Serbia 2019

tension and expectation of possible snap elections. Government holds tight control over media, thus electoral campaigns abound with biased media coverage in favor of the ruling party and uneven access by opposition politicians to public outlets. Lack of balanced representation in media and public is even more emphasized with blurred separation between official state activities by the ruling politicians and their political party campaigning. Hostile climate against opposition politicians, critical journalists and civic activists is embodied in several physical and verbal attacks throughout the year. Public servants are often subject to pressure of voting for the ruling parties and participating in their activities, or else they could face downgrading or losing their job. Election days continuously abound with cases of voter intimidation, tabulation of votes and vote buying. All those are used to shape the outcome of the electoral process in favor of ruling parties, making political playing field largely uneven. Street protests that meanwhile occurred in Serbia served as a consolidation point for certain opposition parties. However, due to their disagreement over whether or not to have participated at the upcoming 2020 parliamentary elections, unclear political agenda and smear discreditation campaign of opposition politicians run by pro-government media, they still lacks seriousness and power to challenge the ruling party.

amendments (up to few hundred) to the laws, biased use of the disciplinary measures and adopting laws in emergency procedures. Such environment led many of opposition political parties to boycott parliamentary sessions. Judicial branch of power is under strong political influence, thus its oversight function over the system is poorly implemented. High level corruption in Serbia is pervasive. Close ties between ruling politicians and wealthy businesses are often used for their personal political and financial gain, undermining democratic institutions. Secret service and organized crime are considered to have significant influence on politicians and country`s politics, while influence of the Serbian Orthodox Church on public opinion is weak, despite their efforts to intervene on issues such as relations between Serbia and Kosovo.

exercised toward media outlets in Serbia transformed them into government propaganda mouthpiece. Ruling elite does not hesitate to abuse legal - or use extralegal - tools to confront with those who are critical of the government and/or of the president Aleksandar Vučić. Journalists are working in a climate of fear, shaped by increased number of physical and verbal attacks on them, intimidation and harassment, editorial censorship and poor economic conditions. Such atmosphere led to a decrease of quality of journalism in Serbia, with objective and independent reporting mostly done online or through several investigative outlets and NGOs. Investigative journalism, which is mostly NGO driven, plays an important role in providing checks to the regime, however their work is often targeted by physical and verbal harassment campaigns. One journalist had his own house burned down due to his investigative work on corruption. The country deteriorated by 14 positions on the Reporters without Borders 2019 World Press Freedom Index and currently holds 90th position.

draft amendments that were discussed fell below the expectations of the public or ideas that came from civil society. Both the EC and Freedom House warn at a scope of political influence on courts, the latter especially pointing out at judicial appointments and at the practice of commenting ongoing court cases by the top politicians. In such a climate, sort of „self-censorship“ is widespread among prosecutors and judges, leading to de facto impunity of the most important public officials. On the top of it, there are also problems of non-political external influences on court decisions, through corruption and/or by criminal, business or other interest groups. Judges who publicly expressed dissatisfaction with the state of affairs often encountered smearing campaigns against themselves in pro-government media.

level, been coupled with the misuse of supposedly independent humanitarian or other NGOs, such as Red Cross, to gain advantage for election contestants – either strategically or tactically - favored by the central government. When it comes to infrastructure projects, most of the major ones are implemented through inter-governmental agreements, thus circumventing usual tender procedures. On the brighter side, the number of investigations and convictions for petty corruption have risen, although even in that segment there was a backlash in that „small gifts“ to medical staff were de facto legalized. Also on the bright side, serious improvement has been made in fighting international money laundering, while the first steps (in the form of new law) were taken to seriously tackle the issue of lobbying. 

improved after 2009, and again after 2014, with Pride rallies now freely held, and with less hate speech or discrimination in society, but the appointment of an out-ed lesbian as the PM in 2017 did not move an inch forward the unresolved issue of same-sex unions. The role of government in running schools and universities has increased since 2017. Fake diplomas and plagiarism among politicians are turned a blind eye at by the ruling parties, thus seriously harming academic integrity. Student associations and Belgrade University, however, took a few meaningful steps to expose some of the worst perpetrators. Genocide denial, and minimization of the war crimes of the 1990s in general, continue to burden Serbia`s own social climate and its relations to neighbors, whereby convicted war criminals who had served their terms continued to enjoy a number of state privileges and public honor. Special UN envoy has, in early 2019, complained about cases of torture or police brutality in custody. On the bright side, among Balkan countries there are perhaps least problems in Serbia with the treatment of migrants, however that one might also further improve in some areas. 

unsolved due to the lack of political will. Corruptive practices within public institutions, including courts, land register or inspectorate, remain present. Political influence over the nominally independent state bodies and regulatory agencies is also attested. Legal enforcement of contracts is an inefficient process, due to time consuming and expensive legal procedures, lasting almost 2 years on average and costing 40% of the claim. Judicial rulings are often inconsistent across different courts and judges. First instance courts also often lack sufficient knowledge and expertise to assess more complicated issues, and there after numerous cases are automatically transferred to appellation courts. Bankruptcy procedures are also long, with low recovery rate of only one third of the claim. Ownership of agricultural land is restricted to Serbian nationals only, or to EU nationals that meet certain highly restrictive conditions. These restrictions are easily circumvented by registering a domestic legal entity owned by a foreign national. Coverage of the land register is restricted mostly to bigger cities, while the performance of its local branches varies significantly, whereby many titles are not clear. The process of legalization of more than 2 million objects, half of which residential, built without a permit, is still ongoing, but very slowly and with many allegations of corruptive practices. Although this process is envisaged to end by 2023, less than 10% of cases have been resolved by legalization so far. The process of restitution of property nationalized during the socialist regime has not yet been finalized: in many cases where property restitution is possible, the government decided to offer bonds, with restrictive clauses which will result in a received amount that is below the perceived value of the property. Issuance of these bonds was again postponed, with new legislative amendments, to 2022.

The growth rate of the economy is slower (approximately 3.3% in 2019) than in comparable countries, due to infrastructural and administrative bottlenecks, corruption and low level of rule of law. Further pressure on the public spending is expected from the unsustainable pension system, bloated and unreformed public wage bill and rising healthcare expenditures. Even after the several privatization rounds, the SOEs still dominate significant sectors of the economy, such as the energy, transportation, utilities, mining and infrastructure, while the state still has a visible share in banking, insurance and telecommunications. According to the official statistics, there are more than 700 SOEs in the country, with 250 000 workers, which is more than 15% of the total employment outside the purely public sector. Additionally, there are approximately 30 000 employees in 90 companies in restructuring, that are planned to be privatized. But, the process of their privatization has been developing slowly since 2015. Recent important privatization cases included Belgrade airport concession to the French company Vinci, RTB Bor mining company sold to the Chinese Zijin Mining, and the agricultural corporation PKB sold to the UAE-based Al Dahra. However, all those privatization cases are widely considered to be non-transparent, with the buyer known in advance. Taxes are mostly in line with other European countries: the standard VAT rate is 20%, while the preferential one is 10%. Both corporate tax and personal income tax are flat, set at 15% and 10% respectively. However, mandatory social security contributions are high, leading to the total labour tax wedge of 38% on average wage which - coupled with a weak institutional setting (tax authorities and labour inspectorate) - fosters widespread shadow-economy activities and employment. Recent tax reforms provided a small tax relief, with a 0.5% reduction in security contribution paid by the employer, and a streamlined list of para-fiscal charges and fees.

regulations are often complicated and non-aligned with one another, and petty corruption is also present. Government administrative capacities are constrained, not only due to the freeze in hiring that has been in place since 2014, but also to political appointments and low professional standards in practice. Recent reforms of the business environment were mostly incremental, with further strengthening of online tools of communication with the state administration, which is mostly visible in the case of construction permits. The VAT refund arrears, which had been piling up in the last two years due to slow administrative procedures and increased tax inspections, have been slowly decreasing through newly appointed internal time limits within the tax service. Starting a business is an efficient process, being fast, inexpensive and without paid-in minimum capital requirements, and is done within a week. But, this procedure was made more difficult by filing for a final beneficiary registry as a separate procedure. Obtaining a construction permit has in recent years been made more business friendly, by significantly lowering the number of procedures and time limits, opening of one stop shops for investors and using electronic tools. It is now done within 3 months and with low associated fees. Getting connection to the electricity grid involves high costs, due to the high fees of the inefficient public-owned energy-distribution company. 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. Labour market regulation has got both flexible and inflexible characteristics. Fixed-term contracts are prohibited for permanent tasks. Their maximum duration is limited to just 24 months. Working hours regulation is not overly stringent. Severance pay increases in accordance with years in tenure, protecting the more seasoned workers, but notice periods do not. The firing section due to redundancy and misdemeanor is overly protective towards the workers, contributing to shadow employment and the high number of people employed through short term and non-standard labour contracts. The minimum wage is high as compared to the average wage, reaching almost 50% of the latter, as was increased for additional 8% in 2019 after the 10% rise in 2018.

practically been put on hold. The main obstacles to Serbian accession are to be found in local regulation, e.g. regarding the total ban on sales of GMO products, while excise duties on alcohol products are levied by the type of beverage and not their alcohol content. Since the bulk of Serbian trade is conducted through multilateral and bilateral free trade agreements, the WTO accession is not high on the reform agenda. Main Serbian trade partners are the EU countries, followed by the Western Balkan countries, members of CEFTA. Other important partners are Russia and China, the latter being the only important partner with whom Serbia does not have a signed trade deal. While the Stabilization and Association Agreement (SAA) functions smoothly, CEFTA does not, since its dispute settlement procedures have not yet been established, which encourages frequent protectionist trade policies, then settled through bilateral negotiations that are slow and unreliable. The most notable one are the 100% ad valorem tariffs imposed by Kosovo for goods from Serbia and Bosnia. Serbia has recently signed an FTA treaty with the Eurasian Economic Union, which in practice broadened the base of the FTA agreement with Russia to the new EAEU members, Armenia and Kyrgyzstan. Serbian government also announced a deeper economic integration with Albania and North Macedonia, but this actual plan yet remains to be presented. Customs agency is considered as inefficient, with complicated regulation, and with obsolete computer equipment, so online tools are underutilized. The customs office is also prone to corruption and political influence which is used by people with good political connections to gain advantage over their competition in case of selling imported goods. Due to its favourable geographical position, Serbia is an important regional trade hub, and the use of the New Computerized Transit System significantly reduced transit burden, making border controls more expeditious. However, low quality of transport infrastructure, especially the railroads and the river ports, still imposes problems through increasing freight cost. The reform of the state-owned Railroad Company was mostly implemented during the previous several years, alleviating some of these problems through higher investment. The international E10 corridor was finally completed, with significant delays and higher costs due to inefficient state project companies and weak oversight. New infrastructure initiatives that would increase connectivity in the region have also been planned (highways to Sarajevo and Prishtina, fast track railroad to Budapest) but their financial viability is dubious, which may prove very costly in the future. The National Bank of Serbia still maintains a significant number of capital controls, as compared to other countries in the region, but mostly on short-term capital, while long-term capital flows are liberalized. The new Law on Foreign Exchange Operations lifted some of these restrictions, so locals can now buy foreign short-term securities issued in the EU or by the international financial organizations, while foreigners can buy Serbian short-term securities. Capital markets are not fully liberalized for individuals, since Serbian citizens are not allowed to maintain currency accounts abroad, short of a few exceptional situations.