Client:

UNDP MIR 2 – Municipal Improvement and Revival Program Office, Gazda Mladenova bb RS-17500 Vranje Serbia

DRAFT FINAL REPORT Identification and analyses of the various options for Development of Industrial Zones in the Jablanica and Pčinja Districts of South Serbia

November 30, 2008 Project No. 181/08

Contractor: CHRONOS, okoljske investicije, d.o.o. Ljubljanska cesta 68 SI-1230 Domžale Slovenia Registry no.: 2171031 VAT ID: SI91916615 Client: UNDP, MIR 2 Programme Office Gazda Mladenova bb RS-17500 Vranje Serbia Project Manager: Robert Špendl, MSc. Comp. Sc., Chem. Eng.

Report prepared by: Gorazd Jenko, B.A. Econ. Igor Gabrenja, M.Sc. Econ. Aljoša Jasim Tahir, B.A. in geography Darko Drašler, B.Sc. in Wood Processing Jasmin Hercegovac Matija Matičič

Project No.: 181/08

Date of the issue of Oct 31, 2008 this report:

Executive Robert Špendl Director/CEO: Table of Contents

1 Executive Summary...... 5 2 Background...... 6 2.1 Description of the Assignment...... 6 2.2 Methodology...... 6 2.3 Legislation Overview...... 6 2.3.1 Spatial Planning...... 6 2.3.2 Environment...... 8 2.3.3 Land Ownership...... 8 2.4 State of Economy...... 8 3 Identified Sites...... 9 3.1 Bojnik...... 9 3.2 Bosilegrad...... 9 3.3 Bujanovac...... 11 3.4 Crna Trava...... 12 3.5 Lebane...... 13 3.6 Leskovac...... 14 3.7 Medveđa...... 15 3.8 Preševo...... 18 3.9 Surdulica...... 19 3.10 Vladičin Han...... 20 3.11 Vlasotince...... 22 3.12 Vranje...... 23 3.13 Trgovište...... 24 4 Site Properties...... 26 4.1 Planning Status Summary...... 26 4.2 Land Ownership...... 26 4.3 Available Infrastructure ...... 26 4.4 Accessibility...... 28 4.5 Technical Analysis...... 28 4.6 Environmental Impact...... 28 4.7 Financing Arrangements...... 29 4.7.1 Investment Needs...... 29 4.7.2 Financing Options...... 30 4.7.2.1 Municipal Investment...... 30 4.7.2.2 Grant Financing...... 30 4.7.2.3 Private Investment...... 30 4.7.2.4 Public-private Partnership...... 30 4.8 Human Resources...... 31 4.8.1 Basic characteristics (Census of inhabitants 2002):...... 31 4.8.1.1 Number of inhabitants (Censuses of inhabitants 1953 - 2002): ...... 32 4.8.1.2 Recent developments (after last census in 2002): ...... 34 4.8.2 Gender and Age Structure of the Population (Census 2002):...... 35 4.8.3 Ethnic Structure of the Population (Census 2002):...... 36 4.8.4 Population by Education ...... 37 4.8.5 Population by Settlements (Source: Regional Socio-Economic Development Plan Southern Serbia 2005 – 2007)...... 39 4.8.6 Population by Activity (Census 2002)...... 40 4.8.6.1 Recent employment data ...... 43

Project 181/08 – Industrial Zones in South Serbia – Final Report Page 3 of 63 4.8.6.2 Recent unemployment data...... 44 4.8.7 Salaries and wages...... 47 4.9 Institutional Capacity...... 48 4.10 Compliance with Strategies...... 48 5 Evaluation of Sites...... 49 5.1 Model for Evaluating Industrial Zone Potential...... 49 5.2 Evaluation...... 49 5.2.1 Attribute values of sites...... 49 5.2.1.1 Profit...... 49 5.2.1.2 Available Workers...... 50 5.2.1.3 Skills...... 51 5.2.1.4 Social infrastructure...... 52 5.2.1.5 Communications...... 53 5.2.1.6 Capacity of Authorities...... 54 5.2.1.7 Social Acceptance...... 55 5.2.1.8 Environmental Impacts...... 55 5.2.2 Evaluation of Criteria...... 56 5.2.2.1 Human Resources...... 57 5.2.2.2 Local Factors...... 58 5.2.2.3 Selling Potential...... 59 5.2.2.4 Potential of Sites...... 60 6 Implementation Options...... 61 6.1 Selection of Priority Sites...... 61 6.2 Financing Options...... 61 6.2.1 Financing of Development of Priority Sites...... 61 6.2.1.1 Vlasotince and Vladičin Han...... 61 6.2.1.2 Vranje – Ristovac...... 61 6.2.1.3 Bojnik...... 62 6.2.2 Revolving Fund...... 62 7 Annex I: Draft Layouts of Sites...... 63

Project 181/08 – Industrial zones in South Serbia – Draft Final Report Page 4 of 63 1 Executive Summary The Contractor CHRONOS, d.o.o. has conducted a study “Identification and analyses of the various options for Development of Industrial Zones in the Jablanica and Pčinja Districts of South Serbia” under the contract no. 4355/2008 for United Nations Development Programme (UNDP) / Municipal Imprevement and Revival Phase 2 (UNDP/MIR2). The goal of the project was to provide mapping of the potential industrial zones and parks in the region of South Serbia (Jablanica and Pčinja districts). The study shall include analysis of each site regarding location, infrastructure, environmental issues, financing options, human resources and institutional capacity. The study shall provide recommendations as to which potential sites have the best potential for industrial zone development. The team has conducted meetings with all municipalities in the region (13 municipalities) and various national institutions involved in industrial zone development. Detailed field work has also enabled the team to get deeper insight in actual potential for each site and obtain necessary information from various sources. The team has put significant efforts to overcome an acute problem of lack of quality mapping data of site and existing infrastructure. By the end of the project many municipalities were able to provide adequate data or the team was able to use alternative data. Furthermore, the response from municipalities was a very good indicator of capacity of each municipality. The team has drafted planned infrastructure for each identified zone and assessed the costs of industrial zone implementation (land acquisition, infrastructure development). The costs of development are in the range 16 – 30 €/m2 (21,40 €/m2 ± 4,20 €) of land that can be finally sold. Larger sites (50 ha and more) tend to be specifically less expensive than smaller sites. The evaluation model was based on a general criterion that the most perspective zone has to return the investment as soon as possible, therefore providing capital that can be used for new development. This criterion consists of two criteria: profit and selling potential. Selling potential consists of criteria human resources, accessibility and local factors (institutional capacity, environmental impacts etc.). Based on the evaluation the following industrial zones were identified as the most viable and shall be assisted in further development: 1. Vlasotince: a site with some existing international businesses and highly competent and motivated municipal authorities (approx. 50 ha available); 2. Vranje – Ristovac: a large (100 ha) site with a strong prospect for obtaining national support as one of 6–7 nationally important business centers; ownership issues are close to final agreement since the whole area is owned by an agricultural co-operative; 3. Vladičin Han: well developed technical documents for construction of the zone, the site is at one of the most economically depressed municipalities along the main transport corridor (approx 100 ha in three phases); 4. Bojnik: ownership issues resolved (the site owned by the Army, agreed to transfer the ownership to municipality), high potential for agricultural and food processing industries. The industrial sites Vranje – Bunuševac and Surdulica are already reasonably well developed industrial zones that can be expanded further without excessive costs or operational issues. As they were both identified as viable, the municipalities Vranje and Surdulica shall be assisted in building capacity to attract new investments.

It would be highly beneficial for the region if grants for industrial zone development are used through a revolving fund, operated by a regional institution and therefore enable implementation of several zones.

Project 181/08 – Industrial Zones in South Serbia – Final Report Page 5 of 63 2 Background

2.1 Description of the Assignment The Contractor CHRONOS, d.o.o. has conducted a study “Identification and analyses of the various options for Development of Industrial Zones in the Jablanica and Pčinja Districts of South Serbia” under the contract no. 4355/2008 for United Nations Development Programme (UNDP) / Municipal Imprevement and Revival Phase 2 (UNDP/ MIR2). The goal of the project was to provide mapping of the potential industrial zones and parks in the region of South Serbia (Jablanica and Pčinja districts). The study shall include analysis of each site regarding location, infrastructure, environmental issues, financing options, human resources and institutional capacity. The study shall provide recommendations as to which potential sites have the best potential for industrial zone development.

2.2 Methodology The team has conducted meetings with all municipalities in the region (13 municipalities) and various national institutions involved in industrial zone development. Detailed field work has also enabled the team to get deeper insight in actual potential for each site and obtain necessary information from various sources. The team has put significant efforts to overcome an acute problem of lack of quality mapping data of site and existing infrastructure. By the end of the project many municipalities were able to provide adequate data or the team was able to use alternative data. Furthermore, the response from municipalities was a very good indicator of capacity of each municipality. The team has drafted planned infrastructure for each identified zone and assessed the costs of industrial zone implementation (land acquisition, infrastructure development). The evaluation model was based on a general criterion that the most perspective zone has to return the investment as soon as possible, therefore providing capital that can be used for new development. This criterion consists of two criteria: profit and selling potential. Selling potential consists of criteria human resources, accessibility and local factors (institutional capacity, environmental impacts etc.). Implementation options shall take into account local economic situation (low capitalization), land ownership issues, planning documents status and capacity of municipalities to manage complex industrial zones projects. The recommendations shall be provided for development of sites that are the most viable.

2.3 Legislation Overview

2.3.1 Spatial Planning Any investor who wants to construct an industrial facility has to obtain a building permit1. The permit is issued by a municipality where the construction is planned, only for major constructions or objects with significant environmental impacts (e.g. oil/gas storage,

1 “Građevinska dozvola” - Zakon o izgradnji objekata (Sl. glasnik RS, br.44/95, 24/96, 16/97 i 43/01)

Project 181/08 – Industrial zones in South Serbia – Draft Final Report Page 6 of 63 chemical plants, hazardous waste processing) the permit is issued by the Ministry of Environment and Spatial Planning2. A prerequisite for issuing a building permit are municipal urban planning acts that allow construction at certain location. The following hierarchy of planning acts is defined in the Planning and Construction Act (only the key relevant documents are presented)3: 1. Spatial Development Strategy of Republic of Serbia (adopted by the National Assembly) 2. Regional Spatial Development Plan (adopted by the Government of Republic of Serbia) 3. Municipal Spatial Plan (adopted by municipal assembly)

While the municipal spatial plan defines spatial development goals and land use, they do not include detailed urban planning elements. Therefore municipalities have to prepare “urban plans”4. There are two types of urban plans defined in the Planning and Construction Act: 1. General urban plans5 2. Regulation plans6

General urban plans are: – general plan7: a long-term development plan of a town (larger settlements) – plan of general arrangement8: a long-term development plan and building rules for smaller settlements Regulation plans are: – plan of general regulation9: a long-term development plan, urban development and building rules for towns that do not have a general plan or part of town, for which there is a provision of preparing a plan of general regulation in the general plan; this plan defines public/private property, infrastructure corridors etc. – plan of detailed regulation10: a detailed urban plan for parts of settlements, defined in the general plan or plan of general regulation; this is the most detailed plan that defines the urban elements at the scale of land cadastre Industrial zone should ideally be regulated by a plan of detailed regulation, where all infrastructure is clearly defined. The site should nevertheless be identified first in the municipal spatial plan and in one of the urban plans (general plan or plan of general regulation).

2 Ministarstvo životne sredine i prostornog planiranja 3 Zakon o planiranju i izgradnji (Sl. glasnik RS, br. 47/03) 4 urbanistički planovi 5 opšti urbanistički planovi 6 regulacioni planovi 7 generalni plan 8 plan opšteg uređenja 9 plan generalne regulacije 10 plan detajlne regulacije

Project 181/08 – Industrial Zones in South Serbia – Final Report Page 7 of 63 2.3.2 Environment Environmental Protection Act11 and Environmental Impact Assessment Act12 stipulate that environmental impact assessment (EIA) is conducted for all projects that can have significant environmental impacts. A Decree on the List of Projects for Which an EIA is Mandatory and a List of Projects for Which an EIA can be Required13 is specifying the types of projects that require an EIA. Industrial zones are not listed among the projects that require EIA, but since they include construction of infrastructure, EIA can be required for the construction of infrastructure. For actual industrial facilities the EIA is conducted as a part of the process of obtaining a building permit for the facility.

2.3.3 Land Ownership Municipalites in Republic of Serbia can not be legal owners of property, owner of all public land is Republic of Serbia. If municipality buys land (e.g. for a future business zone) it actually becomes the property of Republic of Serbia. Selling this land thus requires an approval of the national administration. It is anticipated that this legal framework is changed in the near future (probably 2009) allowing more flexibility in municipal property management.

2.4 State of Economy Detailed analysis of the state of economy in the region is beyond the scope of this project, therefore this section is giving only a brief outline of main characteristics relevant for the industrial zones development. The economy of Jablanica and Pčinja districts is the least developed in Republic of Serbia. The region was among the least developed regions in former Yugoslavia, most of economic activity was in large industrial facilities. The breakup of Yugoslavia and economic sanctions during 1990s have caused collapse or at least major decrease of operations of all large facilities. Combined with slow privatization (the slowest rate in Serbia) the region hosts many industrial sites with very low activity. The most significant aspect of economy for industrial zone project is very low capitalization of existing business. Because of this it is important to attract investors from outside of the region (Serbian and international investors). The unemployment rate in the region is generally high, so the availability of the unskilled work force is also high. Due to almost two decades of low industrial activity in the region there are few specialists or skilled workers available. Nevertheless, the companies who have recently invested in the region have successfully employed required work force.

11 Zakon o zaštiti životne sredine 12 Zakon o proceni uticaja na životnu sredinu 13 Uredba o utvrđivanju liste projekata za koje je obavezna procena uticaja i liste projekata za koje se može zahtevati procena uticaja na životnu sredinu (Sl. glasnik RS, br. 114/08)

Project 181/08 – Industrial zones in South Serbia – Draft Final Report Page 8 of 63 3 Identified Sites

3.1 Bojnik General plan will be ready till the end of year 2008 for area of town Bojnik. There is an military airfild which could be used for industrial zone. It is owned by the army and negotioations for takeover are in progress.

Detailed description:

Municipality Bojnik Site Airport Area [ha] 47,26 Developed [%] 0 Net potential area for investors [ha] 40,17 Distance to highway (TEN X) [km] 20,00 Distance to major road [km] 0,00 Distance to railway [km] 19,00 Capacity of water supply [l/s] (NO DATA) Sewage Collection [Y/N] N Waste water treatment plant [PE] N Distance to 10/30 kV electric power line [m] 0,00 Distance to optical telecommunication cable [m] N/A Broadband Internet Connection [MB/s] (NO DATA) Gas [Y/N] N

Location map:

3.2 Bosilegrad Municipality has a general plan which was prepared in 90-ies with some areas defined as industrial zones. The sites are located at the town border.

Project 181/08 – Industrial Zones in South Serbia – Final Report Page 9 of 63 Detailed description:

Municipality Bosilegrad Site Bosilegrad Area [ha] 1,41 Developed [%] 100 Net potential area for investors [ha] 0,00 Distance to highway (TEN X) [km] 40,00 Distance to major road [km] 0,00 Distance to railway [km] 40,00 Capacity of water supply [l/s] 20,00 Sewage Collection [Y/N] Y Waste water treatment plant [PE] N Distance to 10/30 kV electric power line [m] 0,00 Distance to optical telecommunication cable [m] N/A Broadband Internet Connection [MB/s] (NO DATA) Gas [Y/N] N

Location map:

Project 181/08 – Industrial zones in South Serbia – Draft Final Report Page 10 of 63 3.3 Bujanovac Municipality Bujanovac has prepared a municipal development strategy where industrial zones are identified. The industrial zone is also defined in the general plan. Detailed description:

Municipality Bujanovac Site Bujanovac Area [ha] 59,89 Developed [%] 50 Net potential area for investors [ha] 25,45 Distance to highway (TEN X) [km] 0,00 Distance to major road [km] 0,00 Distance to railway [km] 1,00 Capacity of water supply [l/s] (NO DATA) Sewage Collection [Y/N] N Waste water treatment plant [PE] N Distance to 10/30 kV electric power line [m] 0,00 Distance to optical telecommunication cable [m] N/A Broadband Internet Connection [MB/s] (NO DATA) Gas [Y/N] N

Location map:

Project 181/08 – Industrial Zones in South Serbia – Final Report Page 11 of 63 3.4 Crna Trava Location for industrial zone is defined in the general plan. It is located at the town border at the road to Vlasotince. There are several objects already in the zone, the main production facility is a food processing plant (~ 11 ha). Detailed description:

Municipality Crna trava Site Crna Trava Area [ha] (NO DATA) Developed [%] (NO DATA) Net potential area for investors [ha] (NO DATA) Distance to highway (TEN X) [km] 50,00 Distance to major road [km] 1,00 Distance to railway [km] 50,00 Capacity of water supply [l/s] (NO DATA) Sewage Collection [Y/N] (NO DATA) Waste water treatment plant [PE] (NO DATA) Distance to 10/30 kV electric power line [m] (NO DATA) Distance to optical telecommunication cable [m] N/A Broadband Internet Connection [MB/s] (NO DATA) Gas [Y/N] N

Location map:

Project 181/08 – Industrial zones in South Serbia – Draft Final Report Page 12 of 63 3.5 Lebane There are 2 possible zone location “Bošnjace” and “Exportex”. No documentation is prepared yet. Detailed description for "Bošnjace":

Municipality Lebane Site Bošnjace Area [ha] (NO DATA) Developed [%] 0,00 Net potential area for investors [ha] (NO DATA) Distance to highway (TEN X) [km] 20,00 Distance to major road [km] 0,00 Distance to railway [km] 20,00 Capacity of water supply [l/s] (NO DATA) Sewage Collection [Y/N] (NO DATA) Waste water treatment plant [PE] (NO DATA) Distance to 10/30 kV electric power line [m] (NO DATA) Distance to optical telecommunication cable [m] (NO DATA) Broadband Internet Connection [MB/s] (NO DATA) Gas [Y/N] N

Detailed description for zone location "Exportex": Municipality Lebane Site Exportex Area [ha] 1,20 Developed [%] 80 Net potential area for investors [ha] 0,20 Distance to highway (TEN X) [km] 20,00 Distance to major road [km] 1,00 Distance to railway [km] 20,00 Capacity of water supply [l/s] (NO DATA) Sewage Collection [Y/N] N Waste water treatment plant [PE] N Distance to 10/30 kV electric power line [m] N/A Distance to optical telecommunication cable [m] (NO DATA) Broadband Internet Connection [MB/s] (NO DATA) Gas [Y/N] N

Project 181/08 – Industrial Zones in South Serbia – Final Report Page 13 of 63 Location map:

3.6 Leskovac There 3 partially technically defined and located in the general plan. All sites are part of already existing “Industrial zone east”. Detailed description:

Municipality Leskovac Site Easteren IZ Leskovac Area [ha] 60,79 Developed [%] 0 Net potential area for investors [ha] 51,67 Distance to highway (TEN X) [km] 1,00 Distance to major road [km] 0,00 Distance to railway [km] 1,00 Capacity of water supply [l/s] (NO DATA) Sewage Collection [Y/N] Y Waste water treatment plant [PE] N Distance to 10/30 kV electric power line [m] N Distance to optical telecommunication cable [m] (NO DATA) Broadband Internet Connection [MB/s] (NO DATA) Gas [Y/N] N

Project 181/08 – Industrial zones in South Serbia – Draft Final Report Page 14 of 63 Location map:

3.7 Medveđa There are 2 possible locations for industrial zone in Medveđa which are 100 m apart. The larger zone is completely developed, the smaller only partially developed. Both are defined in the general plan. Detailed description for "zone I":

Project 181/08 – Industrial Zones in South Serbia – Final Report Page 15 of 63 Municipality Medveđa Site Medveđa I Area [ha] 1,50 Developed [%] 0 Net potential area for investors [ha] 1,28 Distance to highway (TEN X) [km] 45,00 Distance to major road [km] 1,00 Distance to railway [km] 45,00 Capacity of water supply [l/s] (NO DATA) Sewage Collection [Y/N] N Waste water treatment plant [PE] N Distance to 10/30 kV electric power line [m] (NO DATA) Distance to optical telecommunication cable [m] (NO DATA) Broadband Internet Connection [MB/s] (NO DATA) Gas [Y/N] N

Detailed description for "zone II":

Municipality Medveđa Site Medveđa II Area [ha] 8,13 Developed [%] 100 Net potential area for investors [ha] 0,00 Distance to highway (TEN X) [km] 45,00 Distance to major road [km] 1,00 Distance to railway [km] 45,00 Capacity of water supply [l/s] (NO DATA) Sewage Collection [Y/N] N Waste water treatment plant [PE] N Distance to 10/30 kV electric power line [m] (NO DATA) Distance to optical telecommunication cable [m] (NO DATA) Broadband Internet Connection [MB/s] (NO DATA) Gas [Y/N] N

Project 181/08 – Industrial zones in South Serbia – Draft Final Report Page 16 of 63 Location map:

Project 181/08 – Industrial Zones in South Serbia – Final Report Page 17 of 63 3.8 Preševo There is current no industrial zone in municipality of Preševo or any documentation for it. Municipal administration has described a possible location “Čukarka” but was not able to provide any detailed map of the proposed zone nor any document where the potential site is defined. Detailed description:

Municipality Preševo Site Preševo Area [ha] 68,43 Developed [%] 0 Net potential area for investors [ha] 58,17 Distance to highway (TEN X) [km] 1,00 Distance to major road [km] 0,00 Distance to railway [km] 1,00 Capacity of water supply [l/s] (NO DATA) Sewage Collection [Y/N] N Waste water treatment plant [PE] N Distance to 10/30 kV electric power line [m] (NO DATA) Distance to optical telecommunication cable [m] (NO DATA) Broadband Internet Connection [MB/s] (NO DATA) Gas [Y/N] N

Location map:

Project 181/08 – Industrial zones in South Serbia – Draft Final Report Page 18 of 63 3.9 Surdulica The general plan which includes location of industrial zone shall be finalized by the end of the year 2008. An industrial site with operating facility (Knauf) is already established. Municipality Surdulica is supporting a common industrial zone with municipalities Vladičin Han and Vranje. Detailed description:

Municipality Surdulica Site Surdulica Area [ha] 99,14 Developed [%] 30 Net potential area for investors [ha] 58,99 Distance to highway (TEN X) [km] 6,00 Distance to major road [km] 0,00 Distance to railway [km] 6,00 Capacity of water supply [l/s] 120,00 Sewage Collection [Y/N] Y Waste water treatment plant [PE] Y Distance to 10/30 kV electric power line [m] 0,00 Distance to optical telecommunication cable [m] (NO DATA) Broadband Internet Connection [MB/s] (NO DATA) Gas [Y/N] N

Location map:

Project 181/08 – Industrial Zones in South Serbia – Final Report Page 19 of 63 3.10 Vladičin Han An existing industrial zone is located approx. 4 km south of Vladičin Han. The potential industrial site is planned in three (3) phases named “A”, “B” and “C”. The total area of all three phases is 360 ha. This project can be developed as a joint project of municipalities Vladičin Han, Vranje and Surdulica. Detailed description for zone "A":

Municipality Vladičin Han Site „A“ Area [ha] 132,00 Developed [%] 90 Net potential area for investors [ha] 11,22 Distance to highway (TEN X) [km] 0,00 Distance to major road [km] 0,00 Distance to railway [km] 0,00 Capacity of water supply [l/s] (NO DATA) Sewage Collection [Y/N] N Waste water treatment plant [PE] N Distance to 10/30 kV electric power line [m] 1,00 Distance to optical telecommunication cable [m] (NO DATA) Broadband Internet Connection [MB/s] (NO DATA) Gas [Y/N] N

Detailed description for zone "B":

Municipality Vladičin Han Site „B“ Area [ha] 111,00 Developed [%] 0 Net potential area for investors [ha] 94,35 Distance to highway (TEN X) [km] 0,00 Distance to major road [km] 0,00 Distance to railway [km] 0,00 Capacity of water supply [l/s] (NO DATA) Sewage Collection [Y/N] N Waste water treatment plant [PE] N Distance to 10/30 kV electric power line [m] 1,00 Distance to optical telecommunication cable [m] (NO DATA) Broadband Internet Connection [MB/s] (NO DATA) Gas [Y/N] N

Project 181/08 – Industrial zones in South Serbia – Draft Final Report Page 20 of 63 Detailed description for zone "C": Municipality Vladičin Han Site „C“ Area [ha] 107,00 Developed [%] 0 Net potential area for investors [ha] 90,95 Distance to highway (TEN X) [km] 0,00 Distance to major road [km] 0,00 Distance to railway [km] 0,00 Capacity of water supply [l/s] (NO DATA) Sewage Collection [Y/N] N Waste water treatment plant [PE] N Distance to 10/30 kV electric power line [m] 1,00 Distance to optical telecommunication cable [m] (NO DATA) Broadband Internet Connection [MB/s] (NO DATA) Gas [Y/N] N

Location map:

Project 181/08 – Industrial Zones in South Serbia – Final Report Page 21 of 63 3.11 Vlasotince The industrial zone is already defined in the general plan. Urbanistic documentation is prepared and the municipality is actively collecting information on land ownership. Location is already partial developed, several local and international companies have operating facilities at the industrial zone site. Detailed description:

Municipality Vlasotince Site Vlasotince Area [ha] 81,96 Developed [%] 50 Net potential area for investors [ha] 34,83 Distance to highway (TEN X) [km] 10,00 Distance to major road [km] 0,00 Distance to railway [km] 10,00 Capacity of water supply [l/s] (NO DATA) Sewage Collection [Y/N] Y Waste water treatment plant [PE] 12.000 Distance to 10/30 kV electric power line [m] 0,00 Distance to optical telecommunication cable [m] N/A Broadband Internet Connection [MB/s] (NO DATA) Gas [Y/N] N

Location map:

Project 181/08 – Industrial zones in South Serbia – Draft Final Report Page 22 of 63 3.12 Vranje Municipality Vranje has possible location on area of Ristovac, where zone in area of 100 ha is planed. There is an existing zone Bunuševac at the location of abandoned military site at the town border. Other option is a joint zone with municipalities Vladičin Han and Surdulica. Detailed description:

Municipality Vranje Site Vranje Area [ha] 100,00 Developed [%] 0 Net potential area for investors [ha] 85,00 Distance to highway (TEN X) [km] 0,00 Distance to major road [km] 0,00 Distance to railway [km] 0,00 Capacity of water supply [l/s] (NO DATA) Sewage Collection [Y/N] N Waste water treatment plant [PE] N Distance to 10/30 kV electric power line [m] N Distance to optical telecommunication cable [m] (NO DATA) Broadband Internet Connection [MB/s] (NO DATA) Gas [Y/N] N

Location map:

Project 181/08 – Industrial Zones in South Serbia – Final Report Page 23 of 63 3.13 Trgovište General plan for municipality of Trgovište defines 2 industrial zones: eastern and western zone. Both are already partial developed. Detailed description "zona zapad" (west):

Municipality Trgovište Site Zona zapad Area [ha] 1,04 Developed [%] 10 Net potential area for investors [ha] 0,80 Distance to highway (TEN X) [km] 35,00 Distance to major road [km] 0,00 Distance to railway [km] 30,00 Capacity of water supply [l/s] (NO DATA) Sewage Collection [Y/N] N Waste water treatment plant [PE] N Distance to 10/30 kV electric power line [m] 1.000,00 Distance to optical telecommunication cable [m] (NO DATA) Broadband Internet Connection [MB/s] (NO DATA) Gas [Y/N] N

Detailed description "zona istok" (east):

Municipality Trgovište Site Zona Istok Area [ha] 1,77 Developed [%] 10 Net potential area for investors [ha] 1,36 Distance to highway (TEN X) [km] 37,00 Distance to major road [km] 0,00 Distance to railway [km] 32,00 Capacity of water supply [l/s] (NO DATA) Sewage Collection [Y/N] N Waste water treatment plant [PE] N Distance to 10/30 kV electric power line [m] 2.000,00 Distance to optical telecommunication cable [m] (NO DATA) Broadband Internet Connection [MB/s] (NO DATA) Gas [Y/N] N

Project 181/08 – Industrial zones in South Serbia – Draft Final Report Page 24 of 63 Location map:

Project 181/08 – Industrial Zones in South Serbia – Final Report Page 25 of 63 4 Site Properties

4.1 Planning Status Summary

4.2 Land Ownership The exact ownership for each individual zone is in most cases still not defined since even the potential zone's borders are not defined. Ownership is mostly mixed (private and state owned). In cases of existing industrial sites ownership issues can be complex since the companies are not yet privatized or the privatization procedure was canceled. In locations for greenfield projects the main problem is private land ownership broken into small pieces. Ownership is solved in Bosilegrad where all land is owned by state and municipality is entitled to use it. In Bojnik the only owner is Army of Serbia, which is prepared to exchange the site for other property. At the time of this report the agreement was allegedly almost finalized.

4.3 Available Infrastructure For most of the zone sites, except zone in Vladičin Han and Leskovac, investments assessment are not done yet because most of crucial data is still not delivered from municipalities. Mostly exact location and border are not defined yet, also there is mostly no data of existing present infrastructure, especially capacities and exact location and specially building cadastre so existing buildings could not be identified. Because of that no planing of infrastructure could not be done yet, at least until municipalities deliver requested data. There is a table with mostly estimated values for required infrastructure on next page.

Project 181/08 – Industrial zones in South Serbia – Draft Final Report Page 26 of 63 Public Telecommu Telephone/Int Railway Power Electric Gas pipeline Municipality Site Roads [m] Water Supply [m] Sewage line [m] WWTP [PE] Lighting [no nication ernet [m] transformers Cables [m] [m] of bulbs] cables [m] Switchboard

(internal grid – depends (internal grid – (internal grid – (depends on (depends on (depends on (depends on There is no Bojnik Airport 0,00 existing 0,00 on project) depends on project) depends on project) project) project) project) project) gas (internal grid – depends (internal grid – (internal grid – (depends on (depends on (depends on (depends on There is no Bosilegrad Bosiljegrad 0,00 existing 0,00 on project) depends on project) depends on project) project) project) project) project) gas (internal grid – depends (internal grid – (internal grid – (depends on (depends on (depends on (depends on There is no Bujanovac Bujanovac 0,00 existing 0,00 on project) depends on project) depends on project) project) project) project) project) gas (internal grid – depends (internal grid – (internal grid – (depends on (depends on (depends on (depends on There is no Crna Trava Crna Trava 0,00 (NO DATA) (NO DATA) on project) depends on project) depends on project) project) project) project) project) gas (internal grid – depends (internal grid – (internal grid – (depends on (depends on (depends on (depends on There is no Lebane Lebane 0,00 (NO DATA) (NO DATA) on project) depends on project) depends on project) project) project) project) project) gas (internal grid – depends (internal grid – (internal grid – (depends on (depends on (depends on (depends on There is no Lebane Bošnjace 0,00 (NO DATA) (NO DATA) on project) depends on project) depends on project) project) project) project) project) gas Leskovac (internal grid – depends (internal grid – (internal grid – (depends on (depends on (depends on (depends on There is no Leskovac 0,00 1,00 N „Easteren“ on project) depends on project) depends on project) project) project) project) project) gas (internal grid – depends (internal grid – (internal grid – (depends on (depends on (depends on (depends on There is no Medveđa Medveđa I 0,00 (NO DATA) (NO DATA) on project) depends on project) depends on project) project) project) project) project) gas (internal grid – depends (internal grid – (internal grid – (depends on (depends on (depends on (depends on There is no Medveđa Medveđa II 0,00 (NO DATA) (NO DATA) on project) depends on project) depends on project) project) project) project) project) gas (internal grid – depends (internal grid – (internal grid – (depends on (depends on (depends on (depends on There is no Preševo Preševo 0,00 (NO DATA) (NO DATA) on project) depends on project) depends on project) project) project) project) project) gas (internal grid – depends (internal grid – (internal grid – (depends on (depends on (depends on There is no Surdulica Surdulica 0,00 None existing 0,00 on project) depends on project) depends on project) project) project) project) gas (internal grid – depends Existing (depends on (depends on (depends on There is no Vladičin Han „A“ 0,00 Existing project Existing project existing 1.000,00 on project) project project) project) project) gas (internal grid – depends Existing (depends on (depends on (depends on There is no Vladičin Han „B“ 0,00 Existing project Existing project existing 1.000,00 on project) project project) project) project) gas (internal grid – depends Existing (depends on (depends on (depends on There is no Vladičin Han „C“ 0,00 Existing project Existing project existing 1.000,00 on project) project project) project) project) gas (internal grid – depends (internal grid – (internal grid – (depends on (depends on (depends on There is no Vlasotince Vlasotince 0,00 None existing 0,00 on project) depends on project) depends on project) project) project) project) gas (internal grid – depends Existing (depends on (depends on (depends on There is no Vranje Vranje 0,00 Existing project Existing project 1,00 N on project) project project) project) project) gas (internal grid – depends (internal grid – (internal grid – (depends on (depends on (depends on (depends on There is no Trgovište Zona zapad 0,00 existing 1.000,00 on project) depends on project) depends on project) project) project) project) project) gas (internal grid – depends (internal grid – (internal grid – (depends on (depends on (depends on (depends on There is no Trgovište Zona Istok 0,00 existing 2.000,00 on project) depends on project) depends on project) project) project) project) project) gas 4.4 Accessibility

4.5 Technical Analysis There is practically no technical documentation prepared for the industrial zones. Exceptions are Vladičin Han, Vlasotince and Leskovac. In Vladičin Han an updated version of “General project for Slobodna Zona ''JUG'' – industrijski park u Vladičinom Hanu, Anahem d.o.o., Beograd, maj 2008” had been prepared (a general plan for development of the industrial zone). In Vlasotince an technical documentation for zone had been made for I. faze of the project which include only a part of whole location. Leskovac had prepared documentation for promotion of their potential locations for industrial zones, but no technical documentation. This promotion material includes some basic description for each site.

4.6 Environmental Impact Municipality Site Issues

Bojnik Airport Location is not problematic from environmental aspect in case where all infrastructure is sufficiently built. Zone is located north of the town and first residential buildings are approximately 50 m and more away.

Bosilegrad Bosilegrad Zone is located in the middle of the town, which can be problematic in terms of noise, air pollution and impact on health.

Bujanovac Bujanovac Zone is located in flood plain (levees already exist) between river J Morava and Moravica. This location is highly vulnerable for any soil and groundwater pollution. Outflow of rainfall from zone area could have effect on flood security down stream. With no wastewater treatment plant it would affect the river.

Crna Trava Crna Trava Zone is located near town, which can be problematic in terms of noise, air pollution and impact on health.

Lebane Lebane Zone is located on the right bank of Jablanica river in the east part of town. There are residential buildings near zone which could be affected by noise. With no wastewater treatment plant it would have affect on river.

Bošnjace Exact location is not known so environmental assessment was not done.

Leskovac Eastern Zone is located on east edge of Leskovac next to water zone channel Bučan. There are some residential areas (Leskovac, Bratmilovce, etc.) next to zone that could be effected in terms of noise, air pollution and impact on health. Problem is

Project 181/08 – Industrial zones in South Serbia – Draft Final Report Page 28 of 63 also polution of river Veternica (III. class).

Medveđa Medveđa Zone is located on right bank of Jablanica river in the east part of town. There are residential buildings near zone which could be effected by noise. With no wastewater treatment plant it would have affect on river.

Preševo Čukarka Zone is located near village Čukarka which could be effected by noise, air pollution and impact on health. The area is highly vulnerable for any soil and groundwater pollution, because during the summer there is a problem with hight of groundwater specially during drought periods.

Surdulica Surdulica Location is not problematic from environmental aspect in case where all infrastructure is sufficiently built.

Vladičin Han Vladičin Zone is located south of town on left bank of river J Morava. Han There are residential buildings near zone (west edge) which could be effected by noise and air pollution. Because of large area (more then 300 ha) outflow of rainfall from zone could have effect on flood security down stream. With no wastewater treatment plant it would have affect on river which is already very polluted.

Vlasotince Vlasotince Location is not problematic from environmental aspect in case where all infrastructure is sufficiently built.

Vranje Vranje Zone is located on left bank of river J Morava between village Davidovac and Pavlovac. The exact location is not known yet, but there industrial use could have effect on residential areas in terms of noise and air pollution. Result of this project would be loss of farm land.

Trgovište Trgovište Zone is located on river Pčinja flood plain. If not sufficiently protected from floods zone could speed up process of erosion and water pollution. Outflow of rainfall from zone could also have effect on flood security down stream.

4.7 Financing Arrangements Several financing models were tested within the project. In reality, any industrial zone is going to be financed through a combination of sources, but nevertheless various distinct options are presented in the report.

4.7.1 Investment Needs There are several main investment requirements when developing an industrial zone: 1. Pre-investment Phase: financing of feasibility studies, engineering designs and administrative costs of acquiring land and permissions. 2. Land Ownership: investment in acquiring land; minimal required investment is purchase (or expropriation) of land, used for public infrastructure (roads, tree

Project 181/08 – Industrial Zones in South Serbia – Final Report Page 29 of 63 lawns) whereas purchase of all lots in the zone is usual practice for active development. 3. Infrastructure Development: the key operation of the development, when public entity is an investor it is usually eligible to cover part (even major part) of the costs through grants. Financing options can vary for each type of investment requirement.

4.7.2 Financing Options

4.7.2.1 Municipal Investment Complete investment can be financed by municipal budget. This approach is possible only in the case when municipalities have significant excess funds or in case the planned zone is relatively small for the municipality. In case there is a high probability of quick sale of lots in the industrial zone and/or investors are willing to pay part of the property price in advance, municipalities can usually obtain short-term bank funding to cover investment costs for the period of construction by the time of receiving payments.

4.7.2.2 Grant Financing Municipalities are usually eligible for obtaining grant financing for construction of business zone. Grant financing can significantly improve financial viability of the project, but there are at least two issues related to this type of financing: 1. If the project was granted public funds (usually from international donor institutions) it is a common practice to prevent sale of financed items for a specific period of time. E.g., if infrastructure was constructed using grant funds, the municipality can not legally sell certain infrastructure to utility companies (e.g. internal telecommunication network, electric power transformers etc.). 2. In case of significant grants the final price of property lots in the industrial zone can be significantly lower than market price. The grant is thus in effect transferred to companies which are buying lots in the industrial zone – being eventually a public subsidy for private companies.

4.7.2.3 Private Investment Since investment in industrial zones can and should be a profitable business venture, private entities can be interested in developing the industrial zone. Since they are usually not eligible for any grant funding, the land in such industrial zones tends to be the most expensive, though this is the actual market price of lots. Private industrial zones are a feasible option in the regions where demand for industrial land is high and municipalities (who are responsible for spatial planning) are willing to designate appropriate areas for industrial use.

4.7.2.4 Public-private Partnership Public-private partnership is a combination of above-mentioned options, merging financial benefits of public financing (availability of partial grant financing) and effectiveness of private venture. Usually the private partner provides the start-up capital and obtains necessary loans, while public partner (municipality) applies for grants for financing infrastructure construction. When lots are sold to buyers, the profit is shared. Public partner can control the price of lots by reducing its profits.

Project 181/08 – Industrial zones in South Serbia – Draft Final Report Page 30 of 63 Since initial investment in purchase of land represents majority or at least significant share of total investment, private owners of land can enter a public-private partnership with the municipality and therefore significantly reduce the need for funds in the early stage of industrial zone development and also disperse the risk of unsuccessful sale of land. This approach is financially very attractive due to very low need for initial financial investment but it is the most demanding in organizational terms. When there are relatively small number (~ 10) of land owners, this approach can be the most attractive option.

4.8 Human Resources This chapter gives a basic overview of the existing potential of human resources and labour force in all municipalities of Pćinja and Jablanica districts of Southern Serbia. The analysis is based on available official data, mainly obtained from the Statistical Office of the Republic of Serbia and National Employment Service of Republic of Serbia, branches of Leskovac and Vranje.

Analysis is done in two steps; in first there are all basic information about the population of all the municipalities of the Pćinja and Jablanica districts, meanwhile in the second part there is more detailed analysis of human resources potential of four municipalities, which have been seen as the most prepared, advanced, with the highest potential for building industrial zones in their municipality from technical point of view.

4.8.1 Basic characteristics (Census of inhabitants 2002):

Districts/ From which Number of Inhabit. National Area (km2) Employees Unemployed Municipalities agricult. % inhabitants per km2 Income p.c Rep. Serbia 88361 65.9 7498001 - 951.4 1848531 904494 Southern Serbia 6289 468613 74.51 100239 63391 % of Rep. Serbia 7.12 - 6.25 - - 5.42 7.01 Jablanica District 2769 55.7 240923 87.01 560.9 49112 36950 Bojnik 264 72.6 13118 49.69 602.5 1948 1671 Vlasotince 308 54.0 33312 108.16 419.7 6292 4935 Lebane 337 63.2 24918 73.94 484.9 4673 4969 Leskovac 1024 57.5 156252 152.59 629.2 33192 24107 Medveđa 524 42.9 10760 20.53 236.1 1619 1081 Crna Trava 312 50.8 2563 8.21 396.5 1388 187 Pćinja District 3520 54.9 227690 64.68 624.0 51127 27441 Bosilegrad 571 61.7 9931 17.39 385.0 2112 704 Bujanovac 461 58.0 43302 93.93 434.1 5711 4785 Vladičin Han 366 44.5 23703 64.76 701.8 5581 3096 Vranje 860 52.0 87288 101.50 1043.7 27455 10151 Preševo 264 60.5 34904 132.21 154.4 3102 5079 Surdulica 628 53.5 22190 35.33 505.8 6181 2963 Trgovište 370 55.9 6372 17.22 515.0 1785 663 Source: - Statistical Office of the Republic of Serbia, Municipalities of Serbia, 2007 - Regional Socio-Economic Development Plan Southern Serbia 2005 – 2007

The region covers an area of 6,289 km2, which represents around 7% of the total area of the Republic of Serbia and consists of two districts (Pćinja and Jablanica) and 13 municipalities. The area of municipalities ranges from 264 km2 (Preševo and Bojnik), to

Project 181/08 – Industrial Zones in South Serbia – Final Report Page 31 of 63 1024 km2 (Leskovac), which is in this respect one of the biggest municipalities in Serbia. Excluding Vranje and Leskovac, all municipalities are considered “underdeveloped” according to criteria from the Republic Office for Development. Seven out of 13 municipalities belong to a group of “most underdeveloped” in Serbia (Bojnik, Medveđa, Crna Trava, Bosilegrad, Bujanovac, Preševo and Trgovište). Although agriculture is one of the important activities in the region it is notable that due to different natural resources (Vojvodina), the share of agricultural land is quite below the Serbian average.

4.8.1.1 Number of inhabitants (Censuses of inhabitants 1953 - 2002):

Districts/ Index 1953 1961 1971 1981 1991 2002 Municipalities 2002/1953 Rep. Serbia 6979154 7642229 8446491 9313676 9778991* 7498001 107.43 Southern Serbia 465038 477375 491358 501284 493300 468613 100.77 Jablanica District 244128 254855 260983 262531 251301 240923 98.69 Bojnik 22329 20838 18801 16246 14341 13118 58.75 Vlasotince 35355 35625 36002 35863 34029 33312 94.22 Lebane 28062 27579 28229 27836 26722 24918 88.80 Leskovac 121311 134250 147487 159001 159478 156252 128.80 Medveđa 24300 24244 20792 17219 12953 10760 44.28 Crna Trava 12771 12319 9672 6366 3778 2563 20.07 Pćinja District 220910 222520 230375 238753 241999 227690 103.07 Bosilegrad 19751 18368 17306 14196 11603 9931 50.28 Bujanovac 36810 39064 43522 46689 49238** 43302 117.64 Vladičin Han 25927 26074 25231 25441 25020 23703 91.42 Vranje 62659 65367 72209 82527 85591 87288 139.31 Preševo 24607 26738 30057 33948 38943** 34904 141.85 Surdulica 35578 32505 29494 27029 24489 22190 62.37 Trgovište 15578 14404 12556 8923 7115 6372 40.90 Source: Regional Socio-Economic Development Plan Southern Serbia 2005 – 2007 * Figure including Kosovo and Metohija ** Data for Bujanovac and Preševo for census 1991 are estimated

The table and graph show changes in the number of inhabitants during the period between the censuses from 1953 and 2002 in Jablanica and Pćinja districts.

Project 181/08 – Industrial zones in South Serbia – Draft Final Report Page 32 of 63 Number of Inhabitants - Southern Serbia 1953-2002

510000

500000

490000

480000 Number of Inhabitants 470000

460000

450000

440000 1953 1961 1971 1981 1991 2002

From the data it is clearly evident that the first decline in the number of inhabitants for the whole Southern Serbia is noted between 1981 and 1991, when the population decreased by 1.6% (in Republic of Serbia increase of 5%). The decrease is much greater in the following decade (- 5%). Overall, the total population decreased by 6.5 % between 1981 and 2002. Only two municipalities managed to keep their population in the last twenty years: Preševo and Vranje, meanwhile only Vranje managed to keep its population between two latest censuses. On average, the yearly decrease of the regional population between 1991 and 2002 was around 2,200 people.

The situation is most dramatic in Trgovište and Medveđa which lost more than half of their population between 1971 and 2002 and even worse in Crna Trava (73%). If we take into the consideration also the age structure of the population in Crna Trava, where around 70% of the population is older than 40 years of age, it can be said that this municipality is struggling for its survive. The total population in 2002 includes approximately 8,000 refugees and Internally Displaced People (IDP), mostly of Serbian origin.

Second characteristic what we can see are huge differences between municipalities. The index in the last column shows that Southern Serbia was on the time of the last census of population in 2002 practically at the same level of population that half of the century ago – 1953. The population statistics is more than worrying (Serbia 107.4% having in mind the census in 2002 doesn’t include population of Kosovo and Metohija), especially if we are aware also of so high unemployment rate as it is nowadays in Southern Serbia. The municipalities that have in 2002 less than a half (!) of the population than fifty years ago are: Crna Trava (20%), Trgovište (41%) and Medveđa (44%), near to that are also Bosilegrad (50%) and Bojnik (59%). On the other hand the population increased the most in Preševo (142%), Vranje (139 %) and Leskovac (128%) respect to their population in 1953.

From this data we can conclude that rural areas begun to lost their population throughout all the period from World war II, but the region as a whole it begun to suffer from emigration only from beginning of the eighties. Before that, two regional centres,

Project 181/08 – Industrial Zones in South Serbia – Final Report Page 33 of 63 Leskovac and Vranje gained the population that has moved form rural areas (centralisation of the districts).

4.8.1.2 Recent developments (after last census in 2002):

It is interesting to compare the figures of the population as stated by censuses with the estimations of the population done by the Statistical Office of the Republic of Serbia on 30.6.2006 and 30.6.2007:

Increase or Districts/ Index 1 Decrease Index 2 Index 3 Index 4 1991 2002 30.6.2007* Municipalities 2002/1991 Annual 30.6.2006* 2006/2002 2007/2006 2007/2002 average per 1000 Rep. Serbia 7576837** 7498001 98.96 -1.0 7411569 98.85 7381579 99.60 98.45 South.Serbia 493300 468613 95.00 -3.8 463614 98.93 460993 99.43 98.37 Jablanica D 251301 240923 95.87 -3.8 234018 97.13 231793 99.05 96.21 Bojnik 14341 13118 91.47 -8.1 12322 93.93 12120 98.36 92.39 Vlasotince 34029 33312 97.89 -1.9 32163 96.55 31762 98.75 95.35 Lebane 26722 24918 93.25 -6.4 24006 96.34 23681 98.65 95.04 Leskovac 159478 156252 97.98 -1.9 153084 97.97 151964 99.27 97.26 Medveđa 12953 10760 83.07 -16.8 10402 96.67 10351 99.51 96.20 Crna Trava 3778 2563 67.84 -34.8 2041 79.63 1915 93.83 74.72 Pćinja D 241999 227690 94.09 -3.8 229596 100.84 229200 99.83 100.66 Bosilegrad 11603 9931 85.59 -14.1 8973 90.35 8758 97.60 88.19 Bujanovac 49238*** 43302 87.94 -7.7 45107 104.17 45212 100.23 104.41 Vladičin Han 25020 23703 94.74 -4.9 22872 96.49 22639 98.98 95.51 Vranje 85591 87288 101.98 1.8 87174 99.87 87095 99.91 99.78 Preševo 38943*** 34904 89.63 -4.0 38385 109.97 38849 101.21 111.30 Surdulica 24489 22190 90.61 -9.0 21248 95.75 20957 98.63 94.44 Trgovište 7115 6372 89.56 -10.1 5837 91.60 5690 97.48 89.30 Sources:- Statistical Office of the Republic of Serbia, Municipalities of Serbia, 2007 - Statistical Yearbook of Serbia 2008 * Estimation by Statistical Office of the Republic of Serbia ** Data calculated without Kosovo and Metohija *** Data for Bujanovac and Preševo for census 1991 are estimated

As it is seen from above it is estimated that the decline of the population in Southern Serbia is slowing down and there should be 1.1 % less population in 2006 than it was in 2002, but than the number felt down in just one year to 1.6% of population less in 2007 compare to 2002. The decline of the population is practically the same as in Republic of Serbia.

We must take into consideration that this are on one hand estimations and on another the fact we are talking about the 4/5 year/s period, meanwhile between censuses is a period long 11 years. This is why we can hardly say the situation is improving for Jablanica district (almost 3.8 % decline in 5 years), even more if the trend continues. The situation would be even worse, namely with the same trend there will be less than 221 thousand people living in Jablanica district in 2013 (more than 8% less than in 2002). The situation is still the worst in municipality of Crna Trava, which looses its population for more than half of the century and it has only 1,915 inhabitants on 30.6.2007, what represents more

Project 181/08 – Industrial zones in South Serbia – Draft Final Report Page 34 of 63 than 25% loss in only five years! Situation is becoming worse also for municipality Bojnik, for which is estimated the decline of 7.6% of its population in only 5 years! The situation is quite different in Pćinja district, where we have a slight rise (0.67%) in 5 years period, but the diversification between municipalities is even bigger. On one hand we find municipalities of Preševo (almost 11.3% rise in 5 years) and Bujanovac (4.4 % rise in 5 years), Vranje, which has been hardly able to keep its population (first decline in the last 50 years) and on the other hand municipalities like Bosilegrad (almost 12% loss in 5 years) and Trgovište (10.7% loss in 5 years), where the emigration process didn’t ended.

4.8.2 Gender and Age Structure of the Population (Census 2002):

Districts/municipalities Male Female Districts/municipalities Male Female Republic of Serbia 48.6 51.4 Southern Serbia 49.9 50.1 Southern Serbia 49.9 50.1 Jablanica District 49.8 50.2 Pćinja District 49.9 50.1 Bojnik 49.8 50.2 Bosilegrad 50.6 49.4 Vlasotince 50.0 50.0 Bujanovac 50.1 49.9 Lebane 50.0 50.0 Vladičin Han 49.7 50.3 Leskovac 49.7 50.3 Vranje 49.7 50.3 Medveđa 50.1 49.9 Preševo 49.7 50.3 Crna Trava 49.2 50.8 Surdulica 49.3 50.7 Trgovište 52.0 48.0 Source: Statistical Office of the Republic of Serbia

The total population is around natural 50/50, slightly in favour of the female population.

Age group Bojnik Vlasotince Lebane Leskovac Medveđa Crna Jablanica Rep. of (in %) Trava District Serbia 0 - 19 22.01 22.94 23.68 23.08 26.75 12.72 23.12 22.30 20 - 39 22.84 26.47 25.23 26.69 23.92 17.91 26.09 26.40 40 - 59 22.70 26.38 25.95 27.20 22.65 24.15 26.48 28.19 60 - 79 29.75 22.06 22.20 20.84 23.57 41.08 21.97 20.52 80+ 2.30 1.55 1.77 1.63 2.30 3.75 1.72 1.94 Unregistered 0.40 0.60 1.18 0.56 0.82 0.39 0.63 0.63

Age Group Vladičin Pcinja Bosilegrad Bujanovac Vranje Preševo Surdulica Trgovište (in %) Han District 0 - 19 20.38 35.20 22.60 25.64 40.87 23.71 26.69 29.09 20 - 39 24.73 29.22 26.33 28.42 28.77 26.31 25.69 27.97 40 - 59 24.79 19.31 27.23 27.13 17.25 27.04 23.07 23.91 60 - 79 25.74 12.92 21.37 16.74 10.10 20.06 21.22 16.32 80+ 3.26 1.26 1.95 1.30 0.96 1.81 1.90 1.46 Unregisterd 1.10 2.09 0.51 0.77 2.05 1.06 1.43 1.25 Source: Statistical Office of the Republic of Serbia

The age structure of the population is very different already between two districts and even more between municipalities. There is a notable difference in the age group of young people (0-19 years old), where Pćinja district is very much ahead with 29.1 % of the population, with respect to 23% in Jablanica district and 22.3% in the area of whole Serbia. In the population group 20 – 39 the districts and Republic of Serbia are approximately the same (26 – 27 %), the differences began in the age group 40 - 59 years of age, when the Pćinja has only 23.9 % of the population, meanwhile is the share in Jablanica already 26.5% and in R of Serbia 28.2 %. The difference is even bigger in the age group 60-79.

Project 181/08 – Industrial Zones in South Serbia – Final Report Page 35 of 63 As already mentioned there are 2 municipalities in Pćinja district with very young structure of their population, which is connected to the ethnic structure of the municipalities’ population. This is particularly visible in Preševo, where almost 41% of people are aged between 0-19, and almost 70% between 0-40 years of age. Bujanovac municipality is near behind with 35% of people aged 0 – 19 and almost 65 % being between 0 – 40 years of age.

The situation is completely opposite in the Crna Trava municipality. Around 70% of people are older than 40 years of age, and almost 45 % older than 60. At the same time, only 12.7 % is between 0-19 years of age. All other municipalities still have more than 20% (Bosilegrad hardly) of their population aged between 0 and 19. In the age group 20 – 59 we see quite big differences where the most worrying should be municipalities like Bojnik, Medveđa, Bosilegrad and Trgovište (beside Crna Trava, of course), which don’t have over 50% of population in age group 20-59 and at the same time low share of age group 0 – 19.

4.8.3 Ethnic Structure of the Population (Census 2002):

Ethnic Bojnik Vlasotince Lebane Leskovac Medveđa Crna Jablanica group Trava District (%) Serbs 88.95 98.64 94.15 94.34 66.57 98.67 93.43 Roma 10.39 0.83 4.67 4.47 1.00 0.00 4.11 Albanian 0.00 0.00 0.00 0.01 26.17 0.04 1.18 Bulgaria n 0.00 0.02 0.02 0.05 0.05 0.31 0.05 Other 0.66 0.52 1.16 1.11 6.21 0.98 1.24

Ethnic Vladičin Pćinja Bosilegrad Bujanovac Vranje Preševo Surdulica Trgovište Group (%) Han District Serbs 13.17 34.14 93.76 93.02 8.55 82.35 98.49 64.58 Roma 0.00 8.93 4.72 5.32 0.92 9.01 0.00 5.25 Albanian 0.00 54.69 0.00 0.01 89.10 0.01 0.08 24.07 Bulgarian 70.86 0.08 0.23 0.40 0.00 4.52 0.19 3.73 Other 15.97 2.17 1.30 1.24 1.43 4.10 1.24 2.37 Source: Statistical Office of the Republic of Serbia

From figures it is evident that the ethnic structure varies a lot between municipalities, as it does also between two districts. Large majority of the population in the Jablanica district is Serbian (93.43%). The Roma population is in second place with 4%. Other ethnic groups participate with a very small percentage. The situation is very different in Pćinja district, surrounded by Kosovo, Macedonia and Bulgaria, where only 65% of the population are Serbs, 24% Albanians, 5% people from Roma population and almost 4% Bulgarians.

Municipalities with practically Serbian population are Vlasotince, Crna Trava and Trgovište (all between 98 and 99 % of the population). The second group would be municipalities with Serbian majority (around 95%) and Roma population at the second place with around 5% (Lebane, Leskovac, Vladičin Han and Vranje). Bojnik is the municipality where the Roma population reaches 10% of the population, living together with 89 % of Serbs. Similar is the situation in Surdulica with 9% Roma population and 82% of Serbs, only difference is here we find also 4.5% Bulgarians and 4% of other

Project 181/08 – Industrial zones in South Serbia – Draft Final Report Page 36 of 63 nationalities. Situation in other municipalities is very much diverse. Medveđa is the only municipality in Jablanica district which has more the 26% of Albanian people and two thirds of Serbs. In Pćinja district we find 2 municipalities where the majority of the population is Albanian. Especially Preševo, where the situation is practically the opposite with almost 90% of the population are Albanians and only 8.5% Serbs. The Albanian population has the majority also in Bujanovac (55%), 34% of Serbs and 9% of Roma population. Bosilegrad, being a municipality on the border with Bulgaria has the majority of the population Bulgarians (71%), only 13 % of Serbs and almost 16% of people from other nationalities.

If we compare this data with the age structure we can see clear connection between ethnic structure and age structure. This confirms also the data of the average family size: 3.5 members for Serbs, 6 for Albanians and 5.5 for Roma. Most Albanians are young, with a very high demographic growth rate. That means that the Serb population has a negative growth rate and is continually decreasing.

4.8.4 Population by Education

Educational level of the population gives us a good picture about the employability of the population living in certain area.

Population over 15 by educational attainment 2002 (Census 2002)

Without Rate 1-3 Rate 4-7 Rate Primar Rate Rate* All education % grade % grade % y school % % Serbia 6321231 357552 5.66 126127 2.00 896847 14.19 1509462 23.88 45.72 Jablanica 200993 23114 11.50 5000 2.49 35345 17.59 44174 21.98 53.55 Bojnik 10948 2025 18.50 488 4.46 2714 24.79 2318 21.17 68.92 Vlasotince 27801 3074 11.06 858 3.09 5241 18.85 6925 24.91 57.90 Lebane 20576 3036 14.76 572 2.78 4098 19.92 4714 22.91 60.36 Leskovac 130554 13220 10.13 2655 2.03 20908 16.01 26958 20.65 48.82 Medveđa 8754 1267 14.47 268 3.06 1864 21.29 2669 30.49 69.32 Crna Trava 2360 492 20.85 159 6.74 520 22.03 590 25.00 74.62 Pćinja 178685 19861 11.12 3324 1.86 25300 14.16 56293 31.50 58.64 Bosilegrad 8461 920 10.87 422 4.99 1657 19.58 2365 27.95 63.40 Bujanovac 31 549 4622 14.65 542 1.72 4896 15.52 12015 38.08 69.97 VladičinHan 19 989 2647 13.24 450 2.25 3411 17.06 5391 26.97 59.53 Vranje 71193 5928 8.33 1028 1.44 8240 11.57 20271 28.47 49.82 Preševo 23873 2866 12.01 310 1.30 3243 13.58 10138 42.47 69.35 Surdulica 18483 2093 11.32 443 2.40 3049 16.50 4417 23.90 54.11 Trgovište 5137 785 15.28 129 2.51 804 15.65 1696 33.02 66.46 Source: Statistical Office of the Republic of Serbia, Municipalities of Serbia, 2007 * Rate of persons with obtained maximum elementary education

Secondar Rate Higher Rate University Rate Rate* Rate* All y Unknown % education % education % % % education Serbia 6321231 2596348 41.07 285056 4.51 411944 6.52 11.03 137895 2.18 Jablanica 200993 67 794 33.73 6679 3.32 7185 3.57 6.90 11702 5.82 Bojnik 10948 2569 23.47 189 1.73 114 1.04 2.77 531 4.85 Vlasotince 27801 8664 31.16 811 2.92 750 2.70 5.61 1478 5.32 Lebane 20576 6208 30.17 561 2.73 480 2.33 5.06 907 4.41 Leskovac 130554 48113 36.85 4882 3.74 5636 4.32 8.06 8182 6.27 Medveđa 8754 1808 20.65 185 2.11 168 1.92 4.03 525 6.00 Crna Trava 2360 432 18.31 51 2.16 37 1.57 3.73 79 3.35 Pćinja 178685 50195 28.09 5291 2.96 6794 3.80 6.76 11627 6.51

Project 181/08 – Industrial Zones in South Serbia – Final Report Page 37 of 63 Bosilegrad 8461 2111 24.95 314 3.71 288 3.40 7.11 384 4.54 Bujanovac 31 549 5659 17.94 558 1.77 700 2.22 3.99 2557 8.10 VladičinHan 19 989 5734 28.69 593 2.97 647 3.24 6.20 1116 5.58 Vranje 71193 24842 34.89 2594 3.64 3767 5.29 8.93 4523 6.35 Preševo 23873 4335 18.16 542 2.27 652 2.73 5.00 1787 7.49 Surdulica 18483 6178 33.43 608 3.29 676 3.66 6.95 1019 5.51 Trgovište 5137 1336 26.01 82 1.60 64 1.25 2.84 241 4.69 Source: Statistical Office of the Republic of Serbia, Municipalities of Serbia, 2007 * Rate of persons with obtained higher education than secondary

What it is clearly evident from the figures above is the fact Southern Serbia is what concerns obtained education of its population over 15 years of age very much lagging behind Serbia. Alarming is particularly the share of people without education, where no municipality is even close to Serbian average with 5.7% of people without education. The best situation is in Vranje with 8.3% and the worst, beside Crna Trava with 20.6% (due to very old age structure), in Bojnik municipality with 18.5% of people with no education (high share of Roma people). Average for both districts is around 11%.

The situation (with worse structure than average of Serbia) continues also with people who didn’t obtain elementary school. The rate of people who obtained primary school education is in Jablanica district (22%) approximately as Serbian average (24%), meanwhile is in Pćinja district higher at 31.5%. But it is better to look at the rate which shows us the percentage of population who don’t have any occupational education. Here we can again clearly see the gap of Jablanica (53.6%) and Pćinja (58.6%) district with Republic of Serbia (45.7%). The situation differs very much between municipalities from 48.8% in Leskovac and 49.8% in Vranje to municipalities with over 60% of people over 15 with obtained maximum primary education: Lebane 60.4%, Bosilegrad 63.4%, Trgovište 66.5%, Bojnik 68.9%, Medveđa 69.3%, Preševo 69.4%, Bujanovac 70% and Crna Trava 74.6%.

The picture remains similar with people who completed secondary education; namely while Serbia has the share of 41%, Jablanica district has 33.7% and Pćinja only 28%. Again two regional centers have the highest share – Leskovac 36.8% and Vranje 34.9%, while the worst was situation in Crna Trava (18.3%), Preševo (18.1%) and Bujanovac (17.9%).

What concerns people who obtained education higher than secondary the situation is the same – Southern Serbia has around 40% lower share of such people (in Jablanica 6.9% and in Pćinja 6.8%) than it is the Serbian average (11%). Again, the highest share have Vranje (8.9%) and Leskovac (8%), while the situation is very poor particularly in Bojnik (2.8%) and Trgovište (2.8%).

It is notable also the difference of share of unknown people, where the average for Serbia is 2.2.%, meanwhile this share reaches in Jablanica district 5.8% and in Pćinja even 6.5%.

With such figures related to level of education it is even more important to act on two sides – on younger generations (where the situation is improving but still to slow) and also on education of adults. By the data from Statistical Office of the Republic of Serbia, Municipalities of Serbia, 2007, there were in school year 2005/2006 3 schools with 13 classes and 196 pupils in Leskovac and 1 school with 6 classes and 60 pupils in Vranje (data for primary and secondary schools), what we can say it is much less that it is needed.

Project 181/08 – Industrial zones in South Serbia – Draft Final Report Page 38 of 63 4.8.5 Population by Settlements (Source: Regional Socio-Economic Development Plan Southern Serbia 2005 – 2007)

Districts/ Number of Number of Districts/municipalities Municipalities settlements settlements Southern Serbia 699 Jablanica District 336 Pćinja District 363 Bojnik 36 Bosilegrad 37 Vlasotince 48 Bujanovac 59 Lebane 39 Vladičin Han 51 Leskovac 144 Vranje 105 Medveđa 44 Preševo 35 Crna Trava 25 Surdulica 41 Trgovište 35 Census of Inhabitants 2002

The division between central and other settlements is similar to that of urban and rural settlements. The difference originates from the fact that the municipal assembly decides how the municipality is divided into urban and rural areas. In that sense, Trgovište and Bojnik are 100% rural. Data for other municipalities correspond to division between central and other- central settlements are urban, while others are rural.

Settlements Southern Serbia 2002

120,00

100,00

80,00 Other 60,00 Central 40,00

20,00

0,00

Vranje Bojnik Presevo Lebane Surdulica Trgoviste Leskovac Medvedja Bosilegrad Bujanovac Vlasotince Crna Trava Vladicin Han

The above graph shows a concentration of the municipal population in central and other settlements. Vranje is the most centralised municipality: around 70% of the population lives in the central area. On the other hand, only 30% of people living in Bojnik, Trgovište, Bosilegrad and Crna Trava are situated in the central area.

Around 45% of the total population of Southern Serbia lives in central areas and 55% live in other (smaller) settlements.

Project 181/08 – Industrial Zones in South Serbia – Final Report Page 39 of 63 4.8.6 Population by Activity (Census 2002)

Districts/ Under 7 7 – 14 years 0 – 14 years Working % of working 65 and % of 65 Total Municipalities years of age of age of age (%) population population over and over Rep. Serbia 7498001 495327 681443 15.69 5032805 67.12 1240505 16.54 Jablanica D. 240923 16924 23006 16.57 157764 65.48 41714 17.31 Bojnik 13118 997 1173 16.54 7758 59.14 3138 23.92 Vlasotince 33312 2364 3147 16.54 21777 65.37 5825 17.49 Lebane 24918 1817 2525 17.43 15987 64.16 4295 17.24 Leskovac 156252 10892 14806 16.45 104241 66.71 25441 16.28 Medveđa 10760 774 1232 18.64 6572 61.08 2094 19.46 Crna Trava 2563 80 123 7.92 1429 55.75 921 35.93 Pćinja D. 227690 21144 27861 21.52 146569 64.37 29262 12.85 Bosilegrad 9931 618 852 14.80 6095 61.37 2257 22.73 Bujanovac 43302 5244 6509 27.14 26328 60.80 4315 9.96 Vladičin Han 23703 1556 2158 15.67 15813 66.71 4054 17.10 Vranje 87288 6810 9285 18.44 59278 67.91 11240 12.88 Preševo 34904 4887 6144 31.60 20523 58.80 2634 7.55 Surdulica 22190 1590 2117 16.71 14617 65.87 3631 16.36 Trgovište 6372 439 796 19.38 3915 61.44 1131 17.75 Source: Statistical Office of the Republic of Serbia, Municipalities of Serbia, 2007

As seen from the figures above municipalities like Crna Trava (36%), followed by Bojnik (24%) and Bosilegrad (23%) have an old age structure. For Crna Trava the situation is already more than alarming, since it has only 8% of youngsters (between 0 an 14 years of age). The situation is very much opposite with the municipalities Preševo with 32% of youngsters, followed by Bujanovac with 27 %. In the figures above are not included unregistered; in Jablanica district there are 1,515 people (0.63%), meanwhile in Pćinja they are 2,854, what represents 1.25% of the population. The highest percentage of unknown is in Bujanovac (2.09%) and Preševo (2.05%).

What concerns working population the percentage is the highest in two economic centres of the region – Vranje (68%) and Leskovac (67%), finding at the end again municipality of Crna Trava with 56%. Since the data are from census 2002 we can be quite sure that Preševo is no longer at the second worst place what concerns working population.

Project 181/08 – Industrial zones in South Serbia – Draft Final Report Page 40 of 63 100%

80%

60%

40%

20%

0% Jablanica Bojnik Vlasotince Lebane Leskovac Medveđa Crna Trava District

Under 7 years of age 7 – 14 years of age Working population 65 and over nn

100%

80%

60%

40%

20%

0% Pćinja District Bosilegrad Bujanovac Vladičin Han Vranje Preševo Surdulica Trgovište

Under 7 years of age 7 – 14 years of age Working population 65 and over nn

Working population are all those between the ages of 15 and 65 and represent the potential working contingent (number of people capable for work). Active population anticipates the persons aged 15 and over, with occupation, as well as the unemployed persons seeking employment and the persons on leave for military service (active population without occupation). Under the term ‘occupation’ is understood the execution of certain jobs in order to provide for life support.

Subsidies Active Population Population Living beneficiaries without abroad for less than 1 Total Rate % income - Total Rate (%) dependants year Rep. of Serbia 3398227 43.80 1511816 20.16 2570639 17319 Southern Serbia 205246 43.80 78076 16.66 184186 1105 Jablanica District 109750 45.55 45400 18.84 85328 445 Bojnik 5632 42.93 3296 25.13 4179 11

Project 181/08 – Industrial Zones in South Serbia – Final Report Page 41 of 63 Vlasotince 14627 43.91 6057 18.18 12594 34 Lebane 12296 49.35 4052 16.26 8496 74 Leskovac 71947 46.05 28882 18.48 55131 292 Medveđa 4450 41.36 2139 19.88 4137 34 Crna Trava 798 31.14 974 38.00 791 - Pćinja District 95496 41.94 32676 14.35 98858 660 Bosilegrad 4301 43.31 2030 20.44 3587 93 Bujanovac 16490 38.08 3805 8.79 22810 197 Vladičin Han 9680 40.84 4679 19.74 9294 50 Vranje 41095 47.08 14568 16.69 31535 90 Preševo 11600 33.23 2232 6.39 20838 234 Surdulica 8896 40.09 4481 20.19 8737 76 Trgovište 3434 53.89 881 13.83 2057 - Source: Statistical Office of the Republic of Serbia, Municipalities of Serbia, 2007

Active population is a statistic equivalent of labour force. From economic development aspect, this category is the most important. It includes all those employed and those registered unemployed. On the other hand, the inactive population is divided into three groups: subsidies beneficiaries or population with own personal income (retired, social help beneficiaries, people with ownership generated income etc.), dependants or population without own income (children, housewives etc.), and population living abroad for less than one year.

As can be seen, the general activity rate for South Serbia was in 2002 at the same level as that of Serbia (43.80%), what on the other hand means that there are more inactive than active people. The situation is again especially negative in Crna Trava (31%), because of very old age structure, following by Preševo (33%), and Bujanovac (38%), but the latter two because of very high share of young population. The connection between the active population and potential working contingent is noteworthy. Approximately 67% of the potential working contingent is really active in South Serbia.

It is interesting to see the share of agricultural population in Southern Serbia compared to the figures of Republic of Serbia.

Agricultural Active Agricultural Dependant Population Population agricultural Total Rate (%) Total Rate (%) population Rep. of Serbia 817052 10.90 529236 64.77 287816 Jablanica District 40742 16.91 27361 67.16 13381 Bojnik 3524 26.86 2646 75.09 878 Vlasotince 5320 15.97 3355 63.06 1965 Lebane 6512 26.13 4343 66.69 2169 Leskovac 22242 14.23 15134 68.04 7108 Medveđa 2990 27.79 1771 59.23 1219 Crna Trava 154 6.01 112 72.73 42 Pćinja District 25170 11.05 15168 60.26 10002 Bosilegrad 1905 19.18 1242 65.20 663 Bujanovac 8267 19.09 4220 51.05 4047 Vladičin Han 837 3.53 633 75.63 204 Vranje 5998 6.87 4706 78.46 1292 Preševo 6223 17.83 2913 46.81 3310 Surdulica 670 3.02 406 60.60 264 Trgovište 1270 19.93 1048 82.52 222 Source: Statistical Office of the Republic of Serbia, Municipalities of Serbia, 2007

Project 181/08 – Industrial zones in South Serbia – Draft Final Report Page 42 of 63 What is notable from the figures above are basically 2 characteristics: first relatively high share of agricultural population (Jablanica District almost 17%, Serbian average 11%), especially if we compare it with share of its agricultural area (what leads us to conclusion of traditional and extensive agriculture) and secondly much higher share among agricultural population of active ones. The situation differs very much between municipalities; from highest in Bojnik and Lebane municipality where more than one fourth of the population is agricultural to the lowest share in Surdulica and Vladičin Han, where only around 3 % of the population is declared as agricultural.

4.8.6.1 Recent employment data

Employment (Average employment based on calculation of data on 31 March and 30 September):

2006 2007 Private Private Total entrepreneurs entrepreneurs Other Total other and their and their employees employees Republic Serbia* 2025627 553877 1471750 2002344 569494 1432851 Jablanica District 47106 16147 30959 38103 9805 28298 Bojnik 1929 777 1153 1719 632 1088 Vlasotince 6353 3151 3202 5223 2142 3081 Lebane 3009 551 2459 2558 377 2181 Leskovac 32969 10206 22764 26914 6181 20733 Medveđa 1327 210 1117 1130 186 944 Crna Trava 1518 1254 264 560 288 272 Pćinja District 46728 10233 36495 44207 9797 34411 Bosilegrad 1550 602 948 1490 594 896 Bujanovac 6887 1775 5113 7442 2500 4943 Vladičin Han 4743 1030 3713 4639 1161 3478 Vranje 22640 3085 19556 20555 1953 18602 Preševo 3698 1122 2576 3702 1218 2484 Surdulica 6020 2407 3613 5318 2064 3255 Trgovište 1190 214 976 1061 308 754 Sources:- Statistical Office of the Republic of Serbia, Municipalities of Serbia, 2007 (for figures 2006) - Statistical Office of the Republic of Serbia, Communication No.6, The number of employment in 2007 * Without Kosovo and Metohija

Employment trend:

Index Index Index Index Index Index Index 07/06 07/06 07/06 07/05 07/05 07/05 07/02 total entrep. other total entrep. other total R. Serbia* 98.85 102.82 97.36 96.78 109.00 92.65 108.32 Jablanica D. 80.89 60.72 91.40 76.71 69.14 79.74 77.58 Bojnik 89.11 81.34 94.36 84.72 89.01 82.48 88.24 Vlasotince 82.21 67.98 96.22 81.52 74.80 86.96 83.01 Lebane 85.01 68.42 88.69 66.02 89.87 63.12 54.74 Leskovac 81.63 60.56 91.08 78.39 70.43 81.13 81.09 Medveđa 85.15 88.57 84.51 74.29 103.05 70.42 69.80 Crna Trava 36.89 22.97 103.03 37.20 23.38 99.42 40.35

Project 181/08 – Industrial Zones in South Serbia – Final Report Page 43 of 63 Pćinja D. 94.60 95.74 94.29 89.01 92.84 87.98 86.47 Bosilegrad 96.13 98.67 94.51 82.82 91.60 77.87 70.55 Bujanovac 108.06 140.85 96.68 100.64 129.80 90.38 130.31 Vladičin Han 97.81 112.72 93.67 87.34 108.71 81.96 83.12 Vranje 90.79 63.31 95.12 84.07 53.30 89.49 74.87 Preševo 100.11 108.56 96.43 102.27 140.81 90.17 119.34 Surdulica 88.34 85.75 90.09 89.63 94.40 86.87 86.04 Trgovište 89.16 143.93 77.25 91.71 158.76 78.30 59.44

What is clearly seen from above is that decline in employment was much more notable in Southern Serbia than in the rest of Serbia. While the fall in employment in Serbia was 1.1%, in Pćinja district already more than 5 % to Jablanica district, which loss was almost 20%! If we look at the ratio 2007/2005 we can see the fall in employment was much more evident in 2007 than in previous year. This is also valid if we compare the figures of 2007 to those of 2002.

The most worrying is that although there was rise of employment in Serbia within the private sector (entrepreneurs, sole proprietors and their employees) the decline in Jablanica district was unbelievable high - 40%, meanwhile the decline in Pćinja district was less than 5%. Here the figures are varying between municipalities the most; from the worst 23% in Crna Trava to 141% in Bujanovac and 144% in Trgovište with municipalities of Vladičin Han and Preševo being also over 100%. What is worrying is that no municipality in Jablanica district was over 100%, so all municipalities have less jobs. Notable is also the drop of employment in private sector in both regional centres Vranje (63%) and Leskovac (61%) what together means 5,157 places.

Employment in enterprises, institutions, cooperatives and other organizations, which in Serbia still employs the majority of population (71.6%), is in decline throughout all Serbia (-2.6%) and also in Jablanica district (-8.6%), where are in 2007 still 28,298 employed (74.3% of all) as in Pćinja district (5.7%) with 34,411 employees (77.8% of all). The differences between municipalities are here lower, from 77% in Trgovište to municipality Crna Trava, which is the only one where there was a rise in employment for 3%.

Between 2007 and 2002 there are only 2 municipalities who have more employees in 2007 than in 2002: these are Bujanovac with 7,442 employees (rise of 30.3%) and Preševo with 3,702 employees (rise of 19.3%). The worst situation is in Crna Trava with 40% of employees in 2007 compare to 2002, followed by Lebane with 55%, Trgovište 59%, Medveđa 70%, Bosilegrad 71%, Vranje 75%, Leskovac 81%, Vlasotince and Vladičin Han 83%, Surdulica 86% and Bojnik 88%.

4.8.6.2 Recent unemployment data

Index Index Index Index Index Index 2002 2005 2006 2007 05/02 06/05 06/02 07/06 07/05 07/02 Serbia 904494 895697 99.03 916257 102.30 101.30 785099 85.69 87.65 86.80 Jablanica 36950 36123 97.76 38528 106.66 104.27 35369 91.80 97.91 95.72 Bojnik 1671 2777 166.19 2682 96.58 160.50 2638 98.36 94.99 157.87 Vlasotince 4935 4992 101.16 4599 92.13 93.19 4613 100.30 92.41 93.48 Lebane 4969 5017 100.97 5887 117.34 118.47 5459 92.73 108.81 109.86 Leskovac 24107 21745 90.20 23294 107.12 96.63 20727 88.98 95.32 85.98 Medveđa 1081 1260 116.56 1719 136.43 159.02 1589 92.44 126.11 146.99 Crna Trava 187 332 177.54 347 104.52 185.56 343 98.85 103.31 183.42 Pćinja D 27441 33926 123.63 36179 106.64 131.84 31369 86.70 92.46 114.31

Project 181/08 – Industrial zones in South Serbia – Draft Final Report Page 44 of 63 Bosilegrad 704 1161 164.91 1332 114.73 189.20 1393 104.58 119.98 197.87 Bujanovac 4785 5351 111.83 7292 136.27 152.39 5266 72.22 98.41 110.05 Vladičin Han 3096 4147 133.95 4567 110.13 147.51 4552 99.67 109.77 147.03 Vranje 10151 12914 127.22 11382 88.14 112.13 8365 73.49 64.77 82.41 115.5 5079 5326 104.86 5738 107.74 112.97 6155 107.27 121.19 Preševo 7 110.5 2963 4047 136.58 4590 113.42 154.91 4473 97.45 150.96 Surdulica 3 Trgovište 663 980 147.81 1278 130.41 192.76 1165 91.16 118.88 175.72 Sources:- National Employment Service of Serbia, Monthly Statistics Bulletins (for data 2007) - Statistical Office of the Republic of Serbia, Municipalities of Serbia, 2006 and 2007

From the table is clearly seen the trend in unemployment by municipalities at the end of the last two years and in 2002. The municipalities where the unemployment has risen the most in the last five years are Bosilegrad which has almost doubled its number of unemployed persons, followed by Crna Trava (183%), Trgovište (176%), Bojnik (158%), Surdulica (150%), Vladičin Han and Medveđa (147%). There are only three municipalities which have less unemployed persons at the end of 2007 than in 2002 and that are Vranje with index of 82%, Leskovac at 86% and Vlasotince at 93%. And if we compare these figures with the average of Republic of Serbia we can clearly see that both regions are even deeping the gap with the rest of the Republic.

But in the recent two years the situation between municipalities is quite different: we can see very big difference for instance in Bojnik, where the unemployment has even fallen in the last two years (07/05 index is 95%, comparing to 07/02 index of 158%), Crna Trava, Bosilegrad, Trgovište, Surdulica and Vladičin Han also doing better in the last two years. Vranje has achieved quite remarkable cut of unemployed persons in the last two years by 35%.

It is worth comparing also the data of employed per 1000 inhabitants and unemployed per 100 inhabitants:

2002* 2005* 2006* Employees Unemployed Employees Unemployed Employees Unemployed per 1000 per 1000 per 1000 per 1000 per 1000 per 1000 inhabitants inhabitants inhabitants inhabitants inhabitants inhabitants R. Serbia 247 121 278 120 274 124 Jablanica D 204 153 210 153 201 165 Bojnik 148 127 162 222 157 218 Vlasotince 189 148 197 154 198 143 Lebane 188 199 160 207 125 245 Leskovac 212 154 223 141 215 152 Medveđa 150 100 145 120 128 165 Crna Trava 542 73 697 154 744 170 Pćinja D. 225 121 216 148 204 158 Bosilegrad 213 71 195 126 173 148 Bujanovac 132 111 165 119 153 162 Vladičin Han 235 131 230 180 207 200 Vranje 315 116 280 148 260 131 Preševo 89 146 96 141 96 149 Surdulica 279 134 276 188 283 216 Trgovište 280 104 194 165 214 219 Source: - Statistical Office of the Republic of Serbia, Municipalities of Serbia, 2006 and 2007 * Data on 31.12.

Project 181/08 – Industrial Zones in South Serbia – Final Report Page 45 of 63 As we can see also by this perspective Southern Serbia is compared to the rest of Serbia in poor position; which is even getting worse. If we look to the figures in 2006 we can see that are only two municipalities that are doing better than the average of Serbia in number of employees per 1000 inhabitants (274): Crna Trava because of its specificity (744) and Surdulica with 283 employees per 1000 inhabitants (Vranje is very near to the average with 260 employees). If we look to the figures of 2002 we can see there were four municipalities with better figures than the average of Serbia (247): Crna Trava with 542 employees per 1000 inhabitants, Vranje (315), Trgovište (280) and Surdulica (279). The worst performers in 2006 are Preševo (96), Lebane (125) and Medveđa with 128 employees per 1000 inhabitants. The highest fall was in Lebane (from 188 in 2002 to 125 in 2006), Medveđa (from 150 in 2002 to 128) in 2006, Bosilegrad (from 213 in 2002 to 173 in 2006), Vranje (from top of 315 in 2002 to 260 in 2006) and Trgovište (from 280 in 2002 to 214 in 2006).

Even worse is picture with the number of unemployed per 1000 inhabitants, namely no municipality has less unemployed persons per 1000 inhabitants than the Serbian average (124 persons)!! The nearest is Vranje with 131 persons per 1000 inhabitants. In 2002 there were still 6 municipalities with better figures in this respect than Serbian average (121 unemployed per 1000 inhabitants): Bosilegrad with only 71 unemployed, followed by Crna Trava with 73, Medveđa 100, Trgovište 104, Bujanovac 111, Vranje 116.

The worst is the situation in municipalities which have more unemployed persons per 1000 inhabitants than employed ones. In 2006 that was the case for: Bojnik (157:218), Lebane (125:245), Medveđa (128:165), Bujanovac (153:162), Preševo (96:149) and Trgovište (214:219). In 2002 this was the case only in 2 municipalities: Preševo (89:146) and Lebane (188:199).

And what are the latest unemployment figures?

Situation IX 2008 % of unemployed in Job seekers Unemployed job seekers % in county unemployment Total Women Total Women Total Women Jablanica D 36383 18967 33106 16965 90.99 89.44 100.00 Bojnik 2367 1261 2359 1255 99.66 99.52 7.13 Vlasotince 5883 2967 5863 2952 99.66 99.49 17.71 Lebane 4643 2342 4627 2333 99.66 99.62 13.98 Leskovac 21593 11504 18363 9534 85.04 82.88 55.47 Medveđa 1557 734 1555 733 99.87 99.86 4.70 Crna Trava 340 159 339 158 71.00 99.37 1.02 Pćinja D 28151 15636 27467 15178 97.57 97.07 100.00 Bosilegrad 1403 723 1340 670 95.51 92.67 4.98 Bujanovac 4808 2556 4728 2500 98.34 97.81 17.08 Vladičin Han 3947 2343 3938 2337 99.77 99.74 14.02 Vranje 7711 4517 7254 4232 94.07 93.69 27.39 Preševo 6080 3292 6026 3250 99.11 98.72 21.60 Surdulica 3112 1706 3094 1693 99.42 99.24 11.05 Trgovište 1090 499 1087 496 99.72 99.40 3.87 Source: National Employment Service of Serbia, Monthly Statistics Bulletins, September 2008

Cumulative I – IX 2008

Project 181/08 – Industrial zones in South Serbia – Draft Final Report Page 46 of 63 Registered vacancies Filled vacancies Unemployed Fixed-term Total Women Total Women Permanent Fixed-term Index contracts employ. contracts IX 08/IX 07 Jablanica D 9473 4851 4622 8913 3841 4511 4402 97.38 Bojnik 373 115 258 347 196 107 240 100.30 Vlasotince 1319 920 399 1181 362 848 333 158.55 Lebane 751 366 385 688 360 325 363 90.27 Leskovac 6599 3289 3310 6270 2788 3065 3205 87.53 Medveđa 266 56 210 268 121 61 207 103.53 Crna Trava 165 105 60 119 14 105 54 98.83 Pćinja D 10879 3647 7232 9924 3959 3298 6626 91.85 Bosilegrad 376 91 285 361 89 88 273 103.80 Bujanovac 1139 389 750 1134 402 394 740 96.77 Vladičin Han 925 394 531 872 339 379 493 90.51 Vranje 6149 1972 4177 5871 2565 1870 4001 89.04 Preševo 502 252 250 406 160 224 182 104.08 Surdulica 1329 428 901 1001 346 292 709 72.54 Trgovište 459 121 338 279 58 51 228 92.59 Source: National Employment Service of Serbia, Monthly Statistics Bulletins, September 2008

As it is seen from the figures above the index of unemployed persons by the end of September 2008 compared to September 2007 is on general little better – in Jablanica district at 97.4% and in Pćinja district 8.15% better than a year ago. Surdulica is in this respect doing well being at only 72.5% of the last year figure. The highest growth in direction nobody wants has happened to Vlasotince where in September 2008 have more than half more unemployed persons than in September 2007.

4.8.7 Salaries and wages

By the latest data issued by the Statistical Office of the Republic of Serbia….

Indices of nominal salaries Share of Average salaries and wages and wages average IX 2008 I – IX 2008 Serbian IX 2008 I – IX 2008 VIII 2008 I – IX 2007 salary Rep. Serbia 46015 44389 99.55 118.89 100.00 Jablanica D. 34856 32647 102.25 131.44 75.75 Bojnik 23010 20508 104.05 113.49 50.01 Vlasotince 29206 26525 105.43 121.81 63.47 Lebane 28540 27027 97.65 152.79 62.02 Leskovac 36844 34684 101.51 132.28 80.07 Medveđa 34457 32128 119.50 120.51 74.88 Crna Trava 38753 38804 95.84 106.95 84.22 Pćinja D. 34286 32574 101.37 118.44 74.51 Bosilegrad 34192 30597 99.68 112.73 74.31 Bujanovac 35976 34299 99.13 120.46 78.18 Vladičin Han 24267 20711 119.44 129.74 52.74

Project 181/08 – Industrial Zones in South Serbia – Final Report Page 47 of 63 Vranje 35337 34383 101.13 115.97 76.79 Preševo 32388 31838 102.18 124.29 70.39 Surdulica 38499 35035 96.92 117.04 83.67 Trgovište 32124 29957 98.20 121.56 69.81 Source: Statistical Office of the Republic of Serbia, Communication No.296, Salaries and wages per employee – September 2008 (brutto)

…it is clearly evident that salaries in Southern Serbia are still very much lagging behind Serbian average. We can see that the salaries have in the last year grown up in Jablanica district almost twice as much (131%) as in Pćinja (118%), which is on the Serbian growth average. The highest growth in the last year was in Lebane, Leskovac and Vladičin Han municipalities. Except Leskovac, who is now at the 80% of Serbian average, in both municipalities salaries are still very low (53% and 62% of the average).

On the average the salaries and wages in Southern Serbia are one quarter lower than those in Serbia. The lowest salaries are in Bojnik and Vladičin Han at little more than half of the Serbian average, meanwhile in Surdulica and Crna Trava the highest at around 84% of the average. The distribution of salaries between municipalities is for sure the reflection of their economic and employment structure (activity, added value, ownership, public/private, educational and qualification level of employees….), but it stands also that salaries are in general lower than in other, more developed parts of Serbia.

4.9 Institutional Capacity By the term “institutional capacity” this projects measures the capacity of municipality to provide support for business zone development. Specifically it means the capacity of municipal authorities: – to conduct urban planning tasks (level of available mapping data, understanding of legislative framework, communication with relevant institutions) – to resolve land ownership issues (knowledge of actual land owners, understanding of options to obtain the ownership) – to assure financing of the infrastructure (knowledge of financial resources, capability of preparing a sound financial plan) – to implement planned infrastructure investments – to attract and assist investors (experience with investors already present, clearly defined and competent personnel for communication with investors). Though assessing the capacity is a complex task beyond the scope of this project, the team has found distinctive levels of response of municipalities to requests for basic information. Generally, we can assume that the municipalities which could readily provide information and clearly understood the formal procedure in planning the industrial zone are more capable of conducting a complex task of planning, financing and implementing investment in infrastructure for industrial zone and finally attracting and assisting investors.

4.10 Compliance with Strategies

Project 181/08 – Industrial zones in South Serbia – Draft Final Report Page 48 of 63 5 Evaluation of Sites

5.1 Model for Evaluating Industrial Zone Potential To evaluate the industrial zone potential, a hierarchical multi-criteria decision model was developed. The hierarchy of criteria is presented in the Figure 1:

Potential (not viable / limited potential / viable) Profit (negative / neutral / 0-5 €/m2 / 5-10 €/m2 / 10-20 €/m2 / over 20 €/m2) Selling Potential (not sold in 5 years / sold in 3-5 years / 1-3 years) Human Resources (poor / moderate / good / excellent) Available Workers (< 100/ha / 100-250/ha / 250-500/ha / > 500/ha) Skills (labor / basic skills / technically skilled / engineering / scientific) Social Infrastructure (very low / basic / moderate / high / very high) Communications (poor / moderate / good / excellent) Local Factors (prohibitive / neutral / supportive) Capacity of Authorities (low / limited / average / highly competent) Social Acceptance (opposed / neutral / supportive) Environmental Impacts (high / moderate / low / positive)

Figure 1. Hierarchy and values of criteria in the decision model

The model was used for evaluation of all sites based on technical, financial and human resource information of industrial zones.

5.2 Evaluation

5.2.1 Attribute values of sites Based on the information on the business zones the attribute values of all sites (options) were defined as presented in the following subsections.

5.2.1.1 Profit The estimated difference between the costs of land and infrastructure and final price of land to be sold including all municipal fees was defined for the zone as follows:

Project 181/08 – Industrial Zones in South Serbia – Final Report Page 49 of 63 Value Sites

neutral Bosilegrad (the sites where municipalities can not charge premium price, the Crna Trava main goal should be attracting investors that provide jobs) Trgovište

0 – 5 €/m2 Bojnik (the sites where municipalities can charge a minimal premium Bujanovac price) Lebane-Bošnjace Lebane-Exportex Medveđa Preševo Surdulica Vladičin Han Vlasotince Vranje-Bunuševac

5 – 10 €/m2 Leskovac (the sites where municipalities can charge a small premium price, Vranje-Ristovac primarily due to already available infrastructure and favorable location)

5.2.1.2 Available Workers The estimated number of available workers per hectare of planned zone. The attribute aims to overcome the difference between small and large municipalities and small and large industrial zones. The number of workers was based on the data of job seekers in the area around the zone where daily commuting time in one direction is approx. 30 minutes.

Project 181/08 – Industrial zones in South Serbia – Draft Final Report Page 50 of 63 Value Sites

100 – 250 /ha Bojnik (an average number of available job seekers) Bosilegrad Bujanovac Crna Trava Lebane-Bošnjace Lebane-Exportex Medveđa Preševo Surdulica Vladičin Han Vlasotince Vranje-Bunuševac Vranje-Ristovac Trgovište

250 – 500 / ha Leskovac (high number of job seekers)

5.2.1.3 Skills Based on educational structure, industrial background and general number of population an estimate of possible highest level of skilled workers are available for facilities in a business zone.

Project 181/08 – Industrial Zones in South Serbia – Final Report Page 51 of 63 Value Sites

labor Bosilegrad (unskilled and mostly uneducated workers) Crna Trava

basic skills Bojnik (some skilled workers available, little technically experienced Bujanovac workers) Medveđa Preševo Trgovište

technically skilled Lebane-Bošnjace (some experienced workers with 4 years education after primary Lebane-Exportex school) Surdulica Vladičin Han Vlasotince

engineering Leskovac (workers with university education are available) Vranje-Bunuševac Vranje-Ristovac

5.2.1.4 Social infrastructure Social infrastructure was evaluated as accessibility to various cultural, medical, leisure and other facilities.

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very low Bosilegrad (very limited facilities in small settlements) Crna Trava

basic Bojnik (basic facilities like bars and restaurant, no quality theaters, medical Lebane-Bošnjace services etc.) Medveđa Trgovište

moderate Bujanovac (standard facilities in smaller towns) Lebane-Exportex Preševo Surdulica Vladičin Han Vlasotince

high Leskovac (hospitals, higher education, theaters) Vranje-Bunuševac Vranje-Ristovac

5.2.1.5 Communications Access to major roads and railway.

Project 181/08 – Industrial Zones in South Serbia – Final Report Page 53 of 63 Value Sites

poor Bosilegrad (traveling time to major highway or railway more than 30 minutes) Crna Trava Medveđa Trgovište

moderate Bojnik (5–20 km from highway/railway by major road) Lebane-Bošnjace Lebane-Exportex

good Surdulica (up to 15 minutes to highway/railway by major road)

excellent Bujanovac (less than 5 km from highway access point/railway station) Leskovac Preševo Vladičin Han Vlasotince Vranje-Bunuševac Vranje-Ristovac

5.2.1.6 Capacity of Authorities This attribute correlate to the ability of the municipal authorities to provide information on urban development and infrastructure to the project team. The value represents also the level of planning documentation available for the identified site: in case the documents exist, the authorities are/were obviously capable of conducting the process. Therefore two sites in the same municipality can be represented by different “capacity”. Regarding overall management impression the municipalities were classified as follows:

Project 181/08 – Industrial zones in South Serbia – Draft Final Report Page 54 of 63 Value Sites

low Preševo (the authorities were not able to provide simple information, there is no clear strategy for development of zones)

limited Bosilegrad (the authorities were able to provide general information but did not Crna Trava demonstrate capacity to identify issues in urban planning or Lebane-Bošnjace infrastructure development; no mapping data on identified site is available at the municipality) Trgovište

average Bujanovac (the authorities were able to provide general information and some Lebane-Exportex planning documents but were not very active in industrial site Leskovac development) Medveđa

highly competent Bojnik (the authorities have demonstrated their active involvement in Surdulica business zones development at the highest levels and have Vladičin Han appointed operative personnel for the task) Vlasotince Vranje-Bunuševac Vranje-Ristovac

5.2.1.7 Social Acceptance The team did not identify any opposition for industrial zones development. Since high unemployment and low income are major problems in the region, all sites were evaluated as having “supportive” local environment.

5.2.1.8 Environmental Impacts The sites vary mainly regarding the distance from settlements, therefore representing standard potential environmental issues of noise and air pollution. Some sites are located near the water bodies so these aspects should be studied in more details. Generally, the sites were classified in two categories:

Project 181/08 – Industrial Zones in South Serbia – Final Report Page 55 of 63 Value Sites

moderate impact Bosilegrad (possible environmental impacts primarily on closely located Bujanovac settlements) Crna Trava Lebane-Exportex Preševo Vladičin Han Vranje-Bunuševac Vranje-Ristovac

low impact Bojnik (no major impacts were identified) Lebane-Bošnjace Leskovac Medveđa Surdulica Vlasotince Trgovište

5.2.2 Evaluation of Criteria Based on the attribute values, the criteria were evaluated as defined in the following subsections.

Project 181/08 – Industrial zones in South Serbia – Draft Final Report Page 56 of 63 5.2.2.1 Human Resources Value Sites

poor Bosilegrad Crna Trava

moderate Bojnik Bujanovac Lebane-Bošnjace Medveđa Preševo Trgovište

good Lebane-Exportex Surdulica Vladičin Han Vlasotince

excellent Leskovac Vranje-Bunuševac Vranje-Ristovac

Project 181/08 – Industrial Zones in South Serbia – Final Report Page 57 of 63 5.2.2.2 Local Factors Value Sites

prohibitive Bosilegrad Bujanovac Crna Trava Lebane-Bošnjace Lebane-Exportex Preševo Trgovište

neutral Leskovac Medveđa

supportive Bojnik Surdulica Vladičin Han Vlasotince Vranje-Bunuševac Vranje-Ristovac

Project 181/08 – Industrial zones in South Serbia – Draft Final Report Page 58 of 63 5.2.2.3 Selling Potential Value Sites

probably not sold in 5 years Bosilegrad Bujanovac Crna Trava Lebane-Bošnjace Lebane-Exportex Medveđa Preševo Trgovište

sold in 3–5 years Bojnik Leskovac

sold in 1–3 years Surdulica Vladičin Han Vlasotince Vranje-Bunuševac Vranje-Ristovac

Project 181/08 – Industrial Zones in South Serbia – Final Report Page 59 of 63 5.2.2.4 Potential of Sites The final criterion is the potential of a site for developing an industrial zone. The sites were classified as follows: Value Sites

not viable Bosilegrad Bujanovac Crna Trava Lebane-Bošnjace Lebane-Exportex Medveđa Preševo Trgovište

limited potential Bojnik Leskovac

viable Surdulica Vladičin Han Vlasotince Vranje-Bunuševac Vranje-Ristovac

The sites classified as “viable” shall be studied in more detail and implementation recommendations shall be provided.

Project 181/08 – Industrial zones in South Serbia – Draft Final Report Page 60 of 63 6 Implementation Options

6.1 Selection of Priority Sites Based on the evaluation the following industrial zones were identified as the most viable and shall be assisted in further development: 1. Vlasotince: a site with some existing international businesses and highly competent and motivated municipal authorities (approx. 50 ha available); 2. Vranje – Ristovac: a large (100 ha) site with a strong prospect for obtaining national support as one of 6–7 nationally important business centers; ownership issues are close to final agreement since the whole area is owned by an agricultural co-operative; 3. Vladičin Han: well developed technical documents for construction of the zone, the site is at one of the most economically depressed municipalities along the main transport corridor (approx 100 ha in three phases); 4. Bojnik: ownership issues resolved (the site owned by the Army, agreed to transfer the ownership to municipality), high potential for agricultural and food processing industries. The industrial sites Vranje – Bunuševac and Surdulica are already reasonably well developed industrial zones that can be expanded further without excessive costs or operational issues. As they were both identified as viable, the municipalities Vranje and Surdulica shall be assisted in building capacity to attract new investments.

6.2 Financing Options

6.2.1 Financing of Development of Priority Sites

6.2.1.1 Vlasotince and Vladičin Han Since the owners of the land in the planned industrial zones Vlasotince and Vladičin Han are primarily small private owners, the municipality has two options for acquisition of land: – public private partnership with land owners: least funds required, highly complex to organize; – public private partnership with a financing institution that can purchase individual lots. Municipality can obtain grants for construction of infrastructure.

6.2.1.2 Vranje – Ristovac The land in this zone is owned by a single entity therefore the municipality has only to finalize the process of land acquisition from the current owner (Farming Cooperative). Besides, the zone is defined as one of the zones of national importance and national grant shall enable construction of infrastructure. Though it might be possible to construct the zone with very little municipal funds, the municipality shall not be tempted into providing land for little or no payment. Since land

Project 181/08 – Industrial Zones in South Serbia – Final Report Page 61 of 63 purchase is only a fraction of implementation costs for investors, the municipality shall recover the costs of investment and with these funds further invest in projects that provide income (public infrastructure with paying users, energy projects, business development etc.).

6.2.1.3 Bojnik The planned site is primarily suitable for larger food processing facilities, therefore it is recommendable that the municipality attracts a potential investor and then provide the necessary infrastructure. The site is not competitive as a general industrial zone therefore major investment in infrastructure without previous agreement with investors is not advisable.

6.2.2 Revolving Fund As proposed in the Regional Development Strategy (project no. 2.1.1. - Creation of a Regional Infrastructure Development Fund), the region can have significant long-term benefit of obtained funds for industrial zones development. Business zone development is in principle a profitable project that generates income therefore there is no need to spend grants only to subsidize investors through lower-than-market property price. The main issue in establishing a fund is a political consensus of all municipalities to transfer the income from property sale into a common regional fund. The municipalities in this manner give away “their” grants. If this scheme can get a consensus, the region could establish an important financial instrument in short period of time that can significantly support regional development.

Project 181/08 – Industrial zones in South Serbia – Draft Final Report Page 62 of 63 7 Annex I: Draft Layouts of Sites

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