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U.S. Department of State

Diplomacy in Action

FY 2007 SEED Act Implementation Report


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

U.S. FOREIGN POLICY AND FOREIGN ASSISTANCE OBJECTIVES & PRIORITIES

A social, political, and geographic crossroad between Eastern and Western Europe, Serbia is a key strategic juncture in the Balkans. It is in this context that U.S. foreign policy objectives aim to promote Serbia’s successful transition to a functioning market economy and stable pluralistic democracy. Foreign policy goals are strategically focused to strengthen democracy, promote peace and security and to expand trade and economic growth. Furthermore, the USG supports Serbia’s goal of Euro-Atlantic integration by way of joining the World Trade Organization (WTO) and the European Union (EU) in the short to mid-term future. U.S. foreign policy objectives in Serbia have been and will be determined independently of the pending issue of Kosovo’s independence status.

USG assistance to Serbia creates opportunities for economic growth, strengthens institutional capacity of key government counterparts, improves important aspects of civil society development, assists in election preparation, and improves transparency through an improved adherence to the rule of law. The U.S. has been engaged in assisting Serbia’s transition to a market-oriented democracy since 1997. These resources, although modest by comparison to the European Union and other instruments, have proven to be instrumental in leveraging other investments and in focusing Serbia’s reform agenda.

During the past year, the U.S. partnership with Serbia produced tangible results. As a direct result of USG interventions, banking supervision has improved, business development policies have reformed, the rule of law has strengthened, and significant advancements have occurred in media support, local economic development and democratic governance. USG support has worked closely with the EU, the World Bank (WB), and other bilateral donors to better ensure that these gains are sustainable.

OPERATING ENVIRONMENT

Despite political uncertainty in Serbia, USG assistance continues to promote opportunities to develop the economy, strengthen peace and security, and foster democratic governance. Moreover, targeted U.S. assistance has increased the participation of women, youth, and ethnic minorities in the political process and increased overall voter turnout in the last parliamentary elections. USG support aims to help steadily move the country toward increased stability and Euro-Atlantic integration.

Key challenges in FY 2007 included ongoing negotiations and debates on the final status of Kosovo; an October 2006 referendum resulting in public endorsement of a new Constitution hastily drawn up and approved by parliament in a process lacking transparency; delayed parliamentary elections in January 2007 giving the largest plurality to the anti-reformist, anti-western Serbian Radical Party, but also conferring a majority of seats to democratic and democratic-leaning parties; and a subsequent protracted delay in government formation.

USG assistance covers three principal strategic areas: Peace & Security, Governing Justly & Democratically and Economic Growth. Assistance focuses on improving economic policy and legal frameworks, strengthening the rule of law, combating crime, promoting an independent media, increasing civil society participation, addressing the needs of vulnerable areas and groups where our assistance is intended to help mitigate and hopefully resolve ethnic tensions.

FY 2007 Country Program Performance


PEACE AND SECURITY

USG assistance to support Peace and Security in Serbia FY 2007 was focused on combating transnational crime by reforming Serbian police institutions and improving the operational capacity of the Serbian organized crime, war crimes and anti-terrorism police units. The goal of USG training, consultations, and targeted material donations in these areas is to further integrate Serbian law enforcement institutions into European and international institutions and assist Serbian and USG efforts to combat corruption, trafficking, and organized crime in the Balkans region.

Organized Crime - USG funding supported eight training events and workshops, benefiting 208 members of the Serbian police and prosecutor’s office. These activities included trainings on undercover information management, organized crime, criminal intelligence computer course, and cyber crimes. The USG also conducted trainings on professional interviewing techniques, trafficking in persons, stress management, and victimology. Day-to-day consultations in the area of organized crime were offered covering needs assessments, organizational structure, and policy. At the request of the Ministry of Interior, ongoing consultative and training services are now also being provided by the USG in the creation of two new police investigative units: undercover operations and anti-terrorism.

This ongoing training and consultation has resulted in the expansion of expertise in organized crime to include both Belgrade police headquarters personnel and their colleagues in outlying jurisdictions. For example, all 27 police secretariats through the country now have organized crime investigators trained to the same level, with sustainability of training assured via train-the-trainer techniques. It has also produced tangible contributions to active cases, including human trafficking case involving eight countries, an organized crime case involving abuse of the privatization process, a country-wide counterfeit insurance scam, and to the creation of the ministry's operational analytical unit. The training and consultation also led to greater inter-agency coordination in major investigations. A Serbian investigative task force was created immediately after a January 2007 study visit to Budapest to meet and discuss the model of the joint Hungarian police-FBI taskforce. This task force, created via inter-ministerial memorandum of understanding describing each agency's role, ultimately was successful in assembling a case involving a major bankruptcy fraud in a privatization sale. The task force also improved in the quality and quantity of law enforcement work. The number and complexity of major organized crime and corruption cases initiated in Serbia have visibly increased, reflecting not only an improvement in the requisite skills but in the professional will to use those skills. This trend is demonstrated in several major cases brought against the Commercial Court, the "Toll Road Mafia," customs fraud in Novi Pazar, money laundering of Milosevic-era funds being secreted to Cyprus and the investigation of a terrorism case in southern Serbia.

War Crimes - USG assistance in this area is focused on improving Serbia’s investigation and prosecution of war crimes. In the area of prosecuting war crimes, the USG conducted four training events. Topics covered assessment interviews, statement analysis, cognitive interviewing, and cognitive interrogation techniques. Participants included presiding judges at the Belgrade Law Faculty, war crimes investigators at the Belgrade Law Faculty, and members of the MOI War Crimes Investigative Service. Besides trainings, consultations in the war crimes area between the USG, Organization for Security and Cooperation in Europe (OSCE), Serbia’s War Crimes Investigation Service (SRB-WCIS), Serbia’s War Crime Prosecutors Office (SRB-WCPO), UNMIK’s Department of Justice (UNMIK-DOJ) and UNMIK’s War Crime Investigations Unit (UNMIK-WCIU) helped these bodies coordinate their investigations, discuss cases of common interest, and develop information sharing capabilities. Finally, material donations of two automobiles and 20 cell phones were made to the Serbian war crimes unit during this fiscal year.

These training events, consultation and material donations resulted in enhanced interviewing skills of war crimes units. Presiding judges obtained additional tools for examining the veracity of victim/witnesses and defendants and improved understanding of the identification of deception and information edited from their testimony to better conduct follow-up questioning. USG assistance also produced an improved understanding of the role of cognitive interviewing to expand on information gathered and to detect deception though statement analysis with the goal to prepare the investigator to conduct a successful interrogation of a suspect, improved police access to remote areas of Serbia and Kosovo for investigative follow-up, and improved physical communication among the war crimes unit personnel.

Counter Terrorism/Anti-Money Laundering - USG assistance in this are is aimed at improving investigation and intelligence gathering techniques and combating money laundering and the financing of terrorism. In FY 2007, the USG conducted the first ministry-wide training course in conjunction with Serbia’s Counterterrorist Investigative Unit. One investigative judge, one prosecutor, and fifty-six police investigators from various districts in Serbia and two Montenegrin investigators attended this workshop, which covered trends in international terrorism, the formation of a joint terrorist task force, investigative techniques, vulnerability assessments, crime scene management, case studies and practical exercise problems. Consultations on terrorism, focused on the staffing, training and mission of the newly created investigative unit, began on the margins of this conference. In addition, USG funded programs assisted Serbia in the establishment of an effective anti-money laundering/counter-terrorist financing regime to aid in combating financial crimes and those crimes where financial evidence may lead to detection and conviction.

Anti-money laundering/counter-terrorist financing programs in FY 2007 increased knowledge of personnel from Serbia’s Financial Intelligence Unit (FIU), the Agency for the Prevention of Money Laundering, and other relevant agencies and provided specialized training to help ensure enforcement of the law. USG assistance will help to bring Serbia into compliance with international standards for legislation, including the third EU Directive on Money Laundering. Training, consultation and material donations have resulted in a more organized start to the creation of the ministry's new Counter-Terrorism Investigative Unit. Likewise, the training provided reinforced insights into the need for the police to develop and deploy an effective system for collecting, analyzing and disseminating criminal intelligence about emerging terror risks.

GOVERNING JUSTLY AND DEMOCRATICALLY

An increased role for nongovernmental organizations and citizen groups formed the core goals of USG assistance in this program area. An informed and active civil society will help to ensure a vibrant government that genuinely responds to the needs of its constituents. USG assistance in the governance area was challenged significantly from the decision-making vacuum caused by the unusually long process of forming a new government after elections in January, a process that consumed almost nine months of FY 2007. The distractions caused by this delay were compounded by the pending resolution of Kosovo’s status which overshadowed the political debate and distracted the country’s leadership. As a result, Serbia remains in transition and her citizens have not yet fully seen the benefits of the move to a pluralistic market-oriented democracy. In spite of political delays, the USG’s assistance to Serbia resulted in improving important aspects of civil society development, election-related assistance, increased access to information, improvements in the judicial system, increasing transparent governance, and improved adherence to the rule of law.

Civil Society Strengthening - In FY 2007, the objectives of USG civil society assistance programs included increasing civil society participation, strengthening civil society's capacity to influence public policy and advocate for reform, and improving the legal and fiscal environment for civil society organizations and public respect for their contributions.

Through one program, the USG awarded small grants to 40 non-governmental organizations with the goal of promoting political participation in Serbia. The USG also funded 145 exchange participants from Serbia in FY 2007. Eighteen U.S. citizens visited Serbia as part of the Speaker's Program to exchange ideas on a number of topics related to increasing civic participation and democratization in the country. Regional outreach programs included cross-border workshops with youth from Serbia and Kosovo, as well as supported the internationally-attended EXIT music festival in Novi Sad, which promoted messages of ethnic tolerance and the value of diversity.

The USG also gave support to the Organization for Development and Democracy (ODD) for a local government monitoring program to improve the transparency of local municipal assemblies and raise citizen awareness about participatory democracy in southern Serbia. This program monitored the proceedings of 16 local parliamentary and 24 municipal council meetings in the towns of Bujanovac, Presevo, and Medvedja. The monitoring was carried out by three multi-ethnic teams of five volunteers each. The teams later produced and distributed 1,000 copies of reports on the event in both Albanian and Serbian to ensure broad understanding of local political processes across ethnic groups.Two training workshops that were also organized for all 114 municipal workers from southern Serbia introduced officials to citizens’ rights according to international standards, which offered examples of model democratic practices from other municipalities throughout Serbia. To further promote citizen participation, the USG organized three public roundtables in each of the three south Serbian municipalities to address the effectiveness of this project. Overall 60 citizens took part, including NGO activists, local media, practitioners, and local government representatives. Lastly, to increase the impact of this project, the USG provided five small grants (averaging $2,000) to six NGOs from the region. Through small grants programs, USG funding also supported civil society projects to promote inter-ethnic dialogue and reconciliation, to raise awareness about human rights issues in local communities, and to build human rights advocacy and monitoring capacity.

USG-funded small grants encouraged youth participation and activism in local communities, built the capacity of youth organizations and marginalized groups such as people with special needs, and intensified watchdog activities throughout the country.

Good Governance and Local Government - In FY 2007 the USG programs sought to promote effective local government, to enhance citizen participation in decision-making processes and to enhance interactions between civil society organizations, ordinary citizens, and national and local government officials.

USG good governance programs facilitated improvements in local democratic governance through work with reform-minded political leaders. The USG supported an advocacy campaign which reached out to more than 200,000 potential young voters while highlighting issues of importance to youth such as moving beyond nationalistic policies in regards to Kosovo, cooperating with the Hague tribunal, enhancing freedom of the press, and dealing with corruption and organized crime. The USG also funded training and support of municipal workers, promoted the efficient functioning of local institutions and increased participation of citizens in local government. The USG also helped rebuild trust between Serbians and Albanians in Southern Serbia. USG assistance to the Public Information Commission and non-governmental organizations strengthened Serbia’s implementation of the 2004 Law on Free Access to Information by promoting understanding of the act by government officials and legal professionals, and by building the capacity of ordinary citizens and independent media outlets to prepare requests for information. USG assistance contributed to the more than 3,000 appeals made by Serbian citizens and organizations to date.

As a result of this assistance, the USG contributed toward good governance in Serbia by increasing citizens' awareness of the importance of anti-corruption and government transparency issues in Serbia, by enhancing interactions between civil society organizations, ordinary citizens and government officials, by improving advocacy and government oversight capabilities of non-governmental organizations and citizens groups, by making local political organizations more transparent and responsive, and by helping the creation of a more democratic national enabling environment.

Judicial Reform - In FY 2007, USG aimed to promote the rule of law and protection of human rights in Serbia by advancing commercial court system reform, facilitating judicial reform efforts (including support for judges and prosecutors’ associations), improving the capacity of the Serbian courts and prosecutors to effectively investigate, prosecute and adjudicate organized crime, war crimes, and corruption cases, improving the capacity of witness protection and victim-witness support programs, and promoting greater efficiency in the criminal justice system and compliance with international standards.

The USG supported key reform measures in the commercial court system by developing and installing an information and case management system in Serbia’s two largest commercial courts. The USG provided targeted training and technical assistance to 1,863 Serbian judges, magistrates, prosecutors, and lawyers this past year. The Government of Serbia has agreed to pay at least half the cost of replicating the system in the remaining 14 courts throughout Serbia.

Following the adoption of the new constitution in October 2006, a USG-funded program supported efforts to develop implementing legislation relating to judicial reform including a law on judges, regulations governing the High Judicial Council and a law establishing a Constitutional Court. This program also facilitated efforts to improve codes of conduct and disciplinary procedures for judges and prosecutors, to build the capacity of the judges and prosecutors’ associations and to provide training to all justice system actors in preparation for implementation of Serbia’s new criminal procedure code.

Rule of Law - With the objective of improving the capacity of the Serbian courts and prosecutors to effectively investigate, prosecute and adjudicate organized crime, USG rule of law programs conducted a number of training workshops and conferences. There were three workshops designed for the Organized Crime Prosecutor's Office, training approximately 20 deputy prosecutors, assistants and investigative judges on financial investigations, complex case presentation, and formal requests for assistance from other countries. These workshops contributed to two indictments and a number of letters filed in complex financial crime cases.

In the area of organized crime, USG funding also provided for a study visit to the International Law Enforcement Academy (ILEA) and FBI-Hungarian task force in Budapest, Hungary for eight senior Organized Crime prosecutors and police officials. This study visit led the Organized crime prosecutor to establish a task force of three investigative agencies in a complex financial crimes case the week following the study visit. In cooperation with OSCE, the USG organized an International Asset Forfeiture Conference of 80 judges, prosecutors, police, tax, customs, Ministry of Justice and Ministry of Finance officials. This conference led the Ministry of Justice to adopt the recommendations of the USG to establish the working group which is now drafting stronger asset forfeiture legislation.

The long-term outcomes of these organized crime trainings included formation of the Asset Forfeiture legislative working group by the Ministry of Justice, and drafting a stronger asset forfeiture law - one of the strongest tools in combating organized crime. USG activities also contributed to increased numbers of high-level corruption and financial crime cases and more effective strategies in investigating these cases. As an example, USG activities contributed to the verdict in the most important organized crime case in Serbia, the Prime Minister Djindjic assassination case, which involved organized criminal gangs and state security officials. Finally, USG activities have provided FBI assistance in a case involving a terrorist group for planning bombings of government facilities in Novi Pazar.

Prosecuting War Crimes - USG-funded rule of law efforts addressed the objective of improving the capacity of the Serbian courts and prosecutors to effectively investigate, prosecute and adjudicate war crimes through two international conferences featuring the War Crimes Ambassador and ICTY Deputy Chief Prosecutor. The first was a Regional War Crimes Conference (over 80 judges, prosecutors, war crimes investigators, witness protection officials and NGOs from Serbia, Bosnia, Croatia, Macedonia, Montenegro, Kosovo and the International Criminal Tribunal for the former Yugoslavia - ICTY). A joint investigative team between Serbia and Bosnia resulted from this conference. The second was the co-organization of a high-profile Regional War Crimes Prosecutorial Meeting (10 chief prosecutors and their deputies from Croatia, Bosnia and Herzegovina, Serbia, Montenegro and Macedonia). The prosecutorial meeting resulted in a common template for war crimes case inventories of countries to facilitate the access to the information and prevent the overlap of prosecutions.

The long-term outcomes of this USG war crimes capacity building assistance included improved regional cooperation and prosecution in war crimes cases, including establishment of the joint investigative team of Serbian and Bosnian judges, and creation of harmonized case inventory systems. In addition, USG activities contributed to the successful adjudication of cross-border cases such as Ovcara, "Scorpions" and Lekaj, and prosecution and (on-going) trial in the Zvornik, Suva Reka, and Bytyqi cases. The improved regional cooperation and prosecution in the war crimes cases further the U.S. goal of supporting the ICTY close-out and strengthening regional stability.

Combating Corruption - USG-funded rule of law efforts addressed the objectives of improving Serbian capacity to effectively prosecute and adjudicate corruption cases by providing a part-time forensic accountant to the Organized Crime Prosecutor's Office. This resulted in more systematic and thorough strategies in investigations and analysis of financial records, including the "Commercial court case" and the "Cyprus Money Laundering case." A USG Anti-Corruption advisor provided on-going advice and monitoring of cases, contributing to the successful corruption verdict against a Supreme Court judge in the Vuckovic case.

The long-term outcomes of USG anti-corruption assistance include increased numbers of corruption cases now being tried. Besides the “Vuckovic” case mentioned above, examples of such cases include the "Commercial court bribery case," "Toll road corruption case," "Customs corruption case," and the "Cyprus money laundering case." In the last mentioned case, the Milosevic-era Customs Director has been charged with laundering money through Cyprus to fund paramilitary groups in Bosnia in the 1990's wars and to enrich Milosevic supporters. Indictments and verdicts in all of these cases are further indications of the progress and capability of justice institutions in this area.

Witness Protection Program - In the area of improving Serbia’s witness protection and victim-witness support capabilities, the USG sponsored a study visit to the ICTY Victim Witness Unit for three officials of the Belgrade District Court's Victim Witness Support Service, as well as a regional Victim Witness Support Conference (over 50 judges, prosecutors, victim witness coordinators, witness protection officers and NGO workers from Serbia, Croatia, Bosnia and Herzegovina, Macedonia, Montenegro, Kosovo and ICTY). This resulted in the first Victim Witness Support Agreement in South East Europe, signed by Serbia and Bosnia-Herzegovina. The USG sponsored the Assistant Head of the Serbian Witness Protection (WP) Unit as a speaker at El Salvador's Witness Security conference and, afterwards, as an expert to asses El Salvador's WP program. The USG sponsored both the Head and Assistant Head of the Serbian WP Unit and the Head of the Montenegro WP Unit at the Second International Witness Protection Symposium, which resulted in Bulgaria's accession to the Witness Protection Cooperation Agreement with Serbia, Bosnia and Herzegovina and Montenegro.

The long-term outcomes in witness protection and victim-witness support include two international cooperation agreements: the above-mentioned Victim Witness Support Agreement in South East Europe between Serbia and Bosnia-Herzegovina and the expanded Witness Protection Cooperation Agreement between Serbia, Bosnia and Herzegovina, Montenegro and Bulgaria. The enhanced capacity and improved regional cooperation of both the Serbian Witness Protection Unit and the Belgrade District Court's Victim Witness Support Service will greatly contribute to the successful prosecution and adjudication of the most complex organized crime and the war crimes cases.

Criminal Justice System Reform - The USG rule of law program promoted the overall reform of the criminal justice system to provide for its more efficient functioning, judicial independence and accountability, in accordance with international standards. Activities to this end included organizing a study visit to the U.S. on criminal procedure code and plea bargaining and the study visit to the U.S. on criminal justice reform. In addition, the USG organized a series of Plea Bargaining training courses for over 450 judges, prosecutors and defense attorneys, as well as training courses on the Leading Role of the Prosecutor in Investigation, for over 60 prosecutors and police, resulting in skills building to effectively implement the new Criminal Procedure concepts. The USG also co-sponsored the Prosecutors’ Association Annual Assembly, at which the Prosecutors' Code of Ethics was adopted.

As a result of this trip, thirty judges and prosecutors learned the main concepts of U.S. criminal procedures, including plea bargaining, as well as the court system, court administration, judicial independence, and continuous legal education and efficiency of criminal procedure. This training resulted in strengthened judicial independence and accountability rules becoming part of the draft Law on prosecutors, and contributed to support of plea bargaining and prosecutor-led investigation concepts in the law.

The long-term outcome in the overall reform of the criminal justice system is to provide for its more efficient functioning, judicial independence and accountability, in accordance with international standards, including adoption of a set of laws ensuring judicial independence and accountability; revisions to the Criminal Procedure Code; and preparation for future implementation of key concepts of prosecutor-led investigations, plea bargaining, and expanded use of special investigative techniques. USG activities in these areas contribute to the goal of improving efficiency, independence and accountability of the Serbian justice system.

Legislative Strengthening and Political Party Support - In FY 2007, USG programs aimed tobuild the capacity of minority and young political leaders to contribute to law-making and policy making, to improve the capacity of pro-reform political parties, particularly in respect of outreach to voters and constituents, and to increase the transparency of local legislative assemblies.

During FY2007, through a small grants program, USG assistance supported an NGO in organizing parliamentary debates and skill-building workshops involving 200 young politicians from all pro-democratic political parties, including the Albanian and Roma parties. This program fostered inter-ethnic dialogue and cooperation among young politicians and provided an example of the kind of cooperation that will be necessary to address Serbia’s challenges. This assistance also further developed the capacity of young leaders to participate in the decision-making processes and policy-making in their respective parties.

Aided by a reduced threshold for participation in parliament and USG-sponsored candidate skill development, a coalition of two ethnic-Albanian parties (KAPD) participated in the January 2007 elections for the first time in ten years and secured a seat in parliament. Similarly, USG pre-election assistance supported the efforts of the Roma community to secure a seat in parliament. The Roma party gained a majority of its votes in areas where the party recently established local branches with USG technical assistance, such as Vranje, Pirot, Nis, Pozarevac, and Kragujevac. With the help of a USG-funded voter targeting database, the Roma party also successfully identified voting districts with high quantities of Roma voters, and as a result, targeted campaign activities in these areas.

USG assistance to increase accountability and other USG-led efforts to improve governance have been institutionalized into regular political branch activities, leading to regular communication with constituents. A total of 15,987 individuals received USG-assisted political party training. It aided a Serbian national women’s political network, which has served as a key public forum enabling women to advance their interests in the political process. The network has developed its website, featuring a layman’s analysis of Serbian laws and their impact on the everyday lives of women. The Union of Romas (URS) political party has institutionalized practices developed through USG-supported targeted campaign training events. The URS is assessing ways to officially register more of the Roma population with the government. This would not only allow the citizens to receive vital state services, but would allow them to be enfranchised and participate in future elections, thus increasing the political voice of the Roma population in Serbian politics.

Media Freedom & Sustainability - USG assistance aims to improve the quality of news reporting in Serbia and strengthen the financial, management, and production capacity of independent and minority broadcast, print and electronic media outlets. More than 100 journalists were trained in media management, political reporting, domestic violence reporting, cultural reporting and adherence to news standards through the USG-funded Media Training program and over 2,000 teachers were trained to incorporate civic education within the secondary school curricula. USG assistance also supported small grants to Serbian independent media outlets working to improve the broadcast quality and capacity of independent media. These grants supported production of thematic television programs and articles, targeted journalism training particularly in areas with significant minority populations and development of youth departments within minority radio stations. The media training program continued to strengthen the capacity of journalists to report on matters of import to ordinary Serbians and build their skills as independent voices of the public. Finally, USG-funded workshops brought together journalists of different ethnic backgrounds including Serbians, Albanians, Bosnian Muslims and Montenegrins. This program provided journalists with the chance to cooperate with each other and discuss different perspectives on sensitive political issues. Such cooperation and improved reporting are crucial to maintaining stability ahead of important political decisions in the region including the final status decision on Kosovo.

ECONOMIC GROWTH

USG economic growth activities in Serbia worked to improve the overall investment climate through support for a strong macroeconomic policy, legal framework, and a sound financial sector. USG assistance focused on promoting private sector-led growth and job creation, with an emphasis on supporting small and medium-sized enterprises, as well as improving the business climate and attracting foreign direct investment. A functioning market economy that supports democratic reform is at the heart of Serbia’s successful transition and accounted for approximately 70% of USG development assistance resources in FY 07. USG assistance supports the principles of privatization, competitiveness and a solid, stable system of laws and regulations. In FY 2007, the USG implemented a wide range of technical assistance and capacity building programs that contributed to achieving the U.S. goals in helping Serbia effectively establish the conditions and capacity for long-term stability and effective transition to a free market economy.

Financial Sector - The banking sector grew at a record rate of 40% in the first quarter of FY 2007. A key factor was targeted USG assistance which improved overall banking supervision by the National Bank of Serbia (NBS). The program was so successful that it was expanded to non-bank entities including insurance companies, as well as new voluntary pension and investment funds. USG assistance further strengthened the banking sector by improving the National Bank of Serbia’s risk-based supervision capacity through the development of a Staff Retention and Development Plan and training programs, including courses at local institutions and on-the-job training for examiners to improve technical skills and risk analysis and for managers to improve administrative and leadership skills. USG assistance also introduced more effective practices in bankruptcy case processing. USG-supported activities have additionally focused on promoting private sector-led growth and job creation, with an emphasis on supporting small and medium-sized enterprises, as well as improving the business climate and attracting foreign direct investment.

As a result of USG assistance, the banking regulatory framework was improved and now complies with international standards and best practices for consolidated supervision, regulations on risk management, external audits, procedures for licensing, and banking regulation enforcement. USG assistance also improved the investment climate through support for a strong macroeconomic policy and legal framework and a sound financial sector. USG assistance led to significant reductions in the number of state-owned enterprises awaiting privatization. As a result, a large percentage of state-owned enterprises were consequently shifted to the private economy, contributing substantially to Serbia's move to the next country category with respect to EU integration and sustaining partner status.

Enterprise Development and Competitiveness - During FY 2007, the USG continued to focus support to enterprise development in order to expand economic opportunities especially in vulnerable areas in southern Serbia. During this period, 135 micro-enterprises received training and technical assistance and 114 new jobs were created. In addition, a core group of 13 Serbians were trained as trainers in business planning skills, as well as in enterprise development training techniques. USG programs worked closely with these trainers to develop targeted courses to support business development in the region. Priority training of 223 individuals was directed toward new and existing entrepreneurs; and the training covered the fundamentals of business planning, marketing and communications, and basic financial administration.

USG assistance supported improved fiscal policies, promoted a sound regulatory framework, and heightened the enforcement environment for facilitating trade and investment. Our support has deepened the understanding within Serbia’s public and private sectors of the importance of effectively complying with the multilateral, rules-based trading system, and strengthening the country’s ability to meet EU and international standards that facilitate competitiveness. USG-supported legal experts worked with their Serbian counterparts to draft amendments to Serbia’s Bankruptcy Law to improve regulation and enforcement of the law. USG assistance to commercial banks led to the first-time offering of liability insurance to bankruptcy administrators to improve their ability to oversee the enforcement of reorganization and liquidation decisions.

Agricultural - The objectives of the USG program in agriculture were to address complex agricultural policy and infrastructure issues that help the country increase its agricultural production, establish transparent science-based regulatory structures, adhere to international trade rules and expand Serbia's agricultural trade potential.

Under a market information system project, USG consultants continued training of analysts from 18 Serbian agricultural stations and organized a study-tour for seven participants at the Chicago Board of Trade and several grain, produce and livestock markets in the U.S. to learn about market price collection, analysis and dissemination that helped farmers and policy makers to make sound production and marketing decisions. In a related activity, USG experts conducted a training workshop on grading and standards for berries and other exported fruits attended by 20 fruit producers, processors and regulating officials from the Serbian Ministry of Agriculture. Under the project, about 40 participants from the extension service stations throughout Serbia, local government officials and NGOs received extensive training in advanced farm management and rural development techniques. USG consultants provided technical training and advised officials from Ministry of Agriculture and Ministry of Health on Sanitary and Phyto-sanitary (SPS) issues.

In FY 2007, USG-funded exchange programs continued to play a significant role in building human capacities of Serbia's agricultural research and academic institutions. Under the Norman Borlaug Agricultural Science Technology Fellowship program, the USG sponsored training activities for 11 fellows from Serbian agricultural colleges and research institutions at six U.S. Land Grant Universities for periods of 5-6 weeks. The USG also sponsored training of two faculty members from Serbian universities for six months in the U.S. through the continuation of the Faculty Exchange Program targeted at reforming the agricultural curriculum and improving teaching methodology. The USG also trained 50 Serbian Extension Agents in the effective and safe handling, storage, and disposal of pesticide and insecticide materials and 50 Extension Agents were trained in advanced biological Integrated Pest Management techniques. U.S. experts trained 20 Serbian specialists in standard operating procedures and plant pests and diseases diagnosis and improved practices in phyto-sanitary laboratories. About 20 veterinary specialists were trained in the diagnosis, risk assessment and animal disease emergency response that will improve Serbia's ability in detecting and responding to animal disease outbreaks. About 40 dairy producers, processors, regulators and inspection services participated in a week-long workshop on food safety practices to increase the awareness and improve prevention of food-born illnesses.

As a result of USG funding, local government officials and NGOs that received extensive training in advanced farm management and rural development techniques are now certified by the Serbian Ministry of Agriculture to provide training to other farmers and members of their rural communities. USG assistance also helped the Serbian WTO negotiating team move Serbia closer to meeting the requirements for accession to the important international body. The success of the USG technical assistance during FY 2007 can be illustrated through the significant improvement of many of Serbia's agricultural institutions, enhancing plant and animal health protection, increasing food safety and expanding Serbia's integration into the world markets. USG training was helpful in increasing crop productivity, assisting farmers and exporters in meeting international standards and in improving the overall food safety in Serbia.

FY 2007 Measures of Country Performance

The following data are based on the Monitoring Country Progress in Europe and Eurasia system developed by the United States Agency for International Development (USAID) to measure and track progress in the region. The system uses four different indices to monitor progress, drawing on readily available standardized country-level data on economic reform, economic structure and performance, democratic reform, and human capital. The primary data sources are the European Bank for Reconstruction and Development (EBRD), the World Bank, the United Nations Children’s Fund (UNICEF), and Freedom House. The data for each of the four indices are converted and standardized to a 1-to-5 scale, with a “5” representing the best performance of the Eastern Europe and Eurasia region, and a “1 the least advancement of the region.

Serbia’s Democratic Reform* Scores in 2006 compared to Romania and Bulgaria in 2002

Date: 01/01/2008 Description: The graph to the left shows Serbias democratic reform scores in 2006* (the grey shaded area) as compared to the average of Romanias and Bulgarias democratic reform scores in 2002 (the bold line) when they were invited to join NATO and received favorable indications of future EU membership. State Dept PhotoThe graph to the left shows Serbia’s democratic reform scores in 2006* (the grey 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 2007 scores not yet available


Serbia’s Democratic Reform Scores in 2006 compared to its Reform Scores in 1999

Date: 01/01/2008 Description: The graph to the left Serbias democratic reform scores in 2006* (the grey shaded area) as compared to its democratic reform scores in 1999 (the bold line). State Dept PhotoThe graph to the left Serbia’s democratic reform scores in 2006* (the grey shaded area) as compared to its democratic reform scores in 1999 (the bold line).

*Actual 2007 scores not yet available

* Democratic reforms include the electoral process (the extent to which elections are free, fair and competitive), civil society (primarily NGO development), the independence of media, public governance and administration, rule of law (primarily judicial reform) and the scope of corruption as well as anti-corruption income.

Serbia’s 1st Stage Economic Reform* 2007 Scores Compared to Bulgaria and Romania in 2002

Date: 01/01/2008 Description: The graph to the left shows Serbias stage one economic reform scores in 2007* (the grey shaded area) as compared to the average of Romanias and Bulgarias economic reform scores in 2002 (the bold line) when they were invited to join NATO and received favorable indications of future EU membership. State Dept PhotoThe graph to the left shows Serbia’s stage one economic reform scores in 2007* (the grey 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.


Serbia’s 1st Stage Economic Reform 2007 Scores Compared to its Scores in 1999

Date: 01/01/2008 Description: The graph to the left shows Serbias stage one economic reform scores in 2006* (the grey shaded area) as compared to Serbia  Montenegros reform scores in 1999 (the bold line). State Dept PhotoThe graph to the left shows Serbia’s stage one economic reform scores in 2006* (the grey shaded area) as compared to Serbia & Montenegro’s reform scores in 1999 (the bold line).


Serbia’s 2nd Stage Economic Reform 2007 Scores Compared to Bulgaria and Romania in 2002

Date: 01/01/2008 Description: The graph to the left shows Serbias stage two economic reform scores in 2006* (the grey shaded area) as compared to the average of Romanias and Bulgarias economic reform scores in 2002 (the bold line) when they were invited to join NATO and received favorable indications of future EU membership. State Dept PhotoThe graph to the left shows Serbia’s stage two economic reform scores in 2006* (the grey 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.

Serbia’s 2nd Stage Economic Reform 2007 Scores Compared to its Scores in 1999

Date: 01/01/2008 Description: The graph to the left shows Serbias stage two economic reform scores in 2006* (the grey shaded area) as compared to Serbia  Montenegros reform scores in 1999 (the bold line). State Dept PhotoThe graph to the left shows Serbia’s stage two economic reform scores in 2006* (the grey shaded area) as compared to Serbia & Montenegro’s reform scores in 1999 (the bold line).



 
* Economic reforms include “first stage” reforms of privatization, stabilization, and liberalization (domestic price liberalization and trade liberalization), and “second stage” reforms in the financial sector, infrastructure (physical and energy), corporate governance and competition policy.



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