Serbia: Country Analysis. Report Sample.

In 1945 the Socialist Republic of Yugoslavia was proclaimed and comprised of six republics including Serbia, Croatia, Montenegro, Slovenia, Macedonia, and Bosnia-Herzegovina. In the 5th of June 2006, Montenegro voted in a referendum backing Serbia to become a stand-alone sovereign republic; separating it from the Union of Serbia and Montenegro. In the year 2012, the European Council accorded Serbia the status candidate state. Accession negotiations kicked off in January 2014 began in order to see through the realization Stabilization of Association Agreement (SAA) between Serbia and the European Council (Zivkovic 616).

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According to a report compiled by the United Nations in 2012, the Republic of Serbia had a population of 9.8 million. The Serbian government is parliamentary and has its capital in Belgrade. The ground covered by Serbia is 88, 361 square kilometers divided into 119 municipalities. The people in Serbia majorly speak Serbian and Christianity is a dominant religion. Life expectancy in Serbia is 77 years for women and 72 for men. Dinar is the currency used in Serbia. National symbols include national colors (Red, Blue, and White) and double-headed eagle. The national anthem is known as Boze pavde (God of Justice).

Political Environment

The Republic of Serbia has not yet submitted an International Court of Jurisdiction declaration, but it operates under the civil law system. The hierarchy of the executive branch includes the president as the head of state and the president as the head of government. The National Assembly elects the cabinet. The presidency is decided upon by a direct majority vote in 2 rounds (Thomas). One presidential term is a 5-year term and eligible for only 2 terms. After the early parliamentary elections, the government has 20 members the Prime Minister. The elected government still is committed to reforms, European Union integration and its facilitated dialogue with Kosovo (Nikolayenko 155).

Continued high level of professionalism and preparedness has been witnessed in the proceedings of negotiations of accession. Speaking administration matters, Serbia is relatively ready in the sector of the civil service reform (Boschler 164). Adoption of the public e-government strategies, management reforms, and laws on procedures of administration, regulatory reform and policy-making has seen good progress and visible achievement. Concerning the normalization of ties between Serbia and Kosovo; since government formation in August, the Serbian government has enhanced the quick implementation process of the August 2015 Agreement (Thomas).

Legal Environment

The legislative branch is made of 250 seats in the Unicameral National Assembly. The legislators are directly elected in a national election in each constituency in a vote that comes after every 4 years. Supreme Court of Cassation (which consists of not less than 60 judges put into panels of 3s and 5s) and Constitutional Court (which consists of 15 judges). The State Prosecutorial Council (SPC) and the High Judicial Council (HJC) propose the judicial appointments and dismissals. The two managerial bodies are also partly responsible for prosecution and court budgets alongside the Ministry of Justice (Zivkovic 600).

The division of power in administrative responsibilities creates loopholes for political influence and further hinders the efficiency of financial management (Nikolayenko 160). Although the constitution assures independence of the judiciary, the legislative and constitutional framework leaves plenty of scope for further unwanted political influence towards the judiciary. The judiciary also undergoes pressure exerted from external parties such as politicians making public comments about cases before the court and not enough protective measures applied by the State (Nikolayenko 161)

Prosecutorial Council and the High Judicial Council. The quality of justice in Serbia is determined by the Judicial Academy which is mandated to prepare its students throughout the initial and continuous training for judicial service. To make it a credible, compulsory and independent entry point into the judiciary, there need to be further reforms in the Judicial Academys financial, professional and administrative capacity (Thomas). There is no quality review mechanism to measure and evaluate how effective is the judicial training. Insufficient training and constant changes in legislation create hoops for the justice system, further leading to inconsistency in the court practices. Besides, practical in-service training lacks in across levels of judiciary servants accountable for the justice quality thus the strong need for the practical training (Boarov 230).

Further challenges are posed by the fact that automated exchange of information is limited across the judiciary. The Information and Communication Technology sector is still underdeveloped. For the quality of justice to be improved there needs to be reforms in the statistical methods employed in the analysis, management and policy decisions. This will also improve the performance of justice (Sandner 200). A case weighting system should be put in place to ensure an even distribution of cases. Despite there being a law on mediation in place beginning January 2015, there has been the limited impact in the intended purpose. There is still little awareness of alternative methods of dispute resolution and mediation talks. The law has, so far, had the desired effects on resolving the backlog of cases (Sandner 199).

Concerning the fight against crime, Serbia has had a good fight, so far. The level of preparation in the counter on organized crime is encouraging; progress is being achieved in taking up new police law, restructuring the Interior Ministry (Nikolayenko 158). There is, also a track record of the number of arrests, prosecutions and convictions for organized crime. This is good news for businesspeople since it creates a conducive environment for the running of businesses in Serbia (Zivkovic 615).

Economic Environment

The Serbian government has had to comply with the agreements reached in European Council in Copenhagen in June 1993. Among the requirements, the capacity to withstand pressure from the external competitors exerted by the market forces within the Union and the existence of a functioning marketing economy (Thomas). Keeping an eye on the economic criteria goes a long way in improving the economic governance in the way to the realization of the enlargement process. Serbia being one of the enlargement countries, it prepares an Economic Reform Programme yearly (Zivkovic 596). It is in this Economic Reform Programme that the expansion state lays out a structural reform agenda and medium-term macro-fiscal policy of framework whose objective is to ensure healthy competition and an all-inclusive economic growth.

The Serbian economy can be said to have developed a functioning market. It has also registered a satisfactory progress in the attempt to address policy weaknesses, particularly regarding the budget deficit (Boarov 218). There has been a reduction of domestic and external imbalances. Furthermore, growth prospects have improved. Although the credit activity is gradually recovering, there remains the issue of non-performing loans. Besides, there is a high a very high rate of unemployment mostly affecting the youth. Additionally, the private sector is still underdeveloped. The private sector is further restricted by the rule of law thus making conducting business in Serbia more of a challenge than an opportunity (Thomas).

There is light at the end of the tunnel because, in an attempt to comply with the Economic Reform Programme, Serbia has shifted its attention to reducing public debt and lowering the budget deficit further. Besides, there has been privatization of state-owned enterprises, addressing non-performing loans and continued restructuring of the enterprises. In order to create a business-friendly, Serbia focuses on improving systematic revenue collection by fighting the informal economy and implementing the tax administration transformation programme (Sandner 207).

The Serbian government has also shown commitment to the economic governance by creating a functioning marketing economy. It has also been faithful to the implementation of the Stand-By Arrangement with the International Monetary Fund (IMF) (Nikolayenko 150). For further improvement in the business environment within Serbia, the government has seen speedy growth based on fundamentals guided by the rigorous and broad-based investments and expansion of exports. There was a new investment cycle that started in the year 2015 has so far seen the significant impact in influencing rebalancing the economy (Boarov 222). There has, however, been an unchanged gap off the European Union at 36% of the European Union average per capita GDP in purchasing power standards. More improvements, though, have been witnessed in the surging exports thus resulting in Serbia's robust export greatly reducing external imbalances. This sector has also exhibited improvement in the solid export performance; rising from two-thirds in 2011 to 90% as at 2016. On top of that, there has been a significant reduction in the account and trade deficits. The account deficit in 2011 dropped from 8% to 4% of GDP in 2016. It was wholly settled by the Foreign Direct Investment (FDI). Most of the FDI influx has been directed to manufacturing and tradable sectors (Nikolayenko 163).

However, there has been no change in the percentage of external debt which still stands at 80 against the GDP. This does not raise concerns since external imbalances have been shrinking over the term (Zivkovic 600).

There has been a monetary policy supporting growth and stabilizing prices in Serbia. This has also seen the declining of commodity prices and a weak domestic demand. It has also kept the inflation rate less than the central banks target of 4% 1.5 percentage points from February 2014. The central bank has also seen to it that the foreign currency reserve requirement ratio has gradually been cut down with the view to improve lending terms and trigger credit growth. This will go a long way to improving the business environment ( Boschler 162).

Another aspect that has been outstanding is the fiscal consolidation has also been steadily growing stable after years of lack of budgetary equilibrium. The budget deficit falling from 6.6% of GDP in 2014 to 3.7% of GDP in the last year. There was a better than expected tax collection at the end of 2014 (Sandner 215). There is also the need for fiscal consolidation to be sustained in order to do away with the constant imbalances and risks which are persistent in the economy, this will, in turn, see a reduction in the deficit. To also improve on creating an enabling business structure. There are constant attempts to see the budgetary governance strengthen alongside budgetary framework, in the same line, the Serbian government adopted a Public Finance Management reform plan in its advanced stages right now (Nikolayenko 148)

To show its commitment to facilitate a conducive business environment, the government of Serbia has improved the entry procedures into the market. The process of registering business entities has now been simplified by steps such as making possible for business persons to apply for incorporation and VAT registration at the same time (Bochsler 160). Another simplified procedure includes the issuance of construction permits by setting up an electronic permitting system which began operation in the year 2016. As a result of the faster processing of permits or licences, there was reported a 12.25 increment in the number of building permits issued with more expected this year. This is actually in compliance with the ERP policy guidance that aims at improving the business conditions and pr...