Books on Serbia & Montenegro
% of GDP
Update No: 099 - (26/07/05)
EU membership still on track
Recent events, above all the French and Dutch 'no' votes on the EU constitution,
might have seemed to have dented the Serbs' chances of entering the EU. But
Brussels is "eagerly awaiting Stabilisation and Association negotiations
with Serbia-Montenegro in October," EU foreign policy and security policy
chief Javier Solana said during a two-day visit to Belgrade in mid-July. At the
same time, he cautioned that better co-operation with the UN tribunal in The
Hague is necessary, and that fugitive indictee Ratko Mladic -- one of the
alleged architects of the 1995 Srebrenica massacre -- must be brought to
"Co-operation with The Hague tribunal is a fundamental issue ... a lot has
been done already, but we expect the last, final push," he said, referring
to Mladic. The fugitive general was the subject of allegations published
recently in the daily Blic, which ran an interview with former security chief
Goran Petrovic, who suggested the army still protects Mladic.
During his visit, which ended on 20th July, Solana met with Serbia-Montenegro
President Svetozar Marovic, Serbian Prime Minister, Vojislav Kostunica, Serbian
President, Boris Tadic, and Montenegrin Prime Minister, Milo Djukanovic.
Marovic said the message brought by Solana was an important one, opening up a
great opportunity for the state union. "We can do much by the end of the
year. I believe it is very important that the Stabilisation and Association
negotiations begin in October, that they be accelerated as much as possible and
that, in the meantime, we finally close the Mladic case and secure the country's
place in NATO's Partnership for Peace programme," Marovic said.
Although Solana indicated that his visit was focused on the upcoming
negotiations and was not meant to cover the thorny topic of Montenegrin
independence, the issue nevertheless was on the table. Djukanovic told Solana
that the referendum on the state status of Montenegro must be held by spring
2006, adding that he anticipates a deal on dismantling the joint state well
Tadic and Kostunica, however, predictably said the Stabilisation and Association
process should take priority over the referendum issue.
From Belgrade, Solana headed on to Pristina, where he called for speedier
implementation of EU standards and government decentralisation. He said that
Kosovo leaders should "step up the process towards reaching the
standards," adding that "the decentralisation process should be
something they believe in."
The EU official announced that his next visit to Kosovo would take place in late
August or early September. He said he hoped all would become more constructive
in heading in the right direction -- one that would earn support from the
NATO relations matter too
The federal defence minister has defended the signing of a troop transit
agreement with NATO in mid-July without consulting the governments of the member
states. The signing was in accordance with the law, said Prvoslav Davinic, but
added that in future important international agreements should not be signed
without the member states having previously stated their position. This did not
mean, he said, that Foreign Affairs Minister Vuk Draskovic had overstepped the
line when he signed the agreement with NATO Secretary-General Jaap de Hoop
"Although the governments of the member states had not been consulted, the
appropriate ministries had been. Now there is a conflict about the authority of
the federal Cabinet and when the position of the government needs to be sought.
This is what we're now clearing up and we have come to the conclusion that in
the case of important political agreements it's desirable that the governments
of the member states give their opinion," said the defence minister.
The agreement still needs to be ratified by the federal Parliament but,
according to Davinic, it may be applied, even before ratification. "The
agreement wasn't signed overnight: there's been four years of work on it. Four
years ago NATO proposed a text for the agreement and various governments have
dealt with it," said the defence minister, adding that the draft agreement
had been approved by the justice and finance ministries of both Serbia and
However the Serbian Government's media representative, Srdjan Djuric says that
no Serbian ministry had given a positive opinion of the agreement, which gives
NATO troops the right of transit across Serbia-Montenegro in the event of an
emergency in Kosovo. According to Djuric the ministries had not even seen the
final version of the agreement.
Meanwhile, the Socialist Party of Serbia, with whose support in the parliament
the minority Kostunica Government clings to power, said that it is unacceptable
that "NATO armies cross our country, as though it is a defeated and
occupied territory which they have conquered." The party said that it would
support an initiative for Foreign Minister Vuk Draskovic, to be dismissed
following the decision that NATO forces may cross Serbia-Montenegro.
Army still protecting Mladic
Both the EU and NATO strongly object to the failure to deliver war crime
suspects to The Hague. Yugoslav Army colonel, Dragomir Krstovic, was responsible
for protection of Hague Tribunal fugitive Ratko Mladic until the end of 2002,
the former head of Serbia's secret police said recently.
Goran Petrovic told Belgrade daily Blic that Krstovic was the commander of
logistics and a member of the army's General Staff Headquarters. He was one of
ten people in the army responsible for securing everything Mladic needed, said
Petrovic, adding that he believes that Krstovic is doing the same job today.
Petrovic says that the Serbia-Montenegro Army and the Army of the Republic of
Srpska have coordinated Mladic's security for a long time and that the
coordinator was Colonel Jovo Djogo. He claims that service records on this were
forwarded to the then Prime Minister, Zoran Djindjic, police minister, Dusan
Mihajlovic, and Yugoslav president, Vojislav Kostunica.
"Dragomir Krstovic didn't make his own decision to take care of Mladic, he
received orders to do so. He needs to say by whom," said Petrovic. The
evidence which points to Krstovic as Mladic's chief protector is in records of
the secret police which show that a current member of the General Staff helped
Mladic to hide in Serbia. Because Krstovic reports only to service chiefs, says
Petrovic, everything points to someone from the top level of the army having
helped Mladic and the same person is probably still protecting him today.
Unsatisfactory as this situation is, it is at least a achievement for democracy
that Serbia's secret police are now naming names.
Pressure needed to keep Serbia on reform path, ICG stresses
Belgrade has made some tentative progress on the issues of war crimes,
Kosovo and transition since the start of the year, the International Crises
Group (ICG) said recently in a report. However, international pressure must
remain in place in order to push the country along the path of reforms, said the
Serbia embarked on a "major policy change" on the International
Criminal Tribunal for the former Yugoslavia and signalled early in 2005 that it
is "somewhat more willing" to discuss the status of Kosovo with the
international community and Kosovo Albanians.
The change was rewarded by a green light to start the stabilisation and
association process with the EU. However, it came only after the US reduced aid
and the EU warned that there would be no progress toward membership. "In
other important areas, Belgrade's policies have been regressive," the ICG
said. "Continued international pressure will be needed to ensure that
reforms stick and real progress occurs."
Touching on the war crime suspects issue, the ICG said that the change of
attitude towards war crimes remains "fragile and not self-sustaining,"
describing Belgrade's cooperation with the Hague tribunal as
"superficial" and efforts on home-based war crime trials as 'feeble'
"Overall the government of Premier Bojislav Kostunica still appears intent
on rehabilitating significant portions of the Milosevic legacy by appointing
Milosevic era personnel in the police, judiciary and military," the ICG
said. "Until it faces up to the real meaning of that legacy, its relations
with other parts of the one-time Yugoslav state and the stability of the Western
Balkans will be uncertain and Serbia will not be able to create stable
relationships with its neighbours," it warned.
Since Kostunica assumed power in 2004 with the "silent support" of
Milosevic's allies, Serbia has lagged behind in reforms vital for its
integration with Europe - the judiciary appears increasingly politicised and the
police and military remain outside of civilian control. According to the ICG,
"Strong, coordinated international pressure will be necessary to prevent
further backsliding" of the Balkan country.
Serb deputies outraged at alleged billionaire bribery
Serbian parliamentarians expressed outrage recently over allegations that a
local billionaire tycoon has gained a foothold in parliament by bribing deputies
to defect to his newly established party. At the centre of the controversy is
Zivadin Lekic, who after leaving the hardline nationalist Serbian Radical party
(SRS) earlier this year, joined billionaire tycoon Bogoljub Karic's Power of
Serbia Movement (PSS) and promoted it to parliamentary party status.
An official of Prime Minister Vojislav Kostunica's Democratic party of Serbia (DSS),
Milos Aligrudic, claimed Lekic switched camps after making a "financial
deal" with Karic. He also accused the tycoon, who amassed his fortune
through his links with Slobodan Milosevic during the 1990s, of attempting to
bribe DSS deputies to join him.
"Karic tried to coax some of our people, but they reported it to us,"
Aligrudic said. He offered them large amounts of money, cash and other
The leader of the Socialist party, Ivica Dacic, made similar claims, warning the
"this practice of cheating the voters is very dangerous for Serbia."
Alexander Vucic, of the SRS, warned that Karic's behaviour threatened the
stability of the Serbian state and would not be tolerated. "We have to
protect Serbia and agree that thieving principles can't rule the country,"
Vucic said in parliament. The controversy has prompted a rare display of unity
among Serbia's feuding legislators who unanimously boycotted Lekic during
parliamentary proceedings recently.
Lekic who was given an opportunity to explain his actions in parliament, was
unable to speak due to lack of a quorum, local media said.
Several parties agreed an initiative to change the election law and condemned
"arrogant millionaires willing to buy even parliamentarians and mock the
electoral will of citizens." "It is theft, political hijacking and
corruption," said parliamentary speaker Predrag Markovic.
Both Karic and Lekic however remained unperturbed and continued insisting that
"several other" deputies were preparing to join PSS in the near
future. At the moment, there are no legal restrictions on such moves.
Serbia targets US$2bn via state-owned assets sales
Serbia is accelerating privatisation efforts to raise US$2bn this year by
selling controlling stakes in banks and large industrial enterprises, including
oil refineries and electrical power stations.
Radovan Jelasic, the central bank governor, told the Financial Times that
Belgrade wanted to take advantage of a surge in international investor interest
in Serbia prompted by recent positive changes, including the EU's decision to
start a feasibility study on a stabilisation and association agreement, a pact
which could pave the way to future EU membership.
"Three years ago I was asking foreign banks to spend US$10m or US$20m (on a
stake in a Serbian bank) and they were not willing. Now they're ready to spend
US$200m or US$300m," Jelasic said after attending the annual meeting of the
European Bank for Reconstruction and Development (EBRD) in Belgrade.
Earlier this year Serbia sold control of state-owned Jubanka, the country's
seventh largest bank, to Greece's Alpha Bank for US$152m (120m Euro). Italy's
Banca Intesa bought the privately owned Delta Bank for US$277.5m.
The sale of two more medium-sized state owned banks, Novasadska and Continental,
will soon be completed, with Austria's Erste Bank and Slovenia's Nova
Ljubljanska Banka positioned as highest bidders. Three more will be offered for
sale by the year, as will DDOR, a leading state owned insurer. Jelasic said the
keenest potential bidders were Austrian, Greek and Italian banks.
In line with an agreement with the International Monetary Fund (IMF), which
recently extended Serbia's three-year loan arrangement until the end of 2005,
Belgrade also appointed an adviser in June for the sale of oil refineries. The
refineries in Novi Sad and Pancevo are the first in a series of privatisations
to be completed by early 2007, including the sale of power and water utilities,
the national airline JAT, railways, post and telecommunications.
Belgrade has already shown its determination to push ahead with big sales of
industrial assets, having sold petrol retailer Beopetrol to LUKoil, the Russian
oil group, and the Smederevo steelworks to US Steel. Two other big industrial
complexes - the Zastava car factory and the Bor mining centre - are still off
the privatisation agenda because of the likely social protests that would be
Jelasic said that the economy, which state economists said expanded last year by
8%, would grow in 2005 by a further 4% to 5%. The EBRD estimates that foreign
direct investment, including privatisation deals, could hit US$1.2bn in 2005, up
from nearly US$1bn last year.
The signs of growth are visible in Belgrade in stores filled with shoppers, new
cars on the streets and houses being built. But the benefits are unevenly spread
with unemployment still an estimated 19%
Zastava in talks with Fiat
A delegation from Italian carmaker Fiat visited the central Serbian city of
Kragujevac on June 28th for negotiations with the Zastava automobile company on
debt repayments and the possibility of automobile assembly at the plant, B92
The Director of the Zastava Group, Milorad Savicevic, said the negotiations were
on two tracks, one of which concerns assembly of Fiat's Punto at the Kragujevac
plant. The other concerns the repayment of Zastava's debt of 11.5m Euro to the
Italian company. Negotiations on Punto assembly are believed to be near a
conclusion, with only technical details remaining to be resolved. According to
unofficial information, Serbian government representatives will be involved in
negotiations on the debt.
Food, steel lead in foreign trade
Serbia's leading export commodities and biggest foreign trade earners - both
last year and this year - are iron, steel, sugar, raspberries, tyres,
polyethylene, and medicaments, according to Ansamed.
Exports have already risen 51 per cent in the first quarter, allaying fears that
the International Monetary Fund (IMF) request for increasing export by 25 per
cent as compared to last year may not be met. It is estimated that in Serbia,
there are 3,000 importers and 1,300 exporters. Last year, the foreign trade
deficit stood at US$7.4bn, which was double the value of the exports. In the
first four months of the year, exports were worth US$1.37bn and the deficit was
US$1.46bn. The deficit was considerably lower than in the same period of last
year, the Blic newspaper wrote quoting sources in the Serbian Chamber of
Serbian 5-mo exports rise 52%
In the first five months of 2005, Serbia's exports increased 52 per cent, while
its imports were down 3.9 per cent, against the same period of 2004, Serbian
Statistics Bureau Director, Dragan Vukmirovic, said, New Europe reported.
Vukmirovic said that Serbia had exported goods to the value of US$1.75bn and
imported goods to the value of US$3.73bn. The foreign trade deficit reduced by
27.5 per cent and amounted to 1.98bn dinars, while the ratio between exports and
imports was 47 per cent, which represented a 29.7 per cent increase.
MINERALS & METALS
KAP net profit down 3-fold
Net profit at Montenegrin Podgorica Aluminium Plant (KAP) amounted to 921,000
Euro last year, which is three times lower than the profit in 2003, company
officials said following the general shareholders' meeting of KAP recently, New
The main factor for the worsening financial performance was the weakening of the
US$ against the Euro last year, which resulted in a 17 per cent year-on-year
drop in revenues to 193m Euro in 2004. KAP managed to repay over US$27m debts
last year and reduced its liabilities to its three biggest creditors (domestic
Vektra, Swiss Glencore and UK Standard Bank) to US$104m at end-2004.