Serbia on the European track Challenges and Perspectives Berlin – May 2010 Božidar Djelić Deputy Prime Minister for European Integration and Minister of.

Serbia on the European trackSerbia on the European track Challenges and PerspectivesChallenges and Perspectives

Berlin – May 2010Berlin – May 2010

Božidar Djelić Deputy Prime Minister for European Integration and Minister of Science and Technological Development

GERMANY IS A KEY PARTNER FOR SERBIAGERMANY IS A KEY PARTNER FOR SERBIA

Germany is the most important trading partner for Serbia Economic and political cooperation with the Länder:

Joint Commission Serbia – Baden Württemberg Joint Commission Serbia – Bavaria Initiative for establishment of the Joint Commission Serbia – North

Rhine-Westphalia Strategic partnership between Deutsche Bahn and Serbian Railways Partnership signed with RWE on Serbia’s hydro potential

development: Drina (200-400MW), Danube Djerdap reversible (up to 4x600MW) and Morava (200MW)

Imminent decision on two thermoplant constructions, each 700MW, with RWE interested in Tesla

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SERBIA IS AN INCREASINGLY IMPORTANT SERBIA IS AN INCREASINGLY IMPORTANT PARTNER FOR GERMANYPARTNER FOR GERMANY Imports from Germany in 2009 were 1.39 bln EUR, while

exports to Germany were 624 mln EUR Germany holds the 4th place on the list of foreign investors in

Serbia, with investments realized in period 2000-2009 totaling 1.508 bln USD

More than 160 German companies are present in Serbia Forthcoming privatization of Telekom Serbia (40% of equity,

20% already held by OTE) of high interest for Deutsche Telekom

President of Serbia Boris Tadić awarded with the Quadriga (2008) and the Steiger (2010) prestigious prizes for his contribution to the region and Europe

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SERBIA ISSERBIA IS A A NATURAL NATURAL PART OFPART OF THE THE EU EU

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EU EU INTEGRATION IS SERBIA’S CENTRAL INTEGRATION IS SERBIA’S CENTRAL STRATEGIC PRIORITYSTRATEGIC PRIORITY 71% of the population supports the European integration of Serbia Successful implementation of the Interim Trade Agreement as of

1st January 2009 Very positive Progress Report for Serbia issued by European

Commission in October 2009 Decision on the unfreezing of the Interim Trade Agreement on

7th December 2009, implemented by the EU as of 1st February 2010 Visa-free travel with the Schengen space achieved on

19th December 2009

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SERBIA CONTINUES TO WORK ON MEETING SERBIA CONTINUES TO WORK ON MEETING THE CRITERIA FOR MEMBERSHIPTHE CRITERIA FOR MEMBERSHIP Application for membership handed over by President Tadić to

Swedish PM Reinfeldt on 22nd December 2009

Expecting the start of the SAA ratification after the report of chief prosecutor of ICTY Serge Brammertz at the June 2010 EU GAC

Hoping for green light to be given to the European Commission to prepare the avis on the application as soon as possible , hopefully before summer of 2010

Serbia is preparing answers to questions addressed to Croatia, Macedonia, Montenegro and Albania

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SERBIA HAS BEEN IMPLEMENTING THE SERBIA HAS BEEN IMPLEMENTING THE NATIONAL PLAN FOR EUROPEAN NATIONAL PLAN FOR EUROPEAN INTEGRATION FOR THE PAST TWO YEARSINTEGRATION FOR THE PAST TWO YEARS

Implementation of and quarterly reporting on the National Plan for European Integration (2009-2012) All-encompassing operational plan for approximating the acquis

communautaire The entire National Programme reached 74% implementation rate for

the period July 2008 - March 2010 We aim to fully approximate the acquis communautaire by

the end of 2012

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STRONG TRACK RECORD IN FIGHTING STRONG TRACK RECORD IN FIGHTING ORGANIZED CRIME AND CORRUPTIONORGANIZED CRIME AND CORRUPTION

The head of the US Drug Enforcement Administration during a visit to Belgrade in April 2010 defined Serbia as its “strategic partner in the region for fighting drug trafficking”

More than 4,000t of cocaine seized in Serbia and South America in collaboration with the DEA and British services

Fight against corruption includes a law on seizing assets of organized crime convicts

A much needed judiciary reform carefully implemented since December 2009

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IPA PROGRAMMING – SERBIA IS ABSORBING IPA PROGRAMMING – SERBIA IS ABSORBING WELL, WITH A PERFECT COMPLIANCE WELL, WITH A PERFECT COMPLIANCE RECORDRECORD

* These allocations include Cross Border Cooperation Programmes in total annual value of approximately €11.5 million

Total IPA allocation 2007 – 2013: €11.5 billionTotal allocation for Serbia 2007 – 2013: €1.4 billion

Year 2007 2008 2009 2010 2011 2012 2013

Allocation(€million)*

189.7 190.9 194.8 197.9 201.8 205.8 214.7

No. projects 36 35 9 26

Comment €100 million of budgetary support

Programming has been launched €189.9 million

Preparations for IPA components III, IV and V have started

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DECENTRALIZED IMPLEMENTATION SYSTEM DECENTRALIZED IMPLEMENTATION SYSTEM (DIS)(DIS)

DIS means establishment of national institutional and legal framework for management of tendering, contracting, payments, monitoring, evaluation and auditing in accordance with EC rules

DIS covers accreditation of each IPA component separately in six stages We have finalized 2 stages and we are currently in the most difficult stage

(i.e. Gap plugging stage) All responsible persons and institutions have been appointed (in some

cases we established new institutions) Accreditation last for 2 years According to Serbian DIS Roadmaps we expect accreditation by end of

2011

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Confirmation of macroeconomic stability in time of crisis 4,3Cuts in Government spending around €1 bn in 2009 % of GDP general Government deficit in 2009 and -2,9% GDP growth 4% of GDP general Government deficit in 2010 and 2% expected

GDP growth Agreement with financial sector to maintain existing credit lines for

Serbian economy in 2009-2010 As results, stability of dinar exchange rate and foreign exchange

reserves are achieved €6,1 bn of domestic saving in Q1 2010, €400 million higher than

before economic crisis

€ 3 BILLION STAND-BY ARRANGEMENT WITH THE IMF INSURES MACROECONOMIC STABILITY

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FISCAL ADJUSTMENT SUPPORTING BALANCED GROWTH

Nominal freezes of public wages and pensions until April 2011 will be replaced by structural sound spending reforms: Fiscal Responsibility Law will limit budget expenditures and

public debt by defining their maximum share in the GDP and maximum annual change

Achieving 1% of general government deficit by 2015 is a medium term goal

In February 2010, Serbia was the only country whose risk category with the OECD was upgraded (form category 7 to 6)

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REGIONAL INITIATIVESREGIONAL INITIATIVES

Development of the EU Strategy for Danube Region

Establishment of the Western Balkan Technology Fund

Transport Community of the South Eastern Europe

Development of the Strategy for inclusion of the Roma population

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FIVEFIVE REASONS REASONS TOTO INVEST IN SERBIA (1) INVEST IN SERBIA (1)

1. Stable political and favourable macroeconomic environment Stable government, with three more years in power European integration top priority Two year IMF program, supported by the EU and the World Bank

2. Comprehensive investment incentives Willingness to support all FDI through standard financial and tax incentives For large enough investments, Government is ready to consider favourable JVs and

provide bureaucratic guidance

3. Access to both the EU and CIS markets Free trade agreements with EU, Russia, Belarus, Turkey and regionally CEFTA Ongoing free trade negotiations with Iran, Syria and Ukraine

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FIVEFIVE REASONS REASONS TOTO INVEST IN SERBIA (2) INVEST IN SERBIA (2)

4. Highly-skilled, low-cost labour One of the best-ranked educational systems in CEE (by World Economic Forum GDI) Total monthly cost of EUR 500 per worker (half of CEE average of EUR 1,053)

5. Solid and improving infrastructure Heavy investments in the road and railway network, especially in the Trans European

Corridor X Investments in energy infrastructure, production capacities and energy efficiency

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SERBIA HAS THE BEST FDI TRACK RECORD IN SERBIA HAS THE BEST FDI TRACK RECORD IN THE REGIONTHE REGION

Source: National Bank of Serbia, Serbia Investment and Export Promotion Agency

Leading Foreign Investors (2002-2009)

Company Industry Investment (EUR mn)

Telenor (Norway) Telecommunications 1,602

Philip Morris (USA) Tobacco 611

Mobilkom (Austria) Telecommunications 570

Banca Intesa (Italy) Banking 508

Stada (Germany) Pharmaceuticals 475

Interbrew (Belgium/Brasil) Food and Beverages 430

NBG (Greece) Banking 425

Gazprom (Russia) Energy 400

Mercator (Slovenia) Retailing 240

Fondiaria SAI (Italy) Insurance 220

Lukoil (Russia) Energy 2102003 2004 2005 2006 2007 2008 2009

1.300

790

1.330

4.280

2.600

2.1001.810

0

1.000

2.000

3.000

4.000

5.000

FDI Inflow (EUR mn)

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SERBIA PROVIDES SERBIA PROVIDES COMPREHENSIVE COMPREHENSIVE INVESTMENT INCENTIVESINVESTMENT INCENTIVES

10-year corporate profit tax holiday for large investments (over €7mn with min. 100 new jobs)

Corporate profit tax credits of up to 80% of investment in fixed assets

1-3 year salary tax exemptions for specific employee categories

2-3 year social insurance charges exemptions for specific employee categories

Imports of equipment exempt from customs duties Cash grants for Greenfield investments

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COMPREHENSIVE INVESTMENT INCENTIVESCOMPREHENSIVE INVESTMENT INCENTIVES

Source: Serbia Investment and Export Promotion Agency

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MOST FAVOURABLE FISCAL SYSTEM IN THE MOST FAVOURABLE FISCAL SYSTEM IN THE CEE REGIONCEE REGION

Source: International Monetary Fund

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INVESTING IN SCIENCE AND TECHNOLOGY ISINVESTING IN SCIENCE AND TECHNOLOGY IS,, FOR SERBIAFOR SERBIA, , THE ONLY WAY TO CREATE A THE ONLY WAY TO CREATE A SUSTAINABLE ECONOMY AND SOCIETYSUSTAINABLE ECONOMY AND SOCIETY

Vision of the newly adopted Science and Technology Strategy:

“Serbia as an innovative country where scientists reach European standards, contribute to the knowledge of the entire society and the technological development of the industry”

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TWO KEY ELEMENTS OF THE STRATEGY

FOCUS by defining seven national priorities in the field of science and technology: Biomedicine and human health New materials and nanosciences Environment protection and countering climate change Agriculture and food Energy and energy efficiency Information and communication technologies Improvement of decision making processes and affirmation of national identity

PARTNER by creating stronger ties within the scientific community, between science and industry, with society and key international partners.

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INCREASING AND DIVERSIFYING R&D INCREASING AND DIVERSIFYING R&D EXPENDITURE, AS WELL AS INVESTING IN EXPENDITURE, AS WELL AS INVESTING IN RESEARCH INFRASTRUCTURE, ARE RESEARCH INFRASTRUCTURE, ARE PRECONDITIONS FOR SUCCESSPRECONDITIONS FOR SUCCESS

On March4th, 2010 Serbia signed a financial agreement with the European Investment Bank for 200 million EUR of investment in R&D infrastructure

Negotiations are underway with CEB and other international financial institutions for a total of 420 million EUR of investment over the next five years

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Projects within the “Serbian R&d Infrastructure Investment Initiative” include:Upgrading existing capacities (facilities renovation and new equipment)Development of human capital (Human Resources Program, the Petnica Science Center, new Center for Promotion of Science)Development of centers of excellence and academic research centers in priority research fields

INCREASING AND DIVERSIFYING R&D INCREASING AND DIVERSIFYING R&D EXPENDITURE, AS WELL AS INVESTING IN EXPENDITURE, AS WELL AS INVESTING IN RESEARCH INFRASTRUCTURE, ARE RESEARCH INFRASTRUCTURE, ARE PRECONDITIONS FOR SUCCESSPRECONDITIONS FOR SUCCESS

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Development of information and communication technology infrastructure (Campus for faculties of technical sciences in Belgrade, Infrastructure for supercomputing initiative “Blue Danube”)

Science and technology parks in Belgrade, Niš, Novi Sad and Kragujevac

Apartment buildings for researchers in Belgrade, Niš, Novi Sad and Kragujevac

INCREASING AND DIVERSIFYING R&D INCREASING AND DIVERSIFYING R&D EXPENDITURE, AS WELL AS INVESTING IN EXPENDITURE, AS WELL AS INVESTING IN RESEARCH INFRASTRUCTURE, ARE RESEARCH INFRASTRUCTURE, ARE PRECONDITIONS FOR SUCCESSPRECONDITIONS FOR SUCCESS

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Thank you for your attention!Thank you for your attention!

GOVERNMENT OF THE REPUBLIC OF SERBIAGOVERNMENT OF THE REPUBLIC OF SERBIAOFFICE OF THE DEPUTY PRIME MINISTEROFFICE OF THE DEPUTY PRIME MINISTER

NEMANJINA 1111000 BELGRADE, SERBIA

[email protected]