The economy
77. Serbia's long standing ostracism from the international
community has taken a serious toll on its economy. In 2003 its
GDP grew by 1.5%, far below the hoped-for 4%, while the trade
deficit topped $4 billion, and the current account deficit has
reached $1.8 billion. The government has also failed to rein in
the budget, with the likely consequence of increasing inflation,
and it strains under $13.8 billion in international debt.[98]
Inflation will rise to about 12-13% in 2004.[99]
The CIA World Factbook states:
Milosevic-era mismanagement of the economy, an extended
period of economic sanctions, and the damage to Yugoslavia's infrastructure
and industry during the NATO airstrikes in 1999 have left the
economy only half the size it was in 1990
The complexity
of Serbia and Montenegro political relationships, slow progress
in privatization, legal uncertainty over property rights, and
scarcity of foreign-investment are holding back Serbia and Montenegro's
economy. Arrangements with the IMF, especially requirements for
fiscal discipline, are an important element in policy formation.
Severe unemployment remains a key political economic problem.[100]
78. The FCO wrote in their submission: "Despite
significant progress, especially in terms of legislation and macro-economic
reform, both republics [Serbia and Montenegro] need to continue
with in-depth reforms on the rule of law and institution building
as well as to deal with a large and unsustainable state-owned
sector."[101]
79. The Embassy of Serbia and Montenegro naturally
presented a more optimistic vision of the Serbian economy, declaring
that inflation has now been under control for four years, that
GDP was likely to surpass projections, that privatisation had
moved forward, and that Serbia had signed an agreement with the
IMF, World Bank and European Bank for Reconstruction and Development.
The economy's fundamental problems, they stated, were "a
traditionally high deficit in the exchange of trade, a high degree
of unemployment (13%) and still a very high percentage of 'grey
economy'".[102]
The FCO agreed that corruption and organised crime were serious
problems for Serbia.[103]
80. One major concern for the Serbian economy is
the threat posed by organised crime, which plays an important
role in the economy given the criminalisation of state structures
which took place under Milosevic and the UN sanctions regime.
However, we were glad to hear from Gabriel Partos that the problem
of crime had lessened in the last year. He told us:
I think that the worst of it is now perhaps behind
us because of the very firm action the government took back in
the spring/early summer of last year and to the extent that organised
crime in many ways dominated Serbia, that situation no longer
is the case.[104]
81. We conclude that the United Kingdom, alongside
its EU partners, should increase its support for projects such
as judicial reform, changes in tax regime, customs reform and
other areas of technical assistance which contribute to Serbian
development; the Government should also examine the possibility
of reduced tariffs on agricultural exports because continued economic
weakness is in no one's interests. We also welcome comments from
our witnesses concerning the reduced threat of organised crime
in Serbia, but stress that much work remains to be done. We recommend
that the Government support initiatives to weaken the hold of
organised criminal gangs.
Conclusion
82. We conclude that Serbia's integration into
the Euro-Atlantic structures is desirable, but must not occur
at the expense of Serbia's legal obligations to the Hague Tribunal.
46 Ev 50 Back
47
Tim Judah, The Serbs: History, Myth and the Destruction of
Yugoslavia, (London, 2000), see chapter 6 and Misha Glenny,
The Balkans:, 1804-1999: Nationalism, War and the Great Powers,
(London, 1999) p 266 Back
48
Ev 1 Back
49
Ev 66 Back
50
Ev 51 Back
51
Ev 6 Back
52
Ev 10 Back
53
Ev 7 Back
54
International Crisis Group, A marriage of inconvenience: Montenegro
2003, 16 April 2003 Back
55
Ev 131 Back
56
Ev 2 Back
57
United Nations Security Council, UNSCR 1244, 10 June 1999
Back
58
Ev 63 Back
59
Ev 4 Back
60
Ev 110 Back
61
Ev 3 Back
62
Ev 55 Back
63
Ev 66 Back
64
Ev 51 Back
65
Ev 58 Back
66
International Criminal Tribunal for the former Yugoslavia, Address
by Carla del Ponte, Prosecutor of the International Criminal Tribunal
for the former Yugoslavia, to the United Nations Security Council,
23 November 2004, Back
67
Ev 132 Back
68
"Wanted Serb general surrenders", BBC, 25 January
2005 Back
69
Ev 66 Back
70
Ev 82 Back
71
Ev 44 Back
72
Ibid. Back
73
"Serbia and Montenegro assistance", US Department
of State Press Statement, 13 January 2005 Back
74
Ev 137 Back
75
Ev 54 Back
76
Ev 132 Back
77
Ev 132 Back
78
Yugoslavia launched a claim in the International Court of Justice
(ICJ) that the bombing in 1999 violated its sovereignty; this
was a major obstacle to Serbia's entry to NATO. However, the ICJ
found in December 2004 that it does not have jurisdiction to rule
on the matter in December 2004, see "The international court
in decline", International Herald Tribune, 13 January
2004. Back
79
US Mission to NATO, Istanbul Summit Communiqué,
26 June 2004, Back
80
Ev 53 Back
81
Ev 43 Back
82
Ev 118 Back
83
Ev 82 Back
84
NATO Parliamentary Assembly, Visit to Serbia and Montenegro
by the Sub-Committee on Central and Eastern Europe, 5-7April
2004, Back
85
Ev 60 Back
86
EC DG External Relations, The Stabilisation and Association
process, http://europa.eu.int/comm/external_relations Back
87
EC DG External Affairs, The Stabilisation and Association Process:
Third Annual Report Back
88
Ev 44 Back
89
"Has anyone heeded the warning", B92, 26 January
2005 Back
90
Ev 82 Back
91
Ev 83 Back
92
Ev 43 Back
93
Foreign Affairs Committee, Fourth Report of Session 2000-2001,
Government policy towards the Federal Republic of Yugoslavia
and the wider region following the fall of Milosevic, HC 246 Back
94
International Crisis Group, Southern Serbia's fragile peace,
9 December 2003 Back
95
Ev 51 Back
96
"Albanians to decide this week on co-ordination body",
B92, 13 January 2005 Back
97
International Crisis Group, Serbia's U-Turn, 26 March 2004 Back
98
Ibid. Back
99
"Inflation into double digits", B92, 28 October
2004 Back
100
CIA World Factbook, Serbia and Montenegro, http://www.cia.gov/cia/publications/factbook/ Back
101
Ev 66 Back
102
Ev 132 Back
103
Ev 135 Back
104
Ev 6 Back