FREE GEOPOLITICAL NEWSLETTER

yugoslavia  

For current reports go to EASY FINDER

SERBIA & MONTENEGRO


 

 

In-depth Business Intelligence

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 19,176 15,555 10,900 70
         
GNI per capita
 US $ 1,910 1,400 930 112
Ranking is given out of 208 nations - (data from the World Bank)

Books on Serbia & Montenegro

REPUBLICAN REFERENCE

Area (sq.km) 
102,350

Population 
10,825,900

Capital 
Belgrade 

Currency 
New Dinar

President 
Boris Tadic

Private sector 
% of GDP 
40% 



Update No: 103 - (28/11/05)

EU opens talks with Serbia
The EU foreign ministers, indeed, decided recently to open economic talks with Serbia and Montenegro as a precursor to possible membership talks. 
The EU's foreign ministers' meeting in Luxembourg recently, granted the mandate after they agreed that Serbia and Montenegro was ready to negotiate a Stabilization and Association Agreement (SAA), which would promote economic and trade relations and aim to regulate issues such as migration and capital movements. 
They said, however, that Serbia's hopes of joining the 25-member bloc depended on the extradition of all war crimes suspects, especially the Bosnian Serb fugitives Radovan Karadzic and Ratko Mladic, and undertaking substantial economic, political and judicial reforms. 
Serbia welcomed the move and promised to capture war crimes suspects, a top precondition for the eventual entry. 
Prime Minister, Vojislav Kostunica, of Serbia said that his government "is ready to fulfil those obligations. This is of huge importance for our country." Serbian officials have suggested 2012 as a possible date for entry into the EU, long before Turkey, but after Croatia. 

Kostunica negotiating Mladic surrender
Kostunica has changed his tune. He used to be adamantly opposed to handing over war crime suspects to The Hague. But the public mood in Serbia has radically changed due to the dissemination on TV of a devastating video depicting Muslims being murdered by Serb troops in the 1992-95 war. 
He is negotiating through an intermediary a surrender of former Bosnian Serb General Ratko Mladic, Belgrade daily "Blic" said on November 16th. Mladic has been indicted by the International Tribunal for War Crimes in Former Yugoslavia (ICTY). Serbian authorities claim they have no knowledge of Mladic's whereabouts, but the ICTY is convinced he's hiding somewhere in Serbia. Court president Theodore Merron said that Brussels would block Serbia and Montenegro talks on joining the European Union unless Mladic was arrested by year's end.
Kostunica has taken the warning seriously and "the Hague is now convinced that he is ready to fulfil the assumed obligation by December 15th, perhaps sooner," the paper said, quoting unnamed Tribunal sources. According to "Blic," Kostunica was negotiating with Mladic through a Serbian businessman with strong ties in Washington, who presented the general an ultimatum to surrender or to face an arrest.
"Blic" said that negotiations were nearing an end and that the only outstanding issue was financial protection for Mladic's family in the case of his surrender. The paper said that Mladic had on several occasions found refuge in Russia, adding that this route of escape was no longer possible. 
Mladic and former Bosnian Serb leader Radovan Karadzic, who is also in hiding, are accused of war crimes during Bosnia's 1992-1995 civil wars and of masterminding a massacre of up to 8.000 Muslims in the town of Srebrenica in 1995.
Belgrade military commentator Ljubodrag Stojadinovic has said that Mladic told him on several occasions that he would "never surrender alive." Stojadinovic said he believed that parts of the secret services, which are out of state control, were helping Mladic to hide. 

EU agreement the top priority
The reformers in Serbia regard the issue of EU entry as Serbia's number one goal. Serbian Deputy Prime Minister, Miroljub Labus, said that the Stabilisation and Association Agreement with the EU (SAA) is a cornerstone for Serbia which will signify that the country has passed half-way from the conflicts and isolation to full integration into the EU. 
Labus said that after concluding this agreement Serbia will have its first contractual relation with the EU. According to Labus, there are three areas in which Serbia has to make radical changes, and these are politics, the economy and the acceptance of EU standards. 
As for the politics, parliamentary democracy was introduced in Serbia, but the system of values which gives meaning to democracy and which is the foundation of the EU has still not been adopted, Labus said. 
The Deputy Prime Minister said that Serbia managed to stabilise and liberalise the economy, but structural reforms must be conducted, and this does not only imply the restructuring of public companies. 
The purpose of structural reforms is creation of an economy that will be able to stand competition with economies of other EU countries, Labus said and recalled that Serbia adopted many laws which were harmonised with EU standards, but now these laws have to be implemented and institutions for the supervision of that process established. 
These changes are necessary regardless of whether we enter the EU or not, the Deputy Prime Minister said and added that the EU is a partner who will help us do that more quickly, in an easier way and with less expense. 
According to Labus, the most important symbolic act in the accession of a country into the EU is the abolishment of visas, but for that to happen Serbia-Montenegro must fulfil a number of conditions, such as the establishment of integrated border management, signing of readmission agreements with all EU members, and a single visa regime between Serbia and Montenegro. 
German Ambassador to Serbia-Montenegro, Andreas Zobel, said that for Serbia the SAA will be a foundation on which other elements leading to EU membership will be added. 
Honorary Secretary General of the EU Council, Jurgen Trumph, voiced hope that Serbia will achieve its final goal and enter the EU, although it lags behind other countries in the region and enters the negotiations later than others.
However, things are easier said than done. The difficulties in Serbia are enormous, as is attested by the following piece by a local observer:-

Reforming the Inert 
By M. Bozinovich 
To comprehend the level of faith citizens place in their country, one should always look at the levels of popularity the domestic currency has among the citizenry. In the last days of the Roman Empire no one desired the once mighty Roman coin. In the aftermath of the American revolution people shunned the central government's Continentals in favour of privately-issued currency... and in Serbia, ever since the communist revolution in 1945, the captive citizenry deprived of any other investment options preferred foreign currency sometimes to the point of awe. 
In a recent speech commemorating the World Savings Day, the governor of the Serbian Central Bank, Radovan Jelasic, acknowledged this "traditional" Serbian reality with a revealing statistic that the foreign currency denominated savings rose by 28% in the past 6 months while the domestically denominated accounts barely moved. 
Indeed, increase in savings is a good thing, but the fact that the foreign currency is winning the popularity contest among the Serbian financial public is an alarming testament to the faith and confidence citizens have in their own state and its institutions. 
It took the IMF, a foreign supranational outfit, to force moves on the escalating Serbian inflation and government spending that aids it. The degree of reform inertness in Serbia is so high that it takes an outsider to prompt reforms. 

Erosion of Credibility 
The credibility erosion of the Serbian national currency is also eroding the credibility of the Central Bank and its effectiveness in maintaining stable prices. 
The Serbian central bank did acknowledge this erosion in May when the "Monetary Council established that the high level of euroisation limits the efficiency of the monetary policy measures due to a strong presence of foreign currency denominated or indexed component in the banks' balance sheets." The policy prompt for this declaration was to "contain inflationary pressures" so the Council pulled out the big gun in monetary control - the reserve requirement. 
Reserve requirement (RR) is a percent of the deposited moneys banks are supposed to keep in the vaults and not use for lending. The higher the RR the more money is restricted from being given to the public (decrease in liquidity) whose reduced spending capacity curbs the level of prices. 
In a bizarre move, however, the central bank then proceeded to lower the reserve requirement on domestic Dinar- denominated bank assets but increased the RR by 3% on foreign currency deposits. "The reduction in the reserve requirement rate on the dinar basis will produce a release of approximately 1 billion dinars of dinar liquidity which the banks will then be able to use to finance their lending activity," said the Press Release from the Governor's Cabinet. The Council and the Governor apparently forgot that it was the Dinar that was inflating and not the Euro. 
Then, at the end of May, inflation of the Dinar was slowly passing the 10% mark. Five months later the inflation rose 7% more. 
It took the IMF, in the beginning of November, to shake up some sense among the policy makers in Serbia and prompt the Governor to raise the reserve requirements on foreign currency deposits to a whopping 39%. 
"We did not want to raise the reserve requirement on foreign currency deposits," recently said the Governor to the Serbian daily Danas but -- in an attempt to deflect blame for making the correct policy decision -- the governor adds that "since the IMF insisted on this solution at all cost" well... the Governor did the right thing. 
Granted, Jelasic does not have a clear legislative mandate for his Central Bank and one is wanton in seeking that among the legal jungle that defines the Serbian Central Bank, let alone the main staple of any central bank - stable prices. Since the collapse of the Milosevic regime, it was the force of personality of the previous governor Mladjan Dinkic, that stabilized the monetary system in Serbia. 
"Nobody in Serbia is interested what inflation means - how corrosive for the entire economy it is," says Jelasic. 
Indeed, the Governor is correct on this point, but what he said recently was also true in May when a demonstration of a pro-active monetary policy was possible and could have had substantial impact on inflation. 
Without legislative and institutional credibility, the Governor's lack of grasp of the inflation control has eroded the last vestige of monetary credibility that Serbia had painstakingly acquired since the fall of the Milosevic regime. 
Some even question whether the whopping reserve requirement of 39% that would freeze any developed economy could have any effect on inflation in Serbia. Jelasic vows that more of the same could be in the offing. "Theoretically, the reserve requirements could be raised further," says Jelasic. 

« Top

AUTOMOBILES

Porsche to invest in retail outlet in Belgrade


The Porsche company in Serbia-Montenegro started work on a retail and service centre in Belgrade by investing 8.5m Euro, ANSAmed reported.
Speaking at the official opening of the construction site, the general director of Porsche Belgrade, Max Wittefeld, said the 8,000 square-metre centre for the sale of Audi, Seat and Porsche models, should be completed in July 2006. He said there will be 70 new job openings in the centre and announced that Porsche will start the construction of two more facilities in Belgrade, worth 10 million Euro, in spring next year and employ another 200 people.

« Top

FOREIGN RELATIONS

Montenegro-Serbia leaders meet to discuss Kosovo talks 

Top leaders from Serbia-Montenegro met recently to map out a strategy for the upcoming UN mediated negotiations on Kosovo's future status, saying the troubled province cannot become independent. After the closed door meeting, a statement said that "the principle" of keeping international borders intact in Europe should also be respected during the Kosovo negotiations, which were expected to start in the later part of November, New Europe reported.
The Serbia-Montenegro leaders said they would like to resolve the problem and are open for "a compromise," but added that there should be no "imposing of solutions" during the negotiations with independence-seeking Kosovo Albanian officials. The late night meeting was held in Belgrade and was attended by presidents and prime ministers of both Serbia and Montenegro. The United Nations, which has been looking after the administration of Kosovo since NATO's 1999 air war against Serbia, appointed former Finnish president, Martti Ahtisaari, to mediate the Kosovo negotiations. The major point of discord continues to be that Kosovo's 90-percent ethnic Albanian majority wants independence, while the Serbian minority and its leaders want Kosovo to remain a part of Serbia.

« Top

  

« Back

 


 
Published by 
Newnations (a not-for-profit company)
PO Box 12 Monmouth 
United Kingdom NP25 3UW 
Fax: UK +44 (0)1600 890774
enquiries@newnations.com