Source: EURLEX
Language: en
Format: md

*|*

# 52014SC0302

**COMMISSION STAFF WORKING DOCUMENT SERBIA 2014 PROGRESS REPORT Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Enlargement Strategy and Main Challenges 2014-2015 /\* SWD/2014/0302 final \*/**

  

TABLE OF CONTENTS

1............ Introduction. 3

1.1......... Preface. 3

1.2......... Context 3

1.3......... Relations between the EU
and Serbia. 3

1.4......... Normalisation of
relations between Serbia and Kosovo. 5

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

2.1......... Democracy and the rule
of law.. 7

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

2.3......... Regional issues and
international obligations. 14

3............ Economic criteria. 16

3.1......... The existence of a
functioning market economy. 16

3.2......... The capacity to cope
with competitive pressure and market forces within the Union. 21

4............ Ability to take on
the obligations of membership. 22

4.1......... Chapter 1: Free movement
of goods. 22

4.2......... Chapter 2: Freedom of
movement for workers. 24

4.3......... Chapter 3: Right of
establishment and freedom to provide services. 24

4.4......... Chapter 4: Free movement
of capital 24

4.5......... Chapter 5: Public
procurement 25

4.6......... Chapter 6: Company law.. 26

4.7......... Chapter 7: Intellectual
property law.. 26

4.8......... Chapter 8: Competition
policy. 27

4.9......... Chapter 9: Financial
services. 27

4.10....... Chapter 10: Information
society and media. 28

4.11....... Chapter 11: Agriculture
and rural development 29

4.12....... Chapter 12: Food safety,
veterinary and phytosanitary policy. 30

4.13....... Chapter 13: Fisheries. 31

4.14....... Chapter 14: Transport
policy. 31

4.15....... Chapter 15: Energy. 32

4.16....... Chapter 16: Taxation. 34

4.17....... Chapter 17: Economic and
monetary policy. 34

4.18....... Chapter 18: Statistics. 35

4.19....... Chapter 19: Social policy
and employment 35

4.20....... Chapter 20: Enterprise and
industrial policy. 37

4.21....... Chapter 21: Trans-European
networks. 38

4.22....... Chapter 22: Regional
policy and coordination of structural instruments. 39

4.23....... Chapter 23: Judiciary and
fundamental rights. 39

4.24....... Chapter 24: Justice,
freedom and security. 50

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

4.26....... Chapter 26: Education and
culture. 55

4.27....... Chapter 27: Environment
and climate change. 56

4.28....... Chapter 28: Consumer and
health protection. 58

4.29....... Chapter 29: Customs union. 59

4.30....... Chapter 30: External
relations. 60

4.31....... Chapter 31: Foreign,
security and defence policy. 61

4.32....... Chapter 32: Financial
control 61

4.33....... Chapter 33: Financial and
budgetary provisions. 62

Statistical Annex. 64

1.
Introduction
1.1.
Preface

The
Commission reports regularly to the Council and Parliament on the progress made
by the countries of the Western Balkans region towards European integration,
assessing their efforts to comply with the Copenhagen criteria and the
conditionality of the Stabilisation and Association Process.

This
progress report, which largely follows the same structure as in previous years:

–   briefly
describes the relations between Serbia and the European 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 European
Union.

This
report covers the period from October 2013 to September 2014. 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
sources have been used, including contributions from the government of Serbia,
the EU Member States, European Parliament reports[1] and
information from various international and non-governmental organisations.

The
Commission draws detailed conclusions regarding Serbia in its separate
communication on enlargement,[2]
based on the technical analysis contained in this report.

1.2.
Context

The
European Council granted the status of candidate country to Serbia in March
2012 and decided to open accession negotiations in June 2013. Accession
negotiations were formally launched in January 2014. The Stabilisation and
Association Agreement between Serbia and the EU entered into force in September
2013.

1.3.
Relations between the EU and Serbia

Following
the adoption of the framework for accession negotiations with Serbia by
the Council in December 2013, the first Intergovernmental Conference with
Serbia was held in January 2014. The analytical examination of the EU acquis
(screening process) started in September 2013. In line with the new approach
for the chapters on judiciary and fundamental rights, together with justice,
freedom and security, the screening meetings for these chapters took place from
September to December 2013. 15 chapters have been fully screened and screening
of 9 more chapters have started. Overall, the screening exercise is expected to
be completed in 2015.

Serbia is
participating in the Stabilisation and Association Process.

Following the
entry into force of the Stabilisation and Association Agreement (SAA),
the inaugural Stabilisation Association (SA) Council met in October 2013. Serbia
has continued to build a satisfactory track record in implementing the
obligations of the SAA. The protocol on the adaptation of
the SAA,
to take account of Croatia’s accession to the EU, was signed in June 2014; pending
its ratification, the protocol is applied on a provisional basis with effect
from 1 August 2014. Further efforts are needed in particular in the area
of state aid control, especially to ensure the
operational independence of the Serbian Commission for State Aid Control and to
repeal the exemption of enterprises under privatisation from state aid rules.

Regular
political and economic dialogue between the EU and the country has continued. The
SA Committee met in March and seven sub-committee meetings were held. Serbia
participates in the multilateral economic dialogue with the Commission and EU
Member States to prepare the country for participation in multilateral
surveillance and EU economic policy coordination. As part of the new approach
to economic governance, this exercise resulted in a number of targeted policy
recommendations endorsed by the Economic and Financial Affairs Council in May.
Serbia is expected to follow up on these recommendations in the course of the
year. A Special Group on Public Administration Reform was established under the
SAA.

The SA
Parliamentary Committee (SAPC) met for the first time in November 2013 in
Belgrade. The composition of the EU-Serbia Inter-Parliamentary Committee was
renewed in May. The European Parliament adopted an opinion on the Commission’s
progress report on Serbia in January. Local and regional representatives from
the EU countries and Serbia met in May in the framework of the Committee of the
Regions’ Working Group on the Western Balkans to discuss EU-Serbia relations,
their impact on the role of local authorities and the state of local democracy
in the process of EU accession. In December, the Serbian parliament adopted a
resolution on its role in the accession negotiations.

Visa
liberalisation for citizens of Serbia travelling to the Schengen
area has been in force since December 2009. As part of the
monitoring mechanism in place since visa liberalisation, the Commission has
been regularly assessing the progress made by the country in implementing
reforms introduced under the visa roadmap. The monitoring mechanism also
includes an alert mechanism to prevent abuses, coordinated by Frontex. The
Commission has regularly submitted its post-visa liberalisation monitoring
reports to the European Parliament and the Council. The next report will be
presented by the end of 2014. A visa-waiver suspension mechanism
entered into force in January 2014. On this basis, EU Member States can request
the Commission, in an emergency situation and as a measure of last resort, to
examine the possibility of temporarily suspending the visa waiver for
third-country nationals. A readmission agreement between the European
Union and Serbia has been in force since 2008.

The
EU has provided financial assistance to Serbia under the Instrument for
Pre-accession Assistance (IPA) for the period 2007-2013, with a total
allocation to Serbia of € 1.4 billion. The IPA National Programme 2013
amounts to € 178.8 million overall with most of the funding supporting
justice and home affairs, private sector development, and environment, climate
change and energy.

In March, the
Commission granted conferral of management powers to Serbia. Part of the IPA
2013 national programme will be implemented for the first time under
decentralised management by the national authorities.

Under IPA II,
Serbia will continue to benefit from pre-accession assistance for the period
2014-2020 with a total indicative allocation of € 1.5 billion. An
indicative strategy paper for the years 2014-2020, drafted in partnership with
Serbia and in consultation with all relevant stakeholders, was adopted by the
Commission in August. Over this period, IPA will aim at supporting
reform efforts in direct line with the negotiation process, in particular in
the area of rule of law and governance, as well as competitiveness and growth,
including key investments for economic development.

In July, the
Commission hosted a donors’ conference for Bosnia and Herzegovina and Serbia,
co-organised with France and Slovenia. Total pledges for Serbia amounted to € 986
million of grants and soft loans out of which € 80 million grants from the
EU budget.

Serbia continues
to benefit from support under the IPA multi-country and regional programmes and
to participate in cross-border cooperation programmes with neighbouring Western
Balkan countries and in trans-national cooperation programmes with Member
States under the European Regional Development Fund and the IPA Adriatic
cross-border programme.

Serbia
participates in the following EU programmes: the Seventh Research
Framework Programme, Progress, the Competitiveness and Innovation Framework
Programme, Culture, Safer Internet, Lifelong Learning, Europe for Citizens,
Customs and Fiscalis. Serbia has also recently concluded or is in the process
of concluding new agreements for a number of programmes, including: Horizon
2020, Competitiveness of Enterprises and Small and Medium-sized Enterprises,
Erasmus+, Creative Europe and Employment and Social Innovation. Serbia has applied
for observer status in the EU Fundamental Rights Agency.

1.4.
Normalisation of relations between Serbia and Kosovo\*

Serbia
and Kosovo have remained engaged in the EU-facilitated dialogue, but progress
has markedly slowed down since March 2014. Early general elections were held in
Serbia in March and in Kosovo in June. Six high-level meetings attended by both
Prime Ministers were held between September 2013 and March 2014. Work continued
throughout the reporting period at technical level.

As a result of
intense work in the first months of the reporting period there has been
progress in the implementation of the agreements reached in the dialogue, in
particular the April 2013 ‘First agreement of principles governing the
normalisation of relations’. For the first time, local elections were held
Kosovo wide with the facilitation of the OSCE in November 2013 (and repeated in
North Mitrovica in February 2014) and, again for the first time, municipalities
in the north of Kosovo were inaugurated in conformity with Kosovo law. Kosovo
Serbs from both north and south of the Ibar river took part in the early
general elections in June 2014. The establishment of the Association/Community
of Serb majority municipalities is still pending. There has been progress in
the dismantling of the Serbian structures on police and justice. Serbia took
measures to facilitate the integration of the police and judiciary following
the adoption of an amnesty law by Kosovo. Integration has been completed as
concerns police officers, while integration of other Serbian Ministry of
Interior personnel is still pending. An agreement in principle has been reached
regarding the judiciary, but its finalisation and implementation are still
pending. Integration of civil protection personnel is also pending.

Some progress
has been made in other important areas. Serbia played a constructive role in
ensuring Kosovo’s participation in the South-East European Cooperation Process
(SEECP) at the Bucharest summit in June 2014. Nevertheless, the implementation
of the agreement on representation and participation of Kosovo in regional forums
continued to be problematic. Preparation for the implementation of the energy
and telecoms agreements reached in September 2013 has continued, leading up, in
the energy sector, to the signing of an inter-TSO agreement, together with the
approval of an action plan, in September 2014.

As concerns the
north of Kosovo, a development fund has been set up to collect revenue at the
northern crossing points. It has received over € 2.9 million to date, but
its board has yet to decide on its use. Implementation of the freedom of
movement arrangements has allowed the use of Serbian and Kosovo ID cards by
residents to enter and exit both Serbia and Kosovo. An agreement was reached to
allow residents in Kosovo to use their ID cards to travel to third countries
through Serbia via six border crossing points. The setting-up of new roadblocks
on the north side of the main Mitrovica bridge in June 2014 increased tensions.
Despite an agreement by both sides on the need for a joint solution, the roadblocks
known as the ‘Peace Park’ are still in place. Kosovo and Serbian insurance
bureaus have defined the parameters for a commercial agreement on mutual
vehicle insurance cover between Serbia and Kosovo. This progress should now be
confirmed by means of a signed agreement.

Implementation
of other agreements has continued, albeit at a slower pace. Regarding IBM, the
six joint interim crossing points have continued to be operational and
technical agreements on the exact locations and on draft layouts of the
permanent IBM crossing points were reached. However, illegal crossing roads/
by-passes, in particular in the north of Kosovo, continue to be regularly used
to smuggle substantial amounts of goods, as reported by EULEX. Additional
measures need to be taken by Serbia to stop illegal crossings.

As concerns
cadastre, Serbia continues to implement the pilot project, but legislation
necessary to implement the agreement is still pending in Kosovo. The copying of
Kosovo civil registry books located in Serbia has been successfully completed.
The implementation of the agreement on acceptance of university diplomas has
had limited results. The certification of diplomas by the European University
Association has progressed well and 387 diplomas have been certified. However,
Serbia has accepted only five certified diplomas so far, following an
additional nostrification process. The deployment of liaison officers has had
limited impact.

Serbia has
continued to cooperate with EULEX, especially on war crimes, but legal cooperation
on the fight against organised crime needs to improve significantly. Criticism
of the handling by EULEX of several criminal cases against Kosovo Serbs is
counterproductive. The Serbian authorities should refrain from statements
undermining the rule of law. Kosovo needs to continue the good cooperation with
EULEX.

The Serbia
Constitutional Court judged the form in which some dialogue agreements have
been transposed unconstitutional. Serbia needs to find legal solutions for the
implementation of agreements that are sustainable over time and not vulnerable
to legal challenges.

Overall,
Serbia and Kosovo have remained engaged in the dialogue and committed to the
implementation of the April 2013 First agreement of principles governing the
normalisation of relations and other agreements reached in the dialogue,
leading to irreversible changes on the ground. However, progress has slowed
down. Early general elections were held in both Serbia and Kosovo. New momentum
needs to be generated to tackle key outstanding issues and open a new phase in
the normalisation of relations. Progress in this area remains essential for
advancing the European future of both Serbia and Kosovo.

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.

2.1.
Democracy and the rule of law

Constitution

The
Constitution is largely in line with European standards. Some provisions remain
to be put in line with the recommendations of the Venice Commission, in
particular concerning the role of parliament in judicial appointments, the
political parties’ control over parliamentary office, the independence of key
institutions and the protection of fundamental rights, including data
protection.

Overall,
constitutional changes should be considered early on in the new legislature, to
address issues of importance for the accession negotiations from the outset.

Elections

The coalition
agreed to hold early parliamentary elections in March, together with a
by-election in Belgrade. The turnout was 53 %. The list of the Serbian
Progressive Party (SNS), led by Aleksandar Vučić, obtained a
majority, with 158 seats out of 250, and the list of its main coalition
partner, the Socialist Party of Serbia (SPS), led by outgoing Prime Minister
Ivica Dačić, obtained 44 seats. Of the opposition parties, the
Democratic Party (DS) obtained 19 seats, while 18 seats went to the New
Democratic Party (NDS), newly founded by former president Boris Tadić.
Three parties representing national minorities obtained eleven seats. None of
the parties critical of the EU reached the necessary threshold of 5 %.
Women continue to comprise a third of all MPs. The opposition chairs 4
committees out of 19 standing committees, including the one on European
integration.

According to
international observation bodies, the elections were inclusive and transparent,
with a genuine choice offered to voters and effective procedures. The campaign
was peaceful overall, although isolated incidents and cases of voter
intimidation were reported. The legal framework is generally in line with
international standards. The OSCE’s Office for Democratic Institutions and
Human Rights (OSCE/ODIHR) noted that some of its previous recommendations
remained unaddressed, in particular those pertaining to transparency of
campaign financing and of the electoral process. It also found that media
reporting was insufficiently analytical and was influenced by the political
parties in power, including through public funding, which led to widespread
media self-censorship. A review by the Anti-Corruption Agency of electoral
campaign financing faced a lack of government cooperation in providing the data
necessary to scrutinise possible misuse of public funding for election
purposes.

Overall,
elections were inclusive and transparent, with a genuine choice offered to
voters and effective procedures. Attention should be given early on in the new
legislature to the OSCE/ODIHR recommendations with a view to revising the
electoral framework and provisions on financing political parties and electoral
campaigns before the next elections.

Parliament

Early
elections in March meant that institutional activity in parliament was
suspended from January until April but it regained momentum as of May and
parliament enacted several important laws, including on labour, bankruptcy,
privatisation and on media. All were however adopted under urgent procedure
with limited possibility for parliamentary debate. Parliament adopted a
resolution in December 2013 aiming at its close involvement in the accession
negotiations process, together with other stakeholders, including civil
society, and a decision in August further regulating the internal consultation
procedure on government draft negotiating positions. Regarding its oversight
activities, parliament remained engaged in public hearings and oral questions.
In April, the ad hoc enquiry committee on Serbian budget spending in
Kosovo issued its report, which remains to be debated and followed up in
plenary. The already extensive use of urgent procedures, which limit the time
for scrutiny of draft legislation, further increased, in part to make up for
the time lost because of early elections. A smoother and more trusting
relationship has yet to be established with independent regulatory bodies and a
more proactive approach taken to examine and promote their findings and
recommendations, including by organising an effective debate on their reports.
Allocation of resources should not be misused by parliament to exert control
over these bodies.

Overall, the
legislative activity was partly held up by the early elections but regained
momentum afterwards, albeit with a further increase in the use of urgent
procedures. Parliament continued to perform oversight activities but still
needs to develop a genuine relationship with independent regulatory bodies,
supporting their independence and promoting their findings.

Government

Following the
early parliamentary elections, the new government of Prime Minister Aleksandar
Vučić (SNS) took office at the end of April, renewing the coalition
between the SNS, SPS lists, and extending it to the Alliance of Vojvodina
Hungarians and other junior parties. The government is based on an
unprecedented wide majority of close to 80 % of seats in parliament. It
consists of 19 ministers, including four women. A deputy prime minister now
oversees public administration and local self-government, while there is no
longer a minister in charge of Kosovo. The new government remains fully committed
to EU integration and to continuing the EU-facilitated dialogue with Pristina;
it aims as a priority to conduct an ambitious economic reform programme and to
further intensify the reforms relating to the rule of law, in particular the
reform of the judiciary, fight against corruption and organised crime.

Under the
leadership of its Chief Negotiator and with the effective support of the
Serbian European Integration Office (SEIO), the Serbian government has so far
demonstrated a high level of preparedness and engagement in the screening
process of the EU acquis. A National Convention on the European Union
was set up as a platform for cooperation with civil society in the accession
negotiation process in June. It gathers around 200 civil society organisations structured
in 21 working groups, covering all 35 negotiating chapters. In February, the
government adopted an action plan to address the findings of the 2013 Progress
Report and in July revised the National Plan for the Adoption of the Acquis
(NPAA) for the period 2014-2018. Further efforts are needed to ensure closer
and consistent involvement of parliament and civil society in the accession
process. Greater coordination of sectoral policies and anticipation of their
financial implications will be key ingredients in a coherent approach to the
negotiations.

Although public
consultations have been slightly further developed in the legislative process,
they remain to be conducted more extensively and under more realistic timelines
to enable interested parties to provide qualitative input. This is especially
needed for draft legislations of high economic and social impact to improve the
social dialogue, which has deteriorated over the reporting period. Effective
monitoring of the implementation of enacted legislation and strategic documents
needs to be strengthened with a view to anticipating and addressing delays and
bottlenecks. The government still needs to develop its understanding of the
role of independent regulatory bodies and to guarantee that these bodies have
appropriate resources to perform their role effectively. Finally, systematic
follow-up of their findings should be ensured.

As regards local
self-government, a revised Statute for Vojvodina was proclaimed in May as a
result of a consensual and collaborative process in the state parliament and
the provincial assembly, effectively following up the Constitutional Court
ruling of December. The law on Vojvodina’s resources has yet to be adopted as
prescribed by the Constitution. Administrative and management capacity at local
level remains weak and significant disparities between municipalities persist.
The National Council for Decentralisation and the inter-ministerial Municipal
Finance Commission remained inactive and none of the tools needed to monitor functions
delegated to municipalities have so far been developed. The legislation on
municipal finance needs to be properly implemented with regard to calculation
of the transfers earmarked by line ministries. Consultation of local
authorities on new legislation that has local implications remains limited.

Overall, the
Serbian government remained actively engaged towards the goal of EU accession
throughout the last period, irrespective of early elections in March and
demonstrated preparedness and engagement in the first phase of the negotiations
process. Involvement of the parliament and other stakeholders, including the
civil society, needs to be strengthened. Independent regulatory bodies’
recommendations need to receive proper follow-up and their independence needs
to be fully respected. The government needs to develop its capacity to
anticipate the financial implications of policies and new legislation and to
effectively monitor the implementation of enacted legislation. The legal
framework for local self-government remains to be improved and further
implemented.

Public
administration

With the
adoption of a new public administration reform strategy in January 2014, Serbia
has a more comprehensive strategic framework for public administration
reform in place. The strategy covers organisational policy at central and
local level, including decentralisation; policy planning and coordination;
e-government; public service and human resources management; public financial
management relating to budgeting, internal control and public procurement;
legal certainty and public services, including administrative procedures;
transparency and openness of the public administration. The strategy needs to
be accompanied by the identification of activities in an action plan, which is
being finalised under the leadership of the new Ministry of State
Administration and Local Government in cooperation with all key stakeholders.
As concerns political leadership for the reform, the Public Administration
Reform Council met in August 2014 in a renewed composition under the leadership
of the Prime Minister. A special group on PAR was established
as a forum for policy dialogue between the Commission and Serbia in the
framework of the SAA.

The
recent establishment of the Secretariat for Public Policies has the potential
to substantially improve policy development and coordination at the
centre of government. This area has presented a considerable challenge to
Serbia, not the least in Serbia’s EU accession process. There are weak links
between the government’s programme and its annual work plan, and a lack of
consistency among ministries’ policies and plans. Serbia has an excessive
number of national strategies (91 sector and 14 multi-sector strategies) of
varying quality and with frequent overlaps. Neither strategies nor action plans
usually contain assessments of their impact on the national budget. Regulatory
impact assessments are also underdeveloped. Laws are often passed without a
sufficiently comprehensive assessment of the policy and budgetary impact,
resulting into inefficiencies in the implementation and enforcement of
legislation.

Concerning
public service and human resources management, recruitment, both for
senior and middle management positions, continues to be an issue of serious
concern, as, in 2013, a substantial proportion of recruitments (60 %) was
not based on open competitions. The current legal framework and its uneven
application leave room for undue influence in the recruitment process.
Administrative and management capacity at local level continues to be weak and
significant disparities between municipalities persist. In the absence of
specific legislative framework, public employees at local level are governed by
general labour legislation. Training needs to be given more importance in
professional development. The civil service legal framework is being revised.
Amendments to laws regulating the state administration and public services were
introduced in September, as an initial step towards further progress in the
establishment of an adequate merit-based civil service system, as regards
selection, appointment, training, evaluation, remuneration and dismissal of
civil servants and other state employees. Substantial changes in recruitment
practices are needed to establish a merit-based professional public
administration both at central and local level. This should include well
defined criteria for appraisal and career development for civil servants.
Internal control should be reinforced. Laws regulating the status of local government
employees and their salaries, and the training strategy for local government,
are still pending. Independent regulatory bodies still lack a consistent
regulatory framework for their establishment and functioning in the area of
human resources.

There has been
no progress with regard to accountability and service delivery. A
new Law on General Administrative Procedures remains to be adopted. The Law on
Administrative Disputes has not yet been fully aligned with European standards
for judicial review of administrative acts.

Serbia is
committed to engaging in a more comprehensive public financial management
reform. This area is acknowledged to be an important aspect of public
administration reform and is partly covered under the new public administration
reform strategy. The Ministry of Finance has engaged in a public
expenditure and financial accountability assessment and is in parallel
preparing a public financial management reform programme which aims to sequence
the reform actions in different parts of the public finance system. The reform
programme is expected to address a number of challenges that Serbia faces,
including improvement of revenue administration and tax collection, transition
to a medium-term expenditure framework and multi-year programme budgeting, more
efficiency in debt management policy, in accounting and reporting, in public
procurement, in public internal financial control, anti-fraud measures and
external audit.

Overall, the
adoption of the new public administration reform strategy, a new dedicated
Ministry for Public Administration and Local Government, and the increased
focus on policy planning and coordination following the establishment of the
Secretariat for Public Policies, represent initial positive steps towards more
efficient public administration. Sound implementation of the reform strategy
together with strong political impetus and mechanisms are needed to move
towards a transparent and merit-based public service system. Lack of
transparency in recruitment and politicisation of public administration
employees remain an issue of concern. Serbia has started to take steps towards
a more comprehensive public financial management reform programme in order to
ensure economy, efficiency and effectiveness in the use of public funds.

Ombudsman

The
State Ombudsman continued to be active and recorded an increase in the number
of citizens’ complaints, related mostly to economic, social and cultural rights
and administrative procedures. There was a decline in the follow-up of the
Ombudsman’s recommendations by the authorities, especially those requiring
systematic changes. The constitutional position of the Ombudsman needs
strengthening. The Ombudsman should be allocated sufficient resources and, in
general, his office’s independence needs to be better respected and understood.

Civilian
oversight of the security forces

The
parliamentary committee for oversight of the security forces extended its
regular review of activities to the reports of the Inspector General of the
Ministry of Defence, beyond the ones of the Security-Information Agency (the
BIA) and military services. In November, the committee held a joint closed
session with the committee for defence and internal affairs about the
activities of extremist organisations and sport hooligans. The committee had a
field visit to BIA in July 2014. Following a Constitutional Court ruling in
December, the Law on the BIA was amended in June to give judges responsibility
for making decisions on exceptions to the principle of absolute confidentiality
of letters and other means of communication. The Ombudsman reiterated the need
to adopt a new law on the BIA, to review the current regulations giving the
security services responsibilities for criminal proceedings and the use of
special measures. A law on access to state security files still needs to be
adopted.

Civil
society

An
empowered civil society is a crucial component of any democratic system and
should be recognised and treated as such by the state institutions. The civil
society sector in Serbia has continued to grow, especially at local level.
Civil society organisations and human rights defenders continued to play a key
role in raising awareness about civil and political rights in a climate often
hostile to their activities, in particular when they express critical views.
Their activities took place against increased campaigns often targeting
individuals in tabloid media and threats from extremist organisations. A more
visible political commitment to promoting a culture of respect and raising
awareness is needed. The authorities have taken steps to involve civil society
in the accession process at regular intervals. A National Convention on the
European Union was set up as a platform for cooperation with civil society in
the accession negotiation process in June. The Office for Cooperation with
Civil Society improved its management capacity and played an important role in
ensuring civil society participation in the screening process. The government
adopted in August guidelines for the participation of civil society in the
legislative process. Those instruments and mechanisms need to be consistently
implemented throughout, and the transparency over public budget expenditure for
civil society increased.

Judicial
system

First steps were
taken in the implementation of the 2013-2018 strategy on judicial reform and
its related action plan, aiming at ensuring structural and sustainable changes
with a view to an impartial, independent and efficient judiciary. Intensive
legislative activities took place. Appraisal rules for judges and prosecutors
were adopted. An important number of Court Presidents were appointed on a
permanent basis. The implementation of the new public notaries system remains
to be further assessed. Several important laws (i.e. on free legal aid and on
mutual legal assistance) and constitutional amendments remain to be
adopted. Delays in adopting key measures under the implementing action
plan reveal the urgent need for effective implementation of the reforms backed
by strong monitoring and coordination mechanisms. The Strategy Implementation
Commission, which should be instrumental in moving forward the judicial reform,
needs to play a more proactive role so as to anticipate delays in
implementation and to adopt corrective measures in due time.

Considerable
challenges remain regarding independence, impartiality, accountability,
efficiency and access to justice, including primarily through the revision of
the Constitution. Attention should further focus on (i) adopting clear rules
for the appointment of Court Presidents, (ii) implementing merit-based
recruitment (iii) tackling the significant backlog of cases and adopting a case
weighting methodology allowing for equal and fair distribution of cases. Beyond
legal steps, significant efforts are required to back these reforms with
appropriate financial resources to produce effective results.

Finally,
inclusive consultation of major stakeholders and main users of the judiciary
system is not systematically ensured. Such consultation would contribute to
reinforcing the accountability and independence of the judiciary as a whole and
to ensure ownership of the new reforms by main practitioners.

Serbia’s ability
to deliver on the implementation of the national
judicial reform strategy and action plan in good time and to
enforce clear
measures conducive to a more predictable and sustainable judicial environment will
provide a clear indication of its ability to move forward on its path to
accession.

For a
detailed analysis of the developments in the judicial system, see Chapter 23
— Judiciary and fundamental rights.

Fight
against corruption

There is a
strong political impetus to fight corruption. Serbia further implemented the recommendations
of the Group of States against Corruption (GRECO). The implementation of the
national strategy on the fight against corruption for the period 2013-2018 and
its related action plan have yet to mirror the strong political impetus to
fight corruption. Several measures were delayed and key developments are
expected in the short to medium term, in particular laws on whistle-blower
protection and legislative changes in the field of conflicts of interest.
Monitoring and coordination mechanisms for the implementation of the national
anti-corruption strategy and action plan have yet to yield results. A track
record on effective verification of asset declarations and checks on party
funding needs to be established. Corruption remains prevalent in many areas.
Significant efforts are needed not only to enhance and fully enforce the legal
framework for the fight against corruption but also to back these reforms with
appropriate resources. Inclusiveness of stakeholders throughout the process
should be guaranteed.

The new
inter-ministerial coordination mechanism put in place in August is a
positive initial step but its impact on the ground remains to be assessed.
Attention needs to be paid to providing the Anti-Corruption Agency and
Anti-Corruption Council with sufficient resources and to ensuring the follow-up
to their proposals and recommendations.

Final
convictions, especially for high-level corruption, remain rare. Further efforts
are needed to establish a convincing track record of investigation, prosecution
and final convictions. A sustainable solution is needed to address the excessive
recourse to the provision on abuse of position in the private sector in the
criminal code. The review of the economic section of the criminal code needs to
be completed without delay.

Finally,
repeated leaks to the media about ongoing investigations, in breach of the
presumption of innocence, are an issue of serious concern.

For a
detailed analysis of developments in the area of anti-corruption policy, see
Chapter 23 — Judiciary and fundamental rights.

Fight
against organised crime

Serbia
actively participated in regional law enforcement cooperation, which led to
effective results in the fight against organised crime and in particular to a
high-profile arrest in connection with organised crime groups. However, there
is no overarching strategic threat assessment of organised crime in the country
and final convictions remain rare. Additional efforts are needed to
systematically carry out financial investigations in parallel with complex
criminal investigations. Intelligence-led policing based on crime mapping and
systematic use of threat assessments remain to be developed. The
dependence of the police on the security and intelligence agencies to carry out
certain special investigative measures in criminal investigations remains a
matter of serious concern and should be addressed urgently.

The
witness protection unit needs adequate staff, equipment and premises to be
fully operational and create a confidence-building environment for witnesses
and victims. Serbia remains a country of origin, transit and destination for
trafficking in human beings, and for sexual and labour exploitation. Both the
institutional framework and shelter capacity should be considerably enhanced to
ensure that the fight against trafficking in human beings is deterrent and
sustainable. Finally, thorough rationalisation of the Ministry of Interior,
including reorganisation of its human resources management, is advisable to
increase efficiency in fighting crime. The introduction of transparent and
merit-based criteria for recruitment and career advancement is crucial, as is
more specialised training. Organised crime remains a serious concern in Serbia.

For a
detailed analysis of developments in the fight against organised crime, see
Chapter 24 — Justice, freedom and security.

2.2.
Human rights and the protection of minorities

The
legislative and institutional framework for observance of international human
rights law is in place. Sustained efforts are needed from Serbian authorities
to ensure its implementation.

Three
laws under the media strategy have been adopted with a view to improving the
situation in the media sector and clarifying the legal framework, particularly
in relation to state financing and control of the media. However, there are
concerns about deteriorating conditions for the full exercise of freedom of
expression. A continued lack of transparency over media ownership and sources
of media advertising and funding was accompanied by a tendency to
self-censorship in the media. The authorities have an important responsibility
to work to create an enabling environment in which this fundamental freedom can
be exercised without hindrance, including by reacting to and publicly
condemning threats, physical assaults and cases of incitement to violence and
hate speech from extremist groups against civil society organisations (CSOs),
human rights defenders, journalists and bloggers.

The
holding of the pride parade in Belgrade on 28 September without major incident
marked a substantial step towards the effective exercise in Serbia of human rights
in general and LGBTI (lesbian, gay, bisexual, transgender and intersex) rights
in particular. Notwithstanding the government’s good preparatory work for this
event, enhanced political support for the promotion of fundamental freedoms is
needed. There is also a need for a consistent and visible political commitment
to promoting a culture of respect towards the LGBTI community. Discriminatory
statements, intimidation and violence still occur without substantial political
reaction nor appropriate follow-up by authorities. An action plan for the
implementation of the anti-discrimination strategy has been adopted in October
2014. A national mechanism for monitoring the implementation of the UN human
rights bodies’ recommendations remains to be adopted.

New strategy
and action plan for further development of the correctional system 2013-2020
were adopted. Further efforts remain necessary to improve conditions in the
prison system. The legal framework for data protection has yet to be aligned
with the EU acquis.

The
legal and institutional framework to protect women and children’s rights was
further improved. Measures to tackle domestic violence and gender inequality at
the workplace remain to yield effective results. The situation of Roma children
and children with disabilities, who remain the most discriminated against,
further weakened in the aftermath of the severe floods in May. Social inclusion
of people with disabilities needs significant improvement.

The
legal framework for the protection of minorities is broadly in place but its
consistent implementation across the country needs to be ensured, e.g. in
relation to education, use of languages, and access to the media and to
religious services in minority languages. The positive steps taken to improve
the situation of the Roma need to be stepped up, particularly when it comes to
education, housing and employment. Further sustained efforts and additional
financial resources are needed to improve the situation of the Roma and of
refugees and displaced persons.

For a
detailed analysis of developments in the area of human rights and the
protection of minorities, see Chapter 23 — Judiciary and fundamental rights.
For developments in the areas of trade union rights, anti-discrimination and
equal opportunities, see also Chapter 19 — Social policy and employment.

2.3.
Regional issues and international obligations

Implementation
of the Dayton/Paris Peace Agreement continued. In his first visit
abroad, to Sarajevo in May, Serbian Prime Minister Aleksandar Vučić
reiterated his support for the agreement and for the sovereignty and
territorial integrity of Bosnia and Herzegovina. Under the Agreement on Special
Parallel Relations between Serbia and the Republika Srpska, joint sessions of
the governments were held in December 2013 and September 2014, with the
emphasis on joint efforts to fight organised crime and corruption and on
economic cooperation.

Serbia has
continued to cooperate fully with the International Criminal Tribunal for
the former Yugoslavia (ICTY) and to answer the ICTY’s requests for
assistance in good time. The new Law on Ministries of April 2014 abolished the
former Office of the National Council for Cooperation with ICTY and transferred
its competences to the Ministry of Justice. Serbia maintained its request to the
ICTY for Serbian convicts to be allowed to serve sentences in Serbia. For
developments related to the domestic processing of war crimes, see Chapter
23 — Judiciary and fundamental rights.

Serbia’s policy
with regard to 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,
along with Bosnia and Herzegovina, Croatia and Montenegro, have continued to
closely cooperate in the framework of the Sarajevo
Declaration Process, which aims to find sustainable
solutions for people who became refugees and displaced persons as a result of
the armed conflicts in ex-Yugoslavia during the 1990s. In March, the UN High
Commissioner for Refugees (UNHCR) recommended that UN member
states terminate refugee status for refugees originating from
Croatia, at
the latest by
the end of 2017.

Implementation
of the regional housing programme, expected to provide sustainable housing solutions
for some 45 000 people in Serbia, has started. The legal framework and the
national implementation bodies have been set up. Four waves of projects have
been approved for Serbia. However, first housing has yet to be provided. The
issue of refugees’ pensions between Croatia and Serbia is still unresolved.
Good overall cooperation between the partner countries on the process and its
housing programme needs to continue.

The unresolved
fate of missing persons from the conflicts in the 1990s remains a
humanitarian concern in the Western Balkans. As of August, a total of 11 155
persons were still missing, according to the International Committee of the Red
Cross (ICRC). Of these, 7 282 cases relate to the conflict in Bosnia and
Herzegovina, 2 163 to the conflict in Croatia and 1 710 to the
conflict in Kosovo. Ascertaining the fate of missing persons remains vital for
reconciliation and stability in the region. Greater political commitment and
renewed efforts are needed.

Serbia, Bosnia
and Herzegovina, Croatia and Montenegro signed in August a Declaration on the
role of the state in addressing the issue of persons missing as a consequence
of armed conflict and human rights. The lack of information on new gravesites
and the difficulties in identifying the already exhumed human remains continue
to be the key obstacles to solving the remaining cases. The ICRC-chaired
Working Group on Missing Persons continued to be the frame within which
Belgrade and Pristina maintain the related dialogue. Since October 2013, the two
delegations have met three times. Significant progress was made by locating the
Rudnica-Raska gravesite in south Serbia, where the exhumation of human remains
started in April. Still, the pace of solving cases of missing persons has been
slow, with only 16 cases closed between October 2013 and August 2014. Following
the first session of the re-established working group between Serbia and
Croatia held in Zagreb in July 2013, no formal meeting took place and no
progress was reported.

Regional
cooperation and good neighbourly relations form an
essential part of Serbia’s process of moving towards the EU.
Serbia has continued to actively participate in regional
initiatives, such as the South-East Europe Cooperation Process, the Regional
Cooperation Council and the Central European Free Trade Agreement. As chair of
the Energy Community Treaty, Serbia hosted the Ministerial Council in October
2013. Serbia took over in June the chair of the Danube Commission for a period
of three years. Serbia played a constructive role in achieving participation of
Kosovo in the South-East Europe Cooperation Process. Serbia also continued to
support the Coalition for Reconciliation Commission (RECOM) and Igman
initiatives on regional reconciliation.

In December,
Serbia, Bosnia and Herzegovina and Montenegro signed a protocol to establish a
joint centre for police cooperation in Trebinje (Bosnia and Herzegovina), which
opened officially in March. On 29 September 2014, Serbia, Bosnia and
Herzegovina, the former Yugoslav Republic of Macedonia and Montenegro signed an
agreement on reducing the prices of roaming services on public mobile communications
networks. A trilateral meeting of the Prime Ministers of Bulgaria, Romania and
Serbia took place in Ruse (Bulgaria) in March.

Concerning bilateral
relations with other enlargement countries and neighbouring EU Member States, Serbia
has maintained a constructive approach and significantly improved its relations
with some of its neighbours through fruitful high-level visits. However, a
range of open issues remain with several neighbours. Serbia has concluded a
bilateral convention on regional cooperation, under Article 15 of the SAA, with
Montenegro, but not yet with Albania or the former Yugoslav Republic of
Macedonia.

Relations with Albania
are stable overall. In November, the Albanian Minister for Social and Youth
Affairs visited the Serbian municipality of Bujanovac where he met with the
chair of the government’s coordinating body for the municipalities of Presevo,
Bujanovac and Medvedja and with the local ethnic Albanian political leaders. A
regular air link between Belgrade and Tirana was established in September.

Relations with Bosnia
and Herzegovina remained good. The new Serbian Prime Minister
Vučić made his first official foreign visit to Sarajevo and focused
on improving economic and trade cooperation and resolving remaining bilateral
issues. There were several other high-level reciprocal visits. The Serbian
leadership took a constructive approach during the social protests in Bosnia
and Herzegovina, calling for restraint and moderation by the political
representatives of the Republika Srpska. A readmission agreement and its
implementing protocol have been ratified. Border demarcation remains to be
addressed.

Relations with the
former Yugoslav Republic of Macedonia remained good. The Serbian Prime
Minister visited Skopje in January. A joint centre for police cooperation was
opened at the border crossing at Tabanovce and a protocol on cooperation
between the Ministries of the Interior was signed. The two countries also
signed agreements on the exchange and mutual protection of classified
information, on mutual recognition of diplomas, and on mutual sharing of
premises for diplomatic and consular offices, as well as a protocol for
cooperation in the field of tourism. There were no developments in the dispute
related to the Orthodox churches in both countries.

Relations with Montenegro
were further upgraded. The Montenegrin Prime Minister visited Belgrade in
December for the first such visit in a decade. A memorandum on cooperation in
the field of tourism was signed in February, and cooperation agreements on
diplomatic training and mutual sharing of premises for diplomatic and consular
offices were signed in June. A joint operation between Serbia and Montenegro
contributed to the arrest of the alleged leader of a prominent organised crime
group. There were no developments regarding disputes related to citizenship
rights and the Orthodox churches in the two countries.

There were ups
and downs in relations with Turkey. The Turkish Prime Minister visited
Serbia in October 2013. Serbia protested over statements made by the Turkish
Prime Minister during his subsequent visit to Kosovo, following which the
Serbian President cancelled Belgrade’s participation in the trilateral Serbia,
Turkey and Bosnia and Herzegovina summit. Political dialogue between the two
countries’ officials resumed in April and relations further improved with a
visit to Belgrade by the Turkish Minister of Foreign Affairs in June. Alleged
statements of the Turkish Prime Minister, threatening those in the region
acting against Bosniaks, although denied by the Turkish authorities, provoked
acute reactions from Serbian authorities in July.

Relations
with Bulgaria, Croatia, Hungary and Romania remained good. The
Serbian Prime Minister visited Bulgaria in December and March and attended the
unveiling of a memorial to a Bulgarian national hero in Dimitrovgrad (Serbia)
in February with his Bulgarian counterpart. A regular air link between Belgrade
and Sofia was established in March. Negotiations on a bilateral agreement are
still ongoing. A landmark visit by the Croatian President to Serbia took
place in October. The Croatian Ministers of Defence and of Foreign Affairs
visited Belgrade in February. An annual plan of bilateral military cooperation
was signed in April. The hearings on mutual genocide lawsuits were held in
March before the International Court of Justice. Missing persons and border
demarcation remain open issues between the two countries. The Serbian
government held a first joint session with the Hungarian government in Belgrade
in July. The Serbian Prime Minister led a delegation to Romania in October
2013, while the Romanian Prime Minister visited Serbia in July.

Overall,
Serbia
generally complies with its international obligations. It continues to fully
cooperate with the International Criminal Tribunal for the former Yugoslavia.
Serbia is participating actively in regional cooperation and has further
developed bilateral relations with its neighbours. Open bilateral issues with
neighbours need to be addressed with a pragmatic and constructive spirit.

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.

Monitoring of
the economic criteria needs to be seen in the context of the increased role of
economic governance in the enlargement process, as welcomed by the General
Affairs Council of 17 December 2013. To this end, targeted policy guidance for
Serbia, based on its pre-accession economic programme, was adopted at the
Ministerial Dialogue between the Economic and Finance Ministers of the EU and
the Candidate Countries in May 2014.

3.1.
The existence of a functioning market economy

State
presence in the economy remains significant. The private sector is weak and
unprotected as the rule of law is not systematically observed. The new
government has a mandate for economic reforms but their implementation has progressed
slowly. Although external deficits declined strongly, fiscal imbalances remain
very high and structural rigidities and obstacles to growth still need to be
addressed. The functioning of market mechanisms remained hampered by
significant distortions and legal uncertainty.

Economic policy

In
January 2014, the government submitted to the Commission its Pre-Accession
Economic Programme for the period 2014-16. The main objectives of the programme
are economic recovery and stabilising government debt below 70 % of GDP.
To this end, the government has proposed a number of fiscal consolidation
measures and structural reforms. Key legislation related to improving the
business environment has been recently adopted but the authorities would need
to step up their efforts to implement the envisaged reforms, in line with the
conclusions from the Ministerial Dialogue between the Economic and Finance
Ministers of the EU and the Candidate Countries from May 2014. The Ministerial
Dialogue provided policy guidance on a number of macroeconomic challenges and
structural reforms with particular emphasis on fiscal consolidation, public
administration reform and privatisation. Delays in the implementation of
reforms led to the resignation of the finance minister in July and discussions
with the International Monetary Fund on a new pre‑cautionary Stand‑By
Arrangement have remained inconclusive. Reducing the very high budget deficit
and taming government debt would require additional efforts. Fiscal
consolidation needs to be further strengthened and frontloaded. Overall,
commitment to economic reforms exists, but significant efforts are needed to
strengthen fiscal consolidation and accelerate the implementation of the
announced structural reform measures.

Macroeconomic stability

Following
an export-led recovery last year, the economy contracted in the first half of
2014. Small pockets of growth remained isolated, suppressed by weak domestic
demand. Net exports have been the major driver of economic activity and
underpinned a continuing rebalancing of the economy away from consumption.
After a slump in 2013, investments remained subdued in the first half of the
year, despite increased government capital expenditure. In addition, heavy
floods in the spring have hit agriculture and damaged transport and, in
particular, energy infrastructure, further undermining short-term growth.
Average per capita income, expressed in purchasing power standards, increased
to 36 % of the EU average in 2013 from 35 % in the previous year. Overall,
impacted by heavy floods the economy contracted in the first half of 2014.
Exports remained the only engine of growth.

External
imbalances fell strongly, mainly due to stellar export performance. The current
account deficit almost halved in euro terms last year, dropping to around 6.5 %
of GDP, and continued falling in 2014. Exports of goods and services in euro
terms kept growing by double-digit rates, while imports remained restrained due
to weak domestic demand. Net foreign direct investment rose slightly on the
previous year, but is still far below its pre-crisis levels, representing 3.8 %
of GDP in 2013. Most foreign direct investment went into trade, construction,
real estate and financial services. After falling in the first months of the
year, the central bank’s international reserves have recovered, covering more
than seven months’ worth of imports. External debt has been fairly stable in
euro terms, but fell in relation to GDP to around 80 % by the end of June.
Overall, strong export growth contributed to a further narrowing of
external imbalances.

Unemployment
stood very high at an average of 22.1 % in 2013. According to the Labour
Force Survey (LFS), it remained above 20 % in the first half of 2014. The
number of registered employed has steadily declined and a fifth of total
employment is in agriculture and about a third in the public sector, revealing
deep-seated structural problems. According to the LFS, informal employment
remains substantial and has further increased. The activity rate of the population
aged20-64 is comparably low at 66 %, as is the employment rate, which
stood at 51.2 % in 2013. In a step towards reversing growing public
employment, the government adopted a partial hiring freeze in January. However,
strict implementation of the envisaged public administration reform is needed
to streamline the bloated public sector and to tackle the unfounded salary
differentials in the public administration. Long-term and youth unemployment
are very high and active labour market programmes remain underfunded. Following
a few months of real growth in the autumn, gross wages fell throughout most of
the period and by an average of 1.0 % in the first seven months of 2014. A
number of labour market rigidities have been addressed with the recently adopted
revision of the Labour law. Overall, deep-seated structural problems and
a weak economy keep unemployment very high. Recent legislative changes have
addressed important labour market rigidities.

The
National Bank of Serbia continued pursuing inflation targeting, reaffirming its
target of 4 %, ±1.5 percentage points. After staying at the average of
7.8% in 2013, inflation decelerated strongly, influenced by weak demand, a
relatively stable exchange rate, dampened food prices after a good harvest and
further reduction of tariff protection under the Stabilisation and Association
Agreement. Since October 2013, monthly inflation rates have averaged 0.1 %
until August and year‑on‑year inflation stayed mostly below the
target band, the central bank missing its target for six consecutive months.
Inflation expectations have declined as well, but in order to anchor them
further and reduce inflation volatility, stronger competition on product
markets and fiscal consolidation efforts will be crucial. The central bank
reduced its key policy rate only gradually, from 11 % in September 2013 to
8.5 % by mid-June 2014. The dinar had remained broadly stable against the
euro until late July, supported by central bank interventions mainly in the
first months of the year, before coming again under depreciating pressures
recently. Overall, weak demand, dampened food prices and the relatively
stable dinar brought a period of very low inflation, even below the target band
of the central bank.

Despite
a series of consolidation efforts, the fiscal situation remains precarious. The
2013 general government deficit of 5.0 % of GDP greatly exceeded the
initial target, although it came in below the 2012 deficit. Budget execution
was marked by significant revenue underperformance and the deficit was
contained only by spending cuts, in particular of public investment, which
suffered a serious blow and was reduced by a third from its medium‑term
average. Interest expenditure reached a new high of 2.6 % of GDP, eating
up a quarter of the space generated by consolidation efforts. The 2014 budget
envisaged an increase in the deficit to 5.5 % of GDP to finance mainly
higher investment and interest payments. This does not include expenditure
amounting to 1.6 % of GDP, such as servicing activated guarantees,
financial system support, and the assumption of obligations from other
entities. A new round of consolidation measures was implemented at the
beginning of the year, which saw the reduced VAT rate raised from 8 % to
10 %, progressive reduction of public sector wages and limitations on
public sector employment. Amendments to the pension and disability insurance
law were adopted in July — a welcome step towards
improving the long‑term sustainability of the pension system. Penalties
for early retirement were introduced and the retirement age for women is set to
gradually increase to 65 years, equalising with that for men in 2032. Other
reforms, with a potentially large budgetary impact, like finalising the process
of enterprise restructuring or improving the efficiency of big state-owned
companies, suffered continuous delays. A process of modernisation of costly
public administration was launched with the adoption of a public administration
reform strategy in the end of 2013 but more efforts would be needed for its
sustained implementation.

Repeating
a pattern from previous years revenues underperformed and, by the end of July,
the budget deficit expanded by 21 % to 2.7 % of the expected GDP. To
stimulate the flagging economy and employment, the government introduced a set
of new measures ranging from tax breaks for new employment, to lending,
construction and investment subsidies. However, some of these subsidies are of
questionable efficiency and might further erode competition and weaken the
fiscal situation. The weak budget performance and reconstruction needs,
following the spring floods, prompted the announcement in September of a budget
revision, which is likely to include progressive cuts of public sector wages
and pensions. The significant fiscal imbalances have led to a further increase
of government debt, which has approached 70 % of GDP. Overall,
despite a series of new measures, fiscal imbalances remain very high.
Significant further efforts are required to reduce government expenditure and
implement the announced structural reforms in order to restore fiscal
sustainability and improve the credibility of the consolidation programme.

Falling
external imbalances reduced some of the pressure on the dinar and, coupled with
weak domestic demand, have brought a period of very low inflation. However,
monetary policy remained relatively restrictive in view of the significant
external risks and domestic uncertainty. Therefore, achieving a proper policy
mix depends on stepping up reform efforts and implementing a strong and
credible medium‑term fiscal adjustment programme, which will also allow
for a more accommodative monetary policy.

Interplay of market forces

The
state continues to hold dominant positions in major sectors such as energy,
transport and telecommunications. The law on public companies, setting criteria
and delineating a procedure for management appointments, has not yet brought
about visible improvement in public companies′ governance and they
continued to be largely overstaffed and inefficient. The envisaged
restructuring of Srbijagas, the state‑owned gas incumbent, has been
delayed and has not started yet. The company has accumulated further losses as
other public companies using its service are not paying their bills. The
announced reorganisation and corporatisation of Elektroprivreda Srbije, the
state-owned power utility company, has been launched in August with changes
increasing the control of the company over its subsidiaries. Overall, the
slow process of restructuring of the big state-owned companies is having a
negative impact on public finances and the rest of the economy and needs to be
urgently addressed.

With
the exception of the establishment of a strategic partnership between the
national air carrier and Etihad, privatisation efforts have only been revived
in summer 2014. After some 26 companies in restructuring went bankrupt, there
was little further progress and around 160 companies, employing more than 50 000
people, continued to be protected from forcible collection of debts and
bankruptcy. The companies in restructuring have accumulated significant
liabilities through the years, representing a serious contingent risk to public
finances and a heavy burden to potential investors. A new privatisation law was
enacted in August, setting the end of 2015 as a deadline for completing the
privatisation process and outlining the possible models of privatisation —
strategic partnership, transfer of capital without compensation, sale of
capital and sale of assets. In line with the law, in mid-August the
Privatisation Agency invited investors to show their interest in the sale of
502 companies. By mid-September, the agency received 1 732 letters of
interest concerning 403 companies. Overall, the state presence in the
economy is significant and the privatisation process was revived only in summer
2014. Companies in restructuring remain a heavy drain on the budget and the
economy.

Market entry and exit

In
2013, the number of companies newly established (8 574) was more than
three times the number of companies closed (2 562). However, market entry
has continued to be burdened by lengthy and costly procedures for obtaining
various specific permits and rising parafiscal charges. This is particularly
valid for construction permits. The issue of converting usage rights into
ownership rights has not been solved, which further hinders potential
investment. Problems with construction permits are meant to be addressed
shortly by amendments to the Law on Planning and Construction. In the first
half of the year, the number of insolvent companies fell by 5 % to 37 711.
However, those in insolvency for more than 180 days continued to increase,
representing more than three quarters of all. In August,
amendments to the bankruptcy law were adopted, regulating more in detail the
role of the bankruptcy administrator and creditor rights. Overall,
some steps were taken to resolve shortcomings in bankruptcy legislation. Red
tape, parafiscal charges and
difficulties in obtaining construction permits remained major obstacles to more
dynamic business creation and expansion.
Further efforts are needed to implement the planned reforms in this area.

Legal system

Many
laws, important for structural reforms and socioeconomic development, are still
adopted without proper consultations with businesses and other social partners
thus excluding them from dialogue on a better regulatory environment. Moreover,
the implementation of laws remains problematic as there are long delays in the
adoption of bylaws. The judicial system is slow in enforcing property rights,
which adds to uncertainty and the cost of doing business. The backlog in the
courts is still substantial and companies often avoid using the courts as a
legal solution to their problems. Enforcement of restitution legislation, which
is expected to improve legal clarity over real estate ownership, is ongoing. By
August 2014, about 18 % of all submitted claims had been resolved. Several
high-level cases of corruption have been prosecuted, but the number of final
verdicts is low. Corruption remains a major threat to the business environment.
Overall, legal predictability and enforcement of court decisions remain
weak. Significant efforts are needed to strengthen the legal system and ensure
even implementation of laws, as a crucial part of the business environment.

Financial sector development

The
banking system continued to face challenges and lending activity deteriorated
further, falling by 6.1 % by the end of
March. Corporate lending fell the most as banks tightened their lending terms
and demand for loans weakened. However, the restarting of government subsidised
lending boosted credit activity and slowed down the fall in bank claims on the
non-government sector to 2.7 % in July. The domestic deposit base expanded
further and banks remained highly liquid, although this liquidity did not spill
over to the real economy. Euroisation continued to be widespread, with about
three quarters of deposits and of loans to households and businesses
denominated in or linked to foreign currency. Deteriorating economic activity
pushed non-performing loans up, mainly in the corporate segment, to a new high
of 23.0 % in
the second quarter of 2014. Bank profitability also suffered and in 2013 the
system as a whole registered negative returns on assets and equity. However,
most of the losses were concentrated in a few banks and the system turned
profitable again in early 2014. The regulatory capital adequacy ratio remained
consistently high and stood at around 21 % at
the end of June, well above the required minimum of 12 %.

Financial
intermediation declined and banking sector assets stood at 92.4 % of
GDP at the end of 2013. Banks and, in particular, foreign‑owned banks,
continued to dominate the financial system, accounting for most of the assets
and liabilities. Weak governance led to the failure of
some of the small banks. In the last two years, four banks had their licences
revoked for failing to align their capital and performance ratios with the law
on banks, which cost the state a total of about € 1 billion. In
December, the central bank adopted a strategy for implementing the Basel III
standards in Serbia. Limited measures were adopted to address
non-performing loans. Overall, lending activity declined and
the banking system, although well capitalised and liquid, continued to face
challenges. The issues of improving corporate governance and the high burden of
non‑performing loans still need to be effectively addressed.

3.2.
The capacity to cope with competitive pressure
and market forces within the Union

Human and physical capital

The
mismatch between the available human capital and economic needs is significant,
leading to low labour market participation and high unemployment. Employment
creation is limited, reflecting narrow production base and structural
rigidities. Human capital fundamentals are very weak as declining population,
emigration and population ageing undermine long‑term growth potential.
Unemployment among the youth and those with lower and intermediate education
remains above the average. Although the number of pupils has declined steadily,
employment in the education sector continued to increase. Inefficiencies of the
education system are also revealed by the long average length of university
studies and the significant number of unemployed with a university degree. A
reorganisation of the schools network, the introduction of funding per student
as planned from next year, and the implementation of the education strategy
adopted in 2012 should improve the quality of education. Overall, significant
efforts are needed to improve the quality and efficiency of the education
system.

The
physical infrastructure would require sustained and large investments to
improve and upgrade it. Floods in the spring have additionally impaired
infrastructure in vast areas of the country and placed an additional burden on
the already modest public investment funds. Due to fiscal constraints,
government investment fell by more than a third last year but started
recovering in 2014, when it grew by 26 % the
first seven months. Furthermore, in the short‑term, public investment is
expected to be boosted by international aid, linked to reconstruction efforts
after the floods. The government has continued its efforts to attract foreign
financing for strategically important projects. However, its approach to
attracting strategic investors has often been non-transparent and with a
potentially adverse impact on public finance. Consideration should be given to
finding a systemic and transparent approach for attracting private capital to
cover at least part of the large investment needs. Overall, the physical
infrastructure is underdeveloped and was further damaged by heavy floods.
Reducing the budget deficit and improving the performance of publicly owned
companies is needed to create space for infrastructure investment.

Sectoral and enterprise structure

The
sectoral structure of the economy remained broadly unchanged. Agriculture
activity, highly sensitive to weather conditions, recovered strongly last year
and increased its share of gross value added to 11.4 %, but is set to fall
again following the floods in 2014. Industry’s share increased slightly to 25.3 %,
while that of construction and services fell to 3.3 % and 62.7 %
respectively. Nevertheless, intrasectoral changes were noticeable; in
particular, manufacture of refined petroleum products and of motor vehicles,
linked to foreign direct investment made in previous periods, increased their
share of total manufacturing and the information and communication sector continued
to gain importance, also recording a marked increase in employment. The
economic weight of the small and medium‑sized enterprises is significant,
representing more than half of the value added in the economy and about two
thirds of employment. According to various surveys, SMEs suffer mostly from the
weak financial and liquidity situation and the unpredictable regulatory
environment. The SME sector is also negatively affected by unfair competition
of the large informal economy.

As
regards network industries, the lack of unbundling of the gas utility continued
to hamper competition and market development. The gradual liberalisation of the
electricity market progressed slowly with the opening up of the medium-voltage
network. However, low prices, compared to the region, suppress actual
competition and the state-owned company continued to dominate the market. The
telecommunication market was further liberalised with the introduction of fixed
number portability in April. Overall, the economic structure is changing
slowly, driven mainly by foreign direct investment, but important sectors of
the economy need further restructuring and liberalisation.

State influence on competitiveness

State-owned,
monopolistic structures dominate many sectors and the state continued to
subsidise them heavily. Since the beginning of 2014, until the end of July,
government subsidies expenditure increased by a real 7.1 %. Contrary
to previous years, the annual State aid report for 2013 has been delayed and
was not available by the time of writing this report. State aid control needs
to be enforced consistently and the exemption from state aid rules given to
enterprises that are being privatised still needs to be abolished. New state
aid measures need to be systematically notified before being put into force.
The Commission for State Aid Control still has to demonstrate its independence.
Overall, the state continues to substantially and negatively influence
competitiveness by providing significant and wide-ranging forms of state aid.
The system of state aid needs to be thoroughly reviewed.

Economic integration with the EU

The
openness of the economy increased and total exports of goods and services
reached 44.7 % of GDP, while imports stood at 56.4 % of GDP in 2013.
The EU (including Croatia) increased its trade with Serbia and remained by far
the country’s main trading partner with 62.8 % of total exports of goods
and 61.8 % of total imports of goods. Serbia’s exports to the EU have
grown faster than its imports, resulting in an increase in the export to import
ratio vis-à-vis the EU from 60 % in 2012 to 72 % in 2013. The share
of net foreign direct investment from the EU in
total FDI stood at 72 % in 2013. In real effective terms (deflated by
inflation), the dinar has remained broadly stable since mid-2013. Overall,
economic integration with the EU increased further and export performance
improved, albeit from a low level.

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 the country’s
administrative capacity to implement the acquis. The analysis is
structured according to the list of 33 acquis chapters. In each sector,
the Commission’s
assessment covers the progress achieved during the reporting period, and
summarises the country’s overall level
of preparation.

4.1.
Chapter 1: Free movement of goods

Concerning horizontal
measures, implementation of the legislation on metrology continued. The
Quality Infrastructure Strategy remains to be adopted. The administrative
capacity of the Ministry in charge of horizontal coordination remains to be
strengthened.

On standardisation,
the Institute for Standardisation of Serbia (ISS) has adopted 94.5 % of
the European standards (ENs), of which 80 % are standards required for
membership of the European Committee for Standardisation (CEN) and the European
Committee for Electrotechnical Standardisation (CENELEC). The total number of
EU standards and other deliverables applied nationally stood at 22 916,
including 16 137 CEN standards, 6 395 CENELEC standards and 384
European Telecommunications Standards Institute (ETSI) standards. The number of
withdrawn conflicting Serbian standards and related documents was 12 066.
Serbia has not yet applied for membership of CEN and CENELEC. Serbian
legislation on standardisation remains to be aligned with EU Regulation
1025/2012. The ISS has downsized its active technical committees from 215 to
193. Institute staff decreased to 61 full-time employees.

In the area of conformity
assessment, a number of conformity assessment bodies designated in
accordance with the relevant EU directives stood at 29: 6 for the Machinery
Directive, 2 for the Low Voltage Directive, 4 for the Electromagnetic
Compatibility Directive, 6 for the Lift Directive, 8 for the Pressure Equipment
Directive, 2 for the Radio and Telecommunications Terminal Equipment Directive
and 1 for the Personal Protective Equipment Directive. Serbia has introduced ex-ante
formal controls of certificates of conformity in areas where EU law only
requires self-certification by the manufacturer. Such controls are not in line
with the acquis.

In the field of accreditation,
in April 2014 the Accreditation Body of Serbia (ABS) signed a multilateral
agreement with the European Accreditation (EA) body. The agreement will expand
the scope of the ABS’s activities to include certification bodies providing
certification of management systems and certification of persons. By the end of
August, the ABS had granted accreditation to 527 bodies, including 302 testing
laboratories, 52 calibration, and 10 medical laboratories, 128 inspection
bodies, and 22 certification bodies for products, 11 for management systems and
2 for persons. ABS staffing levels remain insufficient.

National
legislation in the area of metrology is in line with the acquis
and Serbia has already started preparations for adopting new acquis in
this area. The number of internationally recognised national standards for
calibration and measurement is now 142.

A new law on market
surveillance remains to be adopted. Surveillance of non-food products on
the Serbian market has increased. The Product Safety Council continued its
regular operations. The administrative capacity of the line ministry remains
weak in the area of market surveillance.

In the field of ‘Old
Approach’ product legislation, Serbia has aligned its legislation with the acquis
on textiles and footwear. It has yet to align its legislation in a number
of other areas, including emissions of pollutants from non-road engines and
crystal glass.

As regards ‘New
and Global Approach’ product legislation, Serbia has adopted legislation
transposing the Measurement Instruments Directive. Further alignment is needed
in the areas of construction products, cableway installations, recreational
craft, cosmetics and toy safety.

As regards procedural
measures, Serbia has yet to align its legislation with the acquis on
civil firearms and 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. Serbia continued with the
alignment of its horizontal legislation and the adoption of European standards.
However, stronger emphasis needs to be put on implementing transposed
directives and ensuring adequate equipment and administrative capacity. Better
coordination is needed among various quality infrastructure and market
surveillance authorities. Overall, preparations in the area of free movement of
goods are moderately advanced.

4.2.
Chapter 2: Freedom of movement for workers

As
regards access to the labour market, the Law on Employment of Foreigners
has not been adopted yet. The law should allow free access to the labour market
for EU citizens upon accession.

The
pre-selection of 15 future EURES (European Employment Services)
counsellors has been carried out. Strengthening of the vacancy database of the
National Employment Services (NES) is needed, in particular for what concerns
the collection of vacancies at central/national level.

As regards coordination
of social security systems, a new agreement was signed with Hungary.
Agreements with Canada, Luxembourg and Belgium have been ratified and the agreement
with Turkey has entered into force. The capacity of social security
institutions needs to be strengthened.

Preparations
with regard to the European Health Insurance Card have not started yet.

Conclusion

Little progress
has been made in the area of movement of workers. Overall, preparations in this
area are moderately advanced.

4.3.
Chapter 3: Right of establishment and freedom to
provide services

There
were no developments in the area of right of establishment.

As regards freedom
to provide cross-border services, a general law aligning the Serbian
legislation with the Services Directive is still needed. The capacity of the
institutions dealing with services needs strengthening.

Amendments to
the law on postal services aiming at merging the postal service
regulator with the electronic communications regulator were adopted in June
2014. In line with the postal strategy for 2013-2016, legislation remains to be
brought in line with the third postal Directive. The administrative capacity of
the line ministry’s inspectorate remains weak, affecting the monitoring of the
sector. The public postal operator has not yet been corporatised.

A law on the
mutual recognition of professional qualifications remains to be adopted.

Conclusion

Limited progress
was made in the area of the right of establishment, freedom to provide services
and mutual recognition of professional qualifications. A general law on
services remains to be adopted. Overall, preparations are moderately advanced
in these fields.

4.4.
Chapter 4: Free movement of capital

In
the area of capital movements and payments, in September 2013, the
National Bank of Serbia adopted a decision facilitating loans in dinars granted
by international financial institutions to commercial banks or companies. In
April and July, it adopted two decisions partially liberalising transactions in
foreign currency by Serbian residents. Limitations remain regarding short-term
capital transactions and deposit activities by residents, while long-term
capital transactions are fully liberalised. Restrictions on the acquisition of
real estate, especially agricultural land, still exist.

Serbian
legislation on payment systems is not fully in line with the acquis.

As regards the fight
against money laundering and financing of terrorism, the Agency for
Prevention of Money Laundering signed two memoranda of understanding with
Monaco and Liechtenstein. The new draft strategy for fighting money laundering
and related action plan remain to be adopted. The administrative and analytical
capacity of the agency and the Financial Intelligence Unit of the Ministry of
Finance needs to be strengthened. In addition, the agency does not yet have
adequate premises, preventing recruitment of new staff. Serbia has not yet
established a solid and systematic track record of suspicious investigations
and final convictions in money laundering cases. Reporting remains low, in
particular outside the banking sector and especially in the real estate sector,
currency exchange offices and insurance companies. An effective system for
monitoring and analysing cash transactions needs to be put in place and made
operational.

Conclusion

There was little
progress in the area of capital movements. Serbia needs to adopt and implement
outstanding legislation on free movement of capital. Overall, Serbia’s
alignment in the area of the free movement of capital is moderately advanced.

4.5.
Chapter 5: Public procurement

In the field of general
principles, the Public Procurement Office (PPO) continued to adopt
regulations and model documents for the implementation of the new Law on Public
Procurement that entered into force last year. The government adopted three
decrees and one decision concerning centralised procurement, procurement in the
field of defence and security and common procurement vocabulary. The
PPO recorded an increase in the use of the upgraded public procurement portal.
Most of the measures prescribed by the new law and by the national
strategy and action plan for the fight against corruption with
a view to
increasing transparency and preventing corruption and conflicts of interest in
public tenders have been adopted. The national
strategy and action plan for upgrading the public procurement system remain to
be aligned with the new law.

As
regards the award of public contracts, the value of negotiated
procedures conducted without prior notice decreased to 4 % of the total
value of public tenders in the first half of 2014, from 24 % in 2012. The
average number of bids per tender remained stable, at 2.7 in 2013 and in the
first half of 2014 against 2.6 in 2012. In the area of public-private
partnerships (PPPs) and concessions, five projects were approved by the PPP
Commission, the same number as in the previous reporting period. Eight new
posts were created in the PPO, but further reinforcement of its administrative
capacity is needed in view of its new responsibilities. Since the entry into
force of the new Law on Misdemeanours in March, the PPO initiated 26
misdemeanour procedures against contracting authorities. Institutional cooperation
on public procurement, including with audit, judicial and police institutions,
is improving, but needs to be reinforced.

In
the field of remedies, the number of requests for protection of rights
received by the Republic Commission for the Protection of Bidders’ Rights
(Republic Commission) increased by 39 % from the entry into force of the
new legal framework in April 2013 until the end of 2013 compared to the same
period in 2012. The Republic Commission reached a total of 1.966 decisions in
2013 compared to 1700 in 2012. In 909 cases, public procurement decisions were
partially or fully annulled. In 2013, the Republic Commission further
built up its enforcement record by reviewing the implementation of 635 of its
decisions and concluded that in 24 cases, they had not been properly enforced
by the contracting authorities. It has continued to build up its
administrative and enforcement capacity to a total of 54 employees.

Conclusion

There
has been good progress in the field of public procurement. The capacity of the
PPO needs to be strengthened further. The national strategy and action plan for
upgrading the public procurement system remain to be updated. Overall,
alignment in the area of public procurement is moderately advanced.

4.6.
Chapter 6: Company law

In
the field of company law, the Business Registers Agency, which centrally
manages all registers, increased the number of registers from 15 to 17. The
Register of Bidders became operational in September 2013, and the Register of
Factoring in October 2013. The electronic company registration process is not
yet operational. Reporting obligations regarding domestic mergers and divisions
need to be enforced.

In the areas of corporate
accounting and auditing, all implementing acts for the new laws on
accounting and auditing were adopted. Further efforts are needed to
comply with the new EU accounting directive from 2013. In the field of
auditing, the Public Oversight Board was established in October 2013 as a
government body, which affects its independence. The full version of the
International Financial Reporting Standards in Serbian was published in March
2014. These standards are applied in Serbia.

Conclusion

Some progress
was made in the field of company law. Implementation of the new laws on
accounting and auditing has started. The electronic company registration
process should become operational as soon as possible to contribute to a better
business environment. Independence of the public audit oversight body needs to
be ensured. Overall, Serbia is well advanced in this area.

4.7.
Chapter 7: Intellectual property law

In the area of copyright
and neighbouring rights, the amendments to the Law on Copyrights and
Related Rights introduced in 2012 are not aligned with the acquis. The
Intellectual Property Office has not yet obtained the administrative capacity
corresponding to the responsibilities of the Commission for Copyright that were
transferred to it when the latter was abolished in 2013.

The
relevant laws in the field of industrial property rights remain to be
further aligned with the acquis.

As
concerns enforcement, the number of requests received by the customs
administration for protection of intellectual property rights increased from
205 in 2012 to 244 in 2013. The Tax Administration slightly increased the
number of software legality controls in 2013, from 555 to 573. The Market
Inspectorate received 74 applications for protection of intellectual property
rights
in
2013 compared to 73 in 2012. It confiscated 127 000 counterfeited and
pirated products in 2013 compared to 138 000 in 2013. The number of
controls and of criminal charges filed by the Ministry of the Interior fell
from 414 in 2013 to 350 in 2013. Specific courts were assigned to handling
civil intellectual property rights (IPR) cases from January 2014: the Higher
Court in Belgrade was entrusted with cases involving natural persons and the
Commercial Court in Belgrade with cases concerning legal persons.

Further
alignment of legislation with the Directive on Enforcement of Intellectual
Property Rights needs to be ensured. A formal coordination mechanism for
effective IPR enforcement is still missing. There are still delays in the
implementation of the national IPR strategy and action plan 2011-2015. The
participation of economic operators and consumers in the prevention of
counterfeiting and piracy remains limited.

Conclusion

Little
progress was made in the area of intellectual property law. Formal coordination
between different stakeholders has yet to begin with a view to ensuring more
effective enforcement. Overall, alignment in the area of intellectual property
law is advanced.

4.8.
Chapter 8: Competition policy

In the field of anti-trust
and mergers, the Law on Competition Protection was further aligned with the
acquis in October 2013. The amendments reinforce the investigative
capacity of the Commission for the Protection of Competition (CPC) and bring
the definition of dominant market position closer to the acquis. The CPC
adopted one decision on restrictive agreements, one decision on abuse of
dominance and 82 decisions on mergers in summary procedure and carried out four
investigation procedures on mergers, one of which was conditionally approved.
The CPC issued 35 opinions related to application of the Law on Competition
Protection and other draft legislation. Seven court decisions were in favour of
the CPC and four against. The CPC published
sector analyses of the milk and oil markets. It signed
Memoranda of Understanding with the Croatian and Slovenian competition
authorities. The financial plan of the CPC for 2014 was adopted by the
government in February.

Public
authorities need to ensure more systemic follow-up of the CPC’s opinions
relating to draft legislation affecting competition. With 30 employees, the CPC’s
administrative and investigative capacity remains stable but insufficient. The
judiciary’s capacity to assess complex competition cases and the CPC’s
competition advocacy need to be strengthened.

In
the area of state aid, the rules regarding de minimis aid were
further aligned with the acquis. The Commission for State Aid Control
(CSAC) adopted 47 decisions and conclusions, including 13 initiating ex post
control. This is a significant decrease compared with the previous period,
which can in part be attributed to the end of the notification of de minimis
aid cases.
The capacity of the CSAC’s secretariat was reinforced with two staff members. A
mechanism to trace the cumulation of de minimis aid was developed but
the monitoring of aid granted for the same objective under different legal
bases must be strengthened. A number of existing state aid schemes, including
fiscal aid schemes, still need to be aligned with the acquis. The
exemption from state aid rules for companies in the process of restructuring
and privatisation needs to be repealed. The independence of the CSAC remains to
be ensured. Further efforts are needed to ensure that all aid measures are
notified to the CSAC and approved before being granted. State
aid advocacy and awareness-raising activities need to be stepped up.

As
regards liberalisation of specific sectors, additional efforts need to be made
to move towards market liberalisation in line with the acquis as a
number of Serbian undertakings continue to enjoy special or exclusive rights in
specific business areas.

Conclusion

Limited
progress was made in the area of competition. The operational independence of
the CSAC must be ensured. The legislation on state aid control must be aligned
with the acquis and applied to all undertakings, including those in the
process of restructuring and privatisation. Overall, alignment in the area of
competition policy is moderately advanced.

4.9.
Chapter 9: Financial services

In
the area of banks and financial conglomerates, the National Bank of
Serbia (NBS) adopted amendments to the decision on classification of bank
balance and off-balance sheet assets in December 2013 and to the decision on
assigning receivables to other banks in October, in an attempt to help
resolving the still growing issue of non-performing loans. In December, the NBS
adopted its strategy for the full implementation of Basel III standards, which
are transposed in EU legislation in the new Capital Requirement Directive (CRD
IV) and Regulation (CRR), and which are only partially applied in Serbia.
Alignment with the latest acquis on deposit guarantees remains to be
achieved. The Basel II standards have not been fully implemented yet.

In the area of insurance
and occupational pensions, the NBS carried out eight on-site controls of
insurance companies and the operating licence of one insurance company was
revoked in July. In December, amendments to the Insurance Law introduced
provisions allowing domestic insurance companies to re-insure abroad for
natural disasters. They also postponed the deadline for separating life from
non-life insurance by one year until the end of 2014, pending the adoption of
the new Law on Insurance. Alignment with the Solvency II Directive is part of
NBS strategy, but has yet to be achieved. There have been no changes in
legislation relating to occupational pension funds.

As regards financial
market infrastructure, there have been no new developments.

In the area of
the securities market and investment services, in December, the
inaugural meeting of the Financial Stability Committee was held. This advisory
body brings together the NBS, the Ministry of Finance, the Deposit Insurance
Agency and the Securities Commission to improve cooperation between market
regulators. There has been no further alignment with the acquis on
rating agencies or on undertakings for collective investment in transferable
securities (UCITS).

Conclusion

Little progress
has been made in the area of financial services. Additional steps are needed to
align Serbia’s rules with Basel III standards (and the related EU acquis),
the Solvency II and UCITS directives. Overall, alignment in the area of
financial services is moderately advanced.

4.10.
Chapter 10: Information society and media

In the field of electronic
communications and information and communications technology, amendments to
the Law on Electronic Communications to introduce the legal basis for the
merger of the telecommunications and postal regulators were adopted in July.
Serbia is yet to fully align with the 2009 EU regulatory framework. As of April
2014, fixed number portability was introduced but its implementation needs to
be improved. The frequency assignment rules for 900 MHz and 1800
MHz bands, the former of which is still held for military purposes, need to be
amended to allow 3G and 4G services in these bands. Competitive
safeguards remain to be fully implemented, notably in the fixed telephony
market. The Constitutional Court found in April the provision of the Law on
Cinematography directing 10 % of the revenues of the telecoms regulator to
‘national cinematography’ to be unconstitutional. The operational independence
of the regulator remains to be fully ensured. The emergency number 112 has been
introduced and is partially operational.

The
fixed broadband penetration exceeded 16 %, the EU average being
almost 30 %. The penetration rate of mobile broadband services, including
3G, was slightly above the EU average at around 56 % in 2013.

Consultations
have continued between Serbia and Kosovo on the implementation of the
telecommunications agreement under the EU-facilitated dialogue.

In the
field of information society services, the national interoperability
framework and additional e-government services were introduced as of January.
Further alignment with conditional access and EU legislation on e-commerce
remains to be ensured. The administrative and inspectorate capacity of the line
ministry and its units responsible for ICT and digital administration remain
insufficient. A broadband development strategy was adopted in July.

As regards audiovisual
policy, a package of three laws - the Law on Public Information and
Media, the Law on Electronic Media and the Law on Public Service Broadcasting - was
adopted in August. The adoption of the three laws significantly improves the
media legal framework, in line with the 2011 Serbian media strategy, and
further aligns Serbian legislation with the EU legal framework in this area.
Their implementation and the adoption of necessary bylaws will be crucial to
achieve the goals of the 2011 Serbian media strategy. It has been reported that
the
media market continues to suffer from non-transparent public funding of
selected state-owned media and commercial media through direct budgetary
subsidies and contracts with public enterprises and authorities. Pending the
full implementation of the newly adopted legislative package, the Serbian media
continued to operate in a blurred legal environment which delayed the state’s
withdrawal from media ownership, one of the cornerstones of the 2011 Serbian
media strategy. Media ownership remains non-transparent. The independence as
well as the transparency of the work of the Regulatory Body for Electronic
Media needs to be ensured. The implementation of the digital switchover remains
to be fully ensured to meet the deadline of June 2015 through technical
preparations and a communication campaign to citizens. (See also Chapter
23: Judiciary and fundamental rights —Freedom of expression)

Conclusion

Good
progress was made in the area of information society and media. A package of
three laws implementing the 2011 Serbian media strategy and further aligning
Serbia’s legal framework with the EU acquis has been adopted. The
digital switchover remains to be implemented. The legislative framework
in electronic communications needs to be aligned with the 2009 framework. The
independence of the Regulatory Body for Electronic Media
remains to be ensured. Overall, alignment with the acquis in the area of
information society and media is moderately advanced.

4.11.
Chapter 11: Agriculture and rural development

As
regards horizontal issues, a comprehensive strategy for agricultural and
rural development for the period 2014-2024 has been adopted by government in
July. It defines the framework for a) the institutional and political reform
process, b) for subsidies allocated to agriculture and rural development and c)
the EU and WTO integration process. According to the strategy the subsidies for
agriculture and rural development will be gradually aligned to the Common
Agricultural Policy of the EU.

Establishment of
the Farm Accountancy Data Network (FADN) is progressing. The number of
participating holdings increased from 173 to 499. Rulebooks fully transposing
the FADN regulation have yet to be adopted and the required administrative
structures and capacity need strengthening. There has been no progress as
regards the development of the integrated administration and control system.

As regards
alignment with the common market organisation (CMO), progress is
ongoing, notably in the wine sector, where registration of vineyards
continued smoothly. However, the capacity of the administration in charge of
the wine sector still needs further strengthening. A draft law on spirit drinks
needs to be further aligned with the acquis before adoption. Serbia will
need to develop a roadmap for the alignment and implementation of the CMO for
other products.

Regarding rural
development, preparations for the Instrument for Pre-accession Assistance
for Rural Development (IPARD) programme 2014-2020 continued. While substantial
progress has been achieved as regards the preparation of the programme, the
capacity and readiness of the required operating structures for accreditation
for IPARD has not progressed at the same pace. A major obstacle to the
accreditation preparations is the relocation of the IPARD Agency to Belgrade and
the related recruitment and training of sufficient staff to fulfil
accreditation requirements. In addition, the functions and responsibilities of
the National Authorising Officer (NAO), National IPA Coordinator (NIPAC) and
the Audit Authority in relation to IPARD still have to be established. This is
a serious concern as regards the early implementation of IPARD. Solid and
effective cooperation between all IPARD bodies must be established.

In the area of quality
policy work is underway towards revising the law on geographical
indications.

As regards organic
farming the cultivated area has increased, with considerable potential for
further development. A national action plan for the development of the organic
sector is still outstanding.

Conclusion

There has been
some progress in the area of agriculture and rural development. The
Agricultural and Rural Development Strategy has been adopted. The Farm
Accountancy Data Network was expanded. IPARD operating structures need to be
considerably resourced and major national obstacles for accreditation related
to all IPARD bodies should be solved. Overall, in the area of agriculture and
rural development, alignment with the acquis remains at an early stage.

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

In
the field of general food safety, despite a small increase in their
scientific staff, the national reference laboratories are still understaffed
and unable to perform their duties. Serbia still has no operational milk
quality testing laboratory and no reliable system for quality control of raw
milk.

As for food
safety rules and specific rules for feed, the Law on Animal Medicine and
Medical Devices is not fully in line with the acquis. Further efforts
are needed in the area of specific food safety rules. A Rulebook on the Quality
of Feed was adopted in March 2014. It set, further to the crisis last year, the
maximum level of allowed aflatoxin in feed and milk to 0.25 micrograms per
kilogram, which is not in line with the acquis. Amendments to the Food
Safety Law are still pending, notably to address the lack of a well-established
national reference laboratory.

In the field of veterinary
policy, the downward trend in cases of rabies continued, with only one case
notified this year until August. No cases of classical swine fever were
detected. The annual animal health control programme was published in
February 2014. The implementation of animal welfare legislation needs to
be improved. A new instruction on the method and procedures regarding the
bovine movement control system has been adopted. New rulebooks on the
identification and registration of bovine, sheep and goats, swine and equidae
have yet to be adopted.

With regard to
the placing on the market of food, feed and animal by-products, a
rulebook on veterinary and sanitary conditions was adopted in March 2014,
postponing the Serbia’s deadline for meeting EU raw milk quality standards
until 2019. Serbia has not yet adopted a programme for upgrading agri-food
establishments. The national monitoring and control programme for food and feed
safety is still under preparation. The national system for the management of
animal by-products remains weak and the management of animal waste needs
further strengthening. The hygiene rules for food and feed establishments are
not fully in line with the acquis.

In the area of phytosanitary
policy, plant variety rights were granted to 34 new plant varieties.
Several rulebooks based on the Law on Plant Health were adopted. Also, a
national programme on budget funds for plant health was adopted in January
2014, providing funds for the implementation survey on harmful organisms in
line with the acquis. In the field of plant protection products,
several bylaws were adopted. The laws on plant protection products and plant
nutrition products have yet to be amended. The Phytosanitary Laboratory remains
the weakest part of the National Reference Laboratories Directorate and its
capacity needs to be thoroughly strengthened.

The new Serbian
law on genetically modified organisms (GMOs) remains to be adopted in
line with the acquis, as a condition for Serbia to become a member of
the World Trade Organisation (WTO).

Conclusion

There has been
limited progress in the area of food safety, veterinary and phytosanitary
policy. The maximum level of aflatoxin in milk was not realigned with EU
standards. The administrative capacity of the national reference laboratories
needs to be significantly strengthened. A programme for upgrading agri-food
establishments remains to be adopted and the GMO legislation to be aligned.
Overall, in the areas of food safety, veterinary and phytosanitary policy,
Serbia remains 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 are no new
developments in these areas. A national catch certification scheme for imports
and exports of fishery products in Serbia remains to be adopted.

Serbia does not
have any structural actions in place for small-scale fisheries or inland
fisheries.

As regards market
policy, the capacity of the administration managing and controlling imports
and exports of fisheries’ products needs to be upgraded and brought into line
with the acquis. A producers’ organisation still needs to be
established, and market data collected.

No new international
agreements have been signed.

Conclusion

No progress was
made in the area of fisheries. The relevant Serbian legislation needs to be
amended to establish a national catch certification scheme for imports and
exports of fishery products and a system for the collection of market data.
Overall, preparations in the area of fisheries remain moderately
advanced.

4.14.
Chapter 14: Transport policy

As regards road
transport, amendments to the law on public roads, aiming at further
alignment with the acquis on safety in tunnels, were adopted in
November. The Road Traffic Safety Agency has increased its capacity to 52 of
the 75 planned posts. Road safety
remains a concern with a high, but decreasing, number of fatal road traffic
accidents per year. Alignment with the recent road safety and dangerous goods acquis
is still necessary. Implementing legislation on driving and on rest periods
for drivers engaged in domestic transport has not been adopted.

As
regards rail transport, the new law on railway safety and
interoperability was adopted in November 2013, thus completing alignment with
the railway acquis. Protocols on cooperation were signed between all the
relevant border services and railway companies of Serbia and Montenegro. The
rulebook on the content and form of the network statement was adopted in
October but the network statement remains to be published. The role of the
railway regulator still requires further strengthening. The Rail Directorate
should be given the jurisdiction to enforce regulatory decisions by fines that
do not depend on prior court decisions. Open access to the railway market, with
transparent track access charges and capacity allocation, still needs to be
achieved. Serbian Railways continue to deny track access to a fully licensed
and safety certified domestic freight operator. The freight and public service
passenger undertakings of Serbian Railways should be unbundled. Public service
obligation contracts have not yet been signed at national or local level, and
the establishment of an independent accident investigation body has not been
completed.

Implementing
legislation on inland waterway transport was adopted with regard to the
classification of state waterways, testing navigational accident vessels in
December 2013 and the medical fitness of seafarers in February 2014. The River
Information Services for the Danube and Sava rivers require upgrading with a remote
aid
to navigation
(ATON) monitoring and reaction system. As regards intermodal
transport, the construction of the first modern intermodal terminal in
Belgrade has not yet started. Serbia should develop a balanced intermodal
environmentally-friendly and competitive transport and mobility system, based
on the further use of inland waterways transport. Implementing legislation on
supporting measures for intermodal transport, on incentive measures for road
carriers and on loading units on railway have yet to be adopted.

In the area of air
transport, 18 pieces of implementing legislation were adopted, along with
regulations on common rules for the allocation of slots, ground handling and
airport charges. There was further progress towards meeting requirements
for the first transitional period of the European Common Aviation Area
Agreement (ECAA), but there are some gaps as regards requirements in the field
of economic regulation and aviation safety. There were no major safety findings
identified in the inspections carried out by the European Aviation Safety
Agency. Further harmonisation with the acquis on accident investigation
and working time needs to be achieved. In January 2014, the Civil Aviation
Directorate adopted the revised list of air carriers that are subject to an
operating ban within the European Union. A decision on a list of experts for
the investigation of accidents and serious incidents was adopted in March 2014.
The new national airline, Air Serbia, was established in October 2013 as a
joint venture owned by the Republic of Serbia and United Arab Emirates’ flag
carrier Etihad Airways. Inquiries are ongoing regarding the airline’s
compliance with the ‘effective control’ requirements stipulated in the ECAA.
The administrative capacity of the Civil Aviation Directorate needs to be
strengthened in order to fulfil obligations of the ECAA Agreement.

As
regards maritime transport, amendments to the law on maritime transport
were adopted in November, harmonising the law with the 2006 Maritime Labour
Convention and other International Labour Organisation (ILO) conventions.
Serbia complied with the requirements of the International
Convention on Standards of Training, Certification and Watchkeeping for
Seafarers.

Serbian
participation in the Galileo satellite navigation programme has yet to
start.

Conclusion

Some
progress was made in the area of transport policy, particularly on road, rail,
inland waterways and aviation. Further strengthening of administrative capacity
is required, in particular for enforcement and inspection. Access to the
railway market has yet to be achieved. Overall, Serbia is moderately advanced
in its alignment with the acquis in the area of transport policy.

4.15.
Chapter 15: Energy

In the field of security
of supply, the Law on Commodity Reserves, regulating the compulsory
reserves of oil and oil derivatives, was adopted in December 2013. Serbia did
not provide information regarding the current oil stock levels. Delays in the
construction of the interconnecting gas pipeline between Serbia and Bulgaria
are a cause of concern. The Intergovernmental Agreement (IGA) signed by Serbia
and Russia to build the South Stream pipeline is not compatible with the acquis.
Serbia should not commence work on constructing South Stream until the IGA
is aligned with the acquis. Legislation on security of supply for
natural gas has yet to be aligned with the acquis. Serbia has
contributed to the energy security stress test carried out by the European
Commission in the framework of the European Energy Security Strategy.

On
the internal energy market, Serbia has yet to transpose the third Energy
Package. Regulated tariffs for households and small commercial customers do not
reflect costs. Further efforts are needed strengthen the independence of the
Energy Regulatory Agency (AERS), as well as to increase its capacity to cover
additional responsibilities resulting from the third Energy Package.

The
electricity market was liberalised as of January for all consumers connected to
the distribution network except households and small commercial customers.
About 3 200 new eligible customers, representing around 40 % of total
consumption, no longer have the right to be supplied by the public supplier at
regulated tariffs. In July, the public supplier was established as a separate
legal entity, but the unbundling of distribution and supply functions in the
public electricity company EPS has not been finalised. AERS approved bilateral
agreements between the transmission system operators of Serbia, Bulgaria, and
Croatia. Following September’s 2013 agreement on energy between the Serbian and
Kosovan Prime Ministers, Kosovo’s transmission system operator (TSO) KOSTT, and
its Serbian counterpart, Elektromreza Srbije, signed an inter-TSO agreement in
September 2014. Serbia and Kosovo also approved the action plan to implement
the September 2013 agreement. These represent significant steps in normalising
energy relations between Serbia and Kosovo.

In
the gas sector, AERS approved rules on quality of service in December
2013.
Yugorosgaz-Transport has been legally but not yet operationally unbundled from
Yugorosgaz. The state-owned gas company, Srbijagas, has still not been
unbundled. The Ministerial Council of The Energy Community condemned Serbia for
a failure to comply with obligations under the Treaty as a result of this
failure to unbundle the transmission system operators.

As
regards renewable energy, a power purchase agreement for electricity
produced from renewable sources above 50 MW was adopted in February, but has
not yet led to major new investment. The administrative procedures for issuing
permits and network connections need to be simplified. Under its Energy
Community obligations, Serbia has taken on the target of achieving 27 % of
its gross final energy consumption from renewable sources in 2020.

In
the area of energy efficiency, the second action plan for energy
efficiency, for 2013-2015, was adopted in October 2013. The energy efficiency
fund established by the Law on Energy Efficiency became operational in January
2014. Implementing legislation has yet to be adopted. Administrative capacity
in this area needs to be strengthened.

In
the areas of nuclear energy, nuclear safety and radiation protection,
Serbia started preparing a nuclear safety and security programme. However, the
inspection functions are fragmented and have yet to be transferred to the
Serbian Radiation Protection and Nuclear Safety Agency. Financial independence,
funding and sufficient staffing (only 23 posts out of 35 are filled) are needed
to ensure that the agency functions properly. Environmental radioactivity
monitoring at national level faces problems due to a lack of financial means
and ineffective tendering procedures. A national strategy for radioactive waste
management has yet to be adopted. A national programme for spent fuel remains
to be adopted, and the acquis in the field of radiation protection,
nuclear safety and security transposed. The action plan for decommissioning
research Reactor A at Vinča has yet to be drafted. Further efforts are
required to improve the radiological situation at the Vinča site and the
abandoned Kalna mine and to improve radioactive waste management.

Conclusion

Progress
was made in the area of energy, in particular in the electricity market,
renewable energy and energy efficiency. Additional efforts are needed to
achieve cost-reflective electricity tariffs. A final decision on the unbundling
model of Srbijagas, in line with the acquis, needs to be urgently made.
Serbia should not commence work on constructing the South Stream pipeline until
the IGA is aligned with the acquis. The administrative capacity and
independence of the energy and nuclear regulators need to be significantly
strengthened. Serbia needs to increase its efforts to meet its renewable energy
targets. Approval of the action plan to implement the September 2013 agreement
on energy with Kosovo, and signature of the inter-TSO are positive steps in the
process of normalisation of relations with Kosovo. Serbia should continue to
engage constructively in this process. Overall, preparations in the area of
energy are moderately advanced.

4.16.
Chapter 16: Taxation

In
the area of indirect taxation, the reduced value added tax (VAT)
rate was increased in December 2013 from 8 to 10 %, while some items (e.g.
IT equipment) passed from the reduced to the standard 20 % rate. Regarding
excises, legislation on rates, movement and control, excise warehouses,
storage and the concept of taxpayer remains to be aligned. The same applies to
current rules and exemptions on specific energy resources. Finally, imported
spirits remain taxed at higher level than comparable spirits which are
frequently produced in Serbia.

In the area of direct
taxation, salaries in the public sector above fixed thresholds are
additionally taxed by 20 % and 25 % since January 2014. Some
corporate tax incentives have been abolished as part of fiscal consolidation.

Regarding administrative
cooperation and mutual assistance, exchange of information with
neighbouring countries intensified.

In the area of operational
capacity and computerisation, in March 2014, electronic declarations for
direct and indirect taxes, as well as for social contributions have been
allowed and electronic submission of VAT forms was introduced in July 2014.
Administrative procedures have been simplified. 205 accounts were transformed
into one for the payment of taxes and 35 different tax forms have been reduced
to one, thus enabling human resources to be shifted to tax inspections.
However, there is still a significant number of staff engaged in non-core
duties and audit tools are insufficiently used. Efforts have been made to
enhance transparency, tax compliance and communication with the public. The
Serbian Tax Administration has introduced standards for performance measurement,
but tax procedures need to be further unified and simplified, while the
discretionary powers of individual tax inspectors should be reduced and closely
monitored. The administration’s Computer Data Centre is properly organised and
is being modernised. A new taxation strategy, addressing human resources,
further development of taxpayer services and the fight against the informal
economy remains to be adopted. Frequent changes in the tax administration’s
management are not conducive to its transformation into a compliance and
revenue oriented service.

Conclusion

Some
progress has been made in the area of taxation, notably in the fields of
e-declarations, organisation and transparency. Serbia should continue to align
its rules concerning excise goods, including on imported spirits, with those in
the acquis. Urgent measures are needed to tackle the informal economy in
a consistent, lasting manner. These include further simplifying tax procedures
and reducing and effectively monitoring the discretionary powers of individual
tax inspectors. Overall, preparations in the area of taxation are moderately
advanced.

4.17.
Chapter 17: Economic and monetary policy

On
monetary policy, the National Bank of Serbia (NBS) continued its policy
of inflation targeting in the range of 4 % ± 1.5 percentage points.
Inflation reached historically low levels, but stayed mostly below the target
band of the NBS.

As regards economic
policy, Serbia continues to participate in pre-accession economic
surveillance. It submitted its 2014 Pre-accession Economic Programme to the
Commission in January. Fiscal consolidation and economic recovery are set as
the main objectives of the new government. The macroeconomic scenario
underlying the programme was broadly plausible and the presented alternative
scenario captured some of the main risks. Although largely appropriate, the
fiscal consolidation path envisaged in the programme requires strong additional
efforts. The structural reform framework is coherent and sufficiently
comprehensive; however, the authorities would still have to follow-up on most
of the announced policy intentions. Further efforts are needed to increase the
capacity for economic policy planning, coordination and implementation. Public
debt continued increasing up to 63 % in July 2014, breaching by far the 45 %
of GDP ceiling introduced by the fiscal rules. The Fiscal Council has actively
expressed its opinion, contributing to debates on budgetary and economic
developments and policies.

Conclusion

There has been
little progress in the area of economic and monetary policy. Monetary policy
credibility was enhanced but further efforts are required to pursue the
announced fiscal consolidation. Implementation of the announced reforms needs
to be improved. Overall, Serbia is moderately advanced in the area of economic
and monetary policy.

4.18.
Chapter 18: Statistics

Concerning
statistical infrastructure, the capacity of the Statistical Office of
the Republic of Serbia needs to be further strengthened.

Concerning classification
and registers, the regional statistical classification (NUTS
classification) remains to be decided, pending a political decision on its
territorial coverage.

With regard to sectoral
statistics, several additional reports on the results of the 2011
population census have been published. In December 2013, the official results
of the agriculture census were released. The Statistical Office published an
agricultural statistics development strategy 2013-2018 which presents actions
to be taken in order for Serbia to become compliant with EU standards in
agricultural statistics. It remains to be adopted by the government. For the
censuses additional analytical material has been produced and presented to the
public at large. Data from the first wave of the survey on income and living
conditions were released in late December 2013, while work on the second wave
continued in 2014. These data include the main indicators of poverty and social
exclusion and were inserted into a database to be further updated. Work on the
preparation of national accounts has continued as a priority. Full compliance
with the European System of Accounts (ESA) 2010 standards remains to be
ensured.

Conclusion

Good
progress was made in the area of statistics. The release of the results of the
population and agriculture censuses continued. Sectoral statistics have been
further developed. Work on the preparation of national accounts has continued.
The administrative capacity of the Statistical Office needs to be further
strengthened. The issue of regional statistical classification should be
solved. Overall, Serbia is advanced in the area of statistics.

4.19.
Chapter 19: Social policy and employment

The
amended Labour Law aiming also at achieving some alignment with the acquis
was adopted in July. However, as the law was adopted in an urgent procedure
consultation with the social partners and public debate could not be fully
respected.

In the field of health
and safety at work, work on amending the Law on Health and Safety at Work
is well advanced. The new strategy on health and safety at work for 2013-2017
was adopted in November 2013 and the accompanying action plan for 2014 was
adopted in July. A rulebook on display equipment entered into force in
December. The register of injuries at work is still under construction and depends
on the adoption of the Law on Registers.

The capacity of
the Labour Inspectorate needs to be strengthened to allow for efficient
inspections in the field (there are currently 250 inspectors or 1 inspector per
1 300 companies) and for better implementation of the Labour Law.

Tripartite social
dialogue has been at a stalemate since autumn 2013 with the representative
trade unions withdrawing from the Working Group on the Labour Law. The meetings
of the Economic and Social Council are not systematic and should be improved
according to the relevant rules. No agreement has been reached on the level of
the minimum wage. Consultation of the Council on legislative amendments remains
limited. The criteria and procedure to establish representativeness of trade
unions and employers’ organisations need to be agreed in a clear and
transparent manner. At local level, tripartite social dialogue still needs to
be developed. The administrative capacity of social partners needs further
strengthening to ensure their participation in collective bargaining and
legislative consultations. Bi-partite social dialogue remains underdeveloped.
There are only few sectoral collective agreements, while several have expired
and need to be renewed. The law on strike remains to be adopted. The agency for
peaceful settlement of labour disputes needs further strengthening.

In the area of employment
policy, administrative capacity to ensure better-targeted and efficient
labour market policies is being further developed in the Ministry of Labour,
Employment, Veterans and Social Policy, the National Employment Service and at
local level. The 2015 national employment action plan was adopted in September.
The focus of this year’s action plan is on youth, unemployed with low
qualifications, and workers made redundant from companies in restructuring.
Serbia is preparing its first employment and social reform programme, with a
view to identifying and addressing its key challenges in employment policy and
social policies. A kick-off meeting took place in November 2013. Recent improvements
in labour market participation and employment rate can mainly be attributed to
an increase in seasonal and family work and remain fragile. Unemployment
remains very high at 20 % (June 2014) and long-term unemployed still
represent more than three quarters of the unemployed. Youth unemployment (15-25
years old) is growing (53 % in June) and the share of young people not in
employment, education or training (NEET) is at around 27 % (June 2014).
The implementation of the 2013 national employment action plan was hampered by
a 65 % cut in the budget earmarked for active labour market policies.
Still, of the targeted 109 000 unemployed, 92 % were included in
active labour market measures and 22 % found employment. Some 30 % of
the unemployed included in active labour market measures in 2013 belong to the
most vulnerable groups and to groups with high incidence and persistence of
unemployment, including Roma. Roma will continue to benefit from specific
programmes in addition to regular active measures. The 2014 budget earmarked
for active labour market measures is less than 0.1 % of GDP, which is very
low but nevertheless an increase from the previous year. This is insufficient
to address the high level of unemployment and of long-term unemployment and to
face future challenges, notably the forthcoming large redundancies linked to
the restructuring of 153 state-owned enterprises. According to Labour Force
Survey, informal employment grew significantly, from 17.9 % in October 2012
to 21 % in June 2014.

Administrative
capacity to prepare for the European Social Fund needs strengthening.
The department responsible for international cooperation, EU integration and
projects is now accountable directly to the Minister of Labour, Employment,
Veterans and Social Policy and is structured in three sub-units. Coordination
between the priorities identified in the indicative strategy paper for Serbia
and in the employment and social reform programme needs to be further enhanced
for the programming of IPA funds. (See also Chapter 22 — Regional
policy and coordination of structural instruments)

In the area of social
inclusion, according to preliminary data from the first survey on income
and living conditions, the at-risk-of-poverty rate in Serbia is 24.6 %.
Despite some progress in the overall legislative and regulatory framework, the
implementation of the action plan to improve the status of Roma needs to be
stepped up. Scarce financial resources were mobilised from the budget. The Roma
community continues to be disproportionately excluded from a range of social
services and initiatives to promote social inclusion and access to employment.
A national mechanism ensuring reliable, adequate and timely data on the social
situation needs to be developed. The availability of community-based services
across the country remains limited. The efficiency of the licensing process for
social services providers introduced by the 2011 Social Welfare law is being
discussed. As regards people with disabilities, € 12.8 million was
allocated to the fund for professional rehabilitation and enhancement of
employment of persons with disabilities in 2014. In 2013, approximately 5 700
people with disabilities benefited from active measures, down from 6 500
in 2012.

In the field of social
protection, the pension fund deficit remains large. More than 40 % of
the revenues of the pension fund come from the budget. Budget transfers to pay
pensions continue to be the largest single item on the expenditure side. About
14 % of GDP was spent on pensions in 2013. Amendments to the Law on
Pension and Disability Insurance were adopted in July. They introduce changes
in pension calculation and retirement rules, including extending women’s
retirement age to 65.

In the field of anti-discrimination
policy, the Equality Protection Commissioner’s office continued its
awareness-raising activities on discrimination and mechanisms for protection
against discrimination. However, the capacity of the Office still needs to
improve. An action plan for the implementation of the strategy for the fight
against discrimination was adopted in October 2014. The anti-discrimination law
remains to be further aligned with the acquis. The groups most
discriminated against remain the Roma, sexual minorities, and persons
with HIV/AIDS.
Notwithstanding the government’s good preparatory work for the pride parade, a more
visible political commitment to promoting a culture of respect towards the
LGBTI community and raising awareness is needed. Training has been provided for
the police on anti-discrimination and equality issues. (See also Chapter 23
— Judiciary and fundamental rights)

Regarding equal
opportunities between women and men, legislation with regard to the
dismissal of pregnant women and women on maternity leave, sexual harassment and
inequality in promotion and salaries needs to be systematically enforced.
Administrative capacity on gender equality issues remains weak. The law on
Ministries from April dismantled the previous Directorate for Gender Equality.
The new Ministry of Labour, Employment, Veterans and Social Policy includes a
Unit for gender equality under the sector for development and planning. (See
also Chapter 23 — Judiciary and fundamental rights)

Conclusion

Limited
progress can be reported in the area of social policy and employment.
Developments continued in the area of health and safety at work but have slowed
down in the areas of employment policies and social inclusion. Further work is
needed to align the Labour Law with the acquis. Social dialogue needs to
be strengthened at all levels and the stalemate of tripartite social dialogue
is of particular concern. Further efforts are needed to address labour market
segmentation and to ensure alignment with the acquis. An action
plan for the implementation of the strategy for the fight against
discrimination was adopted in October 2014. Overall, preparations in this area
are at an early stage.

4.20.
Chapter 20: Enterprise and industrial policy

Regarding
enterprise and industrial policy principles, the strategy for the
development of entrepreneurship and competitiveness 2014-2020 has been prepared
but remains to be adopted. This strategy is wider in scope and does not
exclusively cover SMEs like the previous one. It identifies the main activities
to support entrepreneurship and competitiveness, in line with Small Business
Act principles, but does not include a budget for these activities. The SME
Council stopped meeting after years of difficulties — it could not ensure
inter-ministerial coordination as it lacked powers to take binding decisions.
Plans to establish a new body with more powers have been launched.

The
implementation of the law limiting payment deadlines has been relatively
successful with regard to public sector payments, for which a control and monitoring
system has been set up by the Treasury. The law, however, needs to be further
aligned with the EU legislation.

In the field of enterprise
and industrial policy instruments, Serbia continues to implement the Small
Business Act (SBA) and participated in SBA performance Review. Serbia decided
to participate in the EU Programme ‘Competitiveness of Enterprises and Small
and Medium-sized Enterprises’ (COSME), but could not yet agree with the
Commission on full participation in 2014 due to budgetary problems. Serbia has
been invited to consider joining the COPERNICUS programme.

As regards
policy instruments, there are a number of financial instruments, such as
reimbursement of consulting services, subsidies for innovating activities,
subsidies for investment, public promotion of entrepreneurship and women’s
entrepreneurship and support for clusters and incubators. These instruments
remain limited in scope.

As regards the
business environment, the regulatory guillotine process has stalled, while
regulatory impact assessments continue to be applied to new legislation.
Further efforts are needed to improve access to finance for companies,
especially in view of the negative credit growth. Company registration has been
simplified, but parafiscal charges for company operations have increased.

In sector
policies, particular efforts are needed to improve procedures for
construction permits, so as to contribute to the more dynamic construction
sector and improve the business environment in general. A new law facilitating
the issuing of construction permits remains to be adopted.

Conclusion

Limited progress
has been made in the field of enterprise and industrial policy. A number of
strategies and financial instruments are in place, but the business environment
remains weak. Overall, Serbia needs to continue efforts to improve the
environment for its businesses, particularly SMEs.

4.21.
Chapter 21: Trans-European networks

In
the area of trans-European transport networks, Serbia continued to
participate in the work of the South-East Europe Transport Observatory.
Development and prioritisation of projects should take into account the routes
defined in the indicative extension of the TEN-T to the Western Balkans region.
Works on most sections of the road E-75 started. Little progress has been made
regarding the implementation of the action plan for the construction of Road
Route 4 (Belgrade-Bar), also referred to as Corridor XI, for which several
agreements with third countries have been concluded. There has been limited
progress regarding the construction of road corridor X and works on four
sections of the E-80 were delayed due to a change of contractor. On rail
corridor X, project documentation is being prepared for the Novi
Sad-Subotica-Hungarian border and for the section of the Nis bypass. Work
on the Zezelj rail bridge has been further delayed. Different loan agreements
for rail projects have been concluded with third countries. Several
infrastructure projects to improve navigation conditions on the inland
waterways network are in progress.

In the field of
trans-European energy networks, Serbia continues to support the
implementation of the Gas Ring Project for South-East Europe. The financing of
the construction of Nis-Dimitrovgrad interconnector is in jeopardy due to
delays on the part of the government to agree on an unbundling model for the
restructuring of the public gas company, Srbijagas. An expropriation process
was completed for the Resita-Pancevo electricity interconnection between
Romania and Serbia. An investment pipeline for priority infrastructure projects
in energy and transport was worked out in May 2014, and needs to be adopted by
the government.

Conclusion

Serbia
has made little progress in the area of trans-European networks. The financing
of the new interconnections, and various structural problems leading to delays
in construction, both in transport and energy, need to be addressed. Decisive
government action is urgently needed by the end of 2014 to ensure the
construction of Nis-Dimitrovgrad interconnector. Overall, preparations in the
field of trans-European networks remain moderately advanced.

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

With
regard to the legislative framework, legislation in policy areas that
support the implementation of regional policy is still not fully in line with
the acquis.

As
regards the institutional framework, management of IPA components I and
II (IPA 2007-2013 period) was conferred on Serbia in March 2014, under the
decentralised implementation system. Work is ongoing to align the programming
and implementation structures with EU regional policy and to increase the
absorption and co-financing capacity of the EU-funded programmes.

With
regard to administrative capacity, further efforts are needed to an adequate
staff retention and recruitment policy, in line with the anticipated workload
stemming from the conferral of management.

In
the field of programming, Serbia is well prepared for a sectoral
approach under IPA II. The capacity of potential final beneficiaries to produce
project documentation in line with IPA requirements needs to be improved.
Serbia has prepared a project selection methodology and developed a project
pipeline for investments in the fields of energy, transport, environment and
business infrastructure which needs to be adopted by the government. This
project pipeline should serve as the sole basis for investment projects to be
financed by the international donors’ community, international financial
institutions and the national budget over the next programming period. On monitoring
and evaluation, sectoral monitoring committees for all sectors of IPA
components I and II have been set up.

In
the field of financial management, control and audit, financial
management and control systems have been further developed to comply with the
indirect management requirements of IPA components I and II. The capacity of
the audit authority is still undeveloped.

Conclusion

There
has been good progress in the area of regional policy and coordination of structural
instruments. Serbia is starting to acquire experience in the management of EU
funds under the decentralised implementation system. Adequate implementation
capacity needs to be ensured under indirect management to improve results.
Overall, preparations in this area are moderately advanced.

4.23.
Chapter 23: Judiciary and fundamental rights

Judicial system

In
the area of judicial reform, the reinstatement of previously dismissed
judges and prosecutors was finalised. Several key acts, such as the law on seats
and territorial jurisdiction, amendments to the law on the organisation of
courts, the law on judges and the law on public prosecution offices, were
adopted. A new network of courts of general jurisdiction started operating in
January 2014. However, special legislation related to the judicial network in
Kosovo, the deadline for which was set by the law on seats and territorial
jurisdiction as 31 December 2013, has not yet been adopted.

A Strategy
Implementation Commission, led by the Ministry of Justice and composed of 15 representatives of major stakeholders, was
set up in September 2013 to monitor and
measure progress in the implementation of the 2013-2018 national strategy and
the related action plan. However, the commission has not yet been instrumental
in securing timely and adequate implementation of judicial reform. Various
delays in the implementation of the action plan occurred. Work
on constitutional amendments to improve the position of the judiciary, on legal
changes to address the quality and consistency of judicial practice and
judicial education is at an early stage.

Regarding the independence
of the judiciary, the High Judicial Council and the State Prosecutorial
Council adopted respectively in July and May 2014 appraisal rules for judges and
prosecutors. The two Councils continued to share responsibility with the
Ministry of Justice for budget planning, execution and monitoring. An important
number of Court Presidents have been appointed on a permanent basis following
several nominations, albeit in the absence of clear criteria. The law on judges
and public prosecution was amended in June 2014 and provides that the High
Judicial Council and the State Prosecutorial Council will propose only one
candidate, rather than three, to parliament for each judicial and prosecutorial
post. This is a positive step, but only as a transitional solution: the
constitutional and legislative framework still leaves room for undue political
influence affecting the independence of the judiciary, particularly in relation
to the career of magistrates. Constitutional amendments on the composition and
method of election of members of the two Councils and allowing for judicial
review of dismissal decisions are needed to strengthen the independence,
representativeness and hence legitimacy of these self-governing bodies. Some
judges from higher and appellate courts were confronted with direct attempts to
exert political influence over their daily activities without the High Judicial
Council properly defending their independence. The practice of publicly
commenting on trials and announcing arrests and detentions in the media ahead
of court decisions risks being detrimental to the independence of the judiciary
and raises serious concern.

The impartiality
of judges is ensured through the constitutional and legal framework. However,
practical implementation is hampered by the fact that the system of random
allocation of cases is not yet automated in all courts, which provides scope
for circumventing the system.

In relation to accountability,
24 disciplinary charges against prosecutors were filed in 2014. The number of
disciplinary charges against judges increased in 2013 to 540 and 8 new
proposals for disciplinary measures were submitted. Four of them have been
processed and there has been one case of dismissal based on a criminal
conviction. The High Judicial Council nominated new members for its
disciplinary bodies in January 2014 as some mandates expired in December 2013.
It also adopted measures to facilitate the performing of disciplinary functions
by reducing ordinary workload. Nevertheless, Serbia still needs to implement a
comprehensive system of regular individual and periodical evaluation of judges
and prosecutors. Effective implementation of codes of ethics, disciplinary rules
and legislation on conflicts of interest and the lifting of immunity for
certain posts are needed to ensure full accountability of judges and
prosecutors.

As
regards the efficiency of the judiciary, the judicial budget (including
the prison system) was € 269 million in 2014, a 13 % increase on
2013. The Constitutional Court declared unconstitutional the provisions of the
Law on the Judicial Academy stipulating that the High Judicial Council and the
State Prosecutorial Council could propose only graduates of the Academy’s
initial training as candidates for first election to judicial office. The
Academy’s legislative and institutional framework needs to be adapted to allow
it to become the compulsory point of entry to the judicial profession while
ensuring compliance with the ruling. Training capacity and expertise should be
significantly increased.

In December
2013, the Supreme Court of Cassation adopted a national backlog reduction
programme with the objective of reducing the number of cases older than two
years by 80 % nationwide by the end of 2018. The law on mediation in
dispute resolution was adopted in May 2014 but has not yet entered into force.
The backlog of court cases remained a concern, with 2.8 million cases pending
at the end of 2013. The figure for cases older than two years is particularly
worrying (at over 1.7 million out of which 1.2 million are enforcement cases).
Migration of case files to mirror the delegation of competences under the new
court network has not been finalised. The Administrative Court continued to
face an increasing volume of new cases. It resolved 18 277 cases, but
received 21 756 new ones in 2013. The backlog of the Constitutional Court
also remained significant in 2013, with more than 16 000 pending cases (as
compared with 12 000 at the end of 2012). The current system of collecting
court statistics is not efficient and does not allow making a meaningful
analysis of the performances of the Serbian Judicial system. There is also a
need to further improve the expertise of judges in certain areas, especially in
taxation and financial matters, consumer protection, state subsidies,
competition, asylum and human rights protection.

The appointment
of the first generation of public notaries took place in July. The Chamber of
notaries and its managing and disciplinary bodies were established. The
number of notaries will need to increase substantially in order to meet the
demand. While the introduction of public notaries is a positive step, concerns
were raised as to the selection and appointment procedures, which should be
improved. The law should be implemented by taking into consideration the need
to ensure quality services and access to justice. The number of bailiffs
increased, but remains insufficient to meet the target set by the law for its
implementation.

Persistent
differences in the workload among judges, lack of adequate premises and
equipment still constitute serious obstacles to judicial efficiency. A
proper case methodology to measure workload and to ensure a more equal
distribution of cases among judges and prosecutors as part of the reform of the
court network is required.

Inconsistency in
case-law continues to be a concern, especially in appeal courts, and represents
a challenge to the principle of equality before the law. Efforts are needed to
foster more consistency and coherence through judgments made by the most
authoritative courts in the system.

As regards access
to justice, following the general introduction of the adversarial system in
criminal proceedings from October 2013, concerns about procedural safeguards
remain, especially in the absence of a free legal aid system. The draft law on
free legal aid remains to be adopted. A unified case management system remains
to be established. Differences in workload, the high average duration of
proceedings, the significant backlog of cases, the absence of a free legal aid
system and the lack of enforcement of final judgments and indemnity claims are
major obstacles in practice. The system of awarding compensation to victims of
crime through criminal or civil proceedings is not functional.

In the area of domestic
processing of war crimes, implementation of the protocol on cooperation
signed in January 2013 substantially improved cooperation between the special
prosecutors of Serbia and Bosnia and Herzegovina. Cooperation and exchange of
information with Croatia and EULEX continued. It is important that Serbia
continues to strengthen its efforts on regional cooperation in this regard. In
the reference period, Serbia opened investigations in four cases and brought
charges against ten people, and five judgments were rendered in first instance,
with thirteen convictions. A first-instance ruling in a complex case of war
crimes in Kosovo against Albanian civilians acknowledged for the first time the
responsibility of members of the Yugoslav army, who were in the first instance
sentenced to up to 20 years in prison. Despite consistent efforts by the war
crimes jurisdictions, the number of investigations against high-level officers
still remains low, and courts continued to pass lenient sentences in such
cases. Only few victims of war crime have access to effective compensation
under the current legal framework. Serious weaknesses in the witness protection
system have not been addressed and assistance to victims has not improved. The
Commissioner for Public Information denounced the practice of anonymising the
names of convicted persons in judgments made available to the public. (See
Political criteria — Regional issues and international obligations.)

Anti-corruption policy

Serbia further
implemented the recommendations of the Council of
Europe Group of States against Corruption (GRECO). Implementation of the
strategy and action plan for 2013-2018 has yet to mirror the strong political impetus
to fight corruption. Several measures have been delayed. An efficient mechanism
for monitoring implementation of the anti-corruption strategy and action plan
needs to be ensured. Adequate resources and human capacities for implementation
of the Strategy and action plan need to be allocated. The new inter-ministerial
coordination mechanism put in place in August and the appointment of a new
State Secretary for the fight against corruption, in the Ministry of Justice
and Public Administration, are positive initial steps but their impact on the
ground remains to be assessed. Adequate capacity tools and resources
need to be ensured to strengthen the Anti-Corruption Agency with a view to
fulfilling its mandate. In addition, the agency should reflect on proactively
enhancing its role as a key institution in the fight against corruption. This
implies in particular developing and ensuring sound working conditions with the
Ministry of Justice and other relevant institutions.

Almost half of
the relevant authorities did not fulfil their obligation to report to the
Anti-Corruption Agency on the implementation of the national strategy in their
field of competence, without it being entitled to engage their responsibility.
As a result, the agency’s first report to parliament, in June, on the
implementation of the strategy and action plan does not give a clear and
comprehensive picture. Amendments to the legislation enabling
the Agency to perform monitoring in accordance with the Strategy remain to be
adopted. A mechanism to hold public bodies accountable while reporting on
implementation of anti-corruption measures needs to be introduced.

On
the prevention side, the Anti-Corruption Agency received almost double the
number of requests to investigate conflicts of interest compared to the
previous year (1402 requests in 2013 compared to 872 in 2012); however very few
cases were finalised. The Agency filed 56 misdemeanour requests, which is a
substantial increase from the previous years when only 9 such requests were filed.
There were 451 procedures begun in 2013 to check the property and revenues of
public officials, of which the majority (252) referred to officials who had not
submitted a report on their property and income by the deadline set by law. Serbian
legislation in the area of conflict of interest (including provisions defining
conflict of interest) needs to be amended to meet the European and
international best practices to ensure all cases of conflict of interest are
addressed and deterrent sanctions imposed. The agency stepped up asset
declaration checks, and filed a total of 168 requests for misdemeanour
proceedings relating to asset declarations in 2013, of which 142 were for
failing to submit reports on time. It also filed nine criminal charges in 2013,
and an additional 14 criminal charges in the first four months of 2014 out of
which 9 due to reasonable suspicion that a public official did not report
property or gave false information about the property, with an intention to
conceal facts. Moreover, the problem of lack of dissuasiveness of sanctions
needs to be addressed.

The
agency continued to monitor the funding of political activities, including
funding for the early elections that took place in 2014. In 2013, the agency
submitted 335 requests for misdemeanour proceedings, of which the majority (303
cases) related to the failure of political organisations to submit reports on
expenses for the 2012 election campaign. In connection with these cases, only
28 judgments have been passed, of which 8 are final. In the first months of
2014, the
agency
issued 10 decisions pertaining to the loss of funds from public sources for
political entities which were fined for misdemeanour under the Law on Financing
Political Activities. In-depth verification of political parties financing
needs to be carried out by the agency. A track record of enforcing asset
declarations and checks on party funding still needs to be established. Cases
of illicit wealth need to be addressed in line with the provisions of the
action plan for the fight against corruption so as
to make illicit enrichment a criminal offence. The OSCE/ODHIR recommendations
on financing electoral campaigns need to be addressed.

The
Anti-Corruption Agency stepped up risk analysis of draft legislation. Training
and education activities in 2013 were fewer than
previous year (only 417 people attended various educational programmes, as
compared with 3 679 in 2012). Overall, the agency’s capacity for
collection and analysis of data needs to be improved and its access to relevant
databases ensured.

The
Anti-Corruption Council continued to be active in exposing and analysing cases
of systemic corruption, in its advisory role to the government. However, its
recommendations are insufficiently dealt with and followed up by the government
and it is under resourced. This situation needs to be addressed. In addition,
appointment of new Council members should be ensured.

Transparency
of public procurement procedures has improved with the use of the upgraded
public procurement portal. New requirements introduced by the Law on Public
Procurement and the national strategy and action plan for the fight against
corruption remain to be fully implemented. Comprehensive
risk analyses for areas vulnerable to corruption such as health, construction,
privatisation and education, justice and law enforcement are needed. Corruption in local level administration
needs additional attention.

Civil
society still plays a limited role in the implementation of the anti-corruption
agenda. Effective whistle-blowing protection mechanisms have yet to be
established. The government adopted a draft law in October 2014, which remains
to be adopted by parliament. Internal control departments lack equipment,
resources and human capacity. Independent supervision and capacity for early
detection of wrongdoing and conflicts of interest in state-owned companies,
privatisation procedures and public expenditure remain underdeveloped. The
Commissioner for Free Access to Information of Public Importance and Personal
Data Protection recorded an increase in the number of requests for access to
data on public
procurement, privatisation, concessions, public-private partnerships and other
related procedures that have an impact on the budget. The legal
framework needs to be strengthened to ensure adequate follow-up and
effectiveness of the Commissioner’s decisions.

In
relation to law enforcement, the Prosecution for Organised Crime and Corruption
has raised
indictments against 168 persons in 2013, which is an increase from the 81
indictments raised in 2012. Leaks to the media about ongoing
investigations, in breach of the presumption of innocence, are an issue of
serious concern and should be investigated and processed in line with
the law.
The number of investigations launched in 2013 by the Special Prosecutor for
Corruption and Organised Crime in high-level corruption cases remained about
the same as last year (at 147 new investigations, compared with 140 in 2012). Final
convictions remained rare and high-profile cases remained at risk
of political interference. Further efforts are needed to establish a track
record of investigations, prosecution and final convictions, in corruption
cases, including high-level cases. Law enforcement
bodies and prosecution need to become more proactive. Lack of internal capacity
and expertise in financial investigations and asset recovery, together with a
lack of technical equipment for special investigative measures, hamper the
effectiveness of investigations. Interinstitutional cooperation between law
enforcement agencies has improved to a certain extent, but needs to be
developed further. The independence of all investigative and judicial bodies
dealing with investigations into corruption needs to be strengthened.

Most
cases formerly handled under Article 359 (abuse of office) of the criminal code
were re-qualified under the new Article 234 (abuse of a position) applicable to
private operators: out of the 2 411 cases (involving 4 455 persons)
that were processed under former Article 359 and that were re-qualified, 2 202
cases (involving 4 168 persons) were re-qualified under new Article 234. This
illustrates a continuing tendency to overuse these offences in the context of
business disputes, which is harmful to the business climate and legal certainty.
The comprehensive review of the criminal code being conducted to ensure that
corruption and economic crimes are precisely defined and can be effectively
investigated and processed needs to be completed without delay. The criminal
code needs further amendment in this respect.

Fundamental rights

Serbia has
ratified all the main international human rights instruments and is on
track with reporting to the UN human rights mechanisms. Nevertheless,
implementation needs to be more consistent.

During
the reporting period, the European Court of Human Rights delivered 29
judgments on 73 applications against Serbia. In 27 judgments the Court found
that Serbia had violated the European Convention for the Protection of Human
Rights and Fundamental Freedoms. The majority of judgments refer either to
violation of the right to a fair trial due to the length of the procedure or to
the non-enforcement of domestic judgments. As of September 2014, there were
4690 pending allocated applications before the Court regarding Serbia, and 110
cases pending before the Committee of Ministers in charge of supervising the
execution of judgments. More attention needs to be paid to safeguarding
procedural rights connected to arrest, detention and fair trial, in accordance
with Serbia’s obligations under the ECHR. Important developments have taken
place at EU level strengthening procedural safeguards and victims’ rights and
to which Serbia will need to gradually align (including on rights, support and
protection of victims, on translation and interpretation, on the right to
information and on access to a lawyer), in addition to preparing for
implementing the European protection orders in criminal and in civil matters
upon accession.

In
relation to the promotion and enforcement of human rights, the
government’s Office for Human and Minority Rights, but also relevant
parliamentary committees, independent bodies and civil society organisations,
have carried out various activities to promote respect for human rights,
tolerance and anti-discrimination. The Office continued with training courses
for legal practitioners, police officers and social workers on the rights of
the LGBTI population. However, the implementation of relevant international
instruments is still insufficient, particularly at the local level. The role
and the position of the Office need to be strengthened. A national mechanism
for monitoring the implementation of the UN Human Rights Bodies’
recommendations, enabling an overview on recommendations still to be met,
remains to be established.

As
regards the prevention of torture and ill-treatment, the administrative
capacity of the Ombudsman, acting as the national preventive mechanism against
torture, needs to be strengthened. Penalties are not proportionate to the
gravity of the crimes of ill-treatment and torture. Proper legal safeguards for
prevention of torture and abuses in social institutions have yet to be adopted.
The legislation on detention in police custody, the prevention of torture and
the internal complaints system needs to be improved. The internal non-judicial
mechanism for reviewing complaints needs to be strengthened in order to be
effective. There have been no positive developments in changing the unlawful
practice of using district prison facilities for police detention.

Concerning the prison
system, a new strategy and action plan for the further development of the
correctional system 2013-2020, were adopted. New laws on enforcement of
criminal sanctions and on alternative sanctions and measures are in force since
September 2014. This should improve the level of protection of human rights in
enforcement of sanctions. Pilot programmes for vocational training in three
main prisons (Pozarevac, Nis and Sremska Mitrovica) were successfully
conducted. The number of alternative sanctions, such as home imprisonment
monitored by electronic tagging and community service orders, remains to be
further increased. The probationary service network needs to be expanded.
Serious overcrowding in maximum security wards, difficult access to treatment
programmes and quality healthcare remain matters of concern.

Concerning freedom
of expression, a package of three laws — the Law on Public Information and
Media, the Law on Electronic Media and the Law on Public Service Broadcasting
was adopted in August, following an inclusive consultation process with the
active participation of media associations during the preparatory phase albeit
under urgent procedure. The laws’ adoption represents a significant positive
development. Their implementation will be crucial for achieving the goals of
the 2011 Serbian media strategy. The commission specially tasked to look into
unresolved cases of murdered journalists from 1999 and 2001 has made progress
in its work, with new details relating to one particular murder surfacing and
three persons charged so far. The Regulatory Body for Electronic Media has
stepped up activity related to content monitoring but its independence needs to
be strengthened. Access to information of public interest is generally functional,
although disclosure of some documents followed only after intense public
pressure.

However, there
are concerns about deteriorating conditions for the full exercise of freedom of
expression in Serbia. More generally, there is a growing trend of self-censorship
which, combined with undue influence on editorial policies, and a series of
cases of intervention against websites, are detrimental to freedom of the media
and adversely affect the development of professional and investigative
journalism. In this respect, efforts are expected to identify and prosecute
suspects of violations of internet freedoms. Pending the full implementation of
the newly adopted legislative package, the Serbian media continued to operate
in a blurred legal environment which delayed the state’s withdrawal from media
ownership, one of the cornerstones of the 2011 media strategy. Significant
involvement of professional associations is necessary in regulating the
position of journalists and ensuring their employment rights. The sustainability
of public broadcasting services in minority languages, including sustainable
financing of RTV, should be ensured. See also Chapter 10:
Information society and media.

Threats
and violence against journalists, including cases of physical
assault at local level, still remain a concern. While some criminal charges
were filed for incitement to ethnic, racial and religious hatred and
intolerance, final convictions remain rare.

Media campaigns
based on anonymous or leaked sources, detailing investigations, announcing
arrests and quoting investigation documents undermine trust in judicial
institutions, violate personal data laws and challenge the presumption of
innocence. A track record of investigation and convictions in these cases has
to be established. More generally, media owners and top editorial staff should
pay more attention to abiding by professional standards, with support from the
Press Council.

Freedom
of assembly and association is in general upheld. 98 political
parties, including 57 representing minorities, were registered as of April
2014. The holding of the pride parade without major incident and the government’s
good preparatory work in this respect marked a substantial step towards the
effective exercise of freedom of assembly. The activities of extreme right-wing
organisations and violent groups of so-called sports fans continued to be a
cause of concern. Public officials should publicly and more systematically condemn
or react to threats, physical assaults and cases of incitement to violence and
hate speech from extremist groups against non-governmental organisations
(NGOs), prominent human rights defenders, journalists, bloggers or individual
citizens. A track record of investigation and convictions has yet to be
established. The public assembly law has yet to be fully aligned with the
Constitution.

As
regards freedom of thought, conscience and religion, in
addition to seven communities recognised as traditional religious communities,
several religious organisations have been registered. However, the lack of
transparency and consistency in the registration process continues to be one of
the main obstacles preventing some religious groups from exercising their
rights. Some disputable provisions of the rulebook on the register of churches
and religious communities may constitute a breach of the principle of state
neutrality towards the internal affairs of religious communities. Access to
church services in some minority languages is not fully guaranteed in practice.

Concerning women’s
rights and gender equality, parliament ratified in October 2013 the Council
of Europe ‘Istanbul Convention’ on fighting violence against women. The
catalogue of criminal offences has yet to be harmonised with the Convention.
The Gender Equality Directorate in the Ministry of Labour, Employment and
Social Policy has been transformed into a division within the Department for
planning and development affairs. Adequate resources and better coordination of
the national machinery for promotion of gender equality need to be ensured. An action
plan for the implementation of the national strategy for prevention and
combating violence against women remains to be adopted. The number of women
killed by their partners increased. Emergency protection orders are not issued
promptly, no national women’s helpline is in place; the number of shelters is
insufficient and there are no centres for victims of sexual violence. The
mechanisms for coordinating the collection and sharing of data between all
relevant actors in the system need to be improved. Labour legislation needs to
be fully implemented, particularly regarding the dismissal of pregnant women
and women on maternity leave, sexual harassment and inequality in promotion and
salaries.

In the area of children’s
rights, the governmental council of children in charge of monitoring
children’s rights was re-established in January 2014 and has met twice. An
active role of this Council is expected as to bring effective progress in
practice. Roma children and children with disabilities remain the most
discriminated against, with Roma children still overrepresented in special
schools, segregated classrooms and in the state care system. The legal limit of
50 children in residential care institutions is disregarded. Young Roma girls
face specific risks to their right to sexual and reproductive health, such as
marriage at a young age. Lack of resources is an obstacle to the inclusion of
children with disabilities in mainstream schools at local level.
Community-based services should be expanded and service delivery, bringing
together health, education and social welfare, should be ensured. A new
national strategy for the prevention of and protection from violence against
children should be designed. Even though most juvenile offenders are not sentenced
to closed institutions, alternative sanctions need to be improved and measures
aimed at reintegrating juvenile offenders and reducing recidivism are rarely
implemented in practice. Measures for the protection of children as victims in
criminal cases are not properly implemented. International
Labour Organisation’s Worst Forms of Child Labour Convention (No 182)
remains to be effectively implemented.

Regarding socially
vulnerable persons and/or persons with disabilities, the system of social
services is still largely institutionalised and community-based support
services at local level remain very limited. People with disabilities face
obstacles in their everyday activities due to lack of physical access to public
transportation, public and private buildings and various services and products.
Social inclusion of people with disabilities needs significant improvement,
particularly with regard to employment, education and availability of
community-based services. A law on the use of sign language has yet to be
adopted. Placement and treatment of people with mental disabilities in
institutions is still not regulated in accordance with international standards.
Oversight of living conditions and of the way people are admitted to
institutions needs to be strengthened. The procedure for depriving people with
psychosocial and intellectual disabilities of their legal capacity and the
related safeguards need to be aligned with international standards, as it
leaves room for abuse.

Serbia’s
anti-discrimination legislation is generally in line with European
standards on combating racism and racial discrimination. Further alignment is
expected as regards several provisions such as the scope of exceptions from the
principle of equal treatment, the definition of indirect discrimination and the
obligation to ensure reasonable accommodation for employees with disabilities. An
action plan for the implementation of the anti-discrimination strategy was
adopted in October 2014. The Equality Protection Commissioner’s office opened its
first regional office in Novi Pazar and has continued to be active in raising
awareness on discrimination. The Commissioner’s office reported a rise in the
number of complaints, partially due to better awareness of discrimination and
of protection mechanisms among citizens, and increased confidence in the office’s
work. However,
the
Commissioner’s office still lacks adequate premises and its capacity needs to
be improved. Women
and persons with disabilities remain discriminated against. The
groups most discriminated against remain the Roma, sexual
minorities and persons with HIV/AIDS, some of whom often face hate speech and
threats.
Hate-motivated offences are not always properly investigated, prosecuted and
sanctioned. Further steps are needed to align with the EU equal opportunities acquis.

Awareness
and protection of the rights of lesbian, gay, bisexual, transgender and
intersex (LGBTI) persons have started to improve, but this needs to
be sustained. The Ministry of Interior appointed a liaison officer for the
LGBTI community, with whom dialogue improved. This contributed to the pride
parade being held in Belgrade on 28 September without major incident.
Discriminatory statements in Serbian society still prevail, however. A continued
and more visible political commitment to promoting a culture of respect and
raising awareness is needed. Discrimination based on sexual orientation is
still regularly reported in employment. LGBTI activists continue to be subject
to threats and hate speech, and a track record of investigations and
convictions where appropriate remains to be established.

Labour and trade
union rights are guaranteed by the Constitution and broadly
respected. The Labour Law from July 2014 only briefly addressed these rights.
Alignment with the European Charter for Fundamental Rights and conventions of
the International Labour Organisation need to be ensured when it comes to
strikes, abolition of forced labour, right to organise collective bargaining
and freedom of association, while a new Law on Trade Unions remains to be
adopted. The procedures and criteria for determining the representativeness of
social partners, notably trade unions, need to be agreed in a transparent way.
The work of the Economic and Social Council is not systematic; its meetings are
held at random and often delayed, while consultations on draft laws within the
Council’s remit remain sporadic. As a result, tripartite social dialogue came
to a stalemate. At local level, there is no tripartite social dialogue.

With regard to property
rights, the deadline for submission of claims under the Law on Restitution
expired in March 2014. As a result, the total number of claims rose from 40 000
to about 75 000, thus significantly increasing the workload of the Agency
for Restitution. By mid-August, the agency had adopted 13 500
first-instance decisions. While most of them have been approved by the Ministry
of Finance as the second instance decision body, a number of them — mainly on
agricultural land and real estate of privatised companies — were overruled.
Nevertheless, by this date about 3 500 ha of agricultural land
and forest, almost 2 600 apartments and business premises and 580 ha of
land for construction had been returned to the original owners. A working group
mandated to draft a special law on the restitution of Holocaust-era Jewish
property was set up in February, but has remained dormant so far.

The
legal framework for the protection of minorities and cultural rights is
in place and generally upheld, in line with the Framework Convention on
National Minorities to which Serbia is party. Close cooperation between the
Office for Human and Minority Rights and the National Minority Councils has
been established. A traineeship programme offering opportunities in the state
administration to members of underrepresented minorities has continued. The
Third Opinion on Serbia of the Advisory Committee on the Implementation of the
Framework Convention for the Protection of National Minorities was published in
June. It assessed the overall legal framework in Serbia favourably, while
pointing to the need for several improvements, particularly the need for Serbia
to ensure a comprehensive and strategic approach to the integration of national
minorities in Serbian society and several gaps in implementation that still
need to be addressed. Amendments to the Law on National
Minority Councils aimed at eliminating shortcomings in the electoral procedure
were adopted in May and elections are scheduled for October. However, a
comprehensive revision of the law remains to be carried out, in line with the
Constitutional Court ruling of February. The Republican Council for Minorities
is not functioning, and local councils for inter-ethnic relations remain
under-used. Attention
is needed to consistent implementation of the legislation throughout Serbia
especially in the areas of education, the use of languages, and access to media
and religious services in minority languages, whenever there is demand from
minorities. This should not affect learning of the official language, which is
an important factor in the social inclusion of minorities. National minorities’
representation in public administration bodies, particularly at local level,
remains to be improved overall. Serbia has been
invited to adopt by the end of 2015 a dedicated action plan on the protection
of national minorities throughout Serbia, including in the areas of education,
use of minority languages, access to media and religious services in minority
languages, and representation in public administration.

The Autonomous
Province of Vojvodina continued to provide a high degree of
protection for minorities and the inter-ethnic situation remained generally
good, despite sporadic incidents. Measures to promote the learning of minority
languages by police officers have been put in place. The 2013 annual report by
the Provincial Ombudsman reported that 67 out of a total of 1 253 (5.35 %)
complaints were related to minorities and of this number the majority, 30
complaints (44.78 %), concerned official use of language and script.

Concerning the municipalities
of Presevo, Bujanovac and Medvedja, after a first meeting in October with
the Prime Minister and the chairman of the government’s coordinating body on
the implementation of a comprehensive programme of integration and economic
recovery, local ethnic Albanian leaders decided in November to suspend their
participation in these talks over disagreements about the new law on the court
network. One ethnic Albanian party took part in the general elections in March,
while the other parties boycotted them. New scholarships for university and
high-school students were provided, as were investments in infrastructure and
grants to local entrepreneurs. Members of the Albanian national community
remain underrepresented in public employment. Further commitment from the
government is needed to foster the area’s economic development.

Regarding the Sandzak
area, the situation continued to be stable for most of the reporting period but
tensions arose in September. Classes in the Bosniak language started to be held
in primary schools. The Bosniak community continues to be underrepresented in
the local administration, judiciary and police. The issue of the election of
the Bosniak national minority council remain unsolved but elections are
scheduled for October 2014. The area remains one of the most underdeveloped and
requires additional commitment from the central authorities to boost economic
development.

The action plan
for the national strategy to improve the status of the Roma in Serbia to
2015, adopted in June 2013, has started to be implemented. The new set of
recommendations formulated during the June 2013 EU-Serbia seminar on Roma
inclusion produced some positive results, and contributed to a broader
awareness of the challenges. Legal provisions to register ‘legally invisible
persons’ are being implemented and producing encouraging results. Support given
to 170 teaching assistants and 75 health mediators continued to produce a
further positive impact on the ground. Cooperation with EU-funded initiatives
has improved: the multi-sectoral EU programme for Roma inclusion received full
support from various relevant institutions, while cooperation with local
authorities on providing housing and other forms of assistance has shown some
progress. The appointment of the Minister of Labour and Social Affairs as a
chairperson of the Council for the improvement of the Status of Roma is
expected to strengthen government coordination, which needs improvement.

However, the
Roma continued to face difficult living conditions. Those living in the many
informal settlements across the country are subject to high levels of
discrimination in access to social protection, health, employment and adequate
housing, including basic sanitation, water and electricity. Compliance with
international standards on forced evictions and relocations still needs to be
ensured. The legal provision allowing social welfare centres to be used as a
temporary address for registration purposes is implemented unevenly across the
country. The school drop-out rate for Roma children remains high. Despite some
improvements, the Roma population, and especially Roma women, remain the most
discriminated against in the labour market. Roma women and children are still
frequently subject to family violence, which often goes unreported.
Governmental coordination, together with operational cooperation between the
various ministries and bodies relevant for Roma inclusion, remain to be further
improved. Adequate
financial and human resources, together with better involvement by local
authorities in implementing the Roma strategy, are needed.

According to
UNHCR, there are around 43 763 refugees and 204 049 internally
displaced persons (IDPs) in Serbia. There are 14 remaining collective
centres hosting 268 refugees and 901 IDPs. The programme to support
municipalities that adopted local action plans to improve the situation of
refugees and IDPs has continued, and the housing situation of displaced persons
has improved somewhat. Local Councils for
Migration Management and Durable Solutions have been set up in 129
municipalities, while 137 municipalities have adopted local action plans so
far, including the allocation of specific municipal budget lines to implement
the plans (in addition to the state budget and donors’ funds). Nevertheless,
the living conditions of many refugees and IDPs are still difficult. Many are
unemployed and live in poverty. The Law on Permanent and Temporary Residence,
which allows IDPs to apply for residence at social welfare centres, still needs
to be implemented more consistently to allow IDPs without proper documentation
to obtain basic rights.

As
regards access to information and protection of personal data, the trend
of increasing numbers of requests from citizens continued in 2013, with the
public becoming better informed of their rights. The office of
the Commissioner for Free Access to Information of Public Importance and
Personal Data Protection should dispose adequate resources for the tasks of the
Commissioner. The
legal framework remains to be fully aligned with EU standards. Video
surveillance, biometrics, the security of data on the internet, and the
processing and protection of sensitive data, especially by some new professions
such as bailiffs or notaries as well as direct marketing, must comply with EU
data protection legislation. The power to acquire data from electronic
communications in criminal cases remains to be brought in line with data
protection rules. No progress was made in adopting the action plan
to protect personal data.

Conclusion

Limited
progress was made in the area of the judiciary and fundamental rights.

As
regards judicial reform, intensive legislative activities took place. Appraisal
rules for judges and prosecutors were adopted. An important number of Court Presidents
were appointed on a permanent basis. The implementation of the notary system
remains to be further assessed.

Implementation
of the national judicial reform strategy is at an early stage and requires
effective and reliable monitoring and coordination mechanisms. Significant
efforts are needed to enhance the constitutional and legal framework for the
independence, accountability, efficiency and quality of the judiciary. Clear
measures conducive to a more predictable and sustainable judicial environment
and career of magistrates remain to be adopted and fully enforced. The
disciplinary system needs to be substantially reinforced.

Despite
strong political impetus to fight corruption, corruption remains prevalent in
many areas and
continues
to be a serious cause of concern. The implementation of the strategy on the
fight against corruption has not yet yielded concrete results. The ratio of
convictions remains low. Recent strengthening of institutional
coordination and leadership, including the setting-up of a monitoring
mechanism, has yet to produce effective results. Attention needs
to be paid to providing the Anti-Corruption Agency and the Anti-Corruption
Council with sufficient resources and to following up their recommendations. A sustainable
solution is urgently needed for the excessive recourse to bringing cases for
the offence of ‘abuse of position’ in the private sector through revision of
the economic section of the criminal code. The legal framework for
whistle-blower protection and conflicts of interest still needs to be amended. A
track record of asset declarations and checks on party funding needs to be
established.

Regarding
fundamental rights, proactive steps have been taken to create an enabling
environment that guarantees fundamental freedoms. The holding of the pride
parade in Belgrade on 28 September without major incident, following good preparatory
work by the government, marked a substantial step towards the effective
exercise of human rights in general and LGBTI rights in particular. An action
plan for the implementation of the anti-discrimination strategy was adopted in
October 2014. A new strategy for the correctional system has been adopted but
further efforts remain necessary to improve conditions in the prison system.
Three laws under the media strategy have been adopted with a view to improving
the situation in the media sector. However, there are concerns about
deteriorating conditions for the full exercise of freedom of expression. Public
officials rarely condemn or publicly react to threats, physical assaults and
cases of incitement to violence and hate speech from extremist groups against
non-governmental organisations (NGOs), human rights defenders, journalists,
bloggers or individual citizens. A track record of investigation and
prosecution for these cases needs to be established. The legal framework for
the protection of minorities is broadly in place but its consistent
implementation across the country needs to be ensured, notably in the areas of
education, the use of languages, and access to the media and to religious
services in minority languages. The positive steps taken to improve the
situation of the Roma need to be stepped up, particularly in education, housing
and employment. The situation of refugees and IDPs needs to be further
improved. The legal framework on data protection remains to be aligned with the
EU acquis.

4.24.
Chapter 24: Justice, freedom and security

Serbian
authorities continued to be proactive overall with regard to fighting irregular
migration. From September 2013 to February 2014, 108 criminal charges
against 167 persons were filed for 114 criminal acts on illegal border crossing
and trafficking in human beings. The number of detected cases of illegal entry
into the EU through Serbia decreased from 13 900 in 2012 to 8 500 in
2013. However, reception and accommodation capacity needs to be upgraded and
adapted to increasing needs. Efforts are required to ensure that sufficient and
well-trained staff can take up the challenges related to migratory pressure.
Particular attention should be given to the needs of minors and vulnerable
groups. Better coordination is required among all institutions involved in
tackling irregular migration, in particular at local level.
Legislation on legal migration remains to be aligned with the acquis. 6 239
persons were returned to Serbia from EU Member States in 2013 (6 282 in
2012). Readmission agreements were signed with Bosnia-Herzegovina and
Montenegro.

In the area of asylum, the
unified national database for checking the personal data and fingerprints of
foreigners, including asylum-seekers, is established. Three temporary
accommodation centres opened during winter. The decision of the government to
open a third permanent asylum centre remains to be implemented. In 2013, Serbia
faced over 5 000 applications (compared with 2 723 in 2012), of which
only 153 were effectively handled by the asylum authorities, resulting in two
people being granted subsidiary protection and two refugee status. Further
substantial increases in the number of applicants in the first seven months of
2014 require urgently short-term measures from the Serbian authorities for
improving the processing of applications and accommodation capacity. A
comprehensive reform of the asylum system is required, including sufficient
and well-trained staff to handle an increasing number of applications,
strengthening accommodation capacity, and, at the same time, rationalising the
whole asylum procedure. The fact that applicants have no effective access to
the asylum procedure and that, once submitted, their asylum applications are
not effectively processed tends to encourage asylum applicants to see Serbia as
a transit country for entering the EU illegally. The Asylum Office is still
operating as the first-instance body on an ad hoc basis under the Border Police
Directorate of the Ministry of Interior and remains to be established
permanently in line with the 2007 Law on Asylum. Closer cooperation between the
asylum bodies and the border police is necessary. The criteria of safe
countries of origin and of safe third countries have yet to be fully aligned
with the acquis. In the first half of the reporting period, in
particular, there were allegations of illicit activities carried out within the
Serbian asylum system, facilitated by organised criminal groups. The
authorities should open an official enquiry on those issues. More generally, efforts are needed to prevent
asylum centres from being targeted by organised crime groups involved in
smuggling migrants.

As regards visa
policy, Serbia has not yet established a unified Visa Information System to
allow swift information exchange. The list of countries for which a visa is
required, is not fully harmonised with the acquis.

As regards the
implementation of the visa-free regime with the EU, following the entry into force in January 2014 of the visa-waiver
suspension mechanism, Serbia continued to take measures to address the phenomenon of unfounded asylum applications
lodged by Serbian nationals in the EU and Schengen countries.
Operational controls on tourist agencies and transport companies were stepped
up, as were border control and surveillance. Nine criminal charges were filed
against 11 persons for the criminal offence of facilitation of abuse of the
visa-free regime. With more than 22 760 applications in 2013 (a 36 %
increase compared to 2012), Serbian nationals remained one of the largest
groups of asylum applicants in the EU and Schengen associated countries. This
trend was confirmed in August 2014 as applications from Serbia amounted to 10 529
out of 25 866 applications, e.g. an increase of 36 % since August
2013. In turn, the number of Serbian citizens finally granted asylum remained
identical in 2013 compared to 2012 (310). The recognition rate of around 1 %
confirms the largely unfounded nature of these claims. Immediate actions by
Serbia must be taken in the framework of the post-visa liberalisation
monitoring mechanism to address asylum abuse through closer operational
cooperation and information exchange with EU Member States and Schengen
associated countries, carrying out investigations of facilitators of irregular
migration, more effective border controls in line with fundamental rights, and
information campaigns for travellers. More efforts are needed in the short term
to address socioeconomic needs and in the longer run to sustainably improve
social and economic inclusion of the most vulnerable groups of the population
most likely to migrate, in particular Roma and to ensure systematic funding of integration
policies. The capacity and resources for integrating Serbian returnees from the
EU are very limited. In September 2014, the German parliament adopted
amendments to the national asylum legislation for the inclusion of Serbia in
the safe country of origin list.

As regards
external borders and Schengen, infrastructure and equipment at border
crossing points continued to be modernised with passport scanners, licence
plate capture cameras, video surveillance and fingerprint scanners. A risk
analysis system has yet to be established in order to enhance control of the
borders. Inter-agency cooperation between the bodies operating at the borders
needs to improve as there is a lack of coordination between border police,
customs and phytosanitary services. The activities of the coordinating body for
implementing the Integrated Border Management need to be strengthened. Serbia
has cooperated actively with Frontex and in regional initiatives.
Joint patrolling at the external borders with Croatia and Hungary has been
agreed upon but is not yet implemented. Two new joint
centres for border police cooperation were established in December in the
former Yugoslav Republic of Macedonia and in March in Bosnia-Herzegovina (although
in the latter case police officers have not yet been posted). The unimpeded
cross-border traffic through unauthorised alternative crossing places — in
particular with Bosnia and Herzegovina — remains an issue that needs to be
urgently addressed. All border crossing points need to be connected to the
Interpol database and the smaller crossing points modernised. Overall,
interconnectivity between the databases and biometric devices (in both
directions) still needs to be improved to support the operations of the border
police.

As part of the
dialogue on the implementation of the IBM protocol, all six interim IBM BCPs
with Serbia/Kosovo are operational and technical agreements on the exact
locations and on draft layouts of the permanent IBM crossing points were
reached. Since the entry into force in March 2013 of the ‘Procedures on Mutual
Legal Assistance’ (annexed to the IBM Agreement), Kosovo has sent approximately
2 000 requests to Serbia, and received 1 100 responses. Serbia has
sent approximately 180 requests to Kosovo, and of these, around 130 have been
answered.

As regards judicial
cooperation in civil and criminal matters, Serbia ratified the Fourth
Additional Protocol to the European Convention on Extradition in November 2013,
followed by the Hague Convention on the protection of children and cooperation
in the area of international adoption in December. However, Serbia has not yet
acceded to the 1996 Hague Convention on Child protection. Serbia needs to
further strengthen its administrative capacity and to put in place the
necessary infrastructure to reply promptly to requests for mutual legal
assistance and, later on, to apply the principle of mutual recognition. This
implies fostering direct cooperation between Serbian courts and courts from
third countries and centralising the receipt of requests to
courts for international judicial cooperation. Serbia participated in a joint
investigative team for the first time in September 2013. Serbia does not yet
have an cooperation agreement with Eurojust as it needs first to amend its
legislation on data protection.

In the field of police
cooperation and the fight against organised crime, Serbia actively
participated in regional police cooperation. A Regional Police Coordination
Centre for Serbia, Bosnia-Herzegovina and Montenegro was opened in Trebinje
(Bosnia and Herzegovina) in March 2014 to fight against all forms of
trans-border crime but remains to be fully operational. In January 2014, Serbia
signed an operational agreement with Europol which entered into force in June.
Cooperation with CEPOL, the EU police academy, has increased: a
fact-finding mission took place in March 2014 and Serbia participated for the
first time in the CEPOL exchange programme. However, a working
arrangement remains to be signed. Specialisation within the police was further
developed with the creation of three new services for Crime Analysis; Terrorism
and Extremism; and Drug Prevention, Addiction and Repression. But most
positions still have to be filled and staff trained and equipped. No progress
was made in building up capacity to carry out financial investigations in
tandem with complex criminal investigations. Access of law enforcement agencies
and prosecution services to relevant databases and inter-agency cooperation
needs to be ensured. Serbia needs to develop and introduce a strategic threat
assessment on organised crime in line with the EU SOCTA (Serious
and Organised Crime Threat Assessment) methodology. Intelligence-led
policing based on crime mapping and systematic use of threat assessments still
needs to be developed. Final convictions and the effective dismantling of
criminal organisations remain rare. The track record of proactive
investigations and final convictions needs to be established. A central
criminal intelligence system and harmonised statistical data remain to be
established. An integrated IT system linking the police, the prosecution and
the courts is needed for efficient case management. The police’s dependence on
the security and intelligence agencies to carry out certain special
investigative measures in criminal investigations remains a matter of serious
concern, in particular regarding interception of communications. Urgent
measures are needed to align the legislation in this area. The witness
protection unit still lacks qualified staff, equipment and premises. Human
resources management in the Ministry of Interior, including merit-based
recruitment and career advancement, specialised training and internal control,
remain areas in need of improvement. An independent and robust external
oversight mechanism for the police force is still missing. The Directorate that
manages seized assets still lacks resources in terms of staff and
capacity, including storage space. In 2013, the Directorate dealt with 16 court
decisions on temporary seizure of assets; assets were returned in 13 of these
cases. Further efforts are needed for full legislative and institutional
alignment with the new acquis in this area.

In relation to cybercrime,
police officers received training on conducting investigations at domestic
level and in cooperation with other countries. Cooperation with the prosecution
is also improving. The High-Tech Crime Unit is still understaffed and needs to
strengthen its capabilities considering the wide range of complex criminal
activity it is expected to investigate. Partnerships
with the public and private sectors and academia remain to be concluded.
Further specialised training, better coordination between institutions and
adequate budgetary resources are needed.

The
Administration for the Prevention of Money Laundering (APML) put further
efforts into improving national and international cooperation on the
investigation and processing of money laundering and related criminal offences
while continuing with training events and awareness-raising. Judiciary and law
enforcement services need better expertise as well as systemic and specialised
training to handle money laundering and financial crime cases more efficiently.
Efforts to coordinate and harmonise criteria for keeping records and collecting
statistics are needed with a view to establishing a track record. (See also
Chapter 4 — Free movement of capital.)

In the field of trafficking
in human beings, Serbia remains a country of origin, transit and
destination for trafficking in human beings, for all forms of exploitation, in
particular sexual and labour exploitation. New awareness-raising campaigns and
training sessions for prosecutors were rolled out and should continue. The
network of local anti-trafficking teams expanded and is in place in 17 locations.
The draft anti-trafficking strategy 2013-2018 and action plan 2014-2015 are
still pending adoption and a comprehensive, multi-disciplinary and
victim-oriented approach remains to be developed in cooperation with NGOs. The
Centre for Protection of Victims of Human Trafficking needs to strengthen its
capacity to be fully operational. Victims need to be better identified and
receive more assistance, support and protection. A shelter for victims of
trafficking needs to be made operational. Police capacity to efficiently combat
trafficking in human beings needs to be ensured, and enforcement to be
improved. Training modules for the police, including the border police,
regarding trafficking in human beings need to be enhanced. The position of the
National Coordinator should reflect a multi-disciplinary approach to the
trafficking in human beings phenomenon.

Overall,
organised crime remains a concern in Serbia. Fighting organised crime and
corruption is fundamental to countering criminal infiltration of the political,
legal and economic systems.

As regards the fight
against terrorism, the police set up a new service in December 2013 with
two departments: one for terrorism and other for extremism, but most positions
still have to be filled. Criminal charges were pressed in the first ever case
of terrorism. The draft strategy and action plan for the fight against
terrorism still remain to be adopted, together with a new law on freezing
assets that are the proceeds of terrorism. A national database and more efficient
exchange of information are needed, as is better inter-agency
cooperation. Serbia will need to step up its capacity to prevent
radicalisation, including developing adequate measures to address the
phenomenon of foreign fighters.

Good
international and regional cooperation in the field of drugs led to the
arrest of a suspected drug lord in March 2014 in cooperation with Montenegro.
The new strategy 2014-2021 is still under preparation. In January 2014, a new
Service for Drug Prevention Addiction and Repression was created in the police
but most positions still have to be filled. More work on drugs prevention for
risk groups is needed. Treatment demand indicator software was developed. In
April, a new department for the monitoring and prevention of misuse of
psychoactive substances was established in the National Public Health Institute
to serve as a national monitoring centre. In July, an inter-ministerial office
in charge of coordinating the drug policy and overseeing the activities of the
Ministries of Health and Interior was created. Good cooperation has continued
between the national correspondent, also located since April in the National
Public Health Institute, and the European Monitoring Centre for Drugs and Drug
Addiction (EMCDDA). However, the operational capacity of police and customs
needs to be stepped up. The accreditation process for the forensic institute of
the Serbian police needs to be completed. A solid track record of drugs
seizures remains to be established. Destruction of seized drugs resumed after a
halt lasting several years but is not yet comprehensive and systematic. Secure
storage of seized drugs prior to destruction is not yet ensured.

Concerning customs
cooperation (see also Chapter 29 — Customs union), Serbia’s customs
administration continues to cooperate with agencies from neighbouring countries
and to take part in international activities concerning the fight against
illegal trade in and smuggling of narcotics, oil and cigarettes. The
investigative powers of the custom officers and the scope for exchanging data
with other agencies at the border need to be broadened.

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

Conclusion

Overall,
Serbia made limited progress in the area of justice, freedom and security.
Migration management and asylum policies need to be significantly and urgently
strengthened and asylum procedures need to be streamlined. Further efforts are
needed to tackle the phenomenon of unfounded asylum applications lodged by
Serbia’s nationals in the EU Member States. A risk analysis system has to be
established in order to enhance control of the borders. Additional efforts are
needed to increase the inter-agency cooperation between the services operating
at the country’s borders. Across the board, efforts are needed to align with
the EU acquis, to increase efficiency, foster specialisation and ensure
better operational cooperation between the judiciary, law enforcement and
non-law-enforcement bodies. Serbia is actively involved in international and
regional police and judicial cooperation, with good results. However, a track
record of proactive investigations and final convictions needs to be
established. Additional efforts are needed to systematically carry out
financial investigations in conjunction with complex criminal investigations. A
strategic threat assessment on organised crime is needed.

4.25.
Chapter 25: Science and research

The level of
participation in the EU framework programme for research (FP7) is
satisfactory and the overall success rate is around 15.3 %, compared to
the EU average of 21.6 %. The agreement
associating Serbia to the new EU research and
innovation programme Horizon 2020 (covering 2014-2020) was signed on 1 July
2014, allowing for retro-active participation of entities from
the country as
from 1 January 2014. In June, Serbia notified a revised list of national
contacts points and representatives in the programme committees.

With
respect to the European Research Area, Serbia nominated its representative
in the European Research Area Committee (ERAC). The action plan,
implementing the Strategy on scientific and technological development for the
period 2010-2015 was adopted in January 2014. The level of investment in
research in 2013 remained broadly unchanged as in 2012, close to the national
target of 1 % of GDP. This is still substantially below the EU average of
2.07 %.

Concerning
measures for the Innovation Union, the Business Technology Incubator of
Technical Faculties in Belgrade successfully continued to support start-up
firms. While the Innovation Fund disbursed 53 grants to stimulate innovative
companies in different sectors, further institutional support is needed to
ensure the sustainability of this body. Serbia has been active in cooperating
at regional level and co-signed the Western Balkans Regional R&D Strategy
for Innovation adopted in October 2013.

Conclusion

Some
progress was made in the area of science and research. Further efforts are
required in particular to increase the capacity at national level trough
increased investment in research both from public and private sector. Good
administrative capacity will also be necessary to ensure successful
participation under Horizon 2020. Overall, preparations in the area of science
and research are on track.

4.26.
Chapter 26: Education and culture

In the field of education,
training and youth, Serbia continued to participate
successfully in the Tempus, Erasmus Mundus, and Youth in Action as well as in
the centralised actions of the Lifelong Learning programme until 2013. In June,
Serbia signed an agreement with the EU establishing its participation in the
new Erasmus+ programme, allowing it to take part in policy support measures as
well as in electronic platforms for virtual cooperation among schools and adult
education providers. Preparations for the opening of a
National Agency to manage the future full participation in Erasmus + have
started. As a candidate country, Serbia is expected to track statistics on the
EU’s five education and training indicators and make efforts to come closer to
the benchmarks set for 2020.

Quality
assurance in primary and secondary education is improving. The action plan to
implement the strategy for the development of education up to 2020 has not yet
been adopted. The reform of the VET system, which currently does not match
labour market needs, is a major priority but little progress has been made.
There is a need to rationalise the number of VET schools and mainstream more of
the new, more labour market-relevant, VET pilot profiles.

The
lack of an efficient system for recognition of diplomas represents a serious
impediment to graduates for further schooling and employment. A new law on higher
education was adopted in September. It regulates accreditation issues, access
of EU citizens to higher education, recognition of foreign diplomas, as well as
measures to improve transparency in the system. The law is establishing a
registry of PhD theses, thus increasing transparency in the attainment of the
highest university degrees in the country. Plans to reform the training of
primary and secondary school teachers were presented in the 3rd ministerial meeting
of the Western Balkans Platform on Education and Training.

In
2013, the Youth in Action programme involved an increased number of young people
from Serbia in international youth activities such as youth exchanges and the
European Voluntary Service and offered youth workers the opportunity to
cooperate within training and networking activities.

Regarding
culture, Serbia continued its successful participation in the Culture
programme and signed an agreement to participate in the Culture strand of the
new Creative Europe programme.

Conclusion

Little
progress was made in the area of education and culture and significant efforts
are needed to improve the quality and efficiency of the education system.
Participation in the relevant EU programmes in this area has continued
successfully. Overall, preparations for aligning with EU standards are
moderately advanced.

4.27.
Chapter 27: Environment and climate change

In
the area of the environment, there has been no further progress with
regard to horizontal legislation, while improvements in environmental
reporting continued. In 2013, 225 operators reported their
data to the Serbian pollutant release and transfer register, out of 255 with
reporting obligations. Additional efforts are required to improve reporting
from the agricultural and mining operators. Serbia
cooperates well with the European Environment Agency within the European
Environment Information and Observation Network (EIONET), as evidenced by the
level of completeness of data delivery. Public participation and consultation
in the decision-making process need to be strengthened.

The annual
update of air quality showed that seven of Serbia’s eight urban
agglomerations fall into air quality category III, exceeding the margin of
tolerance of several pollutants. Air quality plans for Belgrade remain to be
adopted and planning for the remaining urban agglomerations needs to be
accelerated. Serbia has started work on a National Emission Reduction Plan
(NERP) for its power sector, in order to achieve nationwide emission
reduction.

In
the area of waste management, preparations for new collection
and disposal schemes covering 340 000 people are ongoing. The collection
rate of household waste has increased from 78 % — 80 %. A new
regional waste management centre has been opened in Sremska-Mitrovica-Sabac
covering a population of approximately 200 000. Serbia has now 7 EU
compliant regional sanitary landfills. Other forms of waste management need to
be developed in order to use landfilling only as a last resort. New investments
in the area of waste should focus more on waste separation and recycling.
Non-compliant landfills need to be closed more quickly and enforcement of waste
legislation enhanced. Full alignment with the Waste Framework Directive remains
to be achieved. A pipeline of priority infrastructure projects for waste
management was worked out in May.

As regards water
quality, the decree on limit values for priority and priority hazardous
surface water pollutants was amended in February. The amended decree increases
the number of priority substances to be monitored in line with the requirements
of the Water Framework Directive. Significant investment is needed to modernise
drinking water treatment capacity in all types of agglomerations. Strategic
investment planning for water pollution abatement continues to be hampered by
the lack of a national water protection strategy. The lack of a wastewater
treatment plant in Belgrade limits the scope of investment in wastewater
treatment of upstream urban agglomerations. There has meanwhile been no further
expansion of the monitoring network. The capacity of the Ministry of
Agriculture’s Water Directorate needs to be significantly enhanced to manage
transposition and implementation of the vast body of EU water law. The extreme
floods that took place in May call for swift improvements in flood prevention
and water management systems and infrastructure. A pipeline of priority
infrastructure projects for waste water management was worked out in May.

As
regards nature protection, legislation implementing the Convention on
International Trade in Endangered Species of Wild Fauna and Flora (CITES) has
been updated to include protected species listings. Important seizures of
illegally traded endangered species were made. The capacity of the CITES unit
and that of enforcement agencies needs to be enhanced to keep up with the
challenges of illegal wildlife trade. The institutional framework for
designating and managing future Natura 2000 sites needs to be upgraded and
adequately resourced.

As
regards industrial pollution and risk management, 162 out of an
estimated 185 integrated pollution prevention and control (IPPC) installations
have submitted their requests for integrated permits. Ten permits have so far
been issued compared to six in the previous reporting period. The capacity
constraints of the competent department in the Ministry of Agriculture and
Environmental Protection and the applicants’ limited knowledge, in spite of
training, explain slow progress in issuing permits. Serbia needs to address the
EU legal requirement of either a fully integrated permitting process covering
all areas or formal consultation between permitting authorities. Capacity
constraints also hamper progress in implementing the legislation on prevention
of chemicals accidents.

As
regards chemicals management, the Law on Amendments to the Law on
Prohibition of the Chemical Weapons and on their Destruction was adopted in November
2013. The newly formed department in the Ministry of Agriculture and
Environmental Protection has taken over all the functions of the Chemicals
Agency, which has closed. However, technical posts have been reduced by 30 %.
Further strengthening of administrative capacity is therefore necessary,
especially in the field of risk assessment of biocidal products. Clear and
non-overlapping responsibilities for chemicals inspection remain to be
assigned. In the area of noise, no developments can be reported.

In
the area of civil protection, disaster risk reduction and
disaster management need to be treated as a matter of priority, particularly in
the light of recent severe floods. In July 2014, the European Commission
invited Serbia to join the EU Civil Protection Mechanism.

Regarding
climate change, Serbia does not yet have a comprehensive countrywide
climate policy and strategy. It should reflect on its climate and
energy framework for 2030 in line with the expected EU 2030 policy
framework on climate and energy. Serbia regularly
associated itself with EU positions in international forums. While having
previously associated itself with the Copenhagen Accord and having submitted an
assessment of its mitigation potential to the United Nations Framework
Convention on Climate Change (UNFCCC), the country has not yet put forward a
commitment for mitigation by 2020. Serbia needs to put forward by the first
quarter of 2015 its intended nationally determined contribution to the 2015
Climate Agreement, consistent with those of the EU and its Member States. Preparations
for alignment with emissions trading legislation are advancing with the support
of the IPA. An
implementing law was adopted in December on reducing consumption of
ozone-depleting substances, establishing a licensing and reporting system and a
recovery and recycling scheme in accordance with the Montreal Protocol and
relevant EU legislation. Legislation on fluorinated greenhouse
gas management and on conditions for issuing licences to import and export such
gases entered into force in January. Priority should be given to the
establishment of
a
monitoring, reporting, and verification system for greenhouse
gas emissions in line with EU Monitoring Mechanism legislation.

Serbia
continued to participate in the Environment and Climate Regional Accession
Network (ECRAN) project. Following the reorganisation of the competent
ministry, the establishment of an administrative structure on climate change
with adequate human and financial resources and clearly defined
responsibilities needs to be pursued. The interinstitutional cooperation and
coordination mechanism needs to be improved and expand beyond steering certain
bilateral cooperation projects.

Conclusion

Little
progress has been made in the areas of environment and climate change.
Strategic planning, greater administrative capacity and substantial investments
linked to strategic priorities are needed to further align with EU policies in
areas of environment, climate action and civil protection. A pipeline of
investment priorities was developed in May 2014. Efforts under way to
strengthen inspection and enforcement need to be accompanied by the removal of
inconsistencies and gaps in legislation that prevent effective enforcement. An
effective and permanent financing system for environment and climate action is
needed. The country needs to put forward by the first quarter of 2015 its
intended contribution to the 2015 Climate Agreement. Overall, priorities in the
fields of environment and climate change have started to be addressed.

4.28.
Chapter 28: Consumer and health protection

In
the area of consumer protection, as regards horizontal aspects, a
new consumer protection law was adopted in June, further aligning with the EU
consumer acquis, consolidating the State institutional framework for
consumer protection policy, further empowering consumer organisations and
introducing new mechanisms for enforcement and actual consumer redress. The
National Consumer Complaint Register started operation in July. Currently it
includes the Ministry of Trade, Tourism and Telecommunications and four
consumer associations. Currently, there are 31 registered consumer protection
organisations, of which five participate in the National Council for Consumer
Protection. Cooperation between the line ministries and consumer organisations
needs to be reinforced, as does cooperation between consumer protection
organisations.

With regard to product
safety-related issues, the Product Safety Council is operational and
active. The new Law on Safety Items of General Use has not been adopted; this
remains a precondition for the adoption of four specific rulebooks further
aligning Serbian legislation with the acquis in the field of product
safety.

In the field of non-safety-related
issues, the law on the protection of users of financial services has to be
further aligned with the acquis.

In the area of public
health, the Law on healthcare and the Law on health insurance were amended
in July. An e-Health Unit was established at the Ministry of Health to deal
with information technology development and regulation in the sector. The
overall financial sustainability of the sector remains seriously endangered by
the poor financial situation of the public health fund.

In the area of tobacco
control, amendments were made to the Law on tobacco, focusing on measures
against illicit tobacco trade and labelling of tobacco products, and on
increasing the relevant fines. No progress was made in the preparation of a new
strategy and action plan on tobacco control.

In the area of communicable
diseases, surveillance and response capacity, including microbiology
laboratory capacity, remains limited and requires modernisation. Human
resource management and organisational strengthening are required. More
attention needs to be paid to effective and sustainable financing of
disease-specific strategies, including the national HIV/AIDS strategy and
awareness-raising. Additional work is needed in particular on surveillance of
antimicrobial resistance.

In the area of blood,
tissues, cells and organs, further efforts are needed to align
national legislation with the acquis and to implement the Law on Organ
Transplantation. The administrative and technical capacity of the Directorate
for Biomedicine needs further strengthening.

No new
developments can be noted in the field of patients’ rights in cross-border
healthcare.

In the area of pharmaceuticals,
in 2013 the status of privately owned pharmacies was aligned with that of
state-owned ones. The Ministry of Health issued a tender for partnership with
the Institute of Virology for the production and market supply of vaccines. The
ministry also called for improved cooperation with pharmaceutical companies,
many of which have not yet registered all the required medications in Serbia. A
new reference laboratory for identification and testing of controlled
psychoactive substances was opened in December 2013.

In the field of mental
health, a bylaw was passed in October 2013 on the conditions for using
physical restraint and isolation of people with mental disorders being treated
in psychiatric institutions. Community-based mental health services still
remain to be developed following the recent adoption of a bylaw regulating
centres for such services in December 2013.

In the area of drug
abuse prevention, no measures were taken in the national educational
programme to curb the demand for illicit drugs in schools. As regards cancer
screenings, full implementation of the national screening programme for
colorectal and cervical cancers has yet to be achieved. The capacity of the
national screening office remains very limited. Screening efforts are still
fragmented and strongly rely on the capacity of different municipalities, not
favouring equal access for all citizens. Efforts are needed to develop disease
prevention strategies, such as to fight malnutrition and lack of physical
activity, to improve citizens’ health and provide affordable healthcare in the
long run. In the field of rare diseases, more sustainable funding for
treatment has been provided.

Conclusion

There has been
some progress in the area of consumer and health protection. The new law on
consumer protection has been adopted. The overall financial sustainability of
the public health system needs to be strengthened. Overall, preparations in
these areas remain moderately advanced.

4.29.
Chapter 29: Customs union

As regards customs
legislation, the customs tariff nomenclature was aligned with the 2014 EU
Combined Nomenclature and the liberalisation schedule under the Stabilisation
and Association Agreement implemented in November 2013. However, the
Law on the Customs Service remains to be adopted. In the framework of CEFTA,
since April 2014, Serbia, Albania, Montenegro and the former Yugoslav Republic
of Macedonia started applying the regional Convention on Pan-Euro-Med
Preferential Rules of Origin. The legislation on cash controls, cultural goods
and duty relief on imports of new production equipment needs to be aligned with
the acquis. Legislation on customs-related security initiatives and
authorised economic operators remains to be implemented.

As
regards administrative and operational capacity, the customs
administration continued to strengthen its administrative capacity for
effective enforcement of customs legislation. Integrity procedures for customs
officials were applied by initiating 25 disciplinary procedures against 30
customs officers for serious violation of official duty and completing another
22 disciplinary procedures. The
number of companies making use of simplified customs or approved exporter
procedures increased. Work to establish a functioning interconnected IT system
has started. Intelligence messages are exchanged with other state bodies
and international organisations. In 2013, around 65 % of right holders
used customs’ web application to submit their requests for protection of
intellectual property rights. A new centralised system for the management of
bank guarantees has been established and the core IT system is being
reorganised from a decentralised to a centralised system, enabling the
implementation of the New Computerised Transit System (NCTS)
upon accession to the Common Transit Convention, as planned for 1 June 2015. The
customs declaration processing system needs to be upgraded and the customs
laboratory further equipped. The administration improved communication with the
public.

In
June 2014, Serbia and Moldova signed an Agreement on Cooperation and Mutual
Assistance.

In
2013, in technical dialogue between Serbia and Kosovo, the parties agreed to
automatically exchange electronic pre-arrival data related to customs
declarations for consignments intended to cross the administrative
border/boundary line. The collection of customs duties
started at the joint crossing points between Serbia and Kosovo in December
2013. As part of the dialogue on the implementation of the IBM protocol, all
six interim IBM BCPs with Serbia/Kosovo are operational and technical
agreements on the exact locations and on draft layouts of the permanent IBM
crossing points were reached. However, the administrative border/boundary line
between Kosovo and Serbia remains vulnerable to illicit activities.

Conclusion

There
has been some progress in the area of the customs union. However, further
efforts are needed to complete alignment in a number of key areas. The
customs administration is steadily strengthening its administrative capacity,
but further efforts are needed. The customs declaration processing
system
remains to be upgraded. Overall, preparations in the area of the customs union
are on track.

4.30.
Chapter 30: External relations

In the area of
the common commercial policy, the finalisation of Serbia’s World Trade
Organisation membership remains dependent on the adoption of a WTO-compliant
law on genetically modified organisms, as requested by the United States, and
on the completion of bilateral market access negotiations with some countries,
most notably with Ukraine. Serbia’s General Agreement on Trade in
Services (GATS) schedule is almost aligned to the EU GATS schedule.

As
regards administrative capacity, trade policy would benefit from formal
coordination between various ministries responsible for regulations which
affect trade in goods and services. This permanent coordination could include
services responsible for technical and industrial standards,
sanitary/phytosanitary controls, intellectual property rights and government
procurement rules.

The
Law on Trade in Dual-Use Goods, adopted in November 2013, further aligned
procedures and controls with the relevant acquis. Two rulebooks were
adopted later in February. They ensured further coherence with regard to the acquis
on trade in dual-use goods. Serbia would benefit from joining some of the international
bodies in charge of overseeing the national export control systems (the ‘Multilateral
Export Control Regimes’).

As
concerns bilateral agreements with third countries, Serbia is
negotiating a free trade agreement (FTA) with Ukraine. The Serbian parliament
ratified a bilateral investment treaty with Morocco in October 2013. A
bilateral investment treaty with Canada was signed in September this year. No
progress can be reported in the areas of development policy and humanitarian
aid.

Conclusion

Limited
progress has been made in the field of external relations. Preparations for
accession to the WTO are well advanced but move slowly in the final phase.
Overall, preparations in the area of external relations are moderately
advanced.

4.31.
Chapter 31: Foreign, security and defence policy

The
regular political dialogue between the EU and Serbia on foreign and
security policy continued. (For more information on relations with other
enlargement countries and EU Member States, see Political criteria —
Regional issues and international obligations).

Regarding the common
foreign and security policy (CFSP), Serbia aligned itself, when invited,
with 28 out of 45 EU declarations and Council decisions (62 % alignment
compared to 89 % during the reference period of the 2013 Progress Report).
Serbia supported the sovereignty and territorial integrity of Ukraine in
general terms but was absent at the vote of the UN General Assembly Resolution
on the territorial integrity of Ukraine. Serbia did not align itself, when
invited, with Council decisions introducing restrictive measures in the
context of Russia’s illegal annexation of Crimea and events in eastern Ukraine.
The Serbian government gave reassurances that Serbia would not actively seek to
take undue advantage of the situation arising from the introduction of the
Russian embargo on imports of EU agricultural products in answer to the
restrictive measures against Russia.

A law that would
establish a system for tracking the implementation of restrictive measures
still needs to be adopted. (As regards the International Criminal Court, see
Political criteria — Regional issues and international obligations.)

Regarding non-proliferation,
in October 2013 Serbia adopted a new law on dual-use goods, partially
fulfilling the preconditions for joining the Wassenaar Arrangement on export
controls for conventional arms and dual-use goods and technologies. Its 2008
application to join the Wassenaar Arrangement now remains dependent on the
adoption of a new law on trade of arms and military equipment. The ratification
of the Additional Protocol to the Nuclear Non-Proliferation Treaty is still
pending. Serbia signed the UN Arms Trade Treaty in August 2013.

Serbia continued
to engage actively in cooperation with international organisations.
Serbia is preparing to take over the 2015 chairmanship of the OSCE.

Regarding the common
security and defence policy (CSDP), Serbia continued to participate
in two EU civil and military crisis management operations, the EU
NAVFOR-Atalanta operation and the EUTM Somalia operation, with respectively
four and five members. In June, the parliament adopted a decision on the
participation of the Serbian Army in multinational operations for 2014,
including to EUTM Mali. The parliament also adopted a decision on the
participation of the Serbian Army in the EUFOR RCA in September. In December
2013, Serbia signed an administrative agreement with the European Defence
Agency enabling Serbia to participate in the agency’s programmes.

Conclusion

Serbia
continued to participate in civil and military crisis management operations.
The country’s alignment with EU declarations and Council decisions in the field
of foreign and security policy significantly declined compared to previous
years and needs to be improved. Legislation on the tracking mechanism for the
implementation of EU restrictive measures has yet to be adopted. Overall,
preparations in this field are on track.

4.32.
Chapter 32: Financial control

The new public
administration reform strategy from January 2014 includes public internal
financial control (PIFC) among its priorities. A new PIFC strategy and an
action plan for 2015-2019 are under preparation and PIFC is expected to be
embedded in a wider framework for reform of public financial management. The
Central Harmonisation Unit continued its training and mentoring activities,
whereas it should start to focus more on policy development. Implementation of
financial management and control is at an early stage and risk management is
not applied systematically. Implementing legislation to better define
managerial accountability still remains to be developed. Understanding of the
managerial accountability principle and internal control standards at central
and local levels and in publicly owned enterprises is still weak and needs to
be further developed among senior managers. The centralised budget inspection
function has yet to be developed and regulated in line with PIFC requirements.

In
the area of external audit, the State Audit Institution (SAI) published
its first performance audit report in June 2014. The 2013 audit
programme was implemented on time, but audit capacity is still insufficient to
ensure full audit coverage. The SAI currently has around 175 audit staff,
compared with 372 planned audit posts. The SAI should
be strengthened to provide for the institution’s full operational and financial
independence. In this context, the SAI’s role in filing
misdemeanour and/or criminal charges against individuals with the competent
authority needs to be reconsidered. Audit manuals in line with the
INTOSAI standards are being developed. Certification and systematic training of
audit staff need to continue.

With
regard to the protection of the EU’s financial interests, a national
anti-fraud coordination service (AFCOS), an independent unit under the direct
authority of the Minister of Finance, was set up as a contact point for
cooperation with the Commission in October 2013. While two out of three
foreseen posts have been filled, the AFCOS has yet to become fully operational.
It also lacks a comprehensive legal basis defining its tasks, responsibilities
and cooperation arrangements with the Commission. The AFCOS network also has
yet to be established.

With
regard to the protection of the euro against counterfeiting, the
National Bank of Serbia has administrative structures for technical analysis
and classification of counterfeit money, including euro banknotes and coins. Serbia
concluded an agreement on the handling of euro coins with the Commission in
January and on
the handling of euro banknotes with the European Central Bank in July. Serbia
still needs to ratify the Geneva Convention for the suppression of
counterfeiting currency as well as to ensure full legal alignment with the acquis.

Conclusion

Some
progress has been made in the area of financial control. Considerable efforts
are needed with implementation of PIFC at all levels of the public
administration. A new PIFC strategy and an action plan need to be developed for
2015-2019. In the area of the protection of the EU’s financial interests, the
national anti-fraud coordination service needs to become operational. Overall,
preparations in this area are moderately advanced.

4.33.
Chapter 33: Financial and budgetary provisions

There were no
developments in the areas of traditional own resources, the value
added tax-based resource and the gross national
income-based resource. (For
developments in the underlying policy areas, see Chapters
16 — Taxation; 18 — Statistics; 29 — Customs union; and 32 —Financial
control.)

As regards administrative
infrastructure, administrative capacity of the institutions in charge in
the policy areas affecting the correcting application of the own resources
rules needs to be further strengthened and developed. The coordinating agency
necessary to ensure correct calculation, accounting, forecasting, collection,
payment and control of own resources still needs to be established. Instruments
to fight and reduce tax evasion and fraud and to reduce the informal economy
need to be further developed and strengthened.

Conclusion

No progress can
be reported on financial and budgetary provisions. The coordinating body
required under the own resources scheme still needs to be established. Overall,
preparations in this area are at a very early stage.

Statistical
Annex

STATISTICAL DATA || || || || || || ||

|| Serbia || || || || || || || ||

|| || || || || || || || ||

|| Basic data || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Population (thousand) || || 7 505 || 7 335 || 7 307 || 7 276 || 7 217 || 7 182 ||

|| Total area of the country (km²) || || 77 474 || 77 474 || 77 474 || 77 474 || 77 474 || 77 474 ||

|| || || || || || || || ||

|| National accounts || || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Gross domestic product (GDP) (million national currency) || || 762 178 || 2 720 084 || 2 881 891 || 3 208 620 || 3 348 689 || 3 618 167e ||

|| Gross domestic product (GDP) (million euro) || || 12 819 || 28 952 || 27 968 || 31 472 || 29 601 || 31 980e ||

|| GDP (euro per capita) || || 1 708 || 3 955 || 3 836 || 4 351 || 4 112 || 4 453e ||

|| GDP (in Purchasing Power Standards (PPS) per capita) || 1) || : || 8 400 || 8 500 || 8 900 || 9 100 || : ||

|| GDP (in Purchasing Power Standards (PPS) per capita), relative to the EU average (EU-28 = 100) || 1) || : || 36 || 35 || 36 || 35 || 36 ||

|| Real GDP growth rate: change on previous year of GDP volume (%) || || 5.3 || -3.5 || 1.0 || 1.6 || -1.5 || 2.5e ||

|| Employment growth (national accounts data), relative to the previous year (%) || || 2.0 || : || : || : || : || : ||

|| Labour productivity growth: growth in GDP (constant prices) per person employed, relative to the previous year (%) || || 3.5 || : || : || : || : || : ||

|| Unit labour cost growth, relative to the previous year (%) || || : || : || : || : || : || : ||

|| \*\*3 year change (T/T-3) in the nominal unit labour cost growth index (2005 = 100) || || : || : || : || : || : || : ||

|| Labour productivity per person employed: GDP (in PPS) per person employed relative to EU average (EU-27 = 100) || || : || : || : || : || : || : ||

|| Gross value added by main sectors || || || || || || || ||

|| Agriculture, forestry and fisheries (%) || 2) || 19.8 || 9.6 || 10.2 || 10.9 || 9.9 || 11.4e ||

|| Industry (%) || 2) || 25.1 || 23.0 || 23.2 || 24.3 || 24.5 || 25.3e ||

|| Construction (%) || 2) || 3.4 || 4.9 || 4.8 || 5.0 || 4.9 || 3.3e ||

|| Services (%) || 2) || 53.5 || 65.4 || 65.0 || 62.8 || 63.4 || 62.7e ||

|| Final consumption expenditure, as a share of GDP (%) || || 104.0 || 99.6 || 99.8 || 96.3 || 96.9 || 93.2e ||

|| Gross fixed capital formation, as a share of GDP (%) || || 10.7 || 18.8 || 17.8 || 18.5 || 21.4 || 20.5e ||

|| Changes in inventories, as a share of GDP (%) || || 1.0 || -0.7 || -0.5 || 1.7 || -0.4 || -2.1e ||

|| Exports of goods and services, relative to GDP (%) || || 25.6 || 29.4 || 36.0 || 36.6 || 40.3 || 44.7e ||

|| Imports of goods and services, relative to GDP (%) || || 41.3 || 47.1 || 53.0 || 53.0 || 58.2 || 56.4e ||

|| || || || || || || || ||

|| Industry || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Industrial production volume index (2010 = 100) || || 96.9 || 98.8 || 100.0 || 102.5 || 100.2 || 105.6 ||

|| || || || || || || || ||

|| Inflation rate and house prices || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Consumer price index (CPI), change relative to the previous year (%) || || 93.3 || 8.4 || 6.5 || 11.0 || 7.8 || 7.8 ||

|| \*\*Annual change in the deflated house price index (2010 = 100) || || : || : || : || : || : || : ||

|| || || || || || || || ||

|| Balance of payments || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Balance of payments: current account total (million euro) || || 282 || -1 910 || -1 887 || -2 870 || -3 176 || -1 585 ||

|| Balance of payments current account: trade balance (million euro) || || -2 603 || -4 946 || -4 581 || -5 318 || -5 480 || -3 978 ||

|| Balance of payments current account: net services (million euro) || || 272 || 21 || 8 || 163 || 156 || 334 ||

|| Balance of payments current account: net income (million euro) || || 7 || -502 || -670 || -758 || -799 || -1 095 ||

|| Balance of payments current account: net current transfers (million euro) || || 2 606 || 3 518 || 3 356 || 3 043 || 2 947 || 3 153 ||

|| of which government transfers (million euro) || || 652 || 197 || 193 || 206 || 151 || 131 ||

|| \*\*3 year backward moving average of the current account balance relative to GDP (%) || || : || -15.3 || -11.6 || -7.5 || -8.9 || -8.3 ||

|| \*\*Five year change in share of world exports of goods and services (%) || || : || 52.1 || 37.3 || 21.3 || -2.4 || 9.2 ||

|| Net inward foreign direct investment (FDI) (million euro) || || 184.5 || 1 372.5 || 860.1 || 1 826.9 || 241.9 || 768.5 ||

|| Foreign direct investment (FDI) abroad (million euro) || || 13.8 || 37.6 || 143.0 || 122.0 || 42.3 || 10.0 ||

|| of which FDI of the reporting economy in the EU-28 countries (million euro) || || : || 27.7 || 37.2 || 100.2 || 22.3 || 19.8 ||

|| Foreign direct investment (FDI) in the reporting economy (million euro) || || 198.3 || 1 410.1 || 1 003.1 || 1 948.9 || 284.1 || 778.5 ||

|| of which FDI of the EU-28 countries in the reporting economy (million euro) || || : || 826.9 || 820.9 || 1 710.3 || 96.4 || 575.9 ||

|| \*\*Net international investment position, relative to GDP (%) || || : || : || : || : || : || 95.6 ||

|| || || || || || || || ||

|| Public finance || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| General government deficit / surplus, relative to GDP (%) || || : || -4.5 || -4.7 || -4.9 || -6.4e || -5.0 ||

|| General government gross debt relative to GDP (%) || || 104.8 || 34.0 || 43.5 || 46.0 || 59.0e || 63.2 ||

|| || || || || || || || ||

|| Financial indicators || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Gross foreign debt of the whole economy, relative to GDP (%) || || 85.5 || 77.7 || 85.0 || 76.7e || 86.9 || 80.8 ||

|| Gross foreign debt of the whole economy, relative to total exports (%) || || 407.3 || 265.2 || 236.2 || 210.3 || 217.4 || 179.7 ||

|| Money supply: M1 (banknotes, coins, overnight deposits, million euro) || 3) || 975 || 2 695 || 2 401 || 2 807 || 2 715 || 3 365 ||

|| Money supply: M2 (M1 plus deposits with maturity up to two years, million euro) || 4) || 1 141 || 4 555 || 3 891 || 4 663 || 4 227 || 4 746 ||

|| Money supply: M3 (M2 plus marketable instruments, million euro) || 5) || 2 101 || 12 573 || 12 899 || 14 339 || 14 438 || 14 880 ||

|| Total credit by monetary financial institutions to residents (consolidated) (million euro) || || 4 866 || 14 863 || 17 544 || 18 995 || 19 783 || 19 137 ||

|| \*\*Annual change in financial sector liabilities (%) || 6) || : || : || : || : || : || 0.5 ||

|| \*\*Private credit flow, consolidated, relative to GDP (%) || || : || : || : || : || : || : ||

|| \*\*Private debt, consolidated, relative to GDP (%) || || : || : || : || : || : || : ||

|| Interest rates: day-to-day money rate, per annum (%) || || || 9.45 || 12.02 || 8.46 || 9.81 || 7.04 ||

|| Lending interest rate (one year), per annum (%) || || 16.92 || 12.00 || 14.00 || 12.25 || 13.75 || 12.00 ||

|| Deposit interest rate (one year), per annum (%) || || : || 7.00 || 9.00 || 7.25 || 8.75 || 7.00 ||

|| euro exchange rates: average of period (1 euro = … national currency) || 7) || 59.458 || 93.952 || 103.043 || 101.95 || 113.128 || 113.137 ||

|| Trade-weighted effective exchange rate index (2005 = 100) || 8) || 78.6 || 122.2 || 115.4 || 127.1 || 118.3 || 126.4 ||

|| \*\*3 year change (T/T-3) in the trade-weighted effective exchange rate index, 42 countries (2005 = 100) || || : || : || : || : || : || : ||

|| Value of reserve assets (including gold) (million euro) || || : || 10 602 || 10 002 || 12 058 || 10 915 || 11 189 ||

|| || || || || || || || ||

|| External trade in goods || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Value of imports: all goods, all partners (million euro) || || : || 11 505 || 12 623 || 14 269 || 14 799 || 15 474 ||

|| Value of exports: all goods, all partners (million euro) || || : || 5 983 || 7 388 || 8 462 || 8 836 || 11 001 ||

|| Trade balance: all goods, all partners (million euro) || || : || -5 522 || -5 235 || -5 806 || -5 962 || -4 473 ||

|| Terms of trade (export price index / import price index \* 100) (number) || || 103 || 116 || 115 || 119 || 122 || 122 ||

|| Share of exports to EU-28 countries in value of total exports (%) || || : || 57.0 || 60.5 || 61.6 || 61.6 || 62.7 ||

|| Share of imports from EU-28 countries in value of total imports (%) || || : || 59.4 || 58.6 || 58.0 || 61.0 || 61.9 ||

|| || || || || || || || ||

|| Demography || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Crude rate of natural change of population (natural growth rate): number of births minus deaths (per thousand inhabitants) || || -2.7 || -4.6 || -4.8 || -5.1 || -4.9 || -4.8 ||

|| Infant mortality rate deaths of children under one year of age (per thousand live births) || || 10.2 || 7.0 || 6.7 || 6.3 || 6.2 || 6.3 ||

|| Life expectancy at birth: male (years) || || 69.6 || 71.4 || 71.4 || 71.6 || 72.2 || 72.5 ||

|| Life expectancy at birth: female (years) || || 75.0 || 76.7 || 76.6 || 76.8 || 77.3 || 77.7 ||

|| || || || || || || || ||

|| Labour market || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Economic activity rate for persons aged 20–64: proportion of the population aged 20–64 that is economically active (%) || || : || 65.2 || 63.7 || 64.1 || 64.3 || 66.0 ||

|| \*Employment rate for persons aged 20–64: proportion of the population aged 20–64 that are in employment (%) || || : || 54.5 || 51.2 || 49.2 || 48.9 || 51.2 ||

|| Male employment rate for persons aged 20–64 (%) || || : || 63.0 || 59.2 || 56.8 || 56.7 || 59.5 ||

|| Female employment rate for persons aged 20–64 (%) || || : || 46.4 || 43.5 || 41.7 || 41.1 || 43.1 ||

|| Employment rate for persons aged 55–64: proportion of the population aged 55–64 that are in employment (%) || || 42.1 || 35.4 || 32.8 || 31.4 || 31.6 || 34.3 ||

|| Employment by main sectors || || || || || || || ||

|| Agriculture, forestry and fisheries (%) || || : || : || 22.3e || 21.2e || 21.0 || 21.3 ||

|| Industry (%) || || : || : || 21.0e || 21.5e || 21.3 || 21.1 ||

|| Construction (%) || || : || : || 5.0e || 5.3e || 5.2 || 4.8 ||

|| Services (%) || || : || : || 51.7e || 52.0e || 52.6 || 52.9 ||

|| Unemployment rate: proportion of the labour force that is unemployed (%) || || 12.2 || 16.1 || 19.2 || 23.0 || 23.9 || 22.1 ||

|| Male unemployment rate (%) || || 10.5 || 14.8 || 18.4 || 22.4 || 23.2 || 20.8 ||

|| Female unemployment rate (%) || || 14.8 || 17.8 || 20.2 || 23.7 || 24.9 || 23.8 ||

|| Youth unemployment rate: proportion of the labour force aged 15–24 that is unemployed (%) || || 46.4 || 41.6 || 46.2 || 50.9 || 51.1 || 49.4 ||

|| Long-term unemployment rate: proportion of the labour force that has been unemployed for 12 months or more (%) || || 9.0 || 10.5 || 13.3 || 16.9 || 18.6 || 16.8 ||

|| || || || || || || || ||

|| Social cohesion || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Average nominal monthly wages and salaries (national currency) || 9) || 8 691 || 44 147b || 47 450 || 52 733 || 57 430 || 60 708 ||

|| Index of real wages and salaries (index of nominal wages and salaries divided by the inflation index) (2000 = 100) || 9) || 118.4 || 275.6b || 277.4 || 277.9 || 280.4 || 275.0 ||

|| \*Early leavers from education and training: proportion of the population aged 18–24 with at most lower secondary education who are not in further education or training (%) || || : || 9.3 || 8.2 || 8.5 || 8.1 || 8.7 ||

|| || || || || || || || ||

|| Standard of living || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Number of passenger cars relative to population size (number per thousand population) || || 184.2 || 223.2 || 214.3 || 230.5 || 239.2 || 246.5 ||

|| Number of mobile phone subscriptions relative to population size (number per thousand population) || || 251.1 || 1 351.3 || 1 357.0 || 1 399.4 || 1 261.9 || 1 280.9 ||

|| || || || || || || || ||

|| Infrastructure || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Density of railway network (lines in operation per thousand km²) || || 49.2 || 49.3 || 49.3 || 49.3 || 49.3 || 49.3 ||

|| Length of motorways (kilometres) || || 370 || 495 || 495 || 595 || 606 || 606 ||

|| || || || || || || || ||

|| Innovation and research || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Public expenditure on education relative to GDP (%) || || 3.2 || 5.0 || 4.9 || 4.8 || 4.9 || : ||

|| \*Gross domestic expenditure on R&D relative to GDP (%) || || : || 0.92 || 0.79 || 0.77 || 0.96 || : ||

|| Percentage of households who have internet access at home (%) || || : || 37.0 || 39.0 || 41.2 || 47.5 || 55.8 ||

|| || || || || || || || ||

|| Environment || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| \*Index of greenhouse gas emissions, CO2 equivalent (1990 = 100) || || : || : || : || : || : || : ||

|| Energy intensity of the economy (kg of oil equivalent per 1 000 euro GDP at 2000 constant prices) || || : || : || : || : || : || : ||

|| Electricity generated from renewable sources relative to gross electricity consumption (%) || || 43.3 || 28.6 || 31.4 || 22.6 || 24.8 || : ||

|| Road share of inland freight transport (based on tonne-km) (%) || || 13.8 || 23.6 || 27.8 || 30.5 || 44.8 || 43.1 ||

|| || || || || || || || ||

|| Energy || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Primary production of all energy products (thousand TOE) || || : || 9 487 || 9 876 || 10 504 || 10 105 || : ||

|| Primary production of crude oil (thousand TOE) || || : || 676 || 929 || 1 111 || 1 224 || : ||

|| Primary production of hard coal and lignite (thousand TOE) || || : || 7 330 || 7 226 || 7 822 || 7 276 || : ||

|| Primary production of natural gas (thousand TOE) || || : || 232 || 342 || 449 || 472 || : ||

|| Net imports of all energy products (thousand TOE) || || : || 5 046 || 6 320 || 5 048 || 4 179 || : ||

|| Gross inland energy consumption (thousand TOE) || || : || 14 657 || 15 093 || 15 749 || 13 997 || : ||

|| Electricity generation (thousand GWh) || || 31.0 || 37.9 || 38.0 || 38.6 || 36.8 || : ||

|| || || || || || || || ||

|| Agriculture || Note || 2001 || 2009 || 2010 || 2011 || 2012 || 2013 ||

|| Agricultural production volume index of goods and services (at producer prices) (previous year = 100) || || 118.0 || 101.0 || 99.4 || 100.9 || 82.3 || 121.7 ||

|| Utilised agricultural area (thousand hectares) || || 5 077 || 5 057 || 5 052 || 5 056 || 5 052 || 5 069 ||

|| Livestock numbers: live bovine animals (thousand heads, end of period) || || 1 128 || 1 002b || 938 || 937 || 921e || 913 ||

|| Livestock numbers: live swine (thousand heads, end of period) || || 3 587 || 3 631b || 3 489 || 3 287 || 3 139e || 3 144 ||

|| Livestock numbers: live sheep and live goats (thousand heads, end of period) || || 1 612 || 1 647b || 1 604 || 1 590 || 1 867e || 1 841 ||

|| Production and utilisation of milk on the farm (total whole milk) (thousand tonnes) || 10) || 1 594 || 1 503 || 1 486 || 1 461 || 1 478e || 1 464 ||

|| Harvested crop production: cereals (including rice) (thousand tonnes) || 11) || 9 001 || 9 111 || 9 280 || 9 066 || 5 920 || 9 157 ||

|| Harvested crop production: sugar beet (thousand tonnes) || || 1 806 || 2 798 || 3 325 || 2 822 || 2 328 || 2 983 ||

|| Harvested crop production: vegetables (thousand tonnes) || || 1 283 || 1 257 || 1 314 || 1 305 || 1 054 || 1 242 ||

|| : = not available

|| b = break in series

|| e = estimated value

|| \* = Europe 2020 indicator

|| \*\* = Macroeconomic Imbalance Procedure (MIP) indicator

||

|| Footnotes:

||

1) Source: Eurostat’s reference database (Eurobase).

2) The share of each activity is calculated as a percentage of gross value added after deducting FISIM; as a result the sum exceeds 100% by the amount of FISIM.

3) The money supply M1 consists of currency in circulation and funds in giro, 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 without any restrictions.

4) The money supply M2, in addition to M1, includes other dinar deposits, both short-and long-term.

5) The money supply M3, in addition to M2, includes short-and long term foreign currency deposits (without the so-called frozen foreign currency savings).

6) The total financial sector liabilities are the sum of all liabilities of the following sectors: Central Bank, Banks, Other financial intermediaries’ which include leasing companies, factoring/forfeiting companies. Insurance companies include insurance companies, agency for deposits insurance and national mortgage insurance corporations.

7) Arithmetic mean of official middle exchange rates of the dinar against the euro on working days.

8) 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 the United States. Calculation based on geometric average.

9) 2001: wages and salaries paid to employees of legal entities. 2009–13: wages and salaries paid to employees of legal entities and of unincorporated enterprises.

10) In million litres. Milk from cows and sheep used for human consumption or processing.

11) 2001: excluding triticale.

[1]               Until 1
July 2014, the rapporteur for Serbia was Mr Jelko Kacin. The current
rapporteur is Mr David McAllister.

[2]               Enlargement
Strategy and Main Challenges 2014-2015, COM(2014) 700.

\*               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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