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U.S. Department of State

Diplomacy in Action

II. Country Assessment--Serbia


U.S. Government Assistance to and Cooperative Activities with Central and Eastern Europe
Bureau of European and Eurasian Affairs
January 2007
Report
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Country Overview

Country Facts
  • Map of SerbiaArea: 88,361 sq km, slightly larger than South Carolina 
  • Population: 9,396,411 (2002 census) 
  • Population Growth Rate: N/A (est.) 
  • Life Expectancy: Male 71yrs., Female 76 yrs. 
  • Infant Mortality: N/A deaths/ 1,000 live births 
  • Gross Domestic Product (GDP): $ 41.15 billion (purchasing power parity, 2005 est. including Kosovo) 
  • GDP Per Capita Income: $4,400 (purchasing power parity, 2005 est. including Kosovo) 
  • Real GDP Growth: 5.9% alone (2005 est. excluding Kosovo)

Overview of U.S. Government Assistance

In FY 2006, the USG allocated an estimated $1.45 million that was not disaggregated between Serbia, Kosovo, and Montenegro for border security programs.

In FY 2006, the USG allocated an estimated $75.58 million in assistance to Serbia:

  • $18.65 million in democratic reform programs; 
  • $47.43 million in economic reform programs; 
  • $4.69 million in humanitarian programs; 
  • $3.60 million in security, regional stability, and law enforcement programs; and 
  • $3.85 million in cross-sector and other programs.

Serbia and Montenegro were the same country until summer of 2006.

FY 2006 Assistance Overview

U.S. STRATEGIC INTERESTS & FOREIGN POLICY PRIORITIES

U.S. Secretary of State Condoleezza Rice described the U.S. vision for Serbia as "one of prosperity and democracy and a force for stability in the Balkans and Europe as a whole." The U.S. recognizes significant potential in Serbia as a strong strategic partner on a range of issues, from defense cooperation and trade to promotion of human and minority rights. Serbia's location, ethnic composition, and economic potential make it a linchpin to durable stability in Southeast Europe. However, burdened by a legacy of the destructive policies of the Milosevic era, Serbia is still struggling to rebuild its civil society, economy, and infrastructure. Serbia lags behind its neighbors in certain democratic and economic reforms, and progress toward Euro-Atlantic integration has been relatively slow. U.S. assistance programs help protect the national security of the U.S. by promoting continued political, institutional, and economic reforms and enhancing local capacities to combat terrorism, trafficking, organized crime, and corruption.

FOREIGN ASSISTANCE PRIORITIES

In FY 2006, more than 60% of U.S. Government (USG) assistance to Serbia focused on economic development. The activities supported aimed to improve the investment climate. Priorities include: reforming economic, legal, and regulatory sectors; strengthening the financial sector; furthering macroeconomic stabilization; and promoting private sector growth and job creation, with an emphasis on supporting small- and medium-sized enterprises (SMEs) and attracting foreign direct investment.

USG assistance to Serbia for democratic reform are to strengthen civil society, democratic political parties, and independent media throughout the country. To address vulnerable areas and populations, USG assistance targets the municipalities along the Serbia-Kosovo boundary line (where large numbers of ethnic Albanians reside), the predominantly Bosniak (Muslim) area of Sandzak, and the ethnically diverse region of Vojvodina. USG programs also continue to focus on anti-corruption, rule of law, and judicial reform activities.

OPERATING ENVIRONMENT

Serbia experienced a year of significant changes in 2006: the dissolution of the State Union following Montenegro's referendum on independence; the adoption of a new constitution; and an impending Kosovo status decision. Serbia's leaders seemed preoccupied with the negotiations on Kosovo's future status and efforts to keep Kosovo within Serbia's borders. The country's continued failure to transfer all remaining war crimes suspects, including Ratko Mladic, to The Hague Tribunal, and to come to terms with its past hindered progress toward integration with the European Union (EU) and the North Atlantic Treaty Organization (NATO), although Serbia was invited to join NATO's Partnership for Peace late in 2006. It has also hampered relations with the U.S.: Secretary Rice suspended $7 million in assistance slated to benefit Serbia's Central Government due to insufficient cooperation with the International Criminal Tribunal for the former Yugoslavia (ICTY). Public corruption and organized crime activity - including trafficking of people, weapons, and drugs - remained problems.

COUNTRY PERFORMANCE MEASURES

Serbian Democratic Reform

The "radar" or "spider web" graphs below illustrate Serbia's democratic performance during FY 2005. Ratings are based on a 1 to 5 scale, with 5 representing the greatest advancement. These charts provide a disaggregated look at each of the indices and are reported to Congress on a regular basis. The gray shaded area represents 2005 performance levels, while the two dark lines indicate how each country compares in its progress vis-�-vis two standards: (1) the average of Romania's and Bulgaria's performance in each indicator as of 2002 (2002 was the year that Romania and Bulgaria - the "threshold countries" - were invited to join NATO and received favorable indications of future EU membership); and, (2) where the country stood in each indicator in 1999. Together, these charts provide a broad picture of where remaining gaps are in a country's performance, and to what extent these gaps are being filled. For more information, including a detailed explanation of each indicator shown in the graph, see USAID/E&E/PO, "Monitoring Country Progress in Central and Eastern Europe & Eurasia," No. 10 (August 2006). Found online at: http://inside.usaid.gov/EE/po/mcp.html.

Graph shows Serbian Democratic Reform:  Average of Romania and Bulgaria-2002, corruption, 2.3; electoral process, 3.5; civil society, 3.8; independent media, 3.5; governance/public admin, 3.1; rule of law, 2.8

The graph above shows Serbia's democratic reform scores in 2005* (the gray shaded area) as compared to the average of Romania's and Bulgaria's democratic reform scores in 2002 (the bold line) when they were invited to join NATO and received favorable indications of future EU membership.

*Actual 2006 scores not yet available.

Graph shows Serbian Democratic Reform: 1999, corruption, 2.3; electoral process, 3.5; civil society, 3.8; independent media, 3.5; governance/public admin, 3.1; rule of law, 2.8
The graph above shows Serbia's democratic reform scores in 2005* (the gray shaded area) as compared to its economic reform scores in 1999.

*Actual 2006 scores not yet available.

Serbian & Montenegro Economic Reform

The "radar" or "spider web" graphs below illustrate Serbia & Montenegro's economic performance during 2005 (note that Serbia & Montenegro were one country during 2005). Ratings are based on a 1 to 5 scale, with 5 representing the greatest advancement. These charts provide a disaggregated look at each of the indices and are reported to Congress on a regular basis. The gray shaded area represents 2005 performance levels, while the two dark line indicates how each country compares in its progress vis-�-vis two standards: (1) the average of Romania's and Bulgaria's performance in each indicator as of 2002 (2002 was the year that Romania and Bulgaria - the "threshold countries" - were invited to join NATO and received favorable indications of future EU membership); and (2) where the country stood in each indicator in 1999. Together, these charts provide a broad picture of where remaining gaps are in a country's performance, and to what extent these gaps are being filled. For more information, including a detailed explanation of each indicator shown in the graph, see USAID/E&E/PO, "Monitoring Country Progress in Central and Eastern Europe & Eurasia," No. 10 (March 2006). Found online at: http://inside.usaid.gov/EE/po/mcp.html.

Graph shows Serbian Economic Reform: Average of Romania and Bulgaria-2002, external debt percent GDP, 2.5; private sector share, 2.5; share of employment in SMEs, 2.5; export share of GDP, 0.5; FDI pc cumulative, 2.5; GDP as percent 1989 GDP, 1.0; 3yr avg inflation, 3.0

The graph above shows Serbia & Montenegro's economic reform scores in 2005* (the gray shaded area) as compared to the average of Romania's and Bulgaria's economic reform scores in 2002 (the bold line) when they were invited to join NATO and received favorable indications of future EU membership.

*Actual 2006 scores not yet available.

Graph shows Serbian Economic Reform: Average of NT CEE at graduation, Public expenditure health, 4.0; per capita income, 2.0; secondary school enrollment, 3.5; public expenditure education, 2.5; life expectancy, 4.0; under 5 mortality, 4.5

The graph above shows Serbia & Montenegro's economic reform scores in 2005* (the gray shaded area) as compared to its economic reform scores in 1999 (the bold line).

*Actual 2006 scores not yet available.

FY 2006 Country Program Performance

Governing Justly and Democratically

Several developments in FY 2006 presented significant challenges to Serbia's young democracy: Montenegro's referendum to break from the State Union; the European Union's decision to suspend pre-accession talks; Serbia's failure to capture and turn over the most prominent Serbian war crimes fugitive and the crescendo of international criticism for that failure; and ongoing international talks on the future status of Kosovo. Some key political leaders offered no positive direction for Serbia's future. The public expressed disillusionment with the performance of its government and democratic parties, and polls showed the strongest support for a nationalist, anti-reform party.

Some positive steps were taken to establish a legal framework for non-governmental organizations (NGOs), implement the media framework, and adopt a strategy for judicial reform. However, the non-transparent process of awarding broadcasting licenses and frequencies and the quick parliamentary passage of a new constitution without adequate public debate, created doubt about the commitment to open and democratic processes. Provisions in the new constitution seemed to undermine planned judicial reforms, progress in decentralization, and freedom of information, among other issues. The development of a legal framework for NGOs appeared suspended and leaders of human rights NGOs were publicly demonized.

U.S. ASSISTANCE PRIORITIES

In FY 2006, USG assistance priorities include support for civil society, democratic political parties, the judicial system, legal professional associations, independent media, and media associations. Civil society assistance focuses on developing democratic institutions, fostering effective advocacy for a range of democratic and economic reforms (including those essential for joining the EU), establishing a legal framework supportive of a vibrant civil society, and deepening the understanding by the public and government officials of the role of civil society in a democracy. Programs are designed to help political parties understand and communicate with their constituents, formulate platforms and positive messages, and develop democratic internal organizations and leadership. To build multiple, sustainable, and independent sources of information, USG assistance supports implementation of a predictable legal framework for the media and helps independent media develop effective journalistic and business skills for a rapidly changing media environment. Other priorities are to develop a more independent judicial system and better administration of the civil and commercial courts in order to prevent and mitigate ethnic frictions, support minority and vulnerable groups, and build local capacity to respond to humanitarian crises and natural disasters.

DESCRIPTION OF PROGRAMS AND ACTIVITIES

In FY 2006, The USG supported independent media through training, technical and financial assistance for production, and continued assistance in the media privatization process to provide citizens with balanced news and information. Democratic transition and reform programs focused on the legal status of religious communities, adoption of a law on gender equality, inclusion of Roma in government, establishing an office for youth, awareness of war crimes, multilateral agreements with neighboring countries, media coverage of NGO initiatives, and monitoring the important trials. A new civil society advocacy initiative focused initially on supporting civil society in the October referendum on the constitution and preparations for upcoming parliamentary and presidential elections.

Political party programs provided training to democratic parties and several minority regional and ethnic parties on attracting voters and promoting reform. They also gave training and technical assistance to prepare parties for upcoming elections and used research and polling to provide advice to parties. Programs worked with women activists and youth, strengthened the role of parliamentary committees and party caucuses, and developed the Center for Free Elections and Democracy's survey capacity.

USG assistance helped courts reduce backlogs and improved legal education. A commercial court administration activity provided training and established an information technology system to improve efficiency, transparency, and public access to information. Rule of law reform assistance helped judges and prosecutors develop disciplinary systems, ethical codes, and constitutional provisions to ensure judicial independence. USG assistance brought American guest speakers to Serbia focusing on tolerance, inter-ethnic relations, and reconciliation with a special emphasis on Kosovo. Funds also supported the USG role as host nation at the 2006 Belgrade Book Fair and a robust youth exchange program.

OUTPUTS

USG partners conducted news production training in southern Serbia for ethnic Albanian and Serbian media professionals and conducted electronic media training with Bosniak, Serbian, and Albanian stations in Sandzak and South Serbia. A sub-grant enabled media to provide coverage of the Kosovo status talks in Vienna. The Media Center in Nis produced a series of films entitled "A View from the Other Side," which examined the lives of families in Serbia and Kosovo. Other sub-grants facilitated media programs focusing on EU integration, unemployment, job opportunities, and starting new businesses.

US assistance funded 30 sub-grants focused on advocacy topics such as domestic violence, civilian control of the military, the legal status of minorities, media coverage of NGOs, awareness of war crimes, transparency, and anti-corruption. NGO recipients provided support to grassroots organization, worked to increase corporate social responsibility, and advocated passage of the Law on Associations.

USG partners conducted training and provided technical assistance to virtually all of the democratic parties and larger minority ethnic parties. One partner helped organize a retreat for 22 members of the Democratic Party of Serbia (DSS) parliamentary caucus, which focused on communication and public speaking. Another worked with the Civic Alliance of Serbia (GSS) in 10 municipalities to develop a direct voter communication initiative and a party youth initiative and to expand its cadre of on-call regional trainers. And a third partner conducted political technology training for staff of the Democratic Party (DS) and the G17 Plus party focused on communications technologies. Several former regional trainers were elected key officials of their parties or local government. A USG funded NGO conducted a public opinion research project that measured the views of 4,500 citizens. Others conducted over 20 focus groups of previous and current supporters of democratic parties, providing useful information on the electorate's wishes and expectations, and conducted quarterly political perception surveys on voter priorities, concerns, and political preferences.

The commercial court administrative strengthening program conducted more than 100 training sessions with more than 1,500 participants and implemented its case management system in a pilot court. The information technology system installed in all of Serbia's commercial courts provided system-wide summary data. One partner conducted backlog reduction sessions, improved court management, and introduced new courses to law faculties, particularly legal ethics. Another implementer trained more than 1,000 law students, judges, prosecutors, magistrates, and lawyers, produced an updated Judicial Reform Index, and proposed constitutional provisions on judicial independence. A war crimes database was advanced, war crimes victims and witnesses counseled, and transcripts of Hague proceedings made available in local languages of the region.

Approximately 250 Serbian journalists participated in in-country media training programs. For the first time, Serbian journalists traveled to the U.S. for training, internships, and non-degree study. A youth exchange program sent 95 students to the U.S. and began recruiting for the next group. Funds were also used for the establishment of an undergraduate exchange program and for a month-long youth leadership program in the U.S. for several hundred participants.

PROGRAM PERFORMANCE/IMPACT

Media in Serbia, as well as in Montenegro and Kosovo, made use of USG-funded on-the-ground coverage of the Kosovo status-talks in Vienna. A publication on the cross-border movement of goods and people from Serbia and Kosovo called attention to important aspects of the Serbia-Kosovo issue; it was based on research conducted by a Serbian NGO and a Kosovo think-tank.

Through broad NGO support, the draft Law on Associations was completed in a form acceptable to the government and most NGOs and is now ready for parliamentary review. NGO grantees also made significant advances in domestic violence issues. One worked on standardizing social, legal, and security protection for women in all 16 Belgrade municipalities. Another established a family violence hotline drawing support from the city, and a third assisted a watchdog NGO in Loznica to get funds allocated in the local budget for an SOS phone line for victims of domestic violence.

Other donors institutionalized work on backlog reduction, and the Ministry of Justice adopted a code of conduct for court staff. All Serbian law faculties established legal ethics courses. With USG assistance, the Judges' Association of Serbia initiated hearings of ethical complaints against members and produced the only non-government strategy for judicial reform, including provisions for an independent judiciary. About 50% of magistrates were trained on domestic violence and human trafficking. A local NGO, which received USG funding, assisted prosecutions of war crimes cases. USG assistance produced reliable statistics on commercial court efficiency that are available for the first time for managers and public alike, as are court schedules, hearing information, and bankruptcy case information.

USG-funded public diplomacy programming assisted democratic reforms through support for local NGO projects, media training, a joint TV Coop project with Kosovar Albanians, activities to expand the dialogue on Kosovo, educational and academic exchange programs, translation and publishing of American books, the development of the American Corner program, and the provision of U.S. speakers. Small grants were primarily provided to support grass-root projects from indigenous NGOs in underdeveloped regions outside the capital. Projects included support for development of a free-market economy through business associations and public education programs, empowering youth, and helping build tolerance and reconciliation among different ethnic and religious groups. A civic education program was highly successful in raising students' civic awareness. "Frankly About Kosovo," a year-long program of television debates, newspaper supplements, a dedicated website, and public discussions about the situation in Kosovo had nation-wide reach and greatly expanded public discourse.

MEASURES OF PROGRAM EFFECTIVENESS

In order to determine how U.S. Government assistance affects a country, U.S. embassies set targets for improvement called "performance indicators." Data for these indicators are collected by research institutes, embassies and international organizations. By examining data over time, U.S. policymakers better understand whether specific assistance programs are making their intended impact and, if necessary, how to adjust these programs to improve the impact.

Please find below two important indicators in the area of Governing Justly and Democratically. In the charts, the "Baseline" refers to a starting point from which to measure progress or regression over time. The embassy and its partner organizations then agree on a "Target" figure that they hope to achieve as a result of U.S. assistance programs. The "Rank" figure is the resulting measurement. "FY" stands for "fiscal year," the period of the U.S. budget that runs from October 1 - September 30 of the following year. "CY" stands for "calendar year," or January 1 - December 31.

Performance Indicator: NGO Sustainability Index 2005. Seven different dimensions of the NGO sector are analyzed each year in the NGO Sustainability Index: legal environment, organizational capacity, financial viability, advocacy, service provision, NGO infrastructure and public image. The NGO Sustainability Index uses a seven-point scale, to facilitate comparisons to the Freedom House indices, with 7 indicating a low or poor level of development and 1 indicating a very advanced NGO sector. Source: USAID, The 2005 NGO Sustainability Index for Central and Eastern Europe and Eurasia. Found on line at http://www.usaid.gov/locations/europe_eurasia/dem_gov/ngoindex/2005/.

CY 2003 Baseline

CY 2004 Rank

CY 2005 Rank

CY 2006 Rank

4.0

4.4

4.4

4.6



Impact of U.S. Assistance on the Above Indicator: Major progress was made in negotiating a draft law on associations, but the Government of Serbia's (GOS) attention shifted to the drafting and ratifying of a new constitution. Despite progress with the draft law and several types of advocacy, the overall political climate was not favorable for NGOs and their financial viability, resulting in a continued slight worsening of the index score.

Performance Indicator: Media Sustainability Index 2005. The MSI assesses five "objectives" in shaping a successful media system: free speech; professional journalism; plurality of news sources; business management; supporting institutions. The MSI uses a four-point scale, with a 0-1 range indicating unsustainable, anti-free press, a 1-2 range indicating an unsustainable mixed system, a 2-3 range indicating near sustainability, and a 3-4 range indicating a sustainable, free media environment. Source: USAID/IREX, Media Sustainability Index 2005. CY 2005 rank based on data collected in CY 2005. Found online: www.irex.org/msi/index.asp.

CY 2003 Baseline

CY 2004 Rank

CY 2005 Rank

CY 2006 Target

2.52

2.46

2.47

2.43



Impact of U.S. Assistance on the Above Indicator: USG-funded media programs continued to work on the objectives related to the index, especially professional journalism, business management and strengthening the plurality of news sources. There were important steps taken in the long-delayed licensing and assignment of broad-cast frequency and the regulation of the media, but this was marred by inconsistencies and a lack of transparency in applying the law.

Economic Growth

In FY 2006, unemployment reached 21%; it was even more acute among youth, who faced a jobless rate of around 50%. Other labor market trends - such as a decline in labor market participation to 55.5%, compared to 63.9% in Poland - also demonstrated the toll taken on Serbia's population by the continuing collapse of the socialist-era economy. Election results showed support for extreme nationalist political forces in many of the most distressed areas.

However, Serbia's economy has shown some signs of picking up steam. Economic growth was 6.7% in the first half of 2006, and inflation slowed to about 9% from 17.7% in 2005. Restructuring of the financial sector neared an end with the privatization of Serbia's seventh largest bank. Some 80% of system assets are now in private hands. The currency appreciated relative to the U.S. dollar throughout 2006, and International Monetary Fund experts projected the fiscal deficit to be less than 1% of Gross Domestic Product (GDP). The inflow of foreign investment for 2006 is projected to exceed 3 billion euros, a record for Serbia.

Export growth was up 27.4% in the first nine months of 2006, but the trade deficit was up 11%, with the much larger import account up some 24%. Industrial production in Serbia remained at only about 50% of the level in 1989. Restructuring of the corporate sector moved slowly as the GOS confronted a heritage of insolvent socially owned companies.

U.S. ASSISTANCE PRIORITIES

Economic growth is a top priority in U.S. relations with Serbia, with the USG allocating about 60% of its assistance to this area in FY 2006. Activities are designed to improve the investment climate through a strong macroeconomic policy and legal framework and a sound financial sector. Activities also focus on private sector growth and job creation, with emphasis on supporting small- and medium-sized enterprises, improving the business climate, and attracting foreign direct investment. Investment by U.S. firms is being encouraged, and various types of assistance is provided to U.S. firms seeking to invest in Serbia.

Assistance provided in recent years resulted in the adoption of laws in many areas essential for a market economy. The focus in FY 2006 was on implementation of these laws and on more active assistance interventions at the local level to attract investment and to increase market penetration. Programs in key sectors such as agriculture and in municipalities with high potential for investment and growth work to drive the economy and ultimately produce more jobs. At the same time, USG assistance targets areas of vulnerability, such as southern Serbia, where there is less potential for economic growth but a compelling need to support local development to help prevent and mitigate ethnic frictions and support minority groups.

DESCRIPTION OF PROGRAMS AND ACTIVITIES

In FY 2006, a large community development program was implemented outside the capital of Belgrade. In addition, significant resources were allocated to a new program that focused on vulnerable groups primarily in southern Serbia. A new municipal economic growth activity started, along with assistance for firm-level and sector-level capacity building for the private sector, focused on apparel, food processing, information technology (IT), tourism, and clinical research. The USG also provided technical assistance to develop the agricultural sector.

At the central government level, USG assistance focused on macroeconomic stability and improving the investment climate. A new program worked on: strengthening the National Bank of Serbia's regulation of banks, private pension funds, and insurance companies; improving the Tax Administration's organization, management, and enforcement; and building the capacity of local personnel and institutions to manage effectively the formulation and implementation of economic policy. Other programs were aimed at implementing a modern bankruptcy law and using it to complete privatization of socially owned companies. Technical assistance programs advised on public debt management, bank privatization, and anti-money laundering.

OUTPUTS

Economic growth assistance completed planning for a central register of taxpayers, including design of the registry and definition of detailed business requirements. Assistance also helped to establish a rigorous actuarial training program in line with international standards. USG programs provided technical assistance in the drafting and preparation of implementing regulations of the new banking law, a warehouse receipts law, as well as new laws establishing private pension funds and investment funds.

The USG provided the final installment for a large community development program; more than four million people in over 500 communities throughout rural Serbia have benefited from 629 projects promoting economic development. In September 2006, a municipal capacity building program concluded, having assisted 83 municipalities with financial management and budgeting, citizen assistance centers, IT network capability, and cost-recovery and customer service. A municipal economic growth activity completed strategic planning for economic development in six of the ten participating municipalities, established one-stop permitting centers in eight, and established local economic development and citizen assistance centers in all ten.

A USG-funded enterprise development program supported business advocacy efforts resulting in improvements to various laws, such as those on competition, labor, and association. It supported the development of business curriculum, which a number of technical schools, faculties, and universities implemented to prepare students for job entry.

USG assistance also provided a range of programs in Serbia aimed at increasing production in the agricultural sector, improving plant and animal health and food safety, and integrating Serbia into world markets. These programs provided training on market price collection, analysis, and dissemination; placed fellows from Serbian agricultural and food institutions at U.S. universities for four to six weeks; and sponsored Serbian university faculty members for longer-term U.S. training. In addition, the USG supported training in Serbia for staff from agricultural stations, the Inspection Service, public institutions, and food companies on awareness and prevention of food-borne illnesses. USG experts trained several staff members from the Serbian Ministry of Agriculture in economic analysis of agricultural commodities and commodity balance sheets.

An advisor continued work on privatization of Serbia's banking sector. Two state-owned banks were sold to foreign investors during this period. The USG provided hands-on assistance in restructuring of these banks and their subsequent privatization. With the sale of these two banks, bank privatization has drawn to a close. USG advisors also continued to work to strengthen Serbia's anti-money laundering/counter-terrorist financing (AML/CFT) regulatory and enforcement program, providing technical assistance in IT development and AML/CFT training. After the passage of a new law on anti-money laundering, USG advisors produced an updated training video on the recognition of suspicious transactions.

PROGRAM PERFORMANCE/IMPACT

Implementation of a new law on banks brought Serbia into compliance with most international standards and EU Directives and moved it to full adoption of risk-based supervision, a key development in light of the explosion in lending Serbia has experienced with the restructuring of the banking sector. During FY 2006, the percentage of banking system assets in private sector banks increased from 73% to over 80%, resulting in a significant expansion of credit for business growth. Investment funds and private pension funds established under new market-oriented laws and regulations provide consumers with broader options for their savings than before and give the economy a new and growing source of capital.

The community development program generated more than 110,000 person months of employment and more than $17 million in additional income for families throughout the small towns and rural areas of Sebia-with increased sales in agriculture of more than $8 million. Serbia's exports were up by $141 million in the five sectors assisted by the USG enterprise development project during a nine-month period, with total growth over the same period at over $350 million. Municipal capacity in 83 municipalities substantially increased in financial management and budgeting, utility management, customer relations, and economic development planning and implementation.

In private sector development, the micro enterprise savings association established with USG funding is currently converting to a full-service bank expanding the services it can offer to its customers. As of the end of FY 2006, the partner was serving 3,412 clients, with an active portfolio of nearly 8.5 million euros. To date, it has made over 10,000 loans totaling over 25.7 million euros.

USG technical assistance programs contributed to a vast improvement in food production facilities, the reform of many of Serbia's agricultural agencies and institutions, and increased production and competitiveness of Serbia's agricultural and food exports. With the support of an animal health assistance program, Serbia continued to reform its veterinary service and passed a new law that will introduce a system of control and surveillance for border and internal inspection of animals and animal products. Serbia's trade data show that agricultural trade surplus hit a new record of $220 million during January-August 2006.

MEASURES OF PROGRAM EFFECTIVENESS

In order to determine how U.S. Government assistance affects a country, U.S. embassies set targets for improvement called "performance indicators." Data for these indicators are collected by research institutes, embassies and international organizations. By examining data over time, U.S. policymakers better understand whether specific assistance programs are making their intended impact and, if necessary, how to adjust these programs to improve the impact.

Please find below two important indicators in the area of Economic Growth. In the charts, the "Baseline" refers to a starting point from which to measure progress or regression over time. The embassy and its partner organizations then agree on a "Target" figure that they hope to achieve as a result of U.S. assistance programs. The "Rank" figure is the resulting measurement. "FY" stands for "fiscal year," the period of the U.S. budget that runs from October 1 - September 30 of the following year. "CY" stands for "calendar year," or January 1 - December 31.

Performance Indicator: Foreign Direct Investment (FDI-cumulative per capita). Source: USAID/E&E/PO, Monitoring Country Progress in Central and Eastern Europe & Eurasia #10, March 2006. The rating is based on a 1 to 5 scale, with 5 representing most advanced. Analysis derived from World Bank, World Bank Development Indicators 2005 and EBRD Transition Report 2005. Found on line at http://inside.usaid.gov/EE/po/mcp.html.

FY 2003 Baseline

FY 2004 Rank

FY 2005 Rank

FY 2006 Target

2.0

2.0

2.5

3.5



Impact of U.S. Assistance on the Above Indicator: Significant improvements in the economic, legal, and regulatory framework led to increased investor confidence. USG funding helped to increase the effectiveness and transparency of the commercial courts; launch a new VAT law that turned the GOS's budget from deficit to surplus; implement a modern bankruptcy law and strengthen the rights of creditors; and adopt and implement new banking, insurance, investment and private pension fund laws. These, combined with stricter supervision and licensing requirements and closures or takeovers of weak institutions, encouraged foreign investment, especially in the financial sector.

Performance Indicator: Private Sector Share of GDP. This indicator measures the annual private sector output as a percentage of GDP. Source: USAID/E&E/PO, Monitoring Country Progress in Central and Eastern Europe & Eurasia, No. 10, March 2006. The rating is based on a 1 to 5 scale, with 5 representing most advanced. Analysis derived from World Bank, World Bank Development Indicators 2005 and EBRD Transition Report 2005. Found on line at http://inside.usaid.gov/EE/po/mcp.html. 

FY 2003 Baseline

FY 2004 Rank

FY 2005 Rank

FY 2006 Target

2.0

2.0

2.5

2.5



Impact of U.S. Assistance on the Above Indicator: Success in strengthening and diversifying the financial sector encouraged the growth of private businesses, particularly small- and medium-sized enterprises and micro-enterprises, by expanding the availability of credit for investment. USG competitiveness assistance added value and increased the export potential of promising sectors of the economy such as fruits and juices, apparel, and information and communications technology. Aid and pressure from USG and other donors helped keep privatization moving, with some evidence of progress even for the largest state-owned enterprises.

Peace and Security

After the fall of Slobodan Milosevic in 2000, Serbia took a path toward democratic reforms, including strengthening the rule of law. However, the increased activity of organized crime and the burden of past war crimes remained primary obstacles for national security and regional stability. After the assassination of Prime Minister Zoran Djindjic in 2003, Serbia passed new legislation creating specialized institutions and procedures to strengthen the prosecution of both organized crime and war crimes.

In FY 2006, a witness protection law was adopted and Serbia signed the first ever witness protection cooperation agreement with neighboring countries. Serbia also adopted a new Criminal Procedure Code, to take effect in 2007, that will enable more efficient investigations and adjudication. However, a war crimes statute and an organized crime statute need revision in order to provide more stability to the specialized institutions, and to extend specialized institutions' jurisdiction over high-profile corruption cases. The War Crimes Prosecutor's office made headway by signing an agreement with Croatia on cooperation in the exchange of evidence. USG assistance regarding war crimes becomes increasingly critical as ICTY's mandate expires in 2010 and the burden of prosecution shifts to domestic courts in the region.

U.S. ASSISTANCE PRIORITIES

In FY 2006, the USG continued sustained assistance in support of judicial reform and the rule of law. Priorities include support for witness protection by providing equipment donations, legal advice, professional development, and facilitating regional cooperation. USG programs also support the specialized institutions both for organized crime and war crimes through equipment donations, training and study visits, legislative assistance, and the promotion of regional cooperation. Furthermore, the USG intensified efforts to assist Serbia in combating corruption by funding an anti-corruption advisor co-located at the U.S. Embassy in Belgrade and the Organized Crime Prosecutor's Office. Finally, USG assistance is provided for Criminal Procedure Code reform, making it more effective and modernized, and for institutional reforms and capacity building of the judiciary and domestic law enforcement.

DESCRIPTION OF PROGRAMS AND ACTIVITIES

In FY 2006, the USG implemented a broad range of criminal justice and rule of law programs focusing on organized crime, war crimes, corruption, witness protection, victim/witness assistance, police reform and capacity building, and export control and border security. USG advisors provided assistance to the Special Court, the Special Prosecutor for Organized Crime, and the Organized Crime Police on investigations in organized crime and corruption cases. Assistance included equipment donations, training courses on organized crime and corruption investigations, as well as legal advice and legislative drafting assistance.

USG programs continued to provide technical assistance and training to facilitate regional cooperation for the War Crimes prosecutors and judges, as well as for the war crimes investigation unit within the Ministry of Interior. The USG provided technical assistance to Serbia's Witness Protection Unit and legislative drafting assistance on a witness protection law. USG advisors facilitated regional cooperation, which resulted in the signing of the Witness Protection Cooperation Agreement in South Eastern Europe. The USG also supported the establishment of the Victim Witness Assistance Unit in the Belgrade District Court.

The USG continued assistance to the Serbian Administration for the Prevention of Money Laundering (SAPML), including equipment donation and training. USG advisors provided equipment, advice, and training to the anti-trafficking police, prosecutors, and judges. These programs, combined with other USG programs focusing on victim assistance, provided a comprehensive approach to combating human trafficking.

OUTPUTS

In FY 2006, USG advisors trained more than 260 judges, prosecutors, and police officials in specially devised training courses and study visits. This assistance targeted organized crime, corruption, and war crimes, including regional conferences on war crimes, one held in Montenegro for 80 participants from six legal systems, the other held in the U.S. for 50 participants from 20 countries on witness protection. Assistance included the first-ever working meeting between Serbian and Kosovo/UNMIK war crimes judges and prosecutors.

PROGRAM PERFORMANCE/IMPACT

The Special Court for Organized Crime continued trials of organized crime cases, including the high profile trial of the assassination of former Prime Minister Djindjic and the "Zemun Gang." It also completed some important trials, including the trial in the "Supreme Court Corruption" Case. The Special Prosecutor for Organized Crime also raised an indictment for corruption at the Commercial Court in the "liquidation mafia case." A USG anti-corruption advisor provided legal advice in a high-profile corruption case, which resulted in the conviction of a Supreme Court judge.

Assistance to the Special Court for War Crimes enabled the prosecution and trials of high-profile cases, such as the Zvornik, Scorpions, Bytyqi and Suva Reka cases. USG efforts facilitated the War Crimes Prosecutor's office signing of an agreement on the cooperation in the exchange of the evidence with the Chief Prosecutor's Office of Croatia.

The USG coordinated the signing of the first multilateral Witness Protection Cooperation Agreement in South Eastern Europe, and assisted in the establishment of the first ever Victim/Witness Assistance Service in Serbia, which are essential tools for prosecuting high profile organized crime and war crimes cases.

MEASURES OF PROGRAM EFFECTIVENESS

In order to determine how U.S. Government assistance affects a country, U.S. embassies set targets for improvement called "performance indicators." Data for these indicators are collected by research institutes, embassies and international organizations. By examining data over time, U.S. policymakers better understand whether specific assistance programs are making their intended impact and, if necessary, how to adjust these programs to improve the impact.

Please find below two important indicators in the area of Peace and Security. In the charts, the "Baseline" refers to a starting point from which to measure progress or regression over time. The embassy and its partner organizations then agree on a "Target" figure that they hope to achieve as a result of U.S. assistance programs. The "Rank" figure is the resulting measurement. "FY" stands for "fiscal year," the period of the U.S. budget that runs from October 1 - September 30 of the following year. "CY" stands for "calendar year," or January 1 - December 31.

Performance Indicator: Judicial Framework and Independence Rating. This indicator highlights constitutional reform, human rights protections, criminal code reform, judicial independence, the status of ethnic minority rights, guarantees of equality before the law, treatment of suspects and prisoners, and compliance with judicial decisions. (7-point scale: 1 is the highest, 7 is the lowest). Source: Freedom House, Nations in Transit 2006. (This volume covers events from January 1 through December 31, 2005). Found on line at http://www.freedomhouse.org/research/nattransit.htm. 

CY 2004 Baseline

CY 2005 Rank

CY 2006 Rank

CY 2007 Target

4.25

4.25

4.25

4.25



Impact of U.S. Assistance on the Above Indicator: With the support of USG assistance, the Codes of Ethics, a form of internal rules promoting judicial integrity, were adopted by both the Prosecutors and Judges Associations. The impact of these developments in supporting judicial independence will be seen following the adoption of a new constitution in FY 2007.

Performance Indicator: National Governance Index. This index measures the stability of the governmental system; the authority of the legislative bodies; decentralization of power; the responsibilities, election and management of local governmental bodies; and legislative and executive transparency. (7-point scale: 1 indicates good governance, 7 indicates poor governance) Source: Freedom House, Nations in Transit 2006. (This volume covers events from January 1 through December 31, 2005). Found on line at http://www.freedomhouse.org/research/nattransit.htm

CY 2004 Baseline

CY 2005 Rank

CY 2006 Rank

CY 2007 Target

4.0

4.0

4.0

4.0



Impact of U.S. Assistance on the Above Indicator: USG programs focused on transparency, good governance, and independence of the judiciary. However, the fragile political environment-with the dissolution of the State Union, adoption of a new constitution, and the call for elections-made significant and steady progress difficult.  

FY 2006 Funds Budgeted for U.S. Government Assistance to Serbia and Montenegro [PDF format]

FY 2006 Funds Budgeted for U.S. Government Assistance to Serbia [PDF format]



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