1. Serbia on the European track Challenges and Perspectives Berlin – May 2010
Božidar Djelić
Deputy Prime Minister for European Integration and Minister of Science and Technological Development

2. GERMANY IS A KEY PARTNER FOR SERBIA
Germany is the most important trading partner for Serbia
Economic and political cooperation with the Länder:
Joint Commission Serbia – Baden Württemberg
Joint Commission Serbia – Bavaria
Initiative for establishment of the Joint Commission Serbia – North Rhine-Westphalia
Strategic partnership between Deutsche Bahn and Serbian Railways
Partnership signed with RWE on Serbia’s hydro potential development: Drina ( MW), Danube Djerdap reversible (up to 4x600MW) and Morava (200MW)
Imminent decision on two thermoplant constructions, each 700MW, with RWE interested in Tesla 2

3. SERBIA IS AN INCREASINGLY IMPORTANT PARTNER FOR GERMANY
Imports from Germany in 2009 were 1.39 bln EUR, while exports to Germany were 624 mln EUR
Germany holds the 4th place on the list of foreign investors in Serbia, with investments realized in period totaling bln USD
More than 160 German companies are present in Serbia
Forthcoming privatization of Telekom Serbia (40% of equity, 20% already held by OTE) of high interest for Deutsche Telekom
President of Serbia Boris Tadić awarded with the Quadriga (2008) and the Steiger (2010) prestigious prizes for his contribution to the region and Europe 3

4. SERBIA IS A NATURAL PART OF THE EU4

5. EU INTEGRATION IS SERBIA’S CENTRAL STRATEGIC PRIORITY
71% of the population supports the European integration of Serbia
Successful implementation of the Interim Trade Agreement as of
1st January 2009
Very positive Progress Report for Serbia issued by European Commission in October 2009
Decision on the unfreezing of the Interim Trade Agreement on
7th December 2009, implemented by the EU as of 1st February 2010
Visa-free travel with the Schengen space achieved on
19th December 2009 5

6. SERBIA CONTINUES TO WORK ON MEETING THE CRITERIA FOR MEMBERSHIP
Application for membership handed over by President Tadić to Swedish PM Reinfeldt on 22nd December 2009
Expecting the start of the SAA ratification after the report of chief prosecutor of ICTY Serge Brammertz at the June 2010 EU GAC
Hoping for green light to be given to the European Commission to prepare the avis on the application as soon as possible , hopefully before summer of 2010
Serbia is preparing answers to questions addressed to Croatia, Macedonia, Montenegro and Albania 6

7. SERBIA HAS BEEN IMPLEMENTING THE NATIONAL PLAN FOR EUROPEAN INTEGRATION FOR THE PAST TWO YEARS
Implementation of and quarterly reporting on the National Plan for European Integration ( )
All-encompassing operational plan for approximating the acquis communautaire
The entire National Programme reached 74% implementation rate for the period July March 2010
We aim to fully approximate the acquis communautaire by the end of 2012 7

8. STRONG TRACK RECORD IN FIGHTING ORGANIZED CRIME AND CORRUPTION
The head of the US Drug Enforcement Administration during a visit to Belgrade in April 2010 defined Serbia as its “strategic partner in the region for fighting drug trafficking”
More than 4,000t of cocaine seized in Serbia and South America in collaboration with the DEA and British services
Fight against corruption includes a law on seizing assets of organized crime convicts
A much needed judiciary reform carefully implemented since December 2009 8

9. IPA PROGRAMMING – SERBIA IS ABSORBING WELL, WITH A PERFECT COMPLIANCE RECORD
Total IPA allocation 2007 – 2013: €11.5 billion
Total allocation for Serbia 2007 – 2013: €1.4 billion
Year
2007
2008
2009
2010
2011
2012
2013
Allocation
(€million)*
189.7
190.9
194.8
197.9
201.8
205.8
214.7
No. projects 36 35 9 26
Comment
€100 million of budgetary support
Programming has been launched €189.9 million
Preparations for IPA components III, IV and V have started
* These allocations include Cross Border Cooperation Programmes in total annual value of approximately €11.5 million 9

10. DECENTRALIZED IMPLEMENTATION SYSTEM (DIS)
DIS means establishment of national institutional and legal framework for management of tendering, contracting, payments, monitoring, evaluation and auditing in accordance with EC rules
DIS covers accreditation of each IPA component separately in six stages
We have finalized 2 stages and we are currently in the most difficult stage (i.e. Gap plugging stage)
All responsible persons and institutions have been appointed (in some cases we established new institutions)
Accreditation last for 2 years
According to Serbian DIS Roadmaps we expect accreditation by end of 2011 10

11. € 3 BILLION STAND-BY ARRANGEMENT WITH THE IMF INSURES MACROECONOMIC STABILITY
Confirmation of macroeconomic stability in time of crisis
4,3Cuts in Government spending around €1 bn in 2009
% of GDP general Government deficit in 2009 and -2,9% GDP growth
4% of GDP general Government deficit in 2010 and 2% expected GDP growth
Agreement with financial sector to maintain existing credit lines for Serbian economy in
As results, stability of dinar exchange rate and foreign exchange reserves are achieved
€6,1 bn of domestic saving in Q1 2010, €400 million higher than before economic crisis

12. FISCAL ADJUSTMENT SUPPORTING BALANCED GROWTH
Nominal freezes of public wages and pensions until April 2011 will be replaced by structural sound spending reforms:
Fiscal Responsibility Law will limit budget expenditures and public debt by defining their maximum share in the GDP and maximum annual change
Achieving 1% of general government deficit by 2015 is a medium term goal
In February 2010, Serbia was the only country whose risk category with the OECD was upgraded (form category 7 to 6)

13. REGIONAL INITIATIVES Development of the EU Strategy for Danube Region
Establishment of the Western Balkan Technology Fund
Transport Community of the South Eastern Europe
Development of the Strategy for inclusion of the Roma population 13

14. FIVE REASONS TO INVEST IN SERBIA (1)
Stable political and favourable macroeconomic environment
Stable government, with three more years in power
European integration top priority
Two year IMF program, supported by the EU and the World Bank
Comprehensive investment incentives
Willingness to support all FDI through standard financial and tax incentives
For large enough investments, Government is ready to consider favourable JVs and provide bureaucratic guidance
Access to both the EU and CIS markets
Free trade agreements with EU, Russia, Belarus, Turkey and regionally CEFTA
Ongoing free trade negotiations with Iran, Syria and Ukraine 14

15. FIVE REASONS TO INVEST IN SERBIA (2)
Highly-skilled, low-cost labour
One of the best-ranked educational systems in CEE (by World Economic Forum GDI)
Total monthly cost of EUR 500 per worker (half of CEE average of EUR 1,053)
Solid and improving infrastructure
Heavy investments in the road and railway network, especially in the Trans European Corridor X
Investments in energy infrastructure, production capacities and energy efficiency 15

16. SERBIA HAS THE BEST FDI TRACK RECORD IN THE REGION
Leading Foreign Investors ( )
Company
Industry
Investment (EUR mn)
Telenor (Norway)
Telecommunications
1,602
Philip Morris (USA)
Tobacco
611
Mobilkom (Austria)
570
Banca Intesa (Italy)
Banking
508
Stada (Germany)
Pharmaceuticals
475
Interbrew (Belgium/Brasil)
Food and Beverages
430
NBG (Greece)
425
Gazprom (Russia)
Energy
400
Mercator (Slovenia)
Retailing
240
Fondiaria SAI (Italy)
Insurance
220
Lukoil (Russia)
210
Source: National Bank of Serbia, Serbia Investment and Export Promotion Agency 16

17. SERBIA PROVIDES COMPREHENSIVE INVESTMENT INCENTIVES
10-year corporate profit tax holiday for large investments (over €7mn with min. 100 new jobs)
Corporate profit tax credits of up to 80% of investment in fixed assets
1-3 year salary tax exemptions for specific employee categories
2-3 year social insurance charges exemptions for specific employee categories
Imports of equipment exempt from customs duties
Cash grants for Greenfield investments 17

18. COMPREHENSIVE INVESTMENT INCENTIVES
Source: Serbia Investment and Export Promotion Agency 18

19. MOST FAVOURABLE FISCAL SYSTEM IN THE CEE REGION
Source: International Monetary Fund 19

20. INVESTING IN SCIENCE AND TECHNOLOGY IS, FOR SERBIA, THE ONLY WAY TO CREATE A SUSTAINABLE ECONOMY AND SOCIETY
Vision of the newly adopted Science and Technology Strategy:
“Serbia as an innovative country where scientists reach European standards, contribute to the knowledge of the entire society and the technological development of the industry” 20

21. TWO KEY ELEMENTS OF THE STRATEGY
FOCUS by defining seven national priorities in the field of science and technology:
Biomedicine and human health
New materials and nanosciences
Environment protection and countering climate change
Agriculture and food
Energy and energy efficiency
Information and communication technologies
Improvement of decision making processes and affirmation of national identity
PARTNER by creating stronger ties within the scientific community, between science and industry, with society and key international partners. 21

22. INCREASING AND DIVERSIFYING R&D EXPENDITURE, AS WELL AS INVESTING IN RESEARCH INFRASTRUCTURE, ARE PRECONDITIONS FOR SUCCESS
On March4th, 2010 Serbia signed a financial agreement with the European Investment Bank for 200 million EUR of investment in R&D infrastructure
Negotiations are underway with CEB and other international financial institutions for a total of 420 million EUR of investment over the next five years 22

23. INCREASING AND DIVERSIFYING R&D EXPENDITURE, AS WELL AS INVESTING IN RESEARCH INFRASTRUCTURE, ARE PRECONDITIONS FOR SUCCESS
Projects within the “Serbian R&d Infrastructure Investment Initiative” include:
Upgrading existing capacities (facilities renovation and new equipment)
Development of human capital (Human Resources Program, the Petnica Science Center, new Center for Promotion of Science)
Development of centers of excellence and academic research centers in priority research fields 23

24. INCREASING AND DIVERSIFYING R&D EXPENDITURE, AS WELL AS INVESTING IN RESEARCH INFRASTRUCTURE, ARE PRECONDITIONS FOR SUCCESS
Development of information and communication technology infrastructure (Campus for faculties of technical sciences in Belgrade, Infrastructure for supercomputing initiative “Blue Danube”)
Science and technology parks in Belgrade, Niš, Novi Sad and Kragujevac
Apartment buildings for researchers in Belgrade, Niš, Novi Sad and Kragujevac 24

25. Thank you for your attention!
GOVERNMENT OF THE REPUBLIC OF SERBIA
OFFICE OF THE DEPUTY PRIME MINISTER
NEMANJINA 11
11000 BELGRADE, SERBIA 25