Reforms in Serbia: Achievements and Challenges

1. Reforms in Serbia: Achievements and Challenges Boris Begović Center for liberal-democratic studies Belgrade 20th September 2008

2. Real sector: privatization of social enterprises • Tender i auction privatization 2001-2007 • 1,632 firms • 2.1 billion € of proceeds • Selling portfolio of the Share Fund • 1,220 batches • 613 mil € of proceeds • Employment growth in private sector of 300,000, followed by employment drop in non-private sector of 750,000 (2001-2007) • Due to be finished in 2008

3. Real sector: restructuring • Concept of post-privatizaction restructuring • Limited number of (80) pre-privatization restructuring • Deleyed process: • Problem of identification of receivables • Organizational structure (”holding” companies) • Debts/Liabilities of the firms towards the state • Dispensing liabilities towards the state in 2005 • Selling the assets as a substitute for privatization • Lack of political will

4. Real sector: Business climate “Doing Business”

5. Real sector: Challenges and dilemas • Enterprises in restructuring: finishing the job • Alternative methods of privatization: Zastava and Bor • Privatization of urban land • Privatization of public enterprises and local public enterprises • Urban land and town plalning and conrtsuction regulation

6. Financial sector: banking • Fast recovery of the sector: growth of both credit supply and deposits kredita i depozita • Two aims: growth iof the sector (total financial assests) and increase of efficiency efikasnosti (decreasing intermedation costs) • Desiging strategy for finishing privatization of the sector • Integreated regulation/supervison: banks, insurance and securities

7. Financial sector: markets • Shares for the 1997 privatization • Capitalmarket as a mechanisam for distribution of property rights and cliosing the croporations • Does not wiork ans financial mediation mechanism • Takeover law is too restrictive and it protects corporation too much from takeovers • Stengening regulation and supervision of the financial markets

8. Agriculture • Change fo the ownershiop structire and enlargment of the estate • Decerase fo the share fo agricuolture in the GDP (from 15.7% to 10.7%) • Slow liberalization and expoer growth (preferentals and CEFTA) • Moderd masker cahins do nor exists • Need for policy focused to the enehencing amerte and food safty • Development of institutional support )EU funds for rural development

9. Infrastructure: energy • Power: thorough rehabilitation (grants) i and multiple price increases, intrduction of the regional market without effective cost control. • Vertical separation, with separation of the undergound coal mines. • NIS as vartical integraded monopoly, with strong government regulation. Ongouing privatization with uncertein detalis. • Independet Agecy fro Energy which does not perform the tast that has been allocated to it.

10. Infrastructure: transportation(1) • Significant rehabilitation of the roads network, with some investments in its fuither development • Fundining from the earmarket accises tax and tolls: dilemmas about the organization: road fund and budget. Decisons-making about priorioties is not clear. “Putevi Srbije” operationas are not very transparent • Realroads: lack of demand for cargo, high share of tansit (50%) and dominanca of one custormer (US Steel) • Vertical sepratin is not effective • Paseenger trafic is not profitable

11. Infrastrcture: transportation (2) • Flag carriers is about to be privatited • “Open Sky” agreement has ben signed, but not ratified. • Belgrade airport is a public enterprise with uncertain privatization. • Alaternative airport in Nis: used by low cost carriers • Ministy is in charge for regulation and licences • Privileged pisition of the flag carriers on the Belgrade airport

12. Infrastructure: telecomunication • One operator in fixed telecom with penetration of 30%+ • Three operator of mobile telecom with effective penetracije 72%+ • Low level of Internet penetration 23,4% • Independent regulatora agency (RATEL) • Privatization of Telecom Serbia: IPO or tendering • Municipal infrastructure and local public utilities: completly foreoten.

13. Health care • Reform strategy by 2015. and numerous multisectoral strategies • Well developed network of health institutions in public sector – private sector lags in regulation and control and is not integrated in health care system • Financing of health care system has not been changed, only expenditures rose from 247/51 € per capita • Voluntary health insuranse and private sector • Licencing

14. Social protection • Changed system of remunerations (better targeting, increased efficiency) • Reform of social protection services (children in foster families, etc), further decentralisation and deinstitutionalisation needed • Active and pasive measures on labor market and Transition fond from 2002. • Natinal employment agency and her further reform in activities of mediation and advisory work with users • A need for creating stronger incentives for users

15. Education • Stabilegrowth of investments in education from 2.7 to 3.7% GDP • Low quality of the output (PISA i TIMSS below average) and education inefficiency • Reform of professional education ------ • System of education of adults • Decrease disipation in primary schools • Prolong pre-school education • Introducing financing education by capitation formula

16. Pension system • Serious difficulties and large burden on the budged and on employees • Reforms in 2001. i 2005. godine (working age and indexation) • Basic problem: large expenditures (12,5% BDP-a) and demographic ratio of 1.6:1 • Option No 1: no changes • Option No 2: further parameter changes with no reforms • Option No 3: All three pillars reformed • Option No 4: Capitalisation of the existing pension system

17. Governance (1) • Big improvement (six criteria: democracy and accountability, political stability, quality of state regulation, rule of law and corruption control) • Legislative : mature democracy with large number of parties and a need for a change of the election system. Domination of partisan politics • Executive power: coalition governments and vertical splits, problem of reaching strategic decisions and coordination

18. Governance (2) • Government and its administrative capacity : SSP and negative selection • New regulatory bodies: delays, misunderstandings, imposing, independence and i accontability • Judiciary: inheritances of the past, no lustration, low efficiency, permanent preoccupation with reforms • Corruption: rezults achieved, lowered level, iinstitutional wabbling with retreat to “classical” institutional solutions

19. What next? • European Serbia? • Serbia sharing european values • Serbia on its way to the EU • Another postponement • Vast mutual mistrust • A need for having a domestic consensus about European Serbia

20. Centar za liberalno-demokratske studije