BTI 2018 Country Report Serbia This report is part of the Bertelsmann Stiftung’s Transformation Index (BTI) 2018. It covers the period from February 1, 2015 to January 31, 2017. The BTI assesses the transformation toward democracy and a market economy as well as the quality of political management in 129 countries. More on the BTI at http://www.bti-project.org. Please cite as follows: Bertelsmann Stiftung, BTI 2018 Country Report — Serbia. Gütersloh: Bertelsmann Stiftung, 2018. This work is licensed under a Creative Commons Attribution 4.0 International License. Contact Bertelsmann Stiftung Carl-Bertelsmann-Strasse 256 33111 Gütersloh Germany Sabine Donner Phone +49 5241 81 81501 [email protected] Hauke Hartmann Phone +49 5241 81 81389 [email protected] Robert Schwarz Phone +49 5241 81 81402 [email protected] Sabine Steinkamp Phone +49 5241 81 81507 [email protected] BTI 2018 | Serbia 3 Key Indicators Population M 7.1 HDI 0.776 GDP p.c., PPP $ 14512 Pop. growth1 % p.a. -0.5 HDI rank of 188 66 Gini Index 29.1 Life expectancy years 75.5 UN Education Index 0.779 Poverty3 % 1.4 Urban population % 55.7 Gender inequality2 0.185 Aid per capita $ 44.0 Sources (as of October 2017): The World Bank, World Development Indicators 2017 | UNDP, Human Development Report 2016. Footnotes: (1) Average annual growth rate. (2) Gender Inequality Index (GII). (3) Percentage of population living on less than $3.20 a day at 2011 international prices. Executive Summary Serbia’s current political system is characterized by the dominant rule of one political party at the national and provincial level, as well as most of the local government units. Parliamentary elections in April 2016 were evaluated as free and competitive, but characterized by biased media coverage and uneven advantages for incumbent governing elites relying on administrative resources. Civil society exerts only a weak impact on public policies, as governmental bodies do not regularly hold public discussions and consultations on draft legislation and policy proposals. The existing system of “checks and balances” is occasionally challenged. The, so-called, “fourth branch of power” – the Ombudsman and the Commissioner for Information of Public Importance and Personal Data – is often obstructed and its power is often limited to issuing non-binding recommendations and public appeals. Although most observers considered the 2016 parliamentary elections free and fair, opposition parties have complained about the quality of the election process. The strategic priorities set by the government have been undermined by frequent parliamentary elections since 2012. Although the subjection of state power to the law exists, in recent practices it is undermined, particularly by passing laws on urgent procedures and infringements of independence of autonomous bodies such as the Ombudsman. Minority rights are mostly respected and developed, as Serbia, according to its constitution, is defined as a multicultural state, rather than civic. The independence and pluralism of the mass media system has declined. The judiciary is not operating completely independently from political influence and is further plagued by inefficiency, nepotism and corruption. Anti-corruption policy is not consistent, since there are few judicial verdicts regarding high state officials, and envisaged activities and measures from the anti-corruption strategy and action plan are not fully implemented. The unemployment rate is still considerably high and informal employment is BTI 2018 | Serbia 4 widespread. The income inequality is especially pronounced in Serbia and a large percentage of people are at risk of poverty and social exclusion. The government has introduced several important economic and fiscal reforms since 2014. The most important ones include streamlining the processes of obtaining a building permit, industrial relations and further inclusion of e-government services. The program of fiscal consolidation finally made the level of public debt stable, with an envisaged downward trajectory. However, public sector is still over employed, with little responsibility and efficiency. The current system of streamlining without functional analysis may be a significant burden on the future provision of public services. Fiscal rules (regarding public expenditures and public debt) are still disregarded. Reforms in management of public companies are yet to give any results (apart from the rail transport), and the process of privatization of state owned companies has been only partially carried out. Economic growth has finally rebounded, reaching 2.7% in 2016 and Serbian GDP surpassed its pre-crisis 2008 level, with moderately good economic prospects. One of the most disputed issues Serbia is faced with relates to its border and the definition of territory, as the status of its formerly autonomous province Kosovo and Metohija (referred to as Kosovo in this report) has not been solved yet. Relations with neighboring Western Balkans countries have worsened in 2015 and 2016, primarily due to the political statements and actions of certain state officials. The main strategic goal of joining the European Union has not changed and the accession process has been continued. History and Characteristics of Transformation Serbia’s transition to democracy and market economy has been fraught with statehood conflicts. The first democratic election took place in 1990, when Serbia was the largest constituent republic of the Socialist Federative Republic of Yugoslavia. The successor party of the former Communist party, led by Slobodan Milosevic, won the elections. Whereas Milosevic and his allies sought to preserve the common federal state in a centralized form, the newly elected political leaders of the Slovenian and Croatian republics wanted to decentralize and/or exit the federation. Irreconcilable objectives and nationalist mobilization led to the collapse of the federation, several wars and the emergence of Bosnia and Herzegovina, Croatia, Macedonia and Slovenia as independent states. Facilitated by the wars, Serbia’s President Milosevic established a semi-authoritarian regime in the remaining parts of Yugoslavia and remained in power until 2000. Clientelistic networks in the state apparatus and the state-dominated economy enabled him to control the electronic media, forge election results and effectively divide and isolate the political opposition. Responding to its deepening integration and legitimation crisis, the regime increased political repression in Serbia proper and violently repressed ethnic Albanians in Kosovo via military means. The country then slid into full-scale war. NATO air strikes forced the regime to abandon its control over Kosovo. BTI 2018 | Serbia 5 Military defeat, the deepening socioeconomic crisis, a student protest movement and a broad alliance of opposition parties contributed to Milosevic’s ouster in October 2000. The opposition coalition won the federal parliamentary and presidential elections as well as the Serbian local and parliamentary elections in 2000. The opposition leaders Vojislav Kostunica and Zoran Djindjic became federal president and Serbian prime minister. The heterogeneity of the coalition and the assassination of Djindjic in 2003 limited the government’s capacity to sustain its initially dynamic policy of economic and political reform. However, successive parliamentary and presidential elections in 2003, 2004, 2007 and 2008 generated majorities for political parties and candidates who were committed to liberal democracy and European integration. In 2006, Serbia adopted a new constitution, and in 2008 a Stabilization and Association Agreement was signed with the EU. In 2008, a group of politicians led by Tomislav Nikolic and Aleksandar Vučić left the anti-EU Serbian Radical Party and created the pro-EU Serbian Progressive Party (SNS). Together with the Socialist Party of Serbia, the SNS won the 2012 elections, and Nikolic became state president in 2012. The 2014 parliamentary election confirmed a governing coalition of political actors who had once supported the Milosevic regime. Serbia’s state framework has changed several times since the dissolution of communist Yugoslavia. Between 1992 and 2003, Serbia and Montenegro, the two still united republics of the former Yugoslavia, constituted the Federal Republic of Yugoslavia. In 2003, Serbia and Montenegro replaced this state with an EU-facilitated state union possessing only limited powers. The main aims of this union were EU accession and the creation of an internal market in accordance with EU principles and standards. Following a referendum in 2006, Montenegro became an independent state and the state union was dissolved. As a consequence of its military defeat in the Kosovo war, Serbia had to accept a U.N.-led interim administration in Kosovo. This administration has exercised political authority over the territory since 1999, based upon U.N. Security Council Resolution No. 1244/1999. Serbia’s government and major political actors interpret this resolution as the legal basis according to which Kosovo continues to belong to Serbia. Following violent interethnic clashes in Kosovo, the international community in 2005 initiated negotiations between Serbia’s government and the Kosovo Albanian representatives on the final status of Kosovo. The failure of these talks led the United States and major Western states to back internationally supervised independence for Kosovo.