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Serbia
The Development Challenge
Serbia is at a pivotal point of no less significance than the exhilarating period that surrounded Milosevic's ouster in October 2000. Compliance with The International Criminal Tribunal for the former Yugoslavia (ICTY) at The Hague is uneven and key publicly-indicted war criminals remain free. The economic and democratic reform agenda has stalled; the new government is not expected to act on the reform agenda rapidly. The Republic currently has neither a president nor parliament. Parliamentary elections, held on December 28, 2003, resulted in another coalition government which likely will move slowly on the reform agenda.
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The March 2003 assassination of Serbian Prime Minister Zoran Djindjic accelerated the political disintegration of the democratic governing coalition, dramatically endangering reform efforts and changing the political landscape in Serbia. March and April 2003 saw passage of public information and broadcast laws that set back considerably the goal of laying the groundwork for an open, competitive media market. In November 2003, a third presidential election since October 2002 failed due to lower-than-required 50% turnout, and official results show that the anti-reform Serbian Radical Party candidate took first place, a disturbing indicator of the level of dismay over the Serbian leadership's infighting, corruption and perceived preference for bowing to international pressures. The Djindjic assassination conspiracy trial is scheduled to get underway in early 2004 in Serbia's Special Court for Organized Crime and War Crimes, established with U.S. Government support.
The Serbian macro-economy remained relatively stable. The budget deficit was held in check at approximately 4% of GDP, inflation fell into single digits (8% - 9%) and GDP grew modestly between 2% - 3%. The International Monetary Fund (IMF) projects that the State Union of Serbia and Montenegro will register about 3% of GDP growth for 2003. Serbia represents 94% of the Union economy; thus its growth is similar. Growth slowed in 2003 from 4% in 2002 and remains slower than expected given the low starting base in 2000. Job creation, along with the growth of small and medium enterprises, has been slow, which is expected for a nation emerging from over 40 years of a centrally controlled economy and 10 years of international sanctions. Economic and democratic development has been stalled for much of the year due to political infighting and government paralysis. The assassination of the Prime Minister was a catalyst for the demise of the reform movement in Serbia, as civil rights were rescinded, media legislation was restricted, and economic reforms were set aside.
The USAID managed program in Serbia and Montenegro is aligned to achieve the four strategic objectives enumerated in the joint State-USAID Strategic Plan. The intent of these objectives is to synchronize diplomacy and development assistance through 1) achieving peace and security; 2) advancing sustainable development and global interests; 3) promoting international understanding; and 4) strengthening diplomatic and program capabilities.
The USAID Program: USAID's support for the accelerated development and growth of private enterprises concentrates on economic growth and job creation; competitiveness building activities to attract investment and drive exports; privatization of State-owned enterprises; increased access to credit and financial services; preparation of Serbia for membership in the World Trade Organization; restructuring fiscal, financial and banking systems; sound and prudential practices implemented in bank and non-bank financial institutions; reorganization and strengthening of tax administration; strengthening of private enterprise and free market institutions; and commercial laws and related institutions.
USAID's efforts to create more effective, responsive, and accountable democratic institutions focuses on training for democratically-oriented parties; technical assistance for key government institutions; support for non-partisan efforts aimed at ensuring more participatory and fair election process; building capacity of civil society sector, independent media and trade unions; and anti-trafficking efforts. USAID will expand significantly efforts in judicial reform in FY 2004 and concentrate on promotion of a better-trained, more efficient, and democratically-oriented judiciary, legal profession, and court system, support for legal aid and human rights programs, and a special program aimed at strengthening the capacity of Serbia's newly-established Special Court for Organized Crime and War Crimes.
USAID's efforts to increase an informed citizens' participation in political and economic decision-making will concentrate on building trust between different ethnic groups and highlight the value of citizen participation; provide technical assistance; training and information technology grants to improve local government customer focus and responsiveness; increase citizen and civil society organization involvement and access to local government; improve legal and financial sustainability; and increase local government influence at the national level.
Other Program Elements: U.S. Department of Treasury advisors will complement USAID's program and focus on financial crime investigation; tax implementation; budget and banking reforms; and continue to advance the policy and economic framework for sustainable economic growth and the emergence of a viable private sector. The Department of Commerce will focus on small- and medium-sized companies to improve the country's economic situation and assist it in attracting additional foreign direct investment. The Trade and Development Agency will focus on increasing U.S. exports and fostering economic development in Serbia. Department of State will support Public Diplomacy and similar high priority programs, such as policy reform and training.
Other Donors: USAID is the largest bilateral donor active in Serbia and cooperates actively with multi-lateral and bilateral donors. Among the most significant multilateral donors with whom USAID works are the International Bank for Reconstruction and Development (IBRD), the IMF, European Union (EU), the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB). USAID also collaborates with a large number of bilateral donors, notably the United Kingdom, Germany and Switzerland. USAID's joint efforts center on macro-economic stabilization and restructuring, which includes building an economic policy and legal environment that is conducive to business development and job creation, and which is oriented towards reintegration with regional and world institutions, such as the World Trade Organization and the EU. USAID actively worked with World Bank teams under the €78 million Private and Financial Sector Structural Adjustment Credit on numerous laws, including the Bankruptcy Law and the Company Law. In 2002, Serbia and Montenegro successfully completed a one-year IMF Stand-by arrangement and secured the approval of the IMF Board for a three-year $829 million Extended Fund Facility which sets important budget and monetary targets. USAID advisors to the National Bank of Serbia and to the Ministry of Finance and Economy coordinate, to the greatest extent possible, with the IMF's Resident Representative and missions to Belgrade. The EU committed €223 million in the past year with major investments focused on energy, agriculture, border crossings and public administration. Lesser sums support commercial law reform and private sector development, and USAID works closely with EU implementers in each of these areas. The EBRD and the EIB pledged approximately €143 million and €124 million respectively in 2003. These sums are part of the total €586 and €528 million, respectively, pledged between 2001 and 2003. The bulk of both the EBRD and EIB programs target municipal infrastructure development and energy sector rehabilitation. All USAID programs are carefully coordinated with other donor efforts, and orient Serbia for ultimate accession into the EU.
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