this  field  along  with 
instructions  for  applying  it.  Veterinary  IT  systems  are  being  upgraded.  Serbia  started 
participating  in  the  EU  Trade  Control  and  Expert  System  (TRACES)  in  January  2012. 
Instructions  were  adopted  for  risk  analysis  at  pig  farms  based  on  bio-safety  questionnaires. 
The first three campaigns for oral vaccination of foxes against rabies resulted in the number of 
registered cases of rabies in wild animals in 2011 falling by 75% in comparison to 2009. A 
system  for  the  identification  and  registration  of  bovines  is  in  place  and  the  registration  of 
sheep  and  goats  has  started.  However,  the  registration  of  sheep  and  goats  and  their 
movements  needs  to  be  completed.  Preparations  in  the  veterinary  field  are  moderately 
advanced. 

Some  progress  has  been  made  as  regards  the  placing  on  the  market  of  food,  feed  and 
animal by-products. Serbia has adopted and implements new national hygiene rules for food 
and feed establishments. However, the national upgrading programme for establishments still 
needs to be prepared. The national system for the management of animal by-products needs to 
be  upgraded  in  order  to  comply  with  EU  requirements.  In  this  area,  Serbia  has  started  to 
address its priorities. 

Some  progress  has  been  made  on  phytosanitary  policy.  A  strategy  was  adopted  for  the 
introduction  of  a  plant  passport  system,  along  with  a  manual  for  its  implementation. 
Implementing  legislation  on  plant  health  was  adopted  in  December  2011  and  March  2012. 
However, Serbia’s phytosanitary inspection procedures are outdated and need to be improved. 
The procedure for registering new plant protection products is not yet aligned with the acquis. 
Although  parts  of  the  legislation  on  the  placing  on  the  market  of  plant  protection  products 
have  been  transposed,  alignment  with  the  acquis  still  needs  to  be  completed.  A  pesticide 
residues  monitoring  programme  meeting  EU  requirements  has  yet  to  be  put  in  place.  The 
capacity  of  the  national  reference  laboratory  and  of  the  regional  laboratories  for  control  of 
seed  and  seed  material  and  for  pesticide  residue  analysis  requires  further  strengthening  to 
meet EU requirements. Preparations in the area of phytosanitary policy are on track. 

There  was  no  progress  in  the  area  of  genetically  modified  organisms,  where  Serbia  still 
needs to bring its legislation into line with the acquis. This is also one of the conditions for 
Serbia to become a WTO member. Preparations in this area are at an early stage. 

Conclusion 

Some  progress  was  made  in  the  area  of  food  safety,  veterinary  and  phytosanitary  policy. 
Further strengthening of the administrative capacity of the institutions involved in monitoring 
food  chain  safety,  in  particular  the  veterinary,  phytosanitary  and  national  reference 

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laboratories,  is  needed.  Efforts  are  needed  as  regards  upgrading  of  food  and  feed 
establishments,  the  management  of  animal  by-products  and  genetically  modified  organisms. 
Overall,  preparations  in  the  area  of  food  safety,  veterinary  and  phytosanitary  policy  are 
moderately advanced.  

4.13.  Chapter 13: Fisheries 

EU  requirements  on  resource  and  fleet  management  and  inspection  and  control  do  not 
apply  to  inland  fishing  and  are  therefore  not  applicable  to  Serbia,  except  for  control  of 
marketing  and  traceability  of  fishery  products.  There  has  been  no  progress  on  the 
establishment  of  a  national  catch  certification  scheme  for  imports  and  exports  of  fishery 
products. 

No  progress  can  be  reported  on  structural  action  for  small-scale  commercial  fisheries  and 
inland fisheries. Serbia does not have an operational fisheries programme that could be a basis 
for the introduction of structural measures. 

Some progress can be reported in market policy. Another export facility was added to the list 
for  exports  of  fishery  products  to  the  EU  in  2012.  No  developments  can  be  reported  on 
establishing  producers’  organisations  and  collecting  market  data.  The  capacity  of  the 
administration  dealing  with  management  and  control  for  imports  and  exports  of  fishery 
products  remains  to  be  enhanced  and  brought  into  line  with  the  obligations  of  the  common 
fisheries policy. 

Some  progress  can  be  reported  regarding  State  aid.  Aquaculture  producers  received  aid  to 
buy  juvenile  fish,  and  fisheries  organisations  are  eligible  to  apply  for  subsidies  for  the 
protection  and  sustainable  use  of  fish  in  order  to  improve  the  catch  per  unit  effort,  the 
preservation of the diversity of ichthyofauna and the ecological integrity of aquatic systems.  

Serbia  signed  international  agreements  in  the  veterinary  and  food  safety  area,  which  also 
covers  fishery  products,  with  the  former  Yugoslav  Republic  of  Macedonia,  Bosnia  and 
Herzegovina,  Uruguay,  Algeria  and  Montenegro.  Furthermore,  an  agreement  on  the 
protection and sustainable use of the Danube salmon population in the River Drina was signed 
in March 2012 with Bosnia and Herzegovina.  

Conclusion 

Some  progress  can  be  reported  under  this  chapter  with  the  signing  of  some  international 
agreements. However, the collection of market data needs to be improved and a national catch 
certification  scheme  for  imports  and  exports  of  fishery  products  needs  to  be  established. 
Overall, preparations in the area of fisheries are moderately advanced. 

4.14.  Chapter 14: Transport policy 

Some progress can be reported in the area of road transport. The Law ratifying amendments 
I-VI  to  the  European  Agreement  on  the  work  of  crews  of  vehicles  engaged  in  international 
road transport (AETR) and the Law ratifying the Agreement on the international carriage of 
perishable foodstuffs and on the special equipment to be used for such carriage (ATP) were 
adopted in December 2011. The digital tachograph system has been introduced and in January 
2012  the  Road  Traffic  Safety  Agency  started  issuing  memory  cards  for  digital  tachographs. 
The Agency has continued to increase its capacity and 47 of the 65 planned posts are filled. A 
Road  Safety  Coordination  Body  to  coordinate  work  on  reducing  the  number  of  traffic 
accidents was established in September 2011. Implementing legislation remains to be adopted 
to comply with the EU rules on access to the international road market and to the occupation 
of  road  transport  operator,  the  driving  and  rest  periods  of  drivers  engaged  in  domestic 
transport and the transport safety conditions for tunnels. The transparency of the fees charged 

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for  special  transport  operations  exceeding  the  permitted  vehicle  dimensions,  total  mass  and 
axle load needs to be ensured. Further alignment with recent road safety and dangerous goods 
acquis is still necessary. 

There  has  been  little  progress  in  rail  transport.  The  further  transformation  of  Serbian 
railways JSC into a holding with four different daughter companies is on-going. The new Law 
on  railways  and  the  railway  safety  and  interoperability  Law  have  not  been  adopted.  The 
independence  of  the  infrastructure  manager  from  the  railway  operator,  fair  access  to  the 
market  and  transparent  infrastructure  charging  system  remain  to  be  achieved.  The  market 
remains virtually closed due to the high cost of the license and its maximum duration of one 
year.  The  network  statement  has  not  been  published.  The  railway  regulatory  body  and 
independent  accident  investigation  body  have  not  been  set  up.  The  Border  Crossing 
Agreement  between  Montenegro  and  Serbia  needs  to  be  further  aligned  with  the  EU 
legislation.  

Some  progress  was  made  in  the  area  of  inland  waterway  transport.  Implementing 
legislation on the programme, method and cost of a special examination for navigation safety 
inspectors,  and  on  the  format  of  the  official  navigation  safety  inspector’s  identity  card  was 
adopted  in  February  2012.  A  Rulebook  on  the  qualification  and  conditions  for  obtaining 
certificate for competence of onboard crew member of merchant inland waterway vessels was 
adopted in July 2012. The implementation of River Information Services is ongoing also for 
the River Sava. 

Little progress can be reported in the area of combined transport. The project documentation 
for the construction of an intermodal terminal in Belgrade was completed in March 2012.  

Good  progress  can  be  reported  in  the  area  of  air  transport.  In  all  22  regulations 
implementing  the  Law  on  Air  Transport  have  been  published.  Some  of  these  provisions 
amend  the  responsibilities  of  the  independent  body  for  investigating  accidents  and  serious 
incidents and the inspection oversight duties of the Civil Aviation Directorate, with the aim to 
align national law with the relevant EU rules. Implementation of the requirements under the 
first  transitional  phase  of  the  European  Common  Aviation  Area  Agreement  (ECAA) 
continued.  The  Law  on  Obligations  and  the  Basics  of  Property  Relations  in  Air  Transport, 
aiming  to  align  national  provisions  with  with  the  EU  legislation  on  passengers’  rights,  was 
adopted  in  November  2011.  A  specific  national  body  to  enforce  the  law  has  yet  to  be 
established. Provisions aligning with the EU and international rules (Montreal Convention) on 
air carrier liability in the event of accidents have been introduced. Further national provisions 
intending  the  alignment  with  the  Single  European  Sky  legislation  has  been  achieved,  in 
particular  concerning  the  provision  of  air  navigation  services  (ANS),  the  methodology  for 
determining  and  calculating  the  ANS  charges,  the  regulation  of  air  space  management,  and 
the  interoperability  of  the  ATM  systems.  Implementation  of  the  rules  on  slot  allocation, 
ground handling and airport charges needs to be concluded.  

Little  progress  can  be  reported  in  the  area  of  maritime  transport.  The  Law  on  Maritime 
Navigation has been adopted and entered into force in November 2011.  

No progress was made in the area of satellite navigation. Serbia has announced its intention 
to take part in the Galileo satellite navigation programme. 

Conclusion 

Some  progress  can  be  reported  in  the  area  of  transport  policy,  particularly  in  road,  inland 
waterways  and  air  transport.  Further  strengthening  of  capacity  is  needed,  in  particular  for 
enforcement  and  inspection.  The  new  Law  on  Railways  and  the  Railway  Safety  and 
Interoperability  law  need  to  be  adopted.  Attention  needs  to  be  paid  to  fair  market  access; 

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further efforts need to be made in separation of infrastructure manager and railway operator, 
as  well  as  a  properly  defined  regulator.  Overall,  Serbia  is  moderately  advanced  in  its 
alignment with the acquis in the area of transport policy.  

4.15.  Chapter 15: Energy 

Little progress was made as regards security of supply. As regards oil stocks, the draft Law 
on  Commodity  Reserves,  regulating  the  compulsory  reserves  of  oil  and  oil  derivatives, 
remains  to  be  adopted.  A  feasibility  study  for  the  Serbian  part  of  the  South  Stream  gas 
pipeline was completed in April 2012. The company South-Stream Srbija was established in 
December  2011  to  carry  out  all  activities  involved  in  implementation  of  the  project.  The 
feasibility study for construction of the Nis-Dimitrovgrad gas interconnector linking Serbia to 
Bulgaria has been finalised, but the financing of the project needs to be secured.  

As regards the internal energy market, little progress was made. The 2011 Energy Law is 
largely  in  line  with  the  requirements  of  the  Energy  Community  but  the  adoption  of 
implementing  legislation  is  progressing  slowly.  The  unbundling  of  distribution  and  supply 
functions  in  the  publicly  owned  generation,  distribution  and  supply  electricity  company 
Elektroprivreda  Srbija  (EPS)  has  not  yet  been  achieved.  The  electricity  market  has  been 
opened  for  all  non-household  consumers.  The  energy  regulator  approved  the  new 
methodologies for establishing the costs for connection to electricity and gas transmission and 
distribution  systems  and  the  cross-border  capacity  allocation  rules  for  electricity  for  2012. 
However, no eligible customers have switched supplier. All eligible customers connected to 
the distribution system are entitled to be supplied at regulated tariffs until 2013. EPS, holds a 
de facto monopoly, due to the persistence of regulated prices which are set at levels below the 
market price. Under the new Energy Law, the tasks and powers of the Energy Agency of the 
Republic  of  Serbia  (AERS)  are  largely  in  line  with  the  second  package  of  the  EU  energy 
acquis, but the implementation of the new law will require an increase in the AERS’ staff and 
further  capacity  building.  Adoption  of  the  Electricity  Market  Code  is  still  pending.  Serbia 
needs  to  start  preparing  for  alignment  with  the  EU’s  third  internal  energy  market  package. 
The state-owned Srbijagas has not been unbundled. It remains a fully integrated company and 
is the only wholesale supplier on the market.  

Further  to  the  complaint  against  Serbia  issued  under  the  Energy  Community  dispute 
settlement  mechanism  on  the  absence  of  compensation  for  electricity  transit  to  the  Kosovo 
electricity  transmission  system  and  market  operator  (KOSTT)  and  the  allocation  of  cross-
border capacities, the Energy Community Secretariat issued a Reasoned Opinion in October 
2011.  According  to  that  opinion,  Serbia  has  failed  to  fulfil  its  obligations  under  the  Energy 
Community Treaty. Since then Serbia has not addressed the issue referred to in this opinion.  

There has been little progress in renewable energy and energy efficiency. The Energy Law 
is partly in line with the Renewable Energy Sources Directive. Revised feed-in tariffs, which 
were due by the end of 2011, have not yet been adopted. The administrative procedures for 
issuing  construction permits, licensing and network connections remain the biggest obstacle 
to  the  uptake  of  renewables.  Further  efforts  need  to  be  taken  to  strengthen  administrative 
capacity  and  create  a  regulatory  environment  that  fosters  the  increased  use  of  renewable 
energy  sources  in  all  sectors.  Serbia  has  not  yet  adopted  the  planned  framework  law  on 
rational use of energy. A first annual programme for financing energy efficiency projects in 
the public sector was adopted in March 2012, with a budget of € 13 million. 

There has been some progress in nuclear safety and radiation protection. The Agency for 
Protection  from  Ionising  Radiation  Protection  and  Nuclear  Safety  (SRPNA)  has  issued 
legislation  to  implement  the  Law  on  Ionising  Radiation  Protection  and  Nuclear  Safety.  The 
transfer  of  inspection  functions  from  the  line  ministries  to  the  SRPNA  has  not  yet  been 

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achieved.  Effective  financial  independence  and  sufficient  levels  of  staff  and  funding  are 
needed  to  ensure  that  the  Agency  functions  properly,  particularly  for  licensing  nuclear 
facilities.  Serbia  still  needs  to  adopt  a  national  programme  for  spent  fuel  and  develop  a 
national  strategy  for  radioactive  waste  management  and  the  decommissioning  of  its  RA 
research reactor at Vinča. Further efforts are required to improve the radiological situation at 
the Vinča site, to abandon the Kalna mine and to improve radioactive waste management at 
national level. 

Conclusion 

Little progress can be reported in the area of energy. Further efforts are needed to achieve real 
market opening, unbundling and cost-reflective tariffs. Framework legislation on rational use 
of energy as well as legislation on commodity reserves remains to be adopted. The role and 
independence of the AERS and the nuclear regulator need to be strengthened. As a matter of 
urgency,  Serbia  needs  to  address  the  issue  referred  in  the  Reasoned  Opinion  of  the  Energy 
Community. Overall, preparations in the area are moderately advanced. 

4.16.  Chapter 16: Taxation 

There  was  little  progress  on  alignment  in  the  area  of  indirect  taxation.  The  law  on  excise 
duties  was  amended  in  December  2011  to  further  approximate  with  the  acquis  on  tobacco 
taxation.  The  excise  duties  charged  on  the  retail  price  were  increased.  The  concept  of 
weighted retail price — similar to the one in the EU — has also been introduced, replacing 
the most popular price as the basis for calculating the minimum excise duty. Legislation on 
other  excise  goods  and  on  issues  such  as  movement  and  control,  excise  warehouses  and 
storage or the concept of taxpayer remains to be aligned with the acquis. 

Little progress was achieved in direct taxation. Amendments to the Property Tax Law were 
adopted in October 2011, postponing a tax increase until after 2012. Changes were made to 
the  law  on  tax  on  profits  in  December  2011  to  provide  certain  tax  reliefs  for  companies 
undergoing  financial  restructuring.  Tax  reliefs  were  introduced  for  profits  generated  by 
production  in  free  zones.  The  amendments  to  the  Law  on  Tax  Procedure  and  Tax 
Administration were adopted in December 2011 aim to strengthen fiscal discipline and clarify 
some  tax  procedures.  They  also  allow  companies  undergoing  financial  restructuring  to  pay 
their taxes in instalments over a longer period. 

Some  progress  was  made  as  regards  administrative  cooperation  and  mutual  assistance. 
The B-6 (Balkan countries) agreement on cooperation among tax administrations in the region 
was  extended  to  Croatia.  Agreements  on  avoidance  of  double  taxation  were  signed  with 
Canada, Georgia and Tunisia in April 2012, while the agreements with Montenegro and Iran 
came into force as of 1 January 2012.  

Progress  was  made  in  the  area  of  operational  capacity  and  computerisation.  The  Serbian 
Tax  Administration  (STA)  has  started  to  implement  its  corporate  strategy  for  2011-2015.  It 
adopted  in  December  2011  the  2012  compliance  plan  focussing  on  taxpayers  with  a  poor 
compliance  record.  The  Large  Taxpayers  Office  has  hired  an  additional  22  staff  and  has 
increased the number of taxpayers under its jurisdiction by more than 20%. It has introduced a 
new  operational  plan  aimed  at  boosting  total  tax  revenues.  The  STA  started  routinely 
publishing  data  about  its  biggest  debtors.  The  Contact  Centre  —  which  started  operating  in 
2011 — has become a key customer service unit. As of April 2012, all VAT payers have the 
option  of  declaring  their  tax  electronically.  However,  the  IT  system  needs  to  be  further 
improved. A better coordination in the STA is necessary.  

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Conclusion 

Some  progress  can  be  noted  in  the  area  of  taxation.  The  corporate  STA  strategy  is  being 
implemented,  but  modernisation  needs  to  continue.  Tackling  the  grey  economy  remains  a 
challenge. Substantial efforts are required to improve the IT system and communication with 
taxpayers and to further align the legislation on excise duties. Overall, preparations in the area 
of taxation are moderately advanced.  

4.17.  Chapter 17: Economic and monetary policy 

No progress can be reported in the area of monetary policy. The National Bank of Serbia’s 
(NBS)  independence  has  been  seriously  challenged  by  the  adoption  by  the  Parliament  of 
amendments  to  the  Law  on  the  NBS  in  August  2012.  These  amendments,  which  inter  alia 
force the immediate replacement of the Governor - within 90 days after their entry into force 
and without proper justification - led to the resignation of the incumbent Governor, one vice 
Governor and several NBS Council Members. Another amendment violates the EU Treaty by 
removing the right of judicial review in case of dismissal of the Governor. 

As regards economic policy, Serbia continues to participate in pre-accession economic policy 
surveillance.  It  submitted  its  2012  economic  and  fiscal  programme  (EFP)  in  January.  This 
programme covers the period 2012-2014, providing an overview of expected macroeconomic 
developments. As regards the macroeconomic and fiscal framework, the programme gives a 
clear overview of past economic developments, in line with the requirements. As regards the 
structural reforms framework, the programme fails to provide fully convincing action plans as 
regards  the  medium-term  policy  priorities.  As  a  candidate  country,  Serbia  has  also  been 
included in the bi-annual Economic Forecast prepared by the European Commission. 

As  regards  fiscal  responsibility,  the  level  of  public  debt  has  exceeded  the  maximum  set  by 
national legislation at 45% of GDP and is now over 55%. In view of the huge financing needs, 
the  problem  of  a  possible  further  rise  in  government  debt  remains  acute.  The  capacity  for 
economic policy formulation and coordination needs to be further improved. 

Conclusion 

No progress was made in the area of economic and monetary policy. The amendments to the 
Law on the NBS seriously challenge the independence of the central bank and thus, constitute 
a significant step back in the alignment to the EU acquis. The capacity for economic policy 
formulation  and  coordination  needs  to  be  improved.  Overall,  in  the  area  of  economic  and 
monetary policy, Serbia is moderately advanced in addressing the acquis.  

4.18.  Chapter 18: Statistics 

Some  progress  was  made  in  the  area  of  statistical  infrastructure.  A  plan  for  statistical 
surveys  in  2012  was  adopted  in  December  2011.  The  Statistical  Office  of  the  Republic  of 
Serbia (SORS) also adopted the procedure for granting access to non-identifiable individual 
data  for  scientific/research  purposes.  The  action  plan  for  harmonisation  with  the  European 
Statistics  Code  of  Practice  based  on  the  results  of  the  Light  Peer  Review  is  under  timely 
implementation. 

Given the tasks required to comply with the acquis, the number of qualified staff at the SORS 
will need to be increased over the next few years.  

There  was  some  progress  in  the  area  of  classifications  and  registers.  The  revised 
classification  of  activities,  NACE  rev.2,  has  been  further  applied  to  time  series  of  national 
accounts. The issue of the regional statistical classification (future NUTS) remains open. This 
goes beyond the scope of technical expertise and requires a political decision.  

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There was good progress in the area of sectoral statistics. The population census was carried 
out in 2011; field work has been completed and data processing is ongoing. Preparations for 
the agriculture census are under way. Implementation of the acquis on agricultural statistics 
needs further attention. As regards social statistics, the survey of income and living conditions 
(SILC)  is  about  to  be  introduced.  The  SORS  has  to  step  up  preparations  for  the 
comprehensive delivery of national accounts data according to ESA 95 and its transmission 
programme.  

Conclusion 

Good  progress  can  be  reported  in  the  area  of  statistics.  The  population  and  housing  census 
was  carried  out  according  to  plan.  The  capacity  of  the  Statistical  Office  of  the  Republic  of 
Serbia  will  have  to  be  reinforced  over  the  next  few  years  in  order  to  allow  comprehensive 
implementation of the statistical acquis. Overall, Serbia is moderately advanced in the area of 
statistics.  

4.19.  Chapter 19: Social policy and employment 

There has been no progress in the field of labour law. Further efforts are needed in this area.  

There has been some progress in the area of health and safety at work. Serbia has adopted 
rules further aligning its legislation with the acquis on exposure to vibrations, to noises and to 
carcinogens or mutagens at work. The Labour Inspectorate carried out a considerable number 
of  inspections,  and  training  and  awareness-raising  activities  targeting  workers  and  social 
partners continued. Preparations in this area are well on track.  

the  Economic  and  Social  Council  at  national 

There has been little progress in the area of social dialogue, which continues on a tripartite 
basis  within 
issue  of 
representativeness of member organisations continues to hamper the work of the Council. The 
Council  is  still  not  being  consulted  on  a  regular  basis  on  labour-related  draft  laws,  which 
remains  a  major  problem  for  its  work.  An  agreement  on  the  minimum  wage  was  signed  in 
April 2012 by all members of the Economic and Social Council. At local level, 18 Economic 
and Social Councils are in operation, of which two were recently established. However, they 
lack financial resources, have no work programmes and do not meet regularly. The weakness 
of employers’ organisations at local level is a further obstacle.  

level.  The 

There  has  been  some  progress  as  regards  employment  policy.  The  annual  performance 
agreement between the Ministry of Economic Affairs and Regional Development (MoERD) 
and  the  National  Employment  Service  (NES)  was  concluded  in  March  2012.  The  National 
Employment  Action  Plan  for  2012  has  been  adopted  in  accordance  with  the  priorities 
specified  in  the  National  Employment  Strategy  2011-2020.  Two  new  measures  were 
introduced  in  order  to  address  the  problems  of  unemployed  people  without  working 
experience  or  qualifications.  A  specific  decision  was  adopted  on  co-financing  of  local 
employment measures for 134 local employment plans and 15 licences were issued to private 
employment agencies. Also in 2012, a special public call for inclusion of Roma and people 
with disabilities in active employment measures was published. The administrative capacities 
of the MoERD and the NES have been further developed. Employment policy was transferred 
from the Ministry of Economy back to the Ministry of Labour and Social Policy.  

However,  the  annual  budget  for  active  labour  market  measures  was  reduced  by  14% 
compared to 2011 and the total allocations for active employment policy continue to represent 
only  0.1%  of  GDP.  As  a  result,  the  ‘First  Chance’  programme,  in  favour  of  youth 
employment, will not be expanded. The coverage of active labour market measures remained 
limited  as  only  20%  of  the  unemployed  participated  in  labour  market  measures  and  only  a 
third of them became employed in 2011. Employment policies failed to impact meaningfully 

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on the labour market situation which further deteriorated. Undeclared work remains high, at 
an  estimated  17%  of  the  work  force,  youth  unemployment  increased  and  activity  and 
employment  rates  decreased,  notably  for  women.  Additional  efforts  are  needed  to  ensure 
better  targeted  and  efficient  labour  market  measures  and  to  develop  a  strategic  approach  to 
employment, especially in a context of limited financial resources, increasing unemployment 
and deteriorating economic growth. Preparations in this area are on track. 

There  has  been  some  progress  as  regards  preparations  for  the  European  Social  Fund.  The 
MoERD has reorganised the employment department and provided intensive training for all 
staff. Preparations in this area are on track. 

There has been some progress in the field of social inclusion. The adoption of implementing 
legislation  on  welfare  allowances  and  the  introduction  of  earmarked  transfers  to  local 
municipal governments for community services have provided a basis for the implementation 
of  the  Law  on  Social  Welfare.  Social  services  are  being  improved.  The  law  has  introduced 
new concepts in terms of accessibility to social services, including the right for beneficiaries 
to complain. Active measures to increase social inclusion of the Roma have continued. The 
enrolment rate of Roma children in the education system has increased. 170 Roma teaching 
assistants have been employed together with 75 health mediators. However, the availability of 
community-based social services across the country remains limited. The Roma community, 
one the most vulnerable groups, is exposed to multiple forms of exclusion and is particularly 
in  need  of  cross-sectoral  coordinated  support.  The  strategy  to  improve  the  situation  of 
disabled people for 2007-2015 is being applied. The first results of implementation of the Law 
on  Professional  Rehabilitation  and  Employment  of  People  with  Disabilities  are  positive. 
Preparations in this area are on track. 

No progress can be reported in the area of social protection. As a result of the deterioration 
of  the  Serbian  economy,  which  has  affected  many  businesses,  but  also  due  to  insufficiently 
developed mechanisms of enforcement and control, the pension and health fund deficits have 
increased  further.  In  the  absence  of  sufficient  funds  for  the  payment  of  pensions,  transfers 
from  the  budget  have  become  the  largest  single  item  on  the  expenditure  side.  The  health 
insurance fund has accumulated debt which was estimated to stand at about € 790 million in 
February  2012.  Comprehensive  restructuring  and  reforms  are  needed  in  order  to  regain 
sustainability.  Integrated/cross-sectoral  social  services  need  to  be  further  developed. 
Preparations in this area are not very advanced. 

There  has  been  some  progress  in  the  field  of  anti-discrimination.  The  capacities  of  the 
Commissioner  for  the  Protection  of  Equality  have  been  improved.  Office  space  has  been 
provided, and the office has 18 staff. In 2011, the Commissioner issued 98 opinions and 17 
recommendations to public authorities for the establishment of equality, and filed charges for 
violation of the Anti-discrimination Law in three cases. However, further efforts are needed to 
establish  a  track  record  of  prosecutions  and  final  convictions  for  offences  related  to 
discrimination. A number of provisions of the Serbian Anti-discrimination Law are not in line 
with the acquis: exceptions granted to religious institutions are too wide, there is no mention 
of the obligation to provide reasonable accommodation to disabled employees, the definitions 
of indirect discrimination and instruction to discriminate are not in line with the acquis, and 
the role of NGOs and associations in judicial proceedings is not explicitly provided for. Those 
most  exposed  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.  Serbian  authorities 
need  to  develop  a  proactive  approach  towards  the  better  inclusion  of  the  LGBT  population 
and a greater understanding across society. Serbia has started to address its priorities in this 
area.  

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No  progress  can  be  reported  on  equal  opportunities  between  women  and  men. 
Implementation of the Strategy for the enhancement of women’s position and gender equality 
(2010-2015) and the related Action plan needs to be followed up better. Implementation of the 
National Strategy for Prevention and Elimination of Violence against Women should also be 
continued. Further streamlining of the administrative capacities of bodies dealing with gender 
equality  is  needed  as  women  remain  exposed  to  discrimination  and  lower  salaries,  pensions 
and employment rates. Preparations in this area are moderately advanced. 

Conclusion 

Some progress can be reported in the area of social policy and employment, especially in the 
fields  of  employment  policy,  health  and  safety  at  work  and  social  inclusion.  However, 
employment policies in general are affected by adverse economic developments and limited 
budget allocations and need to be enhanced. Increased efforts are also needed to restructure 
and reform social protection and regain sustainability. Overall, Serbia has started to address 
its priorities in this area.  

4.20.  Chapter 20: Enterprise and industrial policy 

Progress  was  made  in  the  area  of  enterprise  and  industrial  policy  principles.  A  new 
definition of SMEs was adopted in December 2011 in line with the EU recommendation. The 
strategy  for  the  development  of  competitive  and  innovative  small  and  medium-sized 
enterprises  for  the  period  2008-2013  continued  to  be  implemented.  The  SME  policy  is  also 
part  of  a  number  of  other  strategies,  such  as  the  industrial  development  and  regional 
development strategies adopted in 2011. The Business Council established at the Chamber of 
Commerce is working well. The SME Council has not been active.  

Implementing  legislation  on  measures  to  prevent  delayed  payments  by  the  public  sector  to 
business operators was adopted in October 2011. It partly aligns Serbian legislation with the 
Late Payment Directive and sets the maximum deadline for payment at 60 days. So far, the 
new  rules  have  had  a  limited  effect.  Serbia  still  needs  to  pass  legislation  against  delayed 
payments  between  businesses.  Substantial  delays  in  payments  between  economic  operators 
persist, resulting in their chronic illiquidity.  

Regarding  enterprise  and  industrial  policy  instruments  progress  has  been  made;  Serbia 
continues to implement the Small Business Act and to participate in other projects under the 
European  Entrepreneurship  and  Innovation  Programme  (EIP).  However,  further  efforts  are 
needed  in  relation  to  company  registration,  business  incubators  and  access  to  finance  for 
SMEs.  

The Innovation Fund has started working, providing grants for innovations. The Agency for 
Regional Development supports the establishment of incubators. The Development Fund has 
no  new  funds  available  for  loans,  but  channels  the  repayments  of  old  loans  into  some  new 
projects, such as support for women entrepreneurship.  

No progress has been registered in relation to sector policies. 

Conclusion 

Progress  was  made  in  the  area  of  enterprise  and  industrial  policy.  Serbia  implements  the 
Small  Business  Act  in  an  appropriate  manner  and  other  preparations  in  enterprise  and 
industrial policy are on track.  

4.21.  Chapter 21: Trans-European networks  

Some progress was made in the area of trans-European transport networks (TEN-T). Serbia 
cooperated  actively  in  the  implementation  of  the  Memorandum  of  Understanding  on  the 

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development  of  the  South  East  Europe  Regional  Transport  Network  (SEETO).  The  SEETO 
transport network has been integrated into Serbia’s Strategy for the development of railway, 
road, waterway, air and intermodal transport from 2009 to 2015. Implementation of the action 
plan for the construction of road corridor X has advanced. The procurement procedures have 
started  for  several  remaining  sections  on  the  E80  (Nis-Dimitrovgrad)  and  E75  (Nis-former 
Yugoslav  Republic  of  Macedonia)  motorways  and  the  Belgrade  bypass.  Several  major 
projects to develop project documentation for rail corridor X are under way or in preparation.  

Some  progress  was  made  in  carrying  out  infrastructure  projects  and  enhancing  navigation 
conditions  on  the  inland  waterways  network  along  the  River  Danube  and  the  River  Sava 
including River Information Services. 

As  regards  trans-European  energy  networks  (TEN-E)  little  progress  was  made.  The 
feasibility  study  and  general  design  for  the  South  Stream  gas  pipeline  were  prepared.  (See 
Chapter  15  —  Energy)  Serbia  continues  to  support  implementation  of  the  Gas  Ring  project 
for  south-east  Europe.  The  feasibility  study  for  construction  of  the  Nis-Dimitrovgrad  gas 
interconnector linking Serbia to Bulgaria has been finalized. However, the financing for the 
project needs to be secured. Concerning electricity, the construction of section 2 (Leskovac-
Vranje-border  substation)  of  the  electricity  line  from  Nis  to  the  border  with  the  former 
Yugoslav  Republic  of  Macedonia  was  completed  in  November  2011.  Construction  of  the 
Leskovac  and  Vranje  substations  is  ongoing.  Further  project  documentation  for  an 
interconnection  project  with  Romania,  connecting  Pancevo  (Serbia)  to  Resita  (Romania),  is 
being  prepared.  As  regards  oil  infrastructure,  Serbia  continues  to  support  the  planned  pan-
European oil pipeline.  

Conclusion 

Serbia  has  made  some  progress  in  the  area  of  trans-European  networks.  It  is  continuing  to 
develop its transport and energy networks and to participate actively in the work of the South 
East Europe Transport Observatory and the Energy Community. However, major challenges 
remain  in  terms  of  financing  the  new  interconnections  between  energy  and  transport 
networks.  Overall,  preparations  in  the  area  of  trans-European  networks  are  moderately 
advanced. 

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

There  has  been  little  progress  on  the  legislative  framework  impacting  on  regional  policy. 
The government adopted in May 2012 the updated Decree on the Decentralised Management 
of  EU  Pre-accession  Assistance  under  the  Instrument  for  Pre-accession  (IPA).  Efforts  are 
needed in all areas relevant for implementation of the cohesion policy in line with the acquis.  

There  has  been  progress  with  regard  to  the  institutional  framework,  not  least  in  terms  of 
preparing  the  operating  structures  for  the  implementation  of  all  IPA  Components.  Units  for 
programming and implementation of IPA have been established. However, efforts are needed 
to avoid the parallel systems, namely for national policy and for the Cohesion Policy.  

Progress  can  be  reported  with  regard  to  administrative  capacity.  Serbia  finalised 
preparations under the Roadmap and Action Plan for decentralised management of IPA funds 
for Components I-IV and in June 2012 submitted the accreditation package for the conferral 
of management of these Components. Considerable additional efforts are required in order to 
ensure adequate administrative capacity in line with the future workload.  

There  has  been  some  progress  in  the  area  of  programming.  The  Serbian  government  has 
further developed the draft Strategic Coherence Framework and the Operational Programmes 
(OPs)  for  IPA  Components  III  and  IV,  providing  a  good  basis  for  the  next  financial 
perspective and the relevant policy areas. Interministerial coordination has improved. Despite 

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efforts to prepare a pipeline of projects, the lack of strategically developed investment plans 
remains  an  obstacle.  Projects  continue  to  be  selected  on  an  ad  hoc  basis  rather  than  on  the 
basis of strategic sectoral priorities. Coordination between the operating structures responsible 
for  programming  and  final  beneficiaries,  and  the  capacity  of  final  beneficiaries  to  develop 
project documentation in line with the EU standards, are still not sufficient.  

Some progress can be reported with regard to monitoring and evaluation. The secretariat of 
the  National  IPA  Coordinator  (NIPAC)  is  responsible  for  monitoring  and  evaluating 
programmes.  The  sectoral  working  groups  are  increasingly  taking  on  more  ownership  of 
programming and will be gradually transformed into sectoral monitoring committees. 

There has been good progress in the area of financial management, control and audit. The 
Audit  Authority  now  has  minimum  staffing,  including  three  auditors.  Further  staffing  and 
improvement of audit capability is required. 

Conclusion 

Progress was noted in the area of regional policy and coordination of structural instruments. 
Serbia has completed the preparatory stages for the decentralised management of IPA for four 
Components.  Adequate  implementation  capacity  needs  to  be  further  ensured.  Programming 
needs  to  be  improved,  especially  in  terms  of  preparing  a  solid  project  pipeline  based  on 
relevant strategies. Overall, preparations in this area are advancing.  

4.23.  Chapter 23: Judiciary and fundamental rights (See also Political Criteria) 

Serbia has made only little progress in the area of the judiciary. 

There  was  little  progress  regarding  the  independence  of  the  judiciary.  The  High  Judicial 
Council (HJC) and the State Prosecutorial Council (SPC) took over the administration of the 
budget of courts and prosecution services in March 2012. However, the legal framework still 
leaves room for undue political influence over the judiciary. There were shortcomings in the 
composition  of  the  HJC.  The  HJC  and  the  SPC  have  not  yet  finalised  the  appointments  of 
court presidents and public prosecutors. The HJC and the SPC have not yet adopted rules on 
regular  evaluation  of  the  work  and  performance  of  serving  judges  and  prosecutors.  The 
foreseen  evaluation  of  the  magistrates  newly  recruited  in  2009  for  a  three  year  term  is  in 
particular pending.  

The HJC and SPC finalised the review procedure for non-reappointed judges and prosecutors 
on  the  basis  of  objective  guidelines.  The  review  was  intended  as  an  additional  remedy  to 
address the petitioners’ claims without limiting their right to subsequent judicial review by the 
Constitutional  Court.  The  review  was  open  to  external  monitoring,  based  on  individual 
hearings  and  concluded  with  individual,  detailed,  written  decisions.  However,  it  was  not 
conducted  fully  in  line  with  the  letter  and  spirit  of  the  guidelines.  Serious  procedural 
shortcomings were identified, including lack of quorum and voting patterns in the HJC. This 
raised  concerns  that  contrary  to  the  guidelines  the  ex-officio  members  (the  President  of  the 
Supreme  Court  of  Cassation,  the  Minister  of  Justice  and  the  President  of  the  Parliamentary 
Committee for Judicial Affairs), who had participated in the initial reappointment procedure, 
had  substantially  influenced  the  decisions  taken  on  the  basis  of  the  review  commissions’ 
proposals.  Evidence  used  in  the  decisions  was  not  always  admissible  according  to  the 
guidelines or was introduced at too late a stage. For these reasons, in two rulings in July 2012, 
the  Constitutional  Court  revoked  all  the  decisions  taken  by  the  HJC  and  SPC  of  non-re-
appointment  challenged  by  the  petitioners  so  far  and  instructed  the  HJC  and  the  SPC  to 
reinstate all of them. Cases returned by the Constitutional Court will need to be re-examined 
diligently and in full accordance with the Constitutional Court’s rulings. 

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The impartiality of judges continues to be broadly ensured thanks in particular to automated 
allocation of court cases, which has now been introduced in all commercial courts and courts 
of general jurisdiction. In order to enforce accountability, the SPC adopted a first set of Rules 
on  disciplinary  procedure  and  liability  in  July  2012,  which  needs  to  be further  aligned  with 
EU standards. The HJC has started to investigate and impose penalties in disciplinary cases.  

The Judicial Academy has a key role to play in ensuring that professional standards and merit-
based  principles  are  applied  in  the  judiciary.  A  second  generation  of  new  students  was 
selected  and  the  Academy  provided  a  variety  of  in-service  training  programmes  for  judges, 
prosecutors,  judicial  staff  and  attorneys.  A  proper  merit-based  career  system  for  judges  and 
prosecutors remains 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 through the 
Judicial Academy.  

A  number  of  laws  came  into  force  aimed  at  improving  the  efficiency  of  the  judiciary  and 
applying  international  standards  in  national  courts.  In  2011,  following  a  new  accounting 
methodology,  the  courts  received  2.23  million  new  cases,  resolved  2.65  million  cases  and 
were  left  at  the  end  of  the  year  with  a  backlog  of  3.34  million  cases.  However,  major 
imbalances persist in the courts’ workload and a comprehensive analysis of the functioning of 
the new court network is needed. The quality of statistics needs to be improved. Amendments 
aimed  at  improving  the  efficiency  of  the  Constitutional  Court  were  adopted  but  the  Court 
continued to face a significant and rapidly growing backlog of cases. 

Serbia  has  made  little  progress  on  anti-corruption  policy.  The  Government  has  not  yet 
finalised  its  National  Anti-Corruption  Strategy  for  2012-2016  nor  its  corresponding  Action 
Plan. 

The  Anti-Corruption  Agency’s  operations  increased,  mainly  focusing  on  prevention.  The 
Agency  started  to  implement  the  2011  Law  on  the  Financing  of  Political  Activities,  and 
continued to make targeted checks on asset declarations collected and to process cases of dual 
public  functions  presenting  a  risk  of  conflict  of  interest.  However,  the  Agency  has  still  to 
establish a track record of effective checks on party funding and electoral campaign. It also 
needs to improve cooperation with relevant stakeholders to investigate declarations of assets 
effectively.  There  was  little  action  to  protect  whistleblowers.  There  has  been  no  further 
follow-up to the reports of the Anti-Corruption Council on high-profile cases.  

The special prosecutor for corruption and organised crime launched new investigations in 115 
corruption  cases  in  2011,  while  2770  ones  were  launched  from  other  public  prosecutors’ 
offices during the same period. These included several medium- to high-level cases. Further 
efforts  are  needed  in  order  to  establish  a  track  record  of  prosecution  and  conviction, 
particularly in high-level cases. The law enforcement bodies need to become more proactive 
and develop their ability to conduct financial investigations.  

Public  procurement,  management  of  public  enterprises,  privatisation  procedures  and  public 
expenditure remain areas of serious concern, especially in the Health and Education domains, 
in  which  independent  supervision  and  capacity  for  early  detection  of  wrongdoing  are 
underdeveloped. Comprehensive risk analyses for areas vulnerable to corruption are needed. 
Coordination between all stakeholders needs to be strengthened to ensure effective prevention 
and handling of corruption cases.  

Little progress has been made in the area of fundamental rights. 

Regarding  the  prevention  of  torture  and  ill-treatment  the  Ombudsman  carried  out  his  first 
inspections acting as the newly designated National Prevention Mechanism. Overcrowding in 
the prison system, poor living conditions in detention facilities, unsatisfactory healthcare and 

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the  lack  of  adequate  and  specific  treatment  programmes  are  still  a  matter  of  concern.  The 
internal  control  of  the  police  needs  to  be  enhanced.  Alternative  sanctions  need  to  be 
introduced  on  a  wider  scale.  Constitutional  guarantees  on  access  to  justice  are  in  place. 
Legislation  and  funding  for  an  effective  system  of  free  legal  aid  still  need  to  be  developed. 
The legal framework providing for freedom of expression and the media is in place. Attacks 
and  threats  against  journalists  have  decreased  slightly  but  a  more  comprehensive  and 
proactive approach by the police and the judiciary remains essential. Transparency of media 
ownership still needs to be fully ensured and the implementation of the media strategy needs 
to be speeded up. Freedom of assembly and association is constitutionally guaranteed and in 
general respected. The Serbian Constitutional Court developed its case law regarding freedom 
of  assembly.  Freedom  of  thought,  conscience  and  religion  is  guaranteed  and  generally 
respected. The lack of transparency and consistency in the registration process continues to be 
one  of  the  main  obstacles  preventing  some  smaller  religious  groups  from  exercising  their 
rights.  

There has been some progress relating to women’s rights and gender equality. Serbia signed 
the Council of Europe Convention on preventing and combating violence against women and 
domestic violence. A special telephone line and a new shelter for victims of domestic violence 
were opened. However, violence against women still remains an area of concern and there is 
no coordinated collection and sharing of data on violence against women and violence in the 
family.  As  regards  children’s  rights,  little  progress  has  been  achieved.  A  special  telephone 
line for victims of juvenile violence was introduced. Children’s rights are unevenly protected. 
Some Roma children are still being enrolled in special schools. Some progress has been made 
concerning  the  socially  vulnerable  and/or  persons  with  disabilities,  notably  with  regard  to 
their  promotion,  education  and  inclusion  on  the  labour  market  and  the  development  of 
community-based  services.  There  has  been  some  progress  in  the  area  of  anti-discrimination 
policies. Serbia’s anti-discrimination legislation is broadly in line with European standards on 
combating  racism  and  racial  discrimination.  The  Equality  Protection  Commissioner’s  office 
was active in raising awareness of discrimination and ways of addressing it. Police improved 
their  response  to  attacks  against  some  groups.  However,  discrimination  based  on  ethnicity, 
gender,  and  sexual  orientation  remains  widespread.  Serbian  authorities  need  to  develop  a 
proactive  approach  towards  the  better  inclusion  of  the  LGBT  population  and  a  greater 
understanding across  society.  No  progress has  been  made regarding labour and trade union 
rights.  Several  registered  trade  unions  are  still  not  recognised.  Concerns  remain  as  to  the 
criteria for social partners’ representativeness in the social dialogue which remained limited at 
both national and local level. Regarding property rights, implementation of the 2011 law on 
restitution has started. 

Limited  progress  has  been  made  regarding  respect  for  and  protection  of  minorities  and 
cultural rights. The legal framework is in place and generally respected. Some positive steps 
were  taken  to  improve  the  situation  of  minorities,  including  the  Roma.  However,  additional 
efforts  are  needed  to  ensure  effective  implementation  of  the  legislation  throughout  the 
territory  of  Serbia  and  to  address  shortcomings.  Roma,  refugees  and  internally  displaced 
persons continue to face a difficult situation. Additional efforts are required to comply with 
international standards on forced evictions. 

There  has  been  no  progress  regarding  the  protection  of  personal  data.  The  legal  and 
institutional  framework  is  broadly  in  place.  Several  provisions  of  the  Law  on  Protection  of 
Personal  Data  are  not  fully  in  line  with  EU  standards.  An  action  plan  implementing  the 
strategy  still  needs  to  be  adopted.  The  office  of  the  Commissioner  for  Free  Access  to 
Information  of  Public  Importance  and  Personal  Data  Protection,  faced  with  a  constant 
increase  in  the  number  and  complexity  of  the  cases,  still  lacks  sufficient  resources.  Further 

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efforts are needed in order to ensure the collection and processing of personal data in line with 
EU standards.  

There were no developments in relation to EU citizens’ rights.  

Conclusion 

There has been little progress regarding the judiciary and fundamental rights. The review of 
reappointments of judges and prosecutors did not correct the existing shortcomings and was 
overturned  by  the  Constitutional  Court  who  ordered  the  reinstatement  of  all  judges  and 
prosecutors  that  had  appealed  their  non-reappointment.  A  new  strategy  for  judicial  reform, 
based  on  a  functional  review  of  the  judiciary,  is  needed.  Implementation  of  the  legal 
framework to fight corruption has continued. However, a new Anti-Corruption Strategy and 
Action  Plan  are  still  pending.  Stronger  political  direction,  more  effective  inter-agency 
coordination and a proactive approach in investigating and prosecuting corruption are needed. 
Regarding  fundamental  rights,  the  legislation  is  in  place  and  broadly  respected.  Freedom  of 
expression is in general guaranteed but the implementation of the media strategy needs to be 
speeded  up.  Discrimination  based  on  ethnicity,  gender,  and  sexual  orientation  remains 
widespread and further measures to fight all forms of discrimination are needed. A proactive 
approach towards better inclusion of the LGBT population and a greater understanding across 
society  is  needed.  Some  positive  steps  were  taken  to  improve  the  situation  of  minorities, 
including the Roma, but additional efforts are needed to achieve consistent implementation of 
the  legislation  across  Serbia.  Overall,  Serbia  has  started  to  address  its  priorities  regarding 
alignment with the acquis in the area of the judiciary and fundamental rights.  

4.24.  Chapter 24: Justice, freedom and security  

Visa  liberalisation  for  citizens  of  Serbia  travelling  to  the  Schengen  area  has  been  in  force 
since December 2009. In order to ensure on-going implementation of the commitments taken, 
a  post  visa  liberalisation  monitoring  mechanism  has  been  established.  The  Commission 
presented  its  second  monitoring  report  to  the  European  Parliament  and  the  Council  in 
December 2011 and adopted the third in August 2012. The increase observed in the previous 
years in the number of unfounded asylum applications by Serbian citizens under the visa-free 
regime  was  stopped  in  2011,  following  decisive  measures  by  the  Serbian  authorities.  It 
nevertheless increased again in the first months of 2012. With more than 13,900 applications 
in 2011 and more than 5000 in the first seven months of 2012, Serbian nationals remained one 
of  the  highest-ranked  nationalities  of  asylum  applicants  in  the  EU.  This  nonetheless 
corresponded  to  a  25%  decrease  in  2011  applications  compared  to  2010  (more  than  17,000 
applicants at that time). The number of Serbian citizens finally granted asylum in EU Member 
States  remained  stable  in  2011  (310)  compared  to  2010  (315).  Efforts  to  address  this  issue 
need to be strengthened. Overall, Serbia is moderately advanced in addressing the unfounded 
asylum applications by Serbian citizens under the visa free regime.  

There  has  been  no  progress  regarding  migration  management.  The  number  of  irregular 
migrants  passing  through  Serbia  and  whose  final  destination  is  the  EU  has  increased:  about 
9,500 irregular migrants were registered in 2011, as compared to 2010, when approximately 
2,500  were  recorded.  The  2012  Action  Plan  for  the  implementation  of  the  migration 
management strategy was adopted in May 2012. Coordination amongst bodies responsible for 
implementing the migration strategy still needs to be improved and sufficient financial means 
allocated.  The  readmission  agreement  between  the  EU  and  Serbia  continued  to  be 
implemented  without  significant  problems,  although  the  capacities  and  resources  for 
integrating returnees from the readmission process are very limited. Some 5,150 persons were 
returned to Serbia from an EU Member States in 2011 (3,979 in 2010). Under the Agreement, 
a new bilateral implementing protocol has been concluded with Estonia. The main countries 

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from  where  returns  take  place  are,  by  decreasing  number,  Germany,  Sweden,  Switzerland, 
Denmark, France and the Netherlands. Overall, migration management in Serbia continues to 
be moderately advanced.  

Regarding asylum, no progress has been made. Claims are still temporarily processed by the 
Border  Police  Asylum  Unit,  as  the  Asylum  Office  intended  to  operate  as  the  first-instance 
body  has  not  yet  been  formally  established.  The  mandate  of  the  Asylum  Commission,  the 
second-instance body, was renewed in September 2012 and its members were appointed. The 
number of asylum claims has increased. Criteria for verifying safe countries of origin and the 
list  of  safe  third  countries  still  remain  to  be  fully  aligned  with  the  acquis.  A  new  reception 
centre  is  being  built  but  additional  reception  facilities  for  asylum  seekers  are  needed. 
Capacities  and  practices,  including  staff  training,  need  to  be  improved.  A  national  database 
for checking personal data and fingerprints of asylum-seekers is still missing. Overall, Serbia 
continues to be in the early stages of implementing the asylum policy.  

There  has  been  some  progress  on  visa  policy.  As  regards  requirements  to  be  met  as  of 
accession  to  the  Schengen  area,  a  new  software  and  a  Visa  Centre  which  offers  an  online, 
prompt and more  transparent procedure in line with the Visa Information System (VIS) has 
been operational since May 2012.  

The list of countries for which a visa is required needs to be brought fully into line with the 
acquis.  Overall,  Serbia  is  moderately  advanced  in  aligning  its  visa  policy  with  European 
standards.  

Progress has been achieved in the area of external borders and Schengen. The coordination 
body  for  implementing  the  Integrated  Border  Management  (IBM)  strategy  has  become 
operational.  Serbia  has  continued  to  improve  the  infrastructure  and  equipment  at  border 
crossing  points  by  completing  installation  of  the  TETRA  system.  Additional  border  police 
posts have been connected with the central database of the Ministry of the Interior. Serbia has 
been involved in joint operations, regular exchanges of data and best practices, and training 
activities  with  Frontex;  it  participates  in  the  Western  Balkans  Risk  Analysis  Network. 
International  cooperation  continued  to  improve  and  an  agreement  between  Serbia  and 
Hungary  on  border  control  of  road,  railway  and  water  traffic  was  signed  in  January  2012. 
Police  cooperation  with  Bulgaria  has  also  been  enhanced  with  the  establishment  of  joint 
patrols  on  the  Serbian-Bulgarian  border.  However,  the  revised  IBM  strategy  and  its  action 
plan,  the  protocol  on  information  exchange  among  services,  the  concept  for  joint  training 
among services, and the guidelines for risk analysis in border policing still need to be adopted. 
Operational  coordination  between  border  police,  customs  and  phytosanitary  services  remain 
to  be  improved.  Further  modernisation  and  upgrading  of  equipment  and  infrastructure  is 
needed,  both  at  border  crossing  points  and  for  surveillance  purposes,  including  access  to 
relevant  Interpol  databases.  The  border  police  needs  to  further  improve  its  risk  analysis 
capacities. Overall, Serbia continues to be moderately advanced on border management.  

Some progress was achieved regarding judicial cooperation in civil and criminal matters. 
Further  efforts  were  made  to  streamline  practical  cooperation,  especially  at  regional  level. 
Agreements were signed in November 2011 with Slovenia on mutual legal assistance in the 
enforcement  of  court  judgments  and  with  the  former  Yugoslav  Republic  of  Macedonia  on 
extradition  of  own  citizens.  Cooperation  continued  with  Croatia  in  matters  of  extradition, 
enforcement  of  criminal 
judgments  and  war  crimes  processing.  However,  further 
improvements are still needed to ensure practical enforcement of the legal framework. Action 
is  also  needed  to  ensure  effective  cooperation  with  Eurojust.  Overall,  Serbia  remains 
moderately advanced in the areas of judicial cooperation in civil and criminal matters. 

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Serbia has made progress in the area of police cooperation and the fight against organised 
crime. The law on Police was amended in December 2011 to better define police cooperation 
at operative level through joint actions, teams and exchange of liaison officers. Measures have 
been  taken  to  improve  the  methodology  and  standards  of  police  work,  including  an 
information  booklet  on  anti-corruption  for  police  officers.  Cooperation  between  relevant 
agencies has improved within the country, in the region and internationally, leading to good 
results in a number of high-profile investigations into organised crime groups. An agreement 
on  police  cooperation  was  signed  with  the  former  Yugoslav  Republic  of  Macedonia  in 
November  2011.  A  secure  link  at  the  Ministry  of  the  Interior  has  been  established  for 
improving cooperation with Albania, Bosnia and Herzegovina, Croatia, Montenegro and the 
former Yugoslav Republic of Macedonia. The Ministry of the Interior signed an amendment 
to the bilateral technical agreement with Europol in March 2012 and an expert mission from 
Europol  took  place  in  December  2011.  However,  organised  crime  still  remains  a  serious 
concern in Serbia. Final convictions remain rare. Capacity to carry out complex, in particular 
financial,  investigations  needs  to  be  built  up.  Specialised  services,  in  particular  the  unit  for 
witness  protection,  still  lack  sufficient  staff,  resources  and  adequate  premises.  Cooperation 
and  information  flow  between  law  enforcement  agencies  needs  to  be  improved.  Statistical 
data needs to be harmonised and a centralised criminal intelligence system still remains to be 
established.  Risk  assessments  and  crime  mapping  need  to  be  used  more  broadly  and 
intelligence-led  policing  is  to  be  developed.  The  capacity  of  the  police  to  carry  out, 
independently of the security intelligence agencies, certain special investigative measures in 
criminal  investigations  needs  to  be  established  in  line  with  EU  standards.  Overall,  Serbia  is 
moderately advanced as regards police cooperation and the fight against organised crime.  

Regarding seizure of assets, out of 134 requests to confiscate assets, 63 were approved in full, 
14  partially  and  36  denied  in  2011.  There  was  a  significant  increase  in  the  staff  of  the 
Directorate  for  assets  seizure.  However,  further  sustained  efforts  are  needed  to  enhance  the 
effectiveness of legislation in this area. Coordination between the prosecutors and institutions 
involved  in  asset  recovery  needs  to  be  further  improved.  The  Directorate  and  the  Financial 
Investigation Unit (FIU) lack sufficient means and technical expertise. Specialised training on 
financial  instruments  needs  to  be  provided  to  judges  and  prosecutors  in  order  to  be  able  to 
process adequately data provided by the FIU and open financial investigations when justified.  

Some  progress  was  achieved  in  the  fight  against  money  laundering.  (See  also  Chapter  4  — 
Free  movement  of  capital)  The  number  of  identified  cases  of  tax  fraud  and  of  final 
convictions  for  money  laundering  offences  has  increased.  However,  the  staff  and  analytical 
capacity  of  the  Administration  for  the  Prevention  of  Money  Laundering  need  to  be  further 
built  up.  The  number  of  suspicious  transactions  identified  remains  low  and  reporting, 
especially from outside the banking  sector, needs to develop. Law enforcement  and judicial 
authorities still lack expertise to handle money laundering cases. Overall, Serbia is moderately 
advanced in the fight against money laundering.  

Serbia remained a country of origin, transit and destination for trafficking in human beings. 
Some steps were taken to implement the action plan of the national strategy to combat human 
trafficking.  A  temporarily  seized  house  was  in  October  2011  turned  into  a  safe  house  for 
victims of trafficking. However, the strategy and associated action plan remain to be updated. 
A  uniform  database  for  criminal  reports  and  proceedings  and  a  specific  monitoring 
mechanism  in  this  area  have  not  been  established.  The  effective  compensation  and  social 
inclusion of victims, through a special fund, in line with existing EU standards remains to be 
ensured. Overall, Serbia is moderately advanced in fighting trafficking in human beings.  

Serbia  has  made  little  progress  regarding  the  fight  against  terrorism.  Within  the  Security 
Information  Agency,  a  unit  was  created  for  combating  international  organised  crime, 

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including  money  laundering  and  terrorist  financing.  However,  a  national  database  and  more 
efficient  information  exchange  procedures  need  to  be  established  and  inter-agency 
cooperation improved. Overall, Serbia is moderately advanced in fighting terrorism.  

Some  progress  was  achieved  concerning  cooperation  in  the  field  of  drugs.  An 
interministerial  commission  for  controlled  psychoactive  substances  was  established  in 
November  2011.  Actions  were  taken  in  education  and  anti-drugs  campaigning.  A  national 
report on the drug situation and an action plan for a drug information system were developed 
in  cooperation  with  the  European  Monitoring  Centre  for  Drugs  and  Drug  Addiction 
(EMCDDA). The national focal point for EMCDDA, aimed at further improving cooperation 
and  coordination  at  national  level  and  strengthening  data  collection,  is  now  operative  since 
February  2012.  Good  results  were  achieved  in  international  and  regional  cooperation  and 
several  joint  actions  led  to  a  number  of  arrests  and  drugs  seizures  at  border  crossing  points 
with Croatia, Bulgaria and Hungary. Operational information exchanged with Interpol led to 
successful  actions  in  countering  increased  activities  of  some  criminal  groups.  However, 
Serbia  remains  on  the  main  drug  trafficking  routes.  The  national  focal  point  for  European 
Monitoring Center for Drugs and Drug Addiction, aimed at further improving cooperation and 
coordination at national level and strengthening data collection, is now operative. Destruction 
of seized drugs still remains to be ensured. Overall, Serbia is moderately advanced regarding 
the cooperation in the field of drugs.  

Concerning customs cooperation (see also Chapter 29 – Customs Union), some progress was 
achieved.  The  Customs  Administration  of  Serbia  (CAS)  concluded  agreements  on 
international  cooperation  with  Azerbaijan,  Belarus  and  Georgia.  Implementation  of  the 
integrated border management strategy  and action plan has continued. The CAS engaged in 
joint cases with all agencies from neighbouring countries and continues to take an active part 
in international activities concerning the fight against illegal trade in goods such as narcotics, 
oil and cigarettes and cross-border movement control. However, Serbia still needs to align its 
legal  framework  with  EU  legislation  on  the  use  of  technology  for  customs  purposes  and  to 
ratify  and  implement  the  ‘Naples  II’  Convention  on  mutual  assistance  and  cooperation 
between  customs  administrations.  Overall,  Serbia  is  moderately  advanced  regarding  the 
cooperation in the field of customs. 

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

Conclusion 

Serbia  made  some  progress  in  the  area  of  justice,  freedom  and  security.  Serbia  is  actively 
involved  in  international  police  and  judicial  cooperation  and  law  enforcement  agencies 
generally have sufficient capacity to carry out standard investigations. Additional efforts are 
needed  to  increase  capacities  to  carry  out  complex  investigations  and  to  strengthen 
coordination between law enforcement agencies and the judiciary. A track record of proactive 
investigations  and  final  convictions  in  organised  crime  cases  needs  to  be  built  up.  Overall, 
preparations in the area of justice, freedom and security are moderately advanced. 

4.25.  Chapter 25: Science and research 

Some  progress  has  been  made  regarding research and innovation policy. Serbia  has  taken 
actions  to  stimulate  innovation  and  strengthen  its  research  infrastructures  However,  public 
investment in research remains at 0.5% of GDP, below the national target, and the number of 
researchers has not increased.  

Regarding  framework  programmes,  Serbia’s  participation  in  the  7th  EU  Research 
Framework Programme (FP7) remains good, although further efforts are necessary in order to 
involve more small and medium-sized enterprises, obtain Marie Curie actions and participate 

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successfully  in  the  specific  programme  ideas  governed  by  the  European  Research  Council. 
Serbia  has  continued  to  promote  research  cooperation  with  EU  and  other  international 
partners  and  is  well  integrated  in  a  number  of  key  research  themes.  Serbia  participates 
actively  in  COST  and  EUREKA  actions.  The  implementation  of  the  Memorandum  of 
Understanding  on  scientific  and  technological  cooperation  between  Serbia  and  the  Joint 
Research Centre (JRC) is well on track.  

Serbia  became  an  associate  member  of  the  European  Organisation  for  Nuclear  Research 
(CERN) in February 2012.  

Regarding  the  European  Research  Area,  Serbia  has  started  to  apply  the  European  Charter 
and  Code  of  Conduct  on  the  recruitment  of  researchers.  The  national  Euraxess  portal  is 
functioning  well.  Since  May  2012,  Serbia  is  a  founding  member  of  a  European  research 
infrastructure consortium in the area of nanotechnology and material science – C-ERIC. With 
respect  to  the  Innovation  Union,  an  Innovation  Fund  was  established  delivering  grants  in 
support of innovation to companies in the IT, biotechnology, nanotechnology and agro-food 
sector.  Construction  of  research  infrastructure  and  purchase  of  scientific  equipment  has 
progressed  well,  but  a  Research  Infrastructure  roadmap,  in  accordance  with  the  European 
Strategic  Forum  for  Research  Infrastructures  is  still  missing.  The  implementation  and 
monitoring of the action plans and national targets in particular on investment and on mobility 
of researchers remains generally weak and needs to be improved.  

Conclusion 

Some  progress  was  registered  in  the  area  of  science  and  research.  Both  public  and  private 
investment  in  research  remains  low  and  Serbia  generally  needs  to  reinforce  its  national 
research  capacity  and  monitoring  as  well  as  implement  the  actions  envisaged.  Overall, 
preparations in the area of science and research are on track.  

4.26.  Chapter 26: Education and culture 

Limited  progress  has  been  made  in  the  field  of  education  and  training.  Serbia’s  higher 
education institutions continue to operate according to Bologna standards. Serbia is one of the 
leading partner countries in the Tempus programme. It has made some progress as regards the 
social inclusion of children from marginalised groups, including through the introduction of 
pedagogical assistants and greater enrolment of Roma children. As regards quality assurance 
in elementary schools, a new version of the final exam has been introduced and reforms are 
ongoing.  

However, implementation of educational reforms remains slow and the human and financial 
resources of the Ministry weak. Capacities for sound financial management and control still 
need to be strengthened in view of Serbia’s participation in EU programmes. There has been 
limited progress regarding the introduction of a National Qualifications Framework in higher 
education. The Serbian vocational education and training (VET) system needs further reforms 
and  modernisation,  including  the  introduction  of  new  curricula,  with  a  view  to  responding 
better to labour market needs. 

In  the  field  of  youth  policy,  progress  has  been  made  in  implementing  the  youth  law  and 
strategy. Out of 131 established youth offices across Serbian municipalities, 115 have adopted 
local  action  plans.  Serbia  remains  an  active  participant  in  the  Youth  in  Action  programme 
with  40  accredited  organisations.  The  Ministry  of  Youth  and  Sports  has  been  active  in 
supporting  youth  volunteering  initiatives  and  providing  career  guidance  to  young  people 
across Serbia. 

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Little progress can be reported in the field of culture. Serbia is actively participating in the 
EU  Culture  programme.  The  highest  number  of  applications  for  the  literary  translation 
component of this programme came from Serbia.  

Conclusion  

Little  progress  can  be  reported  in  the  area  of  education  and  culture.  There  was  progress  in 
making  the  education  system  more  socially  inclusive,  and  in  introducing  quality  assurance 
standards  in  elementary  education.  Better  implementation  of  higher  education  reforms 
remains  a  challenge  and  reforms  in  the  VET  sector  still  need  to  be  speeded  up.  Financial 
management and financial control still need strengthening in view of Serbia’s participation in 
the  future  Education,  Youth  and  Sport  programme.  Overall,  in  the  area  of  education  and 
culture, alignment with EU standards is moderately advanced. 

4.27.  Chapter 27: Environment and climate change 

As regards the environment, some progress was made with regard to horizontal legislation. 
Serbia  adopted  its  National  Environmental  Approximation  Strategy  in  October  2011.  A 
Strategy for the Implementation of the Aarhus Convention was adopted in December 2011. A 
law ratifying Serbia’s accession to the Pollutant Release and Transfer Register (PRTR) of the 
UN Economic Commission for Europe was adopted in October 2011. The National Strategy 
for Sustainable Use of Natural Resources and Goods was adopted in May 2012. The Serbian 
Environmental Protection Agency (SEPA) has been designated to host and manage Serbia’s 
E-PRTR  database.  To  date  around  60%  of  the  estimated  600  operators  that  fall  under 
reporting  obligations  are  using  the  system.  Although  the  alignment  with  the  Environmental 
Impact Assessment Directive is fully achieved, the implementation needs to be improved, in 
particular  the  public  consultation  process  and  the  quality  of  the  dialogue  with  the  NGOs. 
Some progress can be reported with regard to air quality. The Law ratifying the Protocol on 
heavy metals and the Law ratifying the Protocol on persistent Organic Pollutants have been 
adopted in January and March 2012 respectfully. Air quality monitoring was further enhanced 
with the commissioning of a national calibration laboratory for air monitors and an analytical 
laboratory for air pollutants at SEPA. However, SEPA’s capacity and budget for air quality-
related work alone is largely insufficient. 

Progress  can  be  reported  in  the  area  of  waste  management.  The  Law  on  Mining  and 
Geological Research regulating the management of mining waste was adopted in November 
2011.  Implementing  legislation  on  environmentally  sound  disposal  of  waste  containing 
persistent  organic  pollutants  was  adopted  in  September  2011.  With  the  adoption  of 
implementing  legislation  on  procedures  for  the  management  of  TiO2-containing  waste, 
alignment  with  the  acquis  on  hazardous  waste  legislation  has  been  largely  completed. 
However, Serbia still needs to fully align with the Waste Framework Directive. Preparation of 
national  plans  for  specific  hazardous  waste  streams,  e.g.  asbestos,  batteries,  accumulators, 
electrical  and  electronic  equipment,  waste  oil  is  progressing  well.  Concessions  for  two  EU-
compliant  regional  landfills  have  been  granted  to  private  operators.  The  collection  rate  of 
household waste has increased from 60% to 72%. Pilot projects for primary waste segregation 
have  been  launched  in  selected  communities.  A  system  of  data  collection,  registration  and 
reporting  on  waste  is  operational  as  part  of  the  national  register  of  pollution  sources. 
However,  disparities  between  urban  and  rural  areas  remain.  The  participation  of  waste 
generators in providing relevant data needs to be improved. So far, four landfills were built 
under a concession agreement.  

Some progress can be reported in the area of water quality. Serbia has aligned its legislation 
with  EU  acquis  on  emission  limit  values  (ELVs)  for  water  pollutants  and  deadlines  for 
complying with them, as well as on parameters of ecological and chemical status of surface 

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and  of  chemical  and  quantitative  status  of  ground  waters.  The  process  of  characterising  the 
Serbian part of the Danube River Basin Management Plan has been completed in line with the 
Water  Framework  Directive.  Progress  has  been  made  in  the  construction  of  wastewater 
treatment plants: one waste water treatment plant in Subotica has been completed while the 
construction  of  plants  in  Vrbas,  Kula,  Leskovac  and  Sabac  is  ongoing.  Funds  and  own 
resources  are  allocated  with  priority  to  waste  water  collection  and  treatment.  However,  the 
service  levels  continue  to  be  very  low.  The  capacity  of  the  Ministry  of  Agriculture’s  Water 
Directorate needs to be substantially enhanced.  

The  Law  on  Public  Utility  Services  is  largely  in  line  with  the  tariff  principles  of  the  Water 
Framework Directive. However, cost-covering tariffs for water remain to be introduced in the 
Water Law. The development of the groundwater monitoring network needs to advance.  

Little  progress  can  be  reported  in  the  area  of  nature  protection.  Three  protected  areas 
(Gutavica,  Paljevine,  Bukovicka  Banja  Park)  were  established 
in  December  2011. 
Organisation  of  the  work  of  Natura  2000  stakeholders  has  been  clarified  and  pilot 
management  plans  for  selected  protected  areas  have  been  prepared.  The  first  import  and 
export  certificates  under  the  Convention  on  International  Trade  in  Endangered  Species 
(CITES) were issued and licensing of zoos commenced in line with the provisions of the EU 
Zoos  Directive.  However,  the  administrative  capacity  in  relation  to  protected  areas  is 
insufficient.  The  involvement  of  NGOs  in  the  national  nature  protection  effort  is  lagging 
behind. 

Little  progress  was  made  in  implementing  the  legislation  on  industrial  pollution  and  risk 
management.  The  integrated  approach  to  permitting  must  be  institutionalised  and  the 
administrative  capacity  strengthened.  Thirty  four  safety  reports  and  emergency  plans  have 
been received from operators of upper tier installations belonging to Seveso establishments. 
The  risk  management  group  is  sufficiently  staffed.  However,  its  administrative  capacity 
remains to be improved.  

Good  progress  can  be  reported  in  the  area  of  chemicals.  The  Law  amending  the  Law  on 
Chemicals and the Law amending the Law on Biocidal Products were adopted in December 
2011. A joint body comprising three inspectorates, namely the Environment Inspectorate, the 
Trade Inspectorate and the Sanitary Inspectorate was established. The downstream legislation 
(annexes)  with  regard  to  the  Registration,  Evaluation,  Authorisation  and  Restriction  of 
Chemicals  (REACH),  the  Classification,  Labelling  and  Packaging  of  Chemical  Products 
(CLP) and the Biocidal Products Directive (BPD) has been updated to follow the changes in 
the  EU  legislation.  The  helpdesk  of  the  Serbian  Chemicals  Agency  (SHemA)  acquired  in 
December 2011 observer status with the European Chemicals Agency. Law enforcement has 
improved  with  the  implementation  of  annual  plans  for  the  inspection  and  supervision  of 
industry/manufacturing as regards the classification and labelling of chemicals and biocides. 
An  inspection  campaign  was  performed  during  the  summer.  The  administrative  capacity  of 
SHemA  was  increased  to  42  staff  members.  However,  in  September,  the  Agency  was 
abolished  and  its  activities  were  transferred  to  the  Ministry  of  Energy,  Development  and 
Environmental Protection. It should be ensured that the agency’s transferred competences and 
administrative capacity are preserved. 

There  is  no  progress  to  report  in  the  area  of  noise  pending  the  designation  of  competent 
authorities,  the  identification  of  areas  for  strategic  noise  mapping  and  the  drawing-up  of 
corresponding action plans. 

Regarding  civil  protection,  in  October  2011  a  bilateral  agreement  on  emergency  assistance 
was concluded with Slovakia, and letters of intent were signed with France. In March 2012 a 
memorandum of understanding on emergency management was signed with Italy. A bilateral 

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Serbia-Russia humanitarian centre was opened in Nis in April 2012. Cooperation with the EU 
Civil  Protection  Mechanism  in  order  to  develop  a  regional  approach  with  a  strong  EU 
dimension to disaster prevention, preparedness and response remains to be ensured.  

The administrative capacity in the environment sector needs to be strengthened.  

In  the  area  of  climate  change,  no  progress  was  made  on  general  policy  development;  a 
comprehensive  climate  strategy  is  still  to  be  developed.  Climate  considerations  are  being 
increasingly  integrated  in  the  energy  policy,  but  substantial  efforts  are  required  in  order  to 
fully integrate climate change into sectoral policies and strategies.  

Serbia regularly associated itself with EU positions in the international context. While having 
previously  associated  itself  also  with  the  Copenhagen  Accord  and  having  submitted  an 
assessment  of  its  mitigation  potential  to  the  UNFCCC,  the  country  did  nevertheless  not  yet 
put  forward  a  mitigation  commitment  by  2020.  Serbia  should  consider  taking  mitigation 
commitments  consistent  with  those  of  the  EU  and  its  Member  States  for  the  purpose  of  the 
post-2020  climate  agreement  to  be  reached  by  2015.  Limited  progress  was  achieved  in 
alignment with climate acquis. Serbia took initial steps to identify stationary installations for 
the  purpose  of  future  implementation  of  an  emissions  trading  system  (ETS).  All  Serbian 
aircraft  operators  who  participate  in  the  EU  ETS  have  developed  and  submitted  their 
monitoring plans and CO2 emission reports for 2010 and 2011. The legislation on geological 
storage  of  carbon  dioxide,  and  ozone-depleting  substances  was  partially  aligned.  In  January 
2012 the first centre for recovery and recycling of hydrochloric fluorocarbons (HCFCs) was 
established.  Serbia  started  reflection  on  a  future  ETS.  Significant  efforts  are  required  to 
strengthen  the  country’s  monitoring,  reporting,  and  verification  capacities  because  the 
respective EU legislation sets the foundation for progress with the entire EU climate acquis. 

Serbia participated regularly in the climate work under the Regional Environmental Network 
for Accession (RENA). A successful high level event was organised in February 2012 under 
RENA  on  EU-Serbia  Climate  Cooperation.  There  continues  to  be  a  significant  need  for 
awareness-raising  at  all  levels.  Initiatives  to  raise  awareness  and  promote  co-operation 
between stakeholders should be further intensified.  

Steps are taken to recruit further staff in the Ministry of energy, environmental development 
and protection. However, the shortage of administrative capacity and ad hoc inter-institutional 
cooperation are delaying the preparation and implementation of a climate policy in line with 
the  acquis.  The  administrative  structure  on  climate  change  should  be  considerably 
strengthened,  and  capacity  building  support  is  required  in  order  to  address  the  significant 
capacity, cooperation and coordination needs in the area.  

Conclusions 

Some  progress  has  been  achieved  in  the  area  of  the  environment.  Alignment  with  the 
environmental  acquis  and  the  ratification  of  international  environmental  conventions 
continued. Significant further efforts are needed in order to implement the national legislation, 
especially  in  the  areas  of  water  management,  industrial  pollution  control  and  risk 
management,  nature  protection  and  air  quality.  The  strengthening  of  the  administrative 
capacity should remain a priority. Little progress was achieved in alignment with the climate 
acquis.  Considerable  efforts  are  required  on  awareness-raising  on  opportunities  and 
challenges of climate action, setting a more strategic approach for the country, aligning with 
and  implementing  EU  climate  acquis,  as  well  as  strengthening  administrative  capacity  and 
inter-institutional cooperation. Overall, Serbia has started to address its priorities in the field 
of the environment and climate change. 

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4.28.  Chapter 28: Consumer and health protection 

There  has  been  some  progress  in  the  area  of  consumer  protection.  As  regards  horizontal 
aspects,  cooperation  with  consumer  protection  organisations  has  improved,  as  have 
awareness-raising  and  education  campaigns  for  consumers.  However,  the  administrative 
capacity  of  the  Department  for  Consumer  Protection  within  the  Ministry  of  Agriculture, 
Trade, Forestry and Water Management, and coordination with line ministries and regulatory 
bodies  remain  weak.  The  National  Council  for  Consumer  Protection  has  not  been  yet 
established.  

There has been no progress as regards product safety-related issues. Tools and procedures for 
the  mediation  process  remain  to  be  strengthened  in  order  to  ensure  proper  and  effective 
enforcement of consumer protection rules and market surveillance. There was no further legal 
alignment.  

There  has  been  some  progress  with  regard  to  non-safety  related  issues.  Legislation  on 
consumer credit has been further aligned with the acquis. However, further alignment of the 
law on protection of users of financial services is required. 

There has been no progress in the area of public health. Overall financial sustainability of the 
public health system in Serbia is seriously endangered by the poor financial situation of the 
public health fund.  

There  has  been  no  progress  in  the  area  of  tobacco  control.  Complete  alignment  with  EU 
tobacco legislation has yet to be achieved.  

Little progress has been made in the area of communicable diseases. Some case definitions for 
reporting communicable diseases, including clinical, laboratory and epidemiological criteria, 
are still missing and EU case definitions have to be progressively adopted. The surveillance 
and response capacity remains limited and requires modernisation, in particular in the form of 
human resources and material. More attention is needed for effective implementation of the 
national HIV/AIDS strategy and awareness raising. 

There has been no progress in the area of blood, tissues, cells and organs. Further efforts are 
needed  to  implement  the  Law  on  Organ  Transplantation.  The  administrative  and  technical 
capacity  of  the  Directorate  for  Biomedicine  in  the  Ministry  of  Health  needs  to  be 
strengthened.  

There has been no progress to report in the field of mental health. Administrative capacity is 
still very weak and inadequate to ensure implementation of the Strategy for the development 
of mental healthcare. Community-based mental health services should be further supported as 
an  alternative  to  institutional  care,  across  the  life-span.  Further  action  needs  to  be  taken  to 
promote inclusion of people with mental health problems and ensure equal enjoyment of basic 
human rights and equal access to employment, education and social services. 

Regarding  cancer  screening,  implementation  of  the  national  screening  programmes  for 
cervical, breast and colorectal cancers is ongoing. Additional efforts are needed to implement 
the  EU  guidelines  in  this  field.  There  has  been  some  progress  in  the  area  of  drug  abuse 
prevention as regards measures to curb the supply of illicit drugs and also in the provision of 
needle exchange and substitution treatment in the framework of HIV prevention. There was 
no development in the area of alcohol consumption. 

Conclusion 

There has been some progress in the area of consumer and health protection. Efforts need to 
focus  on  implementing  the  existing  legislative  framework  and  further  aligning  with  the 
acquis.  Institutional  coordination  between  the  relevant  actors  and  administrative  capacity  in 

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both  the  areas  of  consumer  protection  and  public  health  need  to  be  strengthened.  Overall, 
preparations in the area of consumer and health protection are moderately on track.  

4.29.  Chapter 29: Customs union 

There has been good progress on customs legislation. The Serbian government amended the 
decree on customs tariff nomenclature in November 2011 with the aim of aligning it with the 
2012  EU  Combined  Nomenclature  and  with  the  liberalisation  schedule  of  the  Interim 
Agreement.  Serbia  increased  duty  relief  for  postal  packages  in  October  2011.  However,  the 
rules are still not fully in line with the acquis. The Law on the Customs Service remains to be 
established and the classification practice is to be upgraded to EU standards. 

Legislation  has  been  adopted  on  customs-related  security  initiatives,  including  authorised 
economic  operators.  This  legislation  remains  to  be  implemented.  A  regulation  on  the 
application  of  measures  for  the  protection  of  intellectual  property  rights  was  adopted. 
However,  the  Customs  Administration  of  Serbia  (CAS)  still  needs  to  utilise  fully  the 
electronic exchange of data with IPR holders. An adequate legislative framework on cultural 
goods  is  to  be  established.  The  provisions  on  cash  control  remain  to  be  aligned  with  the 
acquis. Preparations in the area of customs legislation are on track.  

There  has  been  some  progress  concerning  administrative  and  operational  capacity.  The 
CAS has continued to improve its administrative capacity to effectively enforce the customs 
legislation.  It  applied  integrity  procedures  for  customs  officials  and  stepped  up  the  fight 
against  corruption.  Post-clearance  controls  and  risk  analysis  systems  were  further 
strengthened  by  adopting  a  strategy  for  post-clearance  audit,  systematisation  of  procedures 
and setting up of an electronic database of customs offenders. Auditing has been reinforced 
and  the  central  customs  administration  has  been  authorised  to  carry  out  audits  of  individual 
customs  offices.  In  December  2011,  the  State  Audit  Institution  reported  on  faultless  2010 
financial  records  for  the  CAS  in  December  2011.The  coordination  between  CAS  and  the 
Ministry of Finance and Economy has also improved and new instructions have been issued 
on  cooperation  between  the  two  entities.  The  CAS  is  establishing  a  fully  functioning  IT 
system based on interconnectivity between its various departments. Around 90% of customs 
declarations  are  submitted  electronically  and  the  concept  of  electronic  signature  introduced. 
However,  the  Customs  Declaration  Processing  System  (CDPS)  should  be  renewed  or 
upgraded and a properly equipped and functioning customs laboratory is needed. 

In  terms  of  trade  facilitation,  the  CAS  implements  the  system  for  exchanging  pre-arrival 
information with Bosnia and Herzegovina, Montenegro and the former Yugoslav Republic of 
Macedonia.  It  continues  to  actively  engage  in  international  activities  concerning  the  fight 
against  illegal  trade  in  goods  (narcotics,  oil  and  cigarettes)  and  cross-border  movement 
control.  

Customs procedures between Kosovo and Serbia have stabilised further since the adoption of 
two  Belgrade-Pristina  dialogue  agreements  on  customs  stamps  and  integrated  border 
management (IBM). However, the situation at gates 1 and 31 remains complicated in terms of 
procedures to be applied. The Serbian side eventually signed the Implementation Protocol on 
IBM  in  September  2012,  but  it  has  yet  to  be  implemented.  In  the  meantime,  the 
Administrative Border/Boundary Line (ABL) between Kosovo and Serbia remains vulnerable 
to illicit activities. Trade in goods between Serbia and Kosovo remains handled by the Serbian 
Tax Administration and its Special Department and not by the Serbian customs. This includes 
most excise goods. Customs procedures to guarantee the application of the acquis at the ABL 
with Kosovo have yet to be introduced.  

Preparations in the area of administrative and operational capacity are on track. 

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Conclusion 

Serbia made good progress in the area of the Customs Union with the adoption of new laws 
and sustained efforts to enhance its administrative capacity, in particular in the audit and post-
clearance  sector.  Coordination  between  the  customs  administration  and  the  Ministry  of  the 
Economy and Finance in charge of customs policy needs to be further improved. Serbia also 
needs to ensure the proper application of the acquis at the ABL with Kosovo. Customs related 
security  legislation  should  be  implemented  and  the  CDPS  system  renewed  or  upgraded. 
Overall, preparations in the area of the Customs Union are well on track. 

4.30.  Chapter 30: External relations 

Some progress was made in the area of the common commercial policy. Serbia is in the final 
stage  of  the  procedure  for  joining  the  World  Trade  Organisation  (WTO).  However,  the 
finalisation  of  its  WTO  membership  remains  dependent  on  the  pace  at  which  bilateral 
negotiations  are  completed,  in  particular  with  Ukraine.  Serbia  also  needs  to  adopt  a  WTO-
compliant law on genetically modified organisms.  

The  Law  on  Foreign  Trade  Transactions  was  amended  in  November  2011  in  order  to 
harmonise  it  with  the  Law  on  Customs,  company  law  and  the  Law  on  Foreign  Exchange 
Transactions.  Regarding  organisational  changes,  the  group  for  the  foreign  trade  system  and 
the  Ministry  of  Foreign  and  Domestic  Trade  and 
safeguard  measures  within 
Telecommunications has experienced considerable downsizing. No decision introducing final 
safeguard measures against importers has been taken. No progress was registered in terms of 
administrative capacity for improved coordination between various ministries.  

Concerning  the  export  credits  scheme,  the  Serbian  Export  Credit  and  Financing  Agency 
continues to cover both short-term and medium-/long-term export credit insurance.  

In relation to dual-use export controls, Serbia continues to participate in relevant international 
fora  and  to  comply  with  the  European  Union  list  of  dual-use  goods  and  technologies.  The 
national control list for dual-use goods and military equipment was adopted and aligned with 
relevant acquis. However, administrative capacities in this area remain insufficient, requiring 
more staff and training. 

In the area of bilateral agreements with third countries, Serbia is currently negotiating a free 
trade  agreement  (FTA)  with  Ukraine.  The  renegotiation  of  its  trade  arrangements  with  the 
Russian  Federation  and  Belarus  are  ongoing,  since  the  two  countries  now  form  a  customs 
union with Kazakhstan. Serbia has ratified three more bilateral investment treaties (BITs) with 
Azerbaijan, Kazakhstan and Indonesia and has signed one with Algeria.  

Conclusion 

Some  progress  has  been  made  in  the  field  of  external  relations.  Accession  to  the  WTO  is 
pending the completion of bilateral negotiations. Overall, preparations in the area of external 
relations are moderately advanced. 

4.31.  Chapter 31: Foreign, security and defence policy 

Political  dialogue  through  regular  political  consultations  between  the  EU  and  Serbia 
continued  and  covered  foreign  policy  issues.  (Concerning  relations  with  other  enlargement 
countries and Member States, see Political criteria 2.3 — Regional issues and international 
obligations) 

As  regards  the  common  foreign  and  security  policy  (CFSP),  Serbia  has  significantly 
improved  its  record  of  alignment.  When  invited  to,  Serbia  aligned  itself  with  69  out  of  70 
relevant  EU  declarations  and  Council  decisions  (99%  alignment).  (As  regards  the 

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International Criminal Court, see Political criteria 2.3 — Regional issues and international 
obligations) 

Serbia continued to implement the UN Security Council’s restrictive measures. However, the 
Law  on  Restrictive  Measures  remains  to  be  adopted  together  with  a  system  for  tracking 
Serbia’s implementation of EU restrictive measures. 

Regarding conflict prevention no particular developments can be reported. 

Regarding  non-proliferation,  a  first  EU-Serbia  political  dialogue  at  working  level  on 
conventional  arms  issues  took  place  in  April  2012.  Serbia  applied  for  membership  of  the 
Nuclear  Suppliers  Group  in  2012.  Serbia’s  2008  application  to  join  the  Wassenaar 
Arrangement on export controls for conventional arms and dual-use goods and technologies is 
being processed. The National Coordinator for the implementation of the small arms and light 
weapons strategy was appointed in December 2011. An Action Plan for the implementation of 
this strategy remains to be adopted. Serbia has yet to fully align with the acquis laying down 
common rules governing exports of military technology and equipment. 

Serbia  continued  to  engage  actively  in  cooperation  with  international  organisations  (UN, 
OSCE, Council of Europe, etc.). It was designated in February 2012 for the chairmanship of 
the OSCE for 2015 and in June 2012 for the presidency of the 67th UN General Assembly. 

As regards security measures, in February 2012 Serbia ratified the May 2011 agreement with 
the EU on security procedures for exchanging and protecting classified information. 

Concerning  the  common  security  and  defence  policy  (CSDP),  in  February  2012  Serbia 
ratified the June 2011 agreement establishing a framework for Serbia’s participation in civil 
and  military  crisis  management  operations.  Serbia  participates  in  the  EU  Navfor-Atalanta 
Somalia operation and EUTM Somalia operation with one member each. Serbia attended the 
EU Battlegroups conference in April 2012. Following the granting of candidate status, Serbia 
started to participate in meetings of the EU Military Committee in March 2012.  

Conclusion 

Serbia significantly improved its alignment with EU declarations and Council decisions in the 
field of CFSP and showed continued commitment to participate in EU civil and military crisis 
management  operations.  Overall,  preparations  in  the  area  of  foreign,  security  and  defence 
policy are well on track. 

4.32.  Chapter 32: Financial control  

There  was  limited  progress  in  the  area  of  public  internal  financial  control  (PIFC). 
Implementing legislation on internal audit (IA) and financial management and control (FMC) 
was  further  aligned  with  international  standards  in  December  2011.  It  now  better  defines 
managerial  accountability  and  separation  of  the  roles  of  a  manager  and  an  accountant.  The 
Central  Harmonisation  Unit  (CHU)  continued  to  focus  on  technical  activities,  especially 
training and certification of internal auditors.  

However, the PIFC Policy Paper needs updating, because the action plan is largely outdated. 
Also the Budget System Law needs to be amended, especially regarding provisions on FMC 
and  inspection.  Managerial  accountability  and  FMC  are  still  understood  in  a  narrow  sense. 
FMC  focuses  on  the  legality  and  regularity  of  financial  transactions,  without  explicit 
consideration  of  economy,  efficiency  and  effectiveness.  More  awareness-raising  with  senior 
public  sector  managers  is  needed  to  increase  their  understanding  of  their  specific  role  and 
responsibilities  in  setting  up  internal  control  systems  and  of  the  role  of  an  internal  auditor 
within their organisation. Preparations in this area are at an early stage. 

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There was progress in the area of external audit. The State Audit Institution (SAI) continued 
to  gradually  build  up  its  capacities,  and  further  auditors  were  recruited  The  SAI  has  now 
approximately 130 staff, including over 100 auditors. A strategic development plan for 2011-
15  was  adopted  by  the  SAI  Council  in  November  2011.  The  SAI  continued  to  work  on 
improving audit methodology. It also further increased audit coverage. However, the SAI Law 
does not provide for full financial and operational independence in line with the standards of 
the International Organisation of Supreme Audit Institutions (INTOSAI). The SAI is still in 
the institution-building phase, as it has only operated for four years. It is under-resourced, and 
the  audit  coverage  is  still  rather  limited.  Performance  audit  work  has  not  yet  started.  In 
addition, according to the requirements of the SAI Law, the SAI continues to have a specific 
responsibility  to  submit  requests  for  filing  misdemeanour  and/or  criminal  charges  to  the 
competent  authority.  This  responsibility,  which  rather  should  be  part  of  wider  budget 
inspection activities, takes up some of the SAI’s limited resources that could be instead used 
for additional audit work. Preparations in this area are at an early stage. 

There was no progress in the area of protection of the EU’s financial interests. Serbia has 
not  yet  designated  an  authority  as  a  contact  point  for  cooperation  with  the  European 
Commission. Preparations in this area are at an early stage. 

There  was  limited  progress  in  the  area  of  protection  of  the  euro  against  counterfeiting. 
Serbian  authorities  continued  to  participate  in  relevant  EU  and  international  training 
programmes.  The  National  Bank  is  still  in  the  process  of  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. Preparations in this area are not very advanced. 

Conclusion 

Some  progress  was  made  in  the  area  of  financial  control,  particularly  as  regards  external 
audit.  Substantial  efforts  are  needed  to  develop  public  sector  financial  management  and 
control based on the underlying concept of managerial accountability. Overall, preparations in 
this chapter are still at an early stage. 

4.33.  Chapter 33: Financial and budgetary provisions 

No progress can be reported in the field of traditional own resources, the VAT resource and 
the GNI resource. (For progress in the underlying areas, see Chapters 16 — Taxation, 18 — 
Statistics, 29 — Customs union and 32 — Financial control)  

With regard to administrative infrastructure, the administrative capacity of the institutions 
in  the  underlying  policy  areas  needs  to  be  further  strengthened.  Also,  a  fully  operational 
coordination  structure  is  required  in  order  to  ensure  the  correct  calculation,  accounting, 
forecasting,  collection,  payment  and  control  of  own  resources  and  reporting  to  the  EU  for 
implementation of the own resources rules. Effective tools to fight tax evasion and fraud and 
reduce the informal economy need to be further developed.  

Conclusion 

There  has  been  no  progress  regarding  financial  and  budgetary  provisions.  The  necessary 
administrative  infrastructure,  including  coordination  and  organisational  and  procedural  links 
between various institutions involved in the own resources system, needs to be developed in 
due time. Overall, preparations in this area are at an early stage.  

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Statistical Annex 

STATISTICAL DATA  
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) 
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) 

Note

2001 
7 505 
77 474 

2007 
7 398 
77 474 

2008 
7 366 
77 474 

2009 
7 335 
77 474 

2010 
7 307 
77 474 

2011 
7 276 
77 474 

Note

2001 

2007 

2008 

2009 

2010 

2011 

762,178  2,276,886 2,661,387  2,720,084  2,881,891 3,175,025e
31 143e 
12 819 
4 280e 
1 708 
: 
: 
: 
: 
1.6e 
5.3 

32 679 
4 437 
8 940 
36 
3.8 

28 474 
3 849 
8 188 
33 
5.4 

28 952 
3 947 
8 340 
36 
-3.5 

27 968 
3 828 
8 406 
35 
1.0 

2.0 

3.5 

: 

: 

19.5 
24.6 
3.3 
52.6 
104.0 
10.7 
1.0 
25.6 
41.3 

2001 
94.3 

2001 
93.3 

2001 
282 
-2 602 
272 
7 
2 605 

652 
184 
-14 
: 

198 

2.3 

4.5 

: 

: 

10.1 
22.5 
5.1 
62.3 
96.9 
24.3 
4.7 
30.6 
56.5 

2007 
108.5 

2007 
6.5 

2007 
-5 053 
-7 069 
-261 
-599 
2 876 

166 
1 821 
-692 
-53 

1.0 

4.5 

: 

: 

10.4 
21.9 
5.5 
62.2 
97.1 
23.8 
6.0 
31.4 
58.2 

2008 
110.0 

2008 
11.7 

2008 
-7 054 
-8 501 
-185 
-922 
2 554 

163 
1 824 
-193 
-78 

: 

: 

: 

: 

9.4 
22.3 
4.8 
63.5 
99.6 
18.8 
-0.7 
29.4 
47.1 

2009 
96.1 

2009 
8.4 

2009 
-2 084 
-5 118 
18 
-502 
3 518 

197 
1 372 
-38 
-28 

: 

: 

: 

: 

9.9 
22.5 
4.6 
63.0 
99.8 
17.8 
-0.5 
36.0 
53.0 

2010 
98.5 

2010 
6.5 

2010 
-2 082 
-4 774 
5 
-670 
3 356 

193 
860 
-143 
-33 

: 

: 

: 

: 

10.4e 
23.0e 
4.7e 
61.9e 
: 
: 
: 
: 
: 

2011 
100.6 

2011 
11.0 

2011 
-2 968 
-5 514 
161 
-758 
3 143 

206 
1 827 
-122 
-84 

2 513 

2 018 

1 410 

1 003 

1 949 

Note

Note

Note

of which FDI of EU-27 countries in the reporting economy 

: 

1 813 

1 470 

808 

778 

1 690 

(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) 

Note

Note

1) 

2) 

3) 

2001 
: 
104.8 

2001 
85.6 
407.3 

2007 
-2.0 
31.2 

2007 
60.2 
197.3 

2008 
-2.6 
26.9 

2008 
64.5 
207.6 

2009 
-4.5 
34.0 

2009 
77.7 
265.3 

2010 
-4.7 
43.5 

2010 
85.0 
236.2 

2011 
-5.0e 
46.5e 

2011 
77.5e 
210.3 

975 

3 141 

2 717 

2 695 

2 401 

2 807 

1 141 

4 928 

4 459 

4 555 

3 891 

4 663 

2 101 

11 407 

11 198 

12 573 

12 899 

14 339 

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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) 

4) 

5) 

Note

6) 

Note

Labour market 
Economic activity rate (20-64): share of population aged 20-64 that 
is economically active (%) 
* Employment rate (20-64): share of population aged 20-64 in 
employment (%) 

Note

Employment rate male (20-64) (%) 
Employment rate female (20-64) (%) 

Employment rate of older workers (55-64): share of population 
aged 55-64 in employment (%) 
Employment by main sectors (%) 

Agriculture 
Industry 
Construction 
Services 

7) 
7) 
7) 
7) 

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 (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 (%) 

4 866 

10 771 

12 926 

14 863 

17 544 

18 995 

: 
16.9 
: 
59.458 

8.3 
12.5 
7.5 
79.964 

18.4 
20.3 
15.3 
81.441 

9.5 
12.0 
7.0 
93.952 

12.0 
14.0 
9.0 
103.043 

8.5 
12.3 
7.3 
101.950 

125.6 
: 

2001 
: 
: 
: 
103.1 
: 
: 

2001 
-2.7 

10.2 

69.6 
75.0 

2001 
: 

: 

: 
: 
42.1 

: 
: 
: 
: 
13.3 
11.5 
15.7 
46.4 

106.2 
9 634 

105.8 
8 162 

122.1 
10 602 

115.3 
10 002 

127.1 
12 058 

2007 
13 501.0 
6 615.0 
-6 886.0 
102.6 
58.1 
55.1 

2008 
14 316.0 
5 157.0 
-9 159.0 
97.6 
48.5 
51.4 

2009 
10 386.0 
4 094.0 
-6 293.0 
100.9 
46.7 
52.9 

2010 
12 475.0 
7 067.0 
-5 408.0 
99.6 
58.7 
54.8 

2011 
13 925.0 
8 058.0 
-5 868.0 
99.2 
59.0 
53.7 

2007 
-4.7 

7.1 

70.9 
76.5 

2007 
67.3 

55.2 

65.1 
46.5 
33.5 

20.8e 
23.4e 
6.1e 
49.7e 
18.3 
16.0 
21.2 
43.7 

2008 
-4.6 

6.7 

71.3 
76.6 

2008 
67.0 

57.8 

67.5 
48.9 
37.6 

25.1e 
19.9e 
6.3e 
48.6e 
13.6 
11.9 
15.8 
35.2 

2009 
-4.6 

7.0 

71.4 
76.7 

2009 
64.7 

54.1 

63.0 
46.4 
35.4 

23.9be 
20.1be 
5.2be 
50.8be 
16.3 
14.8 
17.8 
41.6 

2010 
-4.8 

6.7 

71.4 
76.6 

2010 
63.7 

51.2 

59.2 
43.5 
32.8 

22.3e 
21.0e 
5.0e 
51.7e 
19.2 
18.4 
20.2 
46.2 

2011 
-5.1 

6.3 

71.6 
76.8 

2011 
64.1 

49.2 

56.8 
41.7 
31.4 

21.2e 
21.5e 
5.3e 
52.0e 
23.0 
22.4 
23.7 
50.9 

9.0 

14.8 

9.7 

10.5 

13.3 

16.9 

Note
8) 
8) 

2001 
8 691.0 
118.4 

2007 
38 744.0 
266.1 

2008 

2009 
45 674.0  44 147.0b  47 450.0 
275.6b 

275.7 

277.4 

2010 

2011 
52 733.0 
277.9 

: 

12.6 

11.6 

9.3 

8.2 

8.5 

Note
9) 

2001 
184.2 
251.1 

2007 
199.7 
1 142.6 

2008 
201.8 
1 194.2 

2009 
223.2 
1 351.3 

2010 
214.3 
1 357.0 

2011 
230.5 
1 399.4 

Note

Note

2001 
49.2 
370 

2001 
2.4 

: 
: 

2007 
49.2 
370 

2007 
3.5 

: 
26.0 

2008 
49.2 
465 

2008 
3.6 

0.4 
33.2 

2009 
49.3 
495 

2009 
3.8 

0.9 
37.0 

2010 
49.3 
495 

2010 
3.7 

0.8 
39.0 

2011 
49.3 
595 

2011 
: 

: 
41.2 

EN 

66 

   EN 

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

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

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

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

Note

Note

10) 
10) 
10) 
11) 

12) 

2001 
: 
: 

43.3 

13.8 

2001 
: 
: 
: 
: 
: 
: 
31.0 

2001 
118.0 

5 077 
1 128 
3 587 
1 612 
1 594 

2007 
: 
660.7 

37.9 

15.9 

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

2007 
92.0e 

5 053 
1 087 
3 832 
1 756 
1 562 

2008 
: 
: 

35.1 

16.3 

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

2008 
108.0 

5 055 
1 057 
3 594 
1 760 
1 548 

2009 
: 
: 

39.3 

23.6 

2009 
9 487 
676 
7 330 
232 
5 046 
14 657 
38.0 

2009 
101.0 

5 057 
1 002 
3 631 
1 647 
1 488 

2010 
: 
: 

37.4 

27.8 

2010 
9 876 
929 
7 226 
342 
6 320 
15 093 
38.0 

2010 
99.4 

5 052 
938 
3 489 
1 604 
1 471 

2011 
: 
: 

: 

30.5 

2011 
: 
: 
: 
: 
: 
: 
: 

2011 
100.9 

5 056 
937 
3 287 
1 590 
1 445 

9 001 

6 212 

8 833 

9 111 

9 280 

9 066 

1 806 

3 206 

2 300 

2 798 

3 325 

2 822 

1 283 

1 128 

1 277 

1 257 

1 314 

1 305 

: = not available 
- = not applicable 
p = provisional 
e = estimated value 
b = break in series 
* = Europe 2020 indicator 
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) 

The money supply M1 consists of currency in circulation and funds in gyro, current and other accounts belonging to the owners of 
money  balances  in  banks’  liabilities,  including  money  balances  in  the  accounts  of  local  government  bodies,  i.e.  Accounts  from 
which payments can be made with any restrictions. 
The money to M1, supply M2, in addition includes other dinar deposits, both short-and long-term. 
The  money  supply  M3,  in  addition  to  M2,  includes  short-and  long  term  foreign  currency  deposits  (without  the  so  called  frozen 
foreign currency savings. 
The annual average exchange rate is calculated as an arithmetic mean of official middle exchange rates of the national currency 
(dinar) against a unit of foreign currency applied on working days.  
Index of nominal effective exchange rate adjusted for the ratio of domestic consumer price index to the weighted sum of indices of 
consumer prices in the euro area and US. 
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 were provided according to NACE Rev. 1.1.  
From January 2009, the Statistical Office of the Republic of Serbia is expanding the coverage of units. Besides the salaries and 
wages  paid  to  legal  entities’  employees,  from  January  2009,  salaries  and  wages  paid  to  employees  working  in  unincorporated 
enterprises have been also included in calculation of average salaries and wages.  
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 was before).  
In million litres, includes cows and sheep milk. 
No rice production; since 2005, triticale is included. 

2) 
3) 

4) 

5) 

6) 

7) 
8) 

9) 
10) 
11) 
12) 

EN 

67 

   EN