Serbia 2017

Total score

56.84 change: -0.019999999999996

Score and comments

Political Freedom
Free and Fair Elections

As already noted in the 2016 edition of Freedom Barometer, freedom and fairness of elections have decreased in Serbia, due to 2016 early parliamentary elections that abound with irregularities. Fraudulent voting procedures, abuse of authority and pressure on public servants were all part of the electoral process that created uneven playing field dominated by the ruling parties. Incumbent government composed of Serbian Progressive Party (SNS) and Socialist Party of Serbia (SPS) continued its ruling from August on, with Aleksandar Vučić as the Prime Minister, although lasting for less than a year. Citizens in Serbia live in an environment of constantly held elections, regular or snap. In 2017, regular elections for President of Serbia were held. PM Vučić ran as a presidential

candidate, winning in the first round, with 55% of the votes. According to OSCE ODIHR, a distinction between campaign and official activities by the PM was effectively blurred, benefiting his position and allowing him to dominate in the elections. Following his assuming of the office of President, in June, a new Government was elected in the Parliament, with Ana Brnabić as the PM. She served as the Minister of Public Administration and Local Self-government during the previous term.

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Absence of Unconstitutional Veto Players

Serbian authorities have effective power to govern the country and there are no unconstitutional veto players able to undermine decision making process. However, the biggest threat to country’s democracy is coming from the ruling elite and weak system of checks and balances. When elected as President of Serbia, Aleksandar Vučić shifted the informal power in the country from Prime Minister to presidential position. Both executive and legislative branch are dominated by his authority, while judiciary often goes in line with governmental stance. Corruption among officials, allegedly strong informal influence of secret services and tight connections of politicians to businesses or to organized crime, remain as matters for concern. Also, Serbian Orthodox Church often sought to

interfere into politics and shape the public opinion on some sensitive issues, such as Kosovo, however their influence has been weak.

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Freedom of Press

Freedom and independence of media in Serbia continue to decline due to serious challenges faced by media outlets and journalists. Government make use of both political and economic pressure to influence their reporting, thus biased coverage prevails in both the traditional and online media. Critical outlets, especially investigative journalism, are often targeted by the hostile statements of the highest officials in the country, as well as by state-controlled tabloids. Editorial policy is mostly driven by public funding, resulting in self-censorship by the editors and journalists, and in the lack of balanced reporting. Environment of fear from losing job or being a target of intimidation, threats and violence, surrounds journalists. Many of them lost their jobs or their shows

have been terminated. Physical and verbal attacks against journalists are in increase. During the inauguration of the newly elected President, several journalists from various outlets were attacked by unknown civilians pretending to be security staff of the event.

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Rule of Law
Independence of the Judiciary

Bad situation in judiciary is very slowly improving, if at all. Lack of independence, efficacy, efficiency and integrity of the judiciary is the most important deficiency regarding rule of law in Serbia, the biggest obstacle to freedom and the most demanding task along the reforms needed for EU-accession. Thereby, political pressure on courts (rather not to do, than to do something) is merely a tip of an iceberg. Political influence on law enforcement sector (police, prosecutors), or on various regulators, is even stronger. Their willingness to react and their efficiency highly depend on the hints which they get from the executive branch of power. The Savamala incident as of April 2016 is thereby paradigmatic. It is officially still in

the “pre-investigation” phase. Non-political illicit influences on courts (by powerful interest groups and/or via corruption) are stronger than direct political pressure and sometimes produce decisions that differ from the wishes of the executive yet also from what justice normally required (such as acquittal of tycoons or expiry of their cases in spite of the serious indications of illegalities). After years of keeping low profile, judges` professional associations recently started advocating faster reforms.

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The anti-corruption campaign of 2012 - which skyrocketed the popularity of Serbia`s leader (now President) Aleksandar Vučić - is all history. Old tycoons are getting away with past irregularities (some acquitted, others having had their cases expired), while new ones are emerging. Suspected corruption cases involving the acting high officials are not investigated, while whistle blowing media or NGOs, or other critics, are smeared. Despite promises, there is even less transparency in the biggest public-funded projects. Political manipulation with the Anti-corruption Agency, its marginalization and ignoring it by the law enforcement sector intertwine each other. Other independent state institutions are listened to by the government only

selectively. At the local level, it is even worse – most of the local governments do not even have proper anti-corruption bodies. Petty corruption is also widespread. As portal GAN noted, “the prevalence of bribery exceeds the regional average”. Overall, both the EU`s Progress Report 2016 and the Transparency International`s Corruption Perceptions Index 2016 showed that there was no progress in suppressing corruption in Serbia lately. The latter survey put Serbia to the place 72 of 176, together with Burkina Faso and Solomon Islands.

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Protection of Human Rights

During the past year, Serbia witnessed breakthroughs in certain fields of human rights, while push-backs in other. The only field where otherwise benevolent European Parliament resolution on Serbia as of June 2017 claimed there was no progress at all had been freedom of expression, in connection with the situation in media. Many CSOs point out also at the endangered rights (or freedoms) in the fields of privacy, legal remedy, academic honesty, access to information, secularism, freedom of gathering, political neutrality of the administration, or numerous others. War crimes investigations and trials, as well as overall getting rid of the ruling narratives of the 1990s, still lag behind the needs of regional reconciliation and EU

integration. Convicted war criminals who served their terms participate in public life without repent even in places and events where the government or the ruling parties are in full charge. Hate speech is often heard or read, whereby there is practically no remedy against the worst kinds of defamation if practiced by pro-government actors. On the other hand, climate is changing for better regarding a few other aspects of human rights. In June 2017, Serbia has got the first woman and first LGBT person ever, Ana Brnabić, at the position of its Prime Minister. Women also hold positions of the Speaker of Parliament, Governor of the Central Bank, Minister of Justice, etc. Legislative and law enforcement activities to curb domestic violence are relentless. Each year around, Belgrade Pride or some other LGBT events are taking part with less tension and slightly less need for police protection, even though homophobia is still very strong across society. Ethnic minorities (Hungarians, Bosniaks, Croats) are getting ever more space for integration into the political and social mainstream. Alas, the empowerment of Roma goes slower. Despite setbacks after the closing of the Western Balkans route (such as mixed police-army patrols at the southern border), Serbia`s treatment of refugees is still decent, whereby the government skillfully neutralizes occasional outbursts of xenophobia in various walks of life.

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Economic Freedom
Security of Property Rights

Private property in Serbia is not adequately protected. Judiciary and especially the Prosecutor’s Office are not independent from the strong out-of-court influences. The executive branch of government has a constitutionally significant role in appointment of judges, which will require changes in the Constitution along the further EU accession process. The recent Savamala affair, which showed to what extent government agencies were compromised to serve particular private interests, has not yet been resolved due to obstruction and lack of political will. Corruptive practices are present within public institutions, including the judiciary and Land Register. Legal enforcement of contracts is an inefficient process due to time consuming and expensive legal procedures. Judicial

rulings are often inconsistent across different courts and judges. First level courts also often lack sufficient knowledge and expertise to assess more complicated issues, thus numerous cases are automatically transferred to appellation courts. Bankruptcy procedures are long, with low recovery rate of only 33%. Ownership of agricultural land is restricted to Serbian nationals only, but this restriction is circumvented by registering a domestic legal entity owned by a foreign national, so this regulation affects only foreign natural persons. However, nationals of the EU, under the Stabilization and Association Agreement will eventually have the right to acquire land. Land Register office coverage is restricted mostly to bigger cities, while the performance of its local branches varies significantly. The one year deadline for the application of the law on the conversion of the right of usage of land to the land proprietorship, during which this process had been postponed, passed in July 2016. Since then, land proprietorship has been a prerequisite for obtaining a building permit, which would expectedly help clarify property rights.

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Size of Government: Expenditures, Taxes, and Enterprises

Size of government in Serbia is much more pronounced than in other transition countries on the same level of development, with the government consumption reaching 43.5% of GDP in 2016. In order to curb high public deficits that had been piling up since 2008, a fiscal austerity program was introduced in 2015 with the support of the IMF. It successfully decreased expenditures through several measures, the most important thereof having had been a 10% reduction in wages and pensions. Higher revenues than envisaged, due to better performance of the economy and higher tax collection rates, were used to somewhat loosen some of the measures, but the program as such has still been on. Public debt, which had reached 74% of GDP in 2016, has now been on a downward trajectory. The

unsustainable pension system and bloated public wage bill remain at the core of public finance problems, followed by direct or indirect subsidies to inefficient state-owned enterprises (SOE).The process of privatization or liquidation of SOEs in restructuring is still under way, due to political pressures, although it was initially envisaged to be completed by 2015. The process is not considered as transparent, fueling concerns of corruptive activities. There are still numerous SOEs that are not envisaged for privatization, most notably in sectors such as mining, telecommunications, energy, transportation and banking. Corporate tax is set at 15%, while personal income tax is at 10%. High social security contributions, however, lead to a high labour tax wedge of 38.9% which, coupled with a weak institutional setting (tax authorities and labour inspectorate), fosters widespread shadow-economy activities and employment.

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Regulation of Credit, Labour, and Business

 Serbia still does not pose a very much business-friendly environment. Several reforms in recent years have improved the existing regulatory framework (labour code, law on investments, construction licenses regulations, inspectorate etc.) but the biggest challenges remain in the field of partiality of government officials in dealing with businesses. Corruption remains another obstacle to a better environment. Regulations are often complicated and non-aligned with one another. Starting a business is an efficient process, being fast, inexpensive and without paid-in minimum capital requirements. Registering property is but a lengthy procedure, due to inefficient land registry, which still does not cover all land titles. Recent introduction of time limits is expected to make

their dealings more expedient. Obtaining a construction permit has been made more business friendly, by significantly lowering the number of procedures and time limits, opening a one stop shop for investors and using electronic tools. Getting connection to the electricity grid imposes enormous costs, due to inefficient public-owned energy-distribution company and its high fees. Compliance with tax procedures is also burdensome, with complicated and sometimes contradictory regulations, exacerbated by the high number of annual payments and lack of expertise or resources by the public tax authority service. The most problematic factors for doing business are considered to be high tax rates and inefficient government bureaucracy. Labour market regulations are a mixture of flexible and restrictive solutions: working hours’ regulation is flexible, but fixed-term contracts are prohibited for permanent tasks, while their maximum duration is anyway limited to just 24 months. Severance pay increases in accordance with years in tenure, protecting the seasoned workers, but notice periods do not. The minimum wage is high as compared to the average wage, reaching almost 50% of the latter, which is fostering activities in the undeclared economy, especially among older or people with lower education attainment.

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Freedom to Trade Internationally

Freedom to trade internationally is generally upheld in Serbia. However, the country is, alongside Bosnia and Herzegovina and Belarus, in a small group of European countries that are not members of the World Trade Organization. Serbia’s main trade partners are the EU countries, Western Balkan countries and the Russian Federation. Therefore, majority of its trade is conducted under the Stabilization and Association Agreement (SAA) with the EU, Central Europe Free Trade Agreement (CEFTA) with countries of the WB region, and bilateral preferential trade agreements. Main trade disputes are thus settled on a bilateral basis, which is slow and unreliable. Tariffs are mostly low, apart from agriculture products. The simple average applied MFN tariff is 7.4%. But non-tariff trade

barriers are also in place, with complicated standardization and licensing procedures. The process of EU accession will further reform Serbia’s regulations in this area and get them more in line with the EU rules. Temporary variable tariffs on imported dairy products that were in place as of 2015 were finally abolished in December 2016. Customs agency is considered as inefficient, following complicated regulation. The institution lacks modern equipment that would enable it to use more online tools. The recently introduced New Computerized Transit System has significantly reduced transit burden, which is important for Serbia as a major trading hub due to its geographical position. However, low quality of transport infrastructure, especially the railroads, leads to high freight cost, hampering trade. Construction of the E10 and E11 international corridors is underway, but improvements are slow. Political uncertainty regarding Kosovo hampers trade with it, but the ongoing dialogue process facilitated by the EU, which included chambers of commerce, has somewhat improved the situation.

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