## _cr06141 ## Source details **Canonical URL:** [_cr06141](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2006/_cr06141.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2006/_cr06141.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2006/_cr06141.pdf.json) --- ### Introduction and PRSp purpose - First annual report on implementation of the Poverty Reduction Strategy paper for Serbia (PRSp), covering 2004 until the middle of 2005. - PRSp adopted: October 2003. - Government changes: Parliamentary elections December 28, 2003; new Government formed March 2004. - PRS coordination: Deputy Prime Minister assumed coordination in mid-2004; duty formalized February 2005; PRS Implementation Focal Point consolidated autumn 2004. - PRSp financing: World Bank-administered Poverty Reduction Strategy Trust Fund (Japanese and Dutch funds), UK Department for International Development (DfID), and donations from Danish and Norwegian Governments. - Strategic objective: cut poverty in Serbia almost by half by the year 2010. - PRSp integrates MDGs; Government adopted Review of the Implementation of the Millennium Development Goals in Serbia in May 2005. - Programmatic budget planned: Ministry of Finance to introduce programmatic budget as of 2007. - Report coverage: results of PRS implementation since 2004 to mid-2005; full PRS policy update expected by end-2006/beginning-2007. - Data sources: 2002 and 2003 SLSP; Household Budget Survey (HBS); Working Group for Poverty Measurement established February 2005. ### Poverty measurement: methodology and institutional arrangements - Two-phase measurement approach since 2002: - Phase 1: SLSP surveys in 2002 and 2003 (SLSP critical for PRSp creation). - Phase 2: 2004 decision to use HBS as main permanent source by Republican Statistical Office (RSO). - Working Group on Poverty Measurement (WGPM) tasks: - Analyze SLSP and HBS methodological differences. - Suggest methodological solutions for poverty indicators based on HBS. - Facilitate discussion on poverty line/subsistence minimum; suggest monitoring standard for RSO. - Promote training in poverty analysis. - Key methodological issues: - Consumption measurement differences (SLSP single-month June vs HBS year-round diaries). - Owner-occupied housing imputation differences (SLSP real estate survey vs HBS self-assessed rents). - Non-food component re-estimation required when switching from SLSP to HBS. - Data cleaning procedures jointly developed by RSO, WGPM and World Bank. ### SLSP poverty trends (2002–2003) — key statistics - SLSP sample sizes: - 2002: 6,380 households (19,725 members). - 2003 panel sub-sample: 2,548 households (8,027 individuals). - Poverty incidence: - 2002: The poor 10.6 percent; Poverty index 2.2; Poverty Gap 0.8. - 2003: The poor 10.5 percent; Poverty index 2.0; Poverty Gap 0.6. - Poverty lines: - 2002 poverty line: CSD 4,489 per month per adult equivalent. - 2003 poverty line: CSD 4,970 per month per adult equivalent. - 2003 specific measures: - 10.5% of citizens poor; average consumption per adult equivalent below CSD 4,970/month. - Extreme poverty in 2003: less than one percent; average consumption below CSD 2,097/month per adult equivalent (minimum food basket). - 2003 poverty gap equaled 2%. - Severity of poverty in 2003 reached 0.6%. - Economic mobility (2002→2003 panel): - Not poor in 2002 → Not poor in 2003: 83.3%; → Poor in 2003: 6.1%; Total 89.4%. - Poor in 2002 → Not poor in 2003: 6.2%; → Poor in 2003: 4.5%; Total 10.6%. - Movers: those who moved out of poverty saw consumption grow approximately twice on average; those who became poor saw consumption decline by 43%. - Labor force mobility (status in 2002 = 100, in %): - Employed in 2002 → Employed in 2003: 81.8; → Unemployed in 2003: 3.3; → Inactive in 2003: 14.9. - Unemployed in 2002 → Employed in 2003: 47.7; → Unemployed in 2003: 25.4; → Inactive in 2003: 26.9. - Inactive in 2002 → Employed in 2003: 15.1; → Unemployed in 2003: 3.0; → Inactive in 2003: 81.9. - Regional poverty (2003): - Rural poverty 14.9%; Urban poverty 7.1%; National total 10.5%. - Largest share of poor in Southeast Serbia 23.5%; lowest in Belgrade 4.2%. - Southeast Serbia poverty growth vs 2002: 41.6%; Belgrade poverty almost halved. - Ratio poverty index Southeast Serbia to Belgrade in 2003: 5.6 (up from 2.1 in 2002). ### Preliminary HBS poverty signals (2003–2004) - Preliminary findings: - No significant changes in poverty level between 2003 and 2004 (preliminary). - High concentration of population around the poverty line. - Gini coefficient slightly below 0.30 in both 2003 and 2004. - Upper ranges for preliminary poverty estimates (Serbian Scale, %; adjusted for inflation; period March–December for comparability): - Belgrade: 2003 2 – 7; 2004 2 - 5. - AP Vojvodina: 2003 13 – 19; 2004 16 - 24. - Central Serbia: 2003 12 – 27; 2004 16 - 26. - Rural: 2003 15 – 28; 2004 20 - 31. - Urban: 2003 8 – 14; 2004 7 - 13. - Serbia: 2003 11 – 20; 2004 13 - 20. - HBS confirms regional patterns: Belgrade far below national average; rural areas elevated poverty risk. - Recommendation: future HBS sampling design should incorporate SLSP regional splits for central Serbia. ### Macroeconomic framework and growth (Serbia) — key figures and projections - Real GDP growth: - 2003: 2.4% - 2004: 8.6% - Projected 2005: 4.6% - Projected average annual growth 2004-2006: approximately 5.9% - Projected growth 2006-2008: 5.7% - Inflation (retail prices, end of period): - 2002: 14.8% - 2003: 7.8% - 2004: 13.7% - First nine months of 2005: retail prices growth 11.8% - Target: bring inflation down to 4.5% by end of 2008 (period 2006–2008). - Current account deficit and trade: - 2004 current account deficit equaled USD 2.8 billion i.e. USD 3.447 billion excluding official international assistance (increase of 43.8% vs 2003). - Share of current account deficit (without official support) in GDP: 2003 = 11.7%; 2004 = 15.6%. - Exports/Imports (monetary levels cited): exports increased from USD 2 million in 2002 to almost USD 4 million in 2004; imports from USD 5.6 million in 2002 to almost USD 11 million in 2004. - Trade deficit (%GDP): 2002 = 24.8; 2003 = 24.7; 2004 = 32.8. - Foreign direct investment (FDI): - 2002: 475 (millions of USD) - 2003: 1,360 (millions of USD) - 2004: 966 (millions of USD) - Projected FDI in 2005: minimum USD 1 billion. - Investment share of GDP: - Grew from 13.6% in 2001 to 16.4% in 2004. - Strategy target: share of investments in GDP should reach approximately 25% by 2010. - External debt: - Share of external debt in GDP reduced from 78.6% in late 2002 to 63.8% in late 2004. - External debt amounted to approximately USD 14.1 billion in late 2004. - Expectation: Paris Club will write off over USD 700 million in debt by end of 2005 upon agreement with the IMF. - Banking sector indicators: - Core inflation (NBS): 2002 = 6.0; 2003 = 5.4; 2004 = 11.5. - Fiscal indicators (selected): Public revenues (% GDP) 2002 = 44.3; 2003 = 43.1; 2004 = 45.2. Public expenditures (% GDP) 2002 = 47.7; 2003 = 44.3; 2004 = 44.6. Fiscal deficit/surplus (% GDP) 2002 = -3.4; 2003 = -1.1; 2004 = 0.6. ### Fiscal policy, tax reform and public expenditures (Serbia) - 2004 tax policy changes included: Law on VAT, Law on Income Tax, amendments to Corporate Income Tax, Law on Excise Tax, Law on Property Tax, abolishment of Income Fund Tax and Financial Transaction Tax. - VAT (effective January 1, 2005): - General VAT rate: 18% - Special VAT rate: 8% (certain basic foodstuffs; medications paid from health insurance funds; certain medical supplies, text books and teaching materials; daily newspapers; communal services, etc.) - VAT exemptions: services provided by health institutions (accommodation, care and meals of hospitalized patients), services by medical doctors, dentists, social welfare and care services, accommodation and meals for students in hostels, education and professional retraining. - Initial VAT results: - Rising fiscal revenues and declining gray economy. - Local self-governments recorded a surplus of approximately CSD 4 billion. - Calculated average tax rate decreased; conditions for a drop in prices of up to approximately 1.7%. - Government changes in July 2005: additional categories taxed at lower VAT rate of 8%; humanitarian aid and foreign donations exempted from VAT. - Corporate income tax reductions: - Reduced from 20% to 14% (2003), and from 14% to 10% (2004). - This tax reduction recorded an over 60% increase in tax collection. - Public expenditure concerns: - Largest share used to subsidize pension funds (13.6% in 2004). - Functional reallocation proposed: decrease public administration, defense and national security spending; decrease share for social welfare but retain social programs complementing restructuring; increase share for education, economic affairs and construction and infrastructure. - Projected consolidated public expenditures (% GDP): - 2005: 45.7 - 2006: 44.6 - 2007: 43.5 - 2008: 42.5 ### General public services, subsidies and privatization outcomes (Serbia) - Functional expenditure shares/items (values as presented): - General public services: 5.1, 5.0, 4.9, 4.8. - Defense: 2.8, 2.6, 2.3, 2.0. - National security: 2.2, 2.0, 1.7, 1.4. - Economic affairs: 3.9, 4.0, 4.0, 4.1. - Health: 6.6, 6.5, 6.4, 6.3. - Education: 3.9, 4.0, 4.2, 4.3. - Social welfare: 27, 18.4, 17.5, 17.0, 16.5 (as presented). - Subsidies: - Share of subsidies-based expenditures in GDP: 2002 = 7.6%; 2004 = 5.9% (tendency to further decrease). - Privatization outcomes (2002–end-August 2005): - 50 companies sold in tendering procedures. - 1,191 companies sold in auction sales. - 390 companies sold as minority packages on the capital market. - 1,631 of the 2,027 companies offered in tender procedures were sold (sales success rate of 80%). - Privatization proceeds equal EUR 1.68 billion. - Contracted investments amount to almost EUR 850 million. - Proceeds of social programs amount to EUR 270 million. - Guarantee Fund for SMEs: - Fund approved 950 requests and issued guarantees totaling EUR 7.5 million (activity to July 2004). - Budget allocation additional CSD 1.5 billion in 2005 to the Fund. ### Employment policy, National Employment Strategy and programs (Serbia) - Employment changes: - Employment increased by 0.5% in 2004 vs 2003. - First seven months of 2005: average number of employed increased by 0.1% vs 2004. - National Employment Strategy adopted: 2005-2010 (adopted April 2005). - 2010 targets (Table 3.6.a. values preserved): - Employment rate: Current STATUS 58% ; Current EU STATUS 65% ; YEAR 2010 67%. - Unemployment rate: Current STATUS 14.6% ; Current EU STATUS 6-8% ; YEAR 2010 10.5%. - Participation rate: Current STATUS 68% ; Current EU STATUS 69% ; YEAR 2010 72%. - Youth employment rate: Current STATUS 15% ; Current EU STATUS 40% ; YEAR 2010 20%. - Women employment rate: Current STATUS 48% ; Current EU STATUS 56% ; YEAR 2010 90% of men’s employment rate. - Active labor-market programs (persons by activity; planned 2005 values marked with *): - Training for active job searching: 2002 6,238 ; 2003 12,362 ; 2004 14,471 ; 2005* 7,126. - Job fairs: 2002 4,086 ; 2003 8,207 ; 2004 13,324 ; 2005* 6,710. - Job centers: 2002 692 ; 2004 15,508 ; 2005* 20,000. - Self-employment programs: 2002 1,305 ; 2004 2,646 ; 2005* 2,500. - 2004 CSD allocations: - Total 2004 allocation CSD 900 million; CSD 410 million were spent on active employment programs; almost CSD 250 million for additional training and education. - 2005 budget allocated CSD 750 million for these purposes. - Development Fund allocations (2004–2005 plans): - Approved CSD 4 billion in loans to SMEs in 2004; expected to create 5,000 new jobs. - 2005 plan: CSD 3.9 billion for SME development; CSD 220 million for individual small shops; CSD 600 million in loans to would-be entrepreneurs registered as unemployed with National Employment Service. - Labor market formalization (labor-inspection results): - 2002: 18,564 persons working but not registered → formal employment of 12,695 persons. - 2004: 46,635 persons working but not registered → formal employment of 30,754 persons. - NES Work Program 2005 (TYPE OF ACTIVITY; Number of people; Allocated Funds (EUR)): - Active job search: 8,912 ; 63,898. - Employment fairs: 6,710 ; 69,700. - Additional education and training program: 8,260 ; 4,540,812. - Developing entrepreneurship and employment incentives: 25,650 ; 4,672,500. - TOTAL FUNDS FOR ACTIVE LABOR MARKET PROGRAMS: 49,532 people ; 9,374,992 EUR. ### Social protection, family support and Social Innovation Fund (Serbia) - Minimum social security level introduced in 2004; Family Financial Support (MOP) eligibility revised. - MOP beneficiary numbers and transfers (CSD): - 2002: Average number of Families 39,430 ; Beneficiaries 90,336 ; Total 921,296,000. - 2004: Average number of Families 45,254 ; Beneficiaries 108,793 ; Total 1,709,951,000. - 2005: Average number of Families 52,000 ; Beneficiaries 127,000 ; Total 2,800,000,000. - Children’s allowances: - Number of families receiving children’s allowances: 2002 324,650 ; 2004 262,693. - Number of children: 2002 573,187 ; 2004 489,803. - Total amount of children’s allowances: 2002 6,598,308,482 ; 2004 6,567,688,714 (CSD). - Share of children’s allowances in the budget: 2002 3.07% ; 2004 2.13%. - Social Innovation Fund (SIF/FIS) support and allocations: - 2003: 88 projects approved; EUR 1.2 million donation (Norway) and 44 million dinars from Serbian budget. - 2004: 39 continuing projects; EUR 150,000 donation (Norway) and 24 million dinars from budget. - April 2005: new call; EUR 900,000 from EAR donation and CSD 32 million from budget allocated. - Third competition for disability organizations (August 2004): 84 projects approved; total amount 34 million dinars. - Targeted relief: - 30% discount on electricity costs for socially vulnerable categories; relief program after July 2004 electricity price increase subsidized electricity payments for 142,000 families. ### Pensions and elderly protection (Serbia) - Pension system indicators and issues: - Progress: pension payments became more regular; pensioners received 12 payments in 2004. - Around EUR 215 million necessary for paying farmers’ pension arrears (20.5 pensions). - Deficit of all three pension funds in 2004 was 5.12% GDP. - Budget subsidizes around 40% of pension fund’s income (and for Fund of Farmers, even more). - Consolidation and reforms: - Amendments increased lowest pension protective level and provided framework for consolidation of three pension and disability insurance funds. - Draft law on debt reprogramming envisages solving remaining delay in pension payments in next three to five years for different pensioner categories. - World Bank support: end-May 2005 World Bank granted USD 25 million to support related project. - Services and home-care coverage: - Home assistance provided for 2,500 beneficiaries. - Clubs for elderly rally around 20,000 users and provide meals for around 6,000 people. - Protected housing: around 900 elderly, refugees and displaced persons in 18 municipalities. - Pilot integrated home care includes 100 families in Knić, Kragujevac and Knjaževac. - Forthcoming challenges: - Further reform to decrease burden on economy and republic budget while preventing elderly impoverishment. - Consolidate pension funds; improve information system and register of insured (Maticna evidencija osiguranika). - Improve control of contribution payments; develop alternative forms of social protection at local level. ### Health sector reforms (Serbia) — targets and projects - Health financing reform: change model of financing primary health care and introduce new provider payment model by end of 2006. - World Bank support: loan of USD 23.5 million until 2008 for Development of the Health Care System in Serbia focusing on restructuring health care centers, ICT, and hospital payment methods. - Accreditation, licensing and quality: - Evidence-based clinical practice guidelines based on National Burden of Disease Study developed and being implemented. - New standards for health personnel, performance and hospital provisions proposed. - Pilot project of basic health services in Kraljevo completed June 2005; 2006 pilot to inform capitation formula for financing primary care. - Draft Law on Health Insurance includes basic health benefit package, new financing methods, decentralization of Health Insurance Fund, and room for voluntary/private insurance. - Health information systems: - Kraljevo pilot produced software solution for primary care teams; plan to scale to Belgrade municipalities and clusters via EAR project; development of electronic health record and national clearinghouse planned. - Forthcoming challenges: - Health care financing reform across primary/secondary/tertiary care. - Rationalization of health workers and implementation of new standards. - Options for privatization in dental, rehabilitating spa centers, and public/private mixes. - Establish independent national bodies for licensing, health technology assessment, accreditation and continuous quality improvement. ### Education reforms (Serbia) — key measures and targets - 2002 SLSP: 69% of poor had only elementary or incomplete secondary education; 2% had university degrees. - Share of education expenditure in GDP: 3.9% in 2005 and set to rise to 4% in 2007. - Nine-year compulsory education scheduled for 2006-7 school year; preparatory grade for children 6–7 years. - Republic of Serbia Education Improvement Project (Ministry of Education and Sport and World Bank) targets poorest regions and children from IDP and Roma families. - Teacher training and inclusion: - 220 seminars in 2003 (8,300 teachers); 280 seminars in 2004 (4,000 teachers). - Social inclusion sensitivity seminars for 1,200 education employees, parents and social work center representatives. - Roma education: - Free textbooks for about 6,000 pupils in 2002-3 and 5,886 pupils in 2003-4. - 74 school projects for Roma (6,500 children) supported 2002-3; about 70 projects in 2003-4. - Affirmative action led to enrollment increases (e.g., 42 Roma pupils in secondary schools and 51 students in two-year colleges/universities in 2002-3; 70 pupils in 2004-5; 89 students in two-year colleges/universities). - Action plan for promoting Roma education adopted January 2005. - Forthcoming education challenges: - Improve quality via rationalization, quality standards, teacher training, and approving new school books. - Reform vocational education; include marginalized groups and persons with special needs. ### Regional, rural, urban and environmental priorities (Serbia) - Regional discrepancies pronounced; traditionally undeveloped south and Old Raška, newly impoverished east Serbia and parts of central Serbia. - Development Fund of Republic of Serbia lending activity: - Long-term loans: repayment period five years, one-year grace; interest rate depends on development level of municipality (table of rates preserved). - During 2004, 7.86 billion dinars extended; 4.72 billion dinars to be extended in 2005. - Lending terms (Development Fund table preserved): - < 33% GDP average: up to 80% fund loan share / 1% annual interest rate. - 33% - 50%: up to 60% / 3%. - 50% - 70%: up to 50% / 4%. - > 70%: up to 40% / 5%. - Environmental investments and indicators: - Co-financing totaling CSD 237 million for dams/reservoirs and water supply facilities in 23 municipalities. - CSD 61 million allocated in 2004 to co-finance 30 waste management projects in 61 municipalities. - Estimated less than 15% of 152 wastewater treatment plants operating with satisfactory results. - World Bank project Serbian Danube River Enterprise Pollution Reduction total value approx. USD 20 million planned for September 2005. - Agency for Environmental Protection established December 2003; Fund for Environmental Protection established beginning of 2005. - Draft National Environmental Action Plan (NEAP) prepared with EAR support; numerous action plans expected by December 2006. ### Budget analysis and international assistance - Main obstacle: absence of a model for systematic monitoring of resource allocation based on programmatic goals; line-type budget prevents clear link between expenditures and PRS goals. - Methodology used: assume certain state functions contribute fully to poverty reduction (economy, labor and employment; social welfare and insurance; health; education) and estimate shares in total public spending. - Aggregate shares of allocations directed at these functions (share in total public spending): - 2003: 67.7% - 2004: 70.3% - 2005: 71.0% - Table 4.1.a (share in total public spending, selected rows preserved): - Economy, labor and employment — 2003 9.5 — 2004 9.2 — 2005 9.3. - Social welfare and insurance — 2003 36.7 — 2004 39.0 — 2005 38.9. - Health care — 2003 13.5 — 2004 14.5 — 2005 14.4. - Education — 2003 7.9 — 2004 7.5 — 2005 8.3. - TOTAL — 2003 67.6 — 2004 70.2 — 2005 69.9 (table note). - International assistance (donor totals 2000–2005): - Total allocated to Serbia: EUR 5.3 billion. - Approximately EUR 3.1 billion used during 2000-2004. - 2005 planned allocation: EUR 620 million. - Outstanding funds approx. EUR 1.6 billion. - Ratio of grants and concessional credits (EUR million): - 2000 Grants 187.21 (100%) Total 187.21. - 2001 Grants 592.86 (69%) Concessional Credits 269.80 (31%) Total 862.66. - 2002 Grants 554.27 (68%) Concessional Credits 261.28 (32%) Total 815.55. - 2003 Grants 354.12 (55%) Concessional Credits 287.69 (45%) Total 641.81. - 2004 Grants 124.60 (22%) Concessional Credits 431.26 (78%) Total 555.86. - 2005 Grants 72.94 (12%) Concessional Credits 551.98 (88%) Total 624.92. - TOTAL Grants 1,886.00 (51%) Concessional Credits 1,802.01 (49%) Total 3,688.01. - Priority actions: better coordination and harmonization of international assistance with PRS goals and budgetary resources; development of international assistance classification system (ISDACON) with Development and Aid Coordination Unit, Ministry of International Economic Relations. ### Legal and institutional reform — laws status (Serbia) - Adopted laws (selected): - Law on Mandatory Social Insurance Contributions — Official Gazette No. 84/04 and 61/05. - Law on Free Access to Public Information — Official Gazette No. 120/04. - Law on Drugs and Medical Items — Official Gazette No. 84/04. - Law on Registration of Commercial Entities — Official Gazette No. 55/04 and 61/05. - Law on Value Added Tax — Official Gazette No. 84/04, 86/04 and 61/05. - Law on Public Administration — Official Gazette No. 79/05. - Law on Civil Servants — Official Gazette No. 79/05. - Family Law — Official Gazette No. 18/05. - Draft laws in Parliamentary procedure (selected): - Law on Health Protection — Draft Law in Parliament procedure since May 20, 2005. - Anti Money Laundering Law — Draft Law in Parliament procedure since November 29, 2004. - Law on Goods and Services Market Inspection — Draft Law in Parliament procedure since July 22, 2005. - Laws envisaged by PRS and in preparation (selected): - Law on Foreign Trade — In preparation. - Law on Voluntary Pension and Disability Insurance — In preparation (adoption envisaged until end of 2003 in original plan). - Laws not envisaged by the PRS but adopted as relevant (selected): - Law on Environmental Protection — Official Gazette No. 135/04. - Law on Strategic Environmental Impact Assessment — Official Gazette No. 135/04. - Labour Law — Official Gazette No. 24/05 and 61/05. ### Consultative process and advisory committees - Seven representative Advisory Committees established during PRSp preparation: - Parliamentary Committee for Poverty Reduction in Serbia. - Civil Society Advisory Committee. - Local Self-Governments Advisory Committee. - International Development Partners Advisory Committee. - Trade Unions Advisory Committee. - Business Advisory Committee. - Inter-Ministerial Operational Advisory Committee. - Parliamentary Committee (composition and activity): - Established May 30, 2003; active April 8, 2004. - 15 members from six parties; 13 sessions by June 2005; promoted PRS among MPs; cooperating with UNDP and OSCE. - Civil Society Advisory Committee: - Representatives of 11 NGOs from three largest NGO networks. - Organized nine round tables January 2005; resulting brochure on civil society participation (DFID support). - Local Self-Governments Advisory Committee: - Coordinated via Standing Conference of Towns and Municipalities (SCTM); published brochure “Poverty Reduction Strategy—challenges and opportunities at the local level” January 2005. --- ### Montenegro: DPRS excerpts and poverty diagnostics (selected highlights) - Development and Poverty Reduction Strategy (DPRS) for Montenegro covers 2003–2006; Economic Reform Agenda 2002–2007 complementary. - Poverty incidence estimates: - Between 8.4 and 13.6 percent (best approximation 10.9%) live in absolute material poverty. - Poverty pockets: Roma 48%; recipients of social assistance 39.3%. - One third of population economically vulnerable (below 150% of poverty threshold). - Gini index for consumption per capita estimated at 0.28. - ISSP survey-based figures (selected): - 2002 data: Head Count 9.4 (7.5-11.3) ; Poverty gap 1.3 ; Severity 0.3. - 2003 ISSP: Head Count 12.2* (6.8-17.6). - 2004 ISSP: Head Count 10.9 (8.4-13.6) ; Poverty gap 2.1 ; Severity 0.7. - Macroeconomic projections and indicators (selected values preserved): - GDP in current prices (mil. €): 2002 1.301,5 ; 2003 1.433,0 ; 2004 1.535,0 ; 2005 1.644,0 ; 2006 1.759,0 ; 2007 1.873,3. - Real GDP growth (%): 2002 1,7 ; 2003 2,3 ; 2004 3,7 ; 2005 4,1 ; 2006 4,5 ; 2007 4,5. - Unemployment rate: 2002 30.45 ; 2003 25.82 ; 2004 22.6 ; 2005 21.6 ; 2006 20.6 ; 2007 19.3. - Average wage (€): 2002 193.0 ; 2003 271.0 ; 2004 302.8. - Average pension (€): 2002 108.8 ; 2003 113.0 ; 2004 122.0. - DPRS priority activities (selected): - Target real growth: 2004 3.7% ; 2006 target 4.5%. - Reduce informal economy from 30% (2002) to 15% by 2006. - Fiscal consolidation: decrease fiscal deficit (prior to grants) from 4% (2003) to 1% in 2006. - Employment: unemployment target 20% by 2006. - Social protection and child protection (selected outcomes): - Law on Social and Child Protection adopted. - Pension reform measures: increase retirement age to 60 for women and 65 for men; Swiss indexation; new pension formula based on individual coefficients; contribution rate reduced from 24% to 21.6%. - Pension deficit reduced from 1.1% of GDP in 2002 to 0.9% of GDP in 2004. - Regional development, infrastructure and sectoral priorities noted: water supply and sewage master plans, tourism expansion targets, transport and energy projects, environmental action plans, and housing actions with indicative investment requirements (e.g., EUR 10 million temporary flats; EUR 50 million for ~2,000 new housing units; EUR 46 million for illegal settlements improvements). *Source: _cr06141 - 1. Introduction; 2. Poverty Statistics; 3. PRS Implementation: Reports of the Government; 1. General public services; 4. Analysis of Budget and International Assistance Resources; 5. Consultative Process; 6. Annexes; Montenegro DPRS excerpts as provided in the supplied content.* ### 1. Introduction ........................................................................... 4 ### 1. Introduction ### Background - This document is the first annual report on the implementation of the Poverty Reduction Strategy paper for Serbia (PRSp), covering the period 2004 until the middle of 2005. - The Government of the Republic of Serbia adopted the Poverty Reduction Strategy paper for Serbia (PRSp) in October 2003. - Parliamentary elections were held on December 28, 2003; the new Government was formed in March 2004. - In mid-2004, following an agreement with the Prime Minister, the Deputy Prime Minister assumed responsibility for coordinating and monitoring Government institutions with respect to PRS implementation; this duty was made official in February 2005 by a special decision of the Government of the Republic of Serbia. - The Deputy Prime Minister’s PRS Implementation Focal Point was established and consolidated in the course of autumn 2004. - The PRSp preparation used a wide consultative process to ensure inclusion of stakeholders and to secure legitimacy and ownership by the newly elected Government. ### Role of the PRS within broader strategies and reforms - The PRSp: - Serves as one of two main pillars in the Republic’s medium-term development framework. - Complements the Republic of Serbia’s European Union integration process; the European Commission’s Multi-Annual Indicative Program for 2005-2006 emphasized complementarity between the European Partnership and the PRSp. - Informed the recently adopted National Strategy of the Republic of Serbia for accession of Serbia and Montenegro to the EU. - The PRS addresses twin challenges: - Post-socialist transition to a market economy. - Harmonization with the European Union. - The PRS contributes to alleviating short-term negative effects of transition and to building long-term support for reform. ### Integration of international benchmarks and public administration reform - The United Nations Millennium Development Goals (MDGs) are integrated into the PRSp; the Government adopted the Review of the Implementation of the Millennium Development Goals in Serbia in May 2005. - The PRSp emphasizes public administration reform to increase efficiency and transparency of policy coordination and governance, based on the concept of “open Government.” - Key institutional capacity gaps identified: - Lack of efficient central-level policy coordination. - Insufficient operational knowledge to translate programmatic goals into concrete measures and activities. - Need to establish links between planning and budgetary processes, and between planning and international assistance resources. - Planned mechanisms for improvement: - Introduction of a programmatic budget; the Ministry of Finance plans to introduce the programmatic budget as of 2007. - More efficient implementation of a sector approach for allocation of international development assistance. ### About the Poverty Reduction Strategy Paper for Serbia (PRSp) - The PRSp is the first multi-sector programmatic policy document by the Government of the Republic of Serbia, prepared with participation from governmental and non-governmental organizations and institutions. - The PRSp was financed by the World Bank-administered Poverty Reduction Strategy Trust Fund (Japanese and Dutch funds), the UK Department for International Development (DfID) and donations from the Danish and Norwegian Governments. - The PRSp: - Represents a medium-term development framework to reduce key aspects of poverty by creating material preconditions and opportunities for citizens. - Is in line with the National Strategy for accession to the EU and contains an action plan for achieving the MDGs. - The PRS defines poverty as multi-dimensional, including insufficient income and inability to exercise human rights such as rights to employment, adequate housing, access to social welfare, health, education and communal services, and barriers to a healthy environment and natural resources (clean water and air). ### Historical context and objective - Historical baseline: - Prior to the early 1990s, as part of the Socialist Federal Republic of Yugoslavia (SFRY), Serbia had a GDP per capita of over USD 3,000, with majority access to education, health care, social welfare and other services. - In the economic and social crash of the 1990s, GDP declined dramatically (by approximately 50%), unemployment rates soared, and wages, pensions and other sources of personal income fell considerably. - The situation improved in the period 2001-2003 due to reforms and international support, resulting in significant growth of GDP, wages, pensions and other sources of personal income, but this period was too short to compensate for the prior decade’s gap. - Strategic objective: - The Poverty Reduction Strategy aims to cut poverty in Serbia almost by half by the year 2010. - Main strategic directions toward this aim: - Dynamic economic growth and development with an emphasis on job creation within the private sector. - Preventing emergence of new categories of the poor (“new poverty”) as a consequence of economic restructuring and rationalization of public administration. - Efficient implementation and preparation of programs, measures and activities directly targeting the poorest and most vulnerable social groups (children, the elderly, the disabled, refugees and internally displaced persons, Roma, poor rural populations and the uneducated), particularly in the least developed regions. ### Principles guiding PRSp implementation - Mainstream poverty reduction into regular Government work across line ministries, central government institutions, local self-governments and partners. - Build strong ownership through inclusive participatory processes with active involvement of civil society, private and public sectors, and representatives of vulnerable groups in implementation, monitoring and evaluation. - Ensure effective integration and consolidation of European integration and PRSp implementation as main pillars of Serbia’s reform framework together with relevant sector strategies. - Change the way Government operates by achieving transparency through a well-defined planning process (including more efficient coordination and prioritization). - Engage local-level PRS implementation through participation and cooperation of local self-governments, NGOs, the private sector and donors, aligned with public administration reform and decentralization. - Support partnership building to improve coordination and information sharing and to ensure synergic effects of poverty reduction activities. ### About the content and limits of this report - Coverage: - The report presents results of PRS implementation since 2004 to the middle of 2005, and available data on poverty trends. - A full PRS policy update can be expected by the end of 2006/ beginning of 2007. - Data sources and analysis: - Poverty trend analysis is based on data from the 2002 and 2003 Survey on Living Standard of the Population (SLSP) conducted before PRS implementation. - The most recent poverty assessment for Serbia is based on the Household Budget Survey of the Republic Statistical Office of the Republic of Serbia. - The analysis in this report is a result of the work of the Working Group for Poverty Measurement established by the Government of the Republic of Serbia in February 2005. - Report structure: - Results of PRS implementation are presented through reports of participating government institutions organized to follow the PRSp structure. - The report includes an overview of economic trends (macroeconomic indicators, fiscal policy, transition measures), priority areas (employment, social welfare, health care, education), regional/rural/urban aspects, environmental impact on quality of life, analysis of budget allocation and international assistance. - Limitations in impact analysis: - Poverty reduction efforts cut across multiple sectors, increasing complexity of assessment. - Lack of an established monitoring system limits the ability to fully assess achieved results. - Existing statistical system is predominantly focused on quantitative rather than qualitative data. - A poverty-related monitoring system will be developed in the upcoming period. *Source: _cr06141 - 1. Introduction* ### 2. POVERTY STATISTICS ### 2. POVERTY STATISTICS ### Activities Related to Poverty Measurement - Government goal: create a solid statistical base for continuous and reliable poverty measurement and engage expert resources in poverty diagnostics. - Two phases since 2002: - Phase 1: SLSP surveys in 2002 and 2003 (conducted at Government request, supported by World Bank). SLSP critical for creating the PRSp in 2002-3. - Phase 2: 2004 decision to base poverty statistics on Household Budget Survey (HBS) conducted on a permanent basis by the Republican Statistical Office (RSO); intended to secure full national ownership, long-term continuity, and assist capacity building within the RSO. - Working Group on Poverty Measurement (WGPM) established February 2005 by the Government; tasks: - Analyze methodological and empirical features of SLSP and HBS. - Suggest methodological solutions for creating poverty indicators based on HBS. - Facilitate discussion on poverty line/subsistence minimum and suggest monitoring standard for RSO. - Promote training in poverty analysis and encourage wider research community involvement. - Key methodological differences and issues WGPM addresses: - Consumption measurement: HBS collects data throughout the year and follows Eurostat-recommended diaries; SLSP measured a single month (June) with a shorter form and more interviewer control — SLSP-derived minimum food basket must be revised for HBS item detail. - Owner-occupied housing service flows: SLSP used a special real estate market survey and imputed rents setting an arbitrary interest rate; HBS uses owners’ self-assessed rental values, producing outliers and problematic entries due to a thin housing market — implicit rent information may be combined with other data to periodically assess housing value and household welfare. - Non-food component of subsistence minimum: SLSP used Engel law (parametric approach) to relate non-food consumption to overall welfare; re-estimation of the non-food component is necessary because HBS data differ from SLSP. - Data cleaning: RSO with WGPM and World Bank is developing procedures to handle outliers and inconsistent entries; work ongoing toward a final dataset for poverty assessment. ### 2003 SLSP Poverty Trends - SLSP implementation: - 2002 sample: 6,380 households with 19,725 members. - 2003 sample: sub-sample of 2,548 households (8,027 individuals) all surveyed in 2002; timing May 15–June 15 kept the same for comparability; panel feature tracked changes within same households. - Main indicators 2002–2003: - Percentage of the poor and extremely poor remained unchanged despite significant economic growth in 2002–2003. - 2003: 10.5% of citizens were poor, with consumption per adult equivalent below CSD 4,970/month on average. - Extreme poverty in 2003: less than one percent with average consumption below CSD 2,097/month per adult equivalent (minimum food basket). - Regional/ international comparison: using a poverty line of USD 2.15/day PPP and comparable consumption aggregate, Serbia’s poverty percentage was similar to Romania, lower than Albania, and higher than Bulgaria and Poland (ECAPOV II, World Bank, 2005). - Table 2.2.a. Poverty indicators in Serbia, 2002-2003 (in %) - 2002: The poor 10.6; Poverty index 2.2; Poverty Gap 0.8 - 2003: The poor 10.5; Poverty index 2.0; Poverty Gap 0.6 - Note: In 2002 the poverty line equaled CSD 4,489 per month per adult equivalent, while in 2003, it was CSD 4,970. Source: SLSP for 2002 and 2003. - Depth and severity: - 2003 poverty gap equaled 2% — interpretation: "if the country could mobilize resources amounting to 2% of the poverty line for each person (poor and not poor) and direct these resources towards the poor, poverty would, theoretically, be eliminated, provided that such assistance was perfectly targeted." - Severity of poverty in 2003 reached 0.6%. - Economic mobility (panel, 2002–2003): - Overall poverty percentage unchanged, but significant mobility: slightly over one half of the poor recorded in 2002 moved out of poverty by 2003, while approximately the same number became poor in 2003; the “new” poor comprised slightly over one half of the poor in 2003. - Table 2.2.b. Economic mobility of the population in Serbia, 2002-2003 (in %) - Not poor in 2002 → Not poor in 2003: 83.3; → Poor in 2003: 6.1; Total 89.4 - Poor in 2002 → Not poor in 2003: 6.2; → Poor in 2003: 4.5; Total 10.6 - Total: Not poor in 2003 89.5; Poor in 2003 10.5; 100.0 - Consumption changes among movers: - Those who moved out of poverty: consumption grew approximately twice on average. - Those who became poor: consumption declined by 43%. - Persons whose status remained same: consumption grew 9.5% among those not poor and 10.8% among those who remained poor. - Labor force mobility (Table 2.2.c. Status in 2002 = 100, in %): - Employed in 2002 → Employed in 2003: 81.8; → Unemployed in 2003: 3.3; → Inactive in 2003: 14.9 - Unemployed in 2002 → Employed in 2003: 47.7; → Unemployed in 2003: 25.4; → Inactive in 2003: 26.9 - Inactive in 2002 → Employed in 2003: 15.1; → Unemployed in 2003: 3.0; → Inactive in 2003: 81.9 - Interpretation: significant reallocation within one year, especially among unemployed; one half of unemployed in 2002 found employment in 2003, though one half of those jobs were in the gray economy. - Regional poverty (2002–2003): - 2003: rural poverty 14.9%; urban poverty 7.1%; total 10.5%. - 2002: rural 14.2%; urban 7.8%; total 10.6%. - Graph 2.2.d. (percentages by type of region) shows widening urban–rural gap in 2003. - Graph 2.2.e. Percentage of the poor by region, 2002–2003 (selected values shown): - 2002/2003 regional pairs: Belgrade 4.2; AP Vojvodina 9.7 / 11.4; Western Serbia 23.5; Šumadija and Pomoravlje 7.8 / 8.8; Eastern Serbia 13.5; Southeast Serbia 16.6 / 23.5; (table shows multiple region values culminating in national 10.5). - 2003: largest share of the poor in Southeast Serbia 23.5%; lowest in Belgrade 4.2%. - 2003 change vs 2002: Southeast Serbia highest growth of poverty 41.6%; Belgrade largest decline (poverty almost halved). - Widening regional differences: ratio of poverty index Southeast Serbia to Belgrade equaled 5.6 in 2003, up from 2.1 in 2002. - Context and perceptions: - Despite 15 years of impoverishment, Serbia categorized as medium developed. - Regional comparisons: Serbia similar to Romania, lower than Albania, higher than Bulgaria/Poland. Western Balkans: lowest poverty in Croatia 8,4% and highest in Albania (over 25%) and Kosovo (half below official poverty line). - Subjective poverty: at least half the Serbian population is dissatisfied or mostly dissatisfied with their financial situation. ### Preliminary Poverty Data Based on the Household Budget Survey (2003-2004) - HBS advantages: improved design since 2003 offers opportunity to use HBS as main permanent official source on poverty; provides rich data for research and policy. HBS and SLSP are not straightforwardly comparable. - Preliminary HBS findings: - No significant changes in poverty level between 2003 and 2004 (indicative preliminary data). - High concentration of population around the poverty line; Gini coefficient slightly below 0.30 in both 2003 and 2004. - Table 2.2.f. Upper Ranges for Preliminary Poverty Estimates, based on the 2003-2004 HBS (Serbian Scale, %; adjusted for inflation; period March–December used for comparability) - Belgrade: 2003 2 – 7; 2004 2 - 5 - AP Vojvodina: 2003 13 – 19; 2004 16 - 24 - Central Serbia: 2003 12 – 27; 2004 16 - 26 - Rural: 2003 15 – 28; 2004 20 - 31 - Urban: 2003 8 – 14; 2004 7 - 13 - Serbia: 2003 11 – 20; 2004 13 - 20 - Ranges are relatively wide; final estimates expected to gravitate towards lower ranges once consistency checks and cleaning completed. - Regional patterns confirmed by HBS: - Pronounced regional differences persist (as in SLSP). Belgrade’s poverty incidence remains far below national average; rural areas face elevated poverty risk. - Preliminary HBS implies autonomous province of Vojvodina’s relative position is significantly worse compared to SLSP — may be statistical artifact or reflect real problems (faster transition/restructuring, greater inequality, higher unemployment, unfavorable demographics such as high number of elderly rural households and lower rental prices). - Recommendation: future HBS sampling design should incorporate SLSP approach dividing central Serbia into three distinctive regions to capture lower-level regional differences. - Policy use: - Final HBS data, once available, will be used to monitor reform effects and guide policy to address rural poverty, lagging regions, and socially excluded groups. - Preliminary 2003–2004 HBS results confirm SLSP insights remain relevant for policy and program development aimed at poverty reduction. *Prepared by the Working Group for Poverty Measurement, established in February 2005 by a special act of the Government of Serbia.* ### 3. PRS IMPLEMENTATION: REPORTS OF THE GOVERNMENT ### 3. PRS IMPLEMENTATION: REPORTS OF THE GOVERNMENT ### Overview and institutional capacity - Implementation of the Poverty Reduction Strategy Paper (PRSp) for Serbia witnessed significant progress in 2004 despite initial challenges and barriers. - Ministries and other state institutions do not yet have mechanisms to ensure systematic monitoring of PRS implementation; developing an effective and transparent monitoring and evaluation system is a government priority. - Governmental institutions prepared reports based on tailored questions from the PRSp (chapter “Resume and Activity Matrices”) and the material is organized across 12 segments as in the Strategy. - A pilot project, “Joint Project: towards a more efficient implementation of reforms,” is being implemented by the Government of the Republic of Serbia to begin creating a monitoring system. ### Macroeconomic framework and factors of sustainable economic growth - Macroeconomic stability was established in 2001-2002, providing a basis for continuing reforms and medium-term growth—the key prerequisite for poverty reduction. - Continuous GDP growth was recorded, reaching 8.6% in 2004; progress includes a rise in FDI, a reduced foreign debt to GDP ratio, and satisfactory banking system reform. - Deep structural weaknesses remain: exports, investments and national savings are at very low levels; macroeconomic imbalances and debt burden leave the economy sensitive to shocks. Key findings, projections, and statistics: - Real GDP growth: - 2003: 2.4% - 2004: 8.6% - Projected 2005: 4.6% - Projected average annual growth 2004-2006: approximately 5.9% - Projected growth 2006-2008: 5.7% - Inflation: - Target: inflation should be brought down to 4.5% by end of 2008 (period 2006–2008). - 2002: 14.8% (retail prices, end of period) - 2003: 7.8% (retail prices, end of period) - 2004: 13.7% (retail prices, end of period) - First nine months of 2005: retail prices growth 11.8%; expectation that by end-2005 inflation will not exceed previous year. - Current account deficit: - 2004 equaled USD 2.8 billion i.e. USD 3.447 billion excluding official international assistance (increase of 43.8% vs 2003). - Share of current account deficit (without official support) in GDP: 2003 = 11.7%; 2004 = 15.6%. - Major cause: increase in trade deficit driven by higher imports of production materials and equipment; exports rose but less than imports. - Export/Import monetary levels cited: exports increased from USD 2 million in 2002 to almost USD 4 million in 2004; imports from USD 5.6 million in 2002 to almost USD 11 million in 2004. - Foreign direct investment (FDI): - 2003: USD 1.36 billion (record year) - 2004: USD 966 million (decline due to slow-down in privatization) - Projected FDI in 2005: minimum USD 1 billion. - SIEPA initiated a project worth EUR 4.5 million to develop investment locations and launch new investment projects. - Investment share of GDP: - Grew from 13.6% in 2001 to 16.4% of GDP in 2004. - Strategy target: share of investments in GDP should reach approximately 25% by 2010. - External debt: - Share of external debt in GDP reduced from 78.6% in late 2002 to 63.8% in late 2004. - External debt amounted to approximately USD 14.1 billion in late 2004. - Expectation: Paris Club will write off over USD 700 million in debt by end of 2005 upon agreement with the IMF. - Banking sector reform: - Entering final phase after restructuring and consolidation, liquidation of insolvent banks, entry of foreign banks, improved legal framework for supervision and enhanced transparency. - Completion contingent on privatization of state shares in banks and harmonization with EU directives and Basel Principles. Forthcoming macroeconomic challenges (as identified): - Increase exports by improving business climate, reducing costs of doing business, and creating flexible and competitive market structures to attract FDIs. - Increase ratio of private investments to GDP, focusing on attracting foreign greenfield investments beyond privatization-driven investment. - Raise credibility of the banking sector to encourage long-term savings. ### Macroeconomic indicators (selected table entries preserved) - GDP real growth (%): 2002 = 4.5, 2003 = 2.4, 2004 = 8.6 - Core inflation (NBS): 2002 = 6.0, 2003 = 5.4, 2004 = 11.5 - Retail prices (end of period): 2002 = 14.8, 2003 = 7.8, 2004 = 13.7 - Foreign direct investment (millions of USD): 2002 = 475, 2003 = 1,360, 2004 = 966 - Donations (millions of USD): 2002 = 559, 2003 = 360, 2004 = 456 - Trade deficit (%GDP): 2002 = 24.8, 2003 = 24.7, 2004 = 32.8 - Current account deficit (%GDP): 2002 = 13.5, 2003 = 11.7, 2004 = 15.6 - Public revenues (% GDP): 2002 = 44.3, 2003 = 43.1, 2004 = 45.2 - Public expenditures (% GDP): 2002 = 47.7, 2003 = 44.3, 2004 = 44.6 - Fiscal deficit/ surplus (% GDP): 2002 = -3.4, 2003 = -1.1, 2004 = 0.6 Note: Data for 2005 to be comprised in the revised Memorandum on Budget and Economic and Fiscal Policy for 2006 with projections for 2007 and 2008. ### Fiscal limitations in PRS implementation and public finance reforms - Public finance reform (2001-2003) achieved significant progress toward a more transparent, simpler fiscal system aligned with European standards. - Due to tax policy reform, a consolidated fiscal surplus is envisaged for 2005 and onwards. - Continuing tax reforms aim to reduce taxes, broaden the tax base, raise the share of expenses in GDP related to investment, capital expenditures and education, and lower expenses related to defense, police, health and social welfare (social insurance funds). - Government policy for 2006-2008: preserve fiscal stability, continue reducing public expenditures and taxes, better use fiscal resources, and ensure greater mobilization of public revenues including tax incentives to raise business activity. Major tax policy measures and outcomes: - Significant 2004 tax policy changes include: the Law on VAT, the Law on Income Tax, amendments to the Law on Corporate Income Tax, the Law on Excise Tax, the Law on Property Tax, Amendments to the Law on Using, Holding and Carrying Goods, abolishment of the Income Fund Tax and the Financial Transaction Tax. - Law on Value-Added Tax (VAT) effective January 1, 2005: - General VAT rate: 18% - Special VAT rate: 8% applicable to certain basic foodstuffs; medications paid from health insurance funds; certain medical supplies, text books and teaching materials; daily newspapers; communal services, etc. - VAT not imposed on services provided by health institutions (accommodation, care and meals of hospitalized patients), services by medical doctors, dentists, social welfare and care services (including child and youth protection, social protection services), accommodation and meals for students in hostels and similar institutions, and education and professional retraining. - Initial results of VAT introduction (with fiscal registers): - Significantly rising fiscal revenues and declining gray economy. - Local self-governments recorded a surplus of approximately CSD 4 billion (Ministry of Finance). - Calculated average tax rate decreased; conditions created for a drop in prices of up to approximately 1.7%. - Initial period also saw a slight rise in inflation due to factors related to VAT introduction and coverage of grey economy. - Expert analyses show a certain increase in tax burden on the poor; to address this, in July 2005 the Government adopted changes to the Law on VAT by which additional categories (medications, basic foodstuffs, new apartments, livestock, etc.) are taxed by lower VAT rate of 8%. Humanitarian aid and foreign donations are exempted from paying VAT. - Corporate income tax reductions: - Reduced from 20% to 14% (2003), and from 14% to 10% (2004). - This tax reduction recorded an over 60% increase in tax collection. Other fiscal reforms and actions: - Further harmonization with EU legislation will be implemented, including tax exemptions in the Law on Value-Added Tax; possible replacement of combined personal income tax with synthetic income tax; reform of yield-on-capital taxation to avoid double taxation. - Customs policy will be adjusted to development dynamics and WTO requirements; customs protection levels will be gradually reduced to meet conditions for EU accession and WTO membership. - In 2003 payment operations were transferred to the banks and the Treasury of the Republic Budget was established. - Modernization of the Tax Administration is ongoing, including IT system implementation in the Tax Administration, Customs Administration and UJP to improve tax collection. Public expenditure concerns and priorities: - Reform of the public expenditure system at all levels will follow revenue-side reforms; reform will target budget expenditures and expenditures of compulsory social insurance institutions. - Current public expenditure level remains too high and unsustainable—largest share used to subsidize pension funds (13.6% in 2004)—and may be an obstacle to faster economic growth. - Efforts to correct the pension insurance system have been insufficient; further pension reform is needed. - Functional reallocation of expenditures proposed: decrease public administration, defense and national security spending; decrease share for social welfare but retain social programs complementing economic restructuring; increase share for education, economic affairs, and construction and infrastructure. Fiscal indicators (consolidated public revenues, expenditures and deficit % GDP): - Public revenues (% of GDP): 2002 = 44.3, 2003 = 43.1, 2004 = 45.5 - Public expenditures (% of GDP): 2002 = 47.7, 2003 = 44.3, 2004 = 44.6 - Fiscal deficit/surplus: 2002 = -3.4%, 2003 = -1.1%, 2004 = 0.6% Projected consolidated public expenditures (% GDP): - 2005: 45.7 - 2006: 44.6 - 2007: 43.5 - 2008: 42.5 *Source: _cr06141 - 3. PRS IMPLEMENTATION: REPORTS OF THE GOVERNMENT* ### 1. General public services ### 1. General public services ### Functional expenditure shares / items (values as presented) - 1. General public services: 5.1, 5.0, 4.9, 4.8 - 2. Defense: 2.8, 2.6, 2.3, 2.0 - 3. National security: 2.2, 2.0, 1.7, 1.4 - 4. Economic affairs: 3.9, 4.0, 4.0, 4.1 - 5. Environmental protection: 0.3, 0.4, 0.4, 0.4 - 6. Building and communal services: 2.0, 2.0, 2.1, 2.2 - 7. Health: 6.6, 6.5, 6.4, 6.3 - 8. Recreation, culture and religion: 0.6, 0.6, 0.6, 0.6 - 9. Education: 3.9, 4.0, 4.2, 4.3 - 10. Social welfare: 27, 18.4, 17.5, 17.0, 16.5 ### Subsidies, privatization, and fiscal balance - With privatization and restructuring of socially and state-owned enterprises comes a gradual reduction in the subsidies granted to them. - The share of subsidies-based expenditures in GDP in 2002 equaled 7.6% only to fall to 5.9% in 2004 with a tendency to further decrease over the following period. - 2005 and the following years envisage a consolidated fiscal surplus so that the privatization gains shall not be used to cover the fiscal deficit. ### Forthcoming challenges (as listed) - Further decreasing the share of public expenditure in GDP. - The major challenge in the long run will be to reduce subsidies to the pension funds and, in the short run, to socially and state-owned enterprises. - While subsidies to companies will be reduced as privatization progresses, reduction of subsidies to pension funds will be the major challenge for the future. - The population of Serbia is relatively old and aging and the political pressure to maintain or even improve its standard of living remains strong. - Reforming property taxes and local public finances in general. - Currently, property taxes do not represent an important source of government revenues. - The creation of an efficient and equitable system of property taxation will require political consensus as well as a current lacking in expertise, both at the local level and in the Tax Administration. - Reforming the budgetary process and introducing the programmatic budget. - Although the fiscal system has seen fast and decisive reforms in the past four years, the system of budget preparation is still relatively unreformed. - Due to the lack of capacity, the introduction of a programmatic approach to budget formulation is running late, although it represents a necessary step for further improving the use of budgetary resources, as well as monitoring and evaluating the government’s performance. ### Transition to a Market Economy: Establishing Conditions for Private Sector Development - Serbia has made significant progress in tackling structural problems and in establishing a more conducive environment for private sector driven economic growth, ranking first in the effectiveness of reforms in 2004 (WB CPIA and Doing Business 2005 referenced). - Despite recent improvements, the 2004 World Economic Forum’s Index of Business Competitiveness indicates considerable potential for improving the business environment in Serbia. - Key elements for progress: - Successful privatization and restructuring of companies. - Development of entrepreneurship and the SME sector. - Overall improvement of the investment and business climate. - Legal and institutional measures: - 50 new economic and system laws were adopted. - A total of 1,631 companies were privatized by the end of August 2005. - It is expected that the share of private ownership in the total economy will reach 75% by the end of 2006. - International trade and export structure: - Foreign trade remains un-restructured for the most part, with a very low reorientation towards the EU and an unchanged structure of goods. - Export structure is characterised by too many different products, which is a sign of low specialization and low representation of more processed products with higher added value. ### Legal/institutional framework and business environment issues - A transparent legal and institutional framework is indispensable for attracting private investments. - Examples of reform measures: - Law on Registration of Economic Entities and the Law on the Agency for Registration of Economic Entities simplified registration procedures. - Remaining problems: - Poor functioning of the courts—the average time needed for debt collection is almost three years—bearing negatively on the investment climate. ### Guarantee Fund for SMEs (establishment and activity) - In 2004 the Government formed the Guarantee Fund to stimulate the development of business operations of small and medium-sized enterprises, entrepreneurs and farmers. - Mandate: issue guarantees to banks amounting to 50-80% of their requisitions for loans granted to small and medium-sized enterprises which have growing potential but do not fulfill all conditions required to obtain loans from commercial banks. - Activity to July 2004: - The Fund approved 950 requests and issued guarantees totaling EUR 7.5 million. *Italicized source attribution: _cr06141 - 1. General public services_* ### 1.5 billion for the capital increase of the Guarantee Fund. See www.gf.co.yu. ### 1.5 billion for the capital increase of the Guarantee Fund. See www.gf.co.yu. ### Privatization, enterprise restructuring, and support programs - The budget of the Republic of Serbia allocated an additional CSD 1.5 billion to the Fund in 2005 activities. - Privatization outcomes (2002–end-August 2005): - 50 companies sold in tendering procedures. - 1,191 companies sold in auction sales. - 390 companies sold as minority packages on the capital market. - 1,631 of the 2,027 companies offered in tender procedures were sold (sales success rate of 80%). - Privatization proceeds equal EUR 1.68 billion. - Contracted investments amount to almost EUR 850 million. - Proceeds of social programs amount to EUR 270 million. - 2005 privatization plan and pipeline: - Plan to put up for sale 318 companies and share packages for a minimum 200 others, with expected earnings of EUR 262.2 million. - In 2005, 19 companies shall embark upon restructuring. - So far 73 companies identified as needing restructuring prior to sale; including dependent companies would raise the number of companies undergoing restructuring to 600. These companies employ 200,000 workers. - Banking sector privatization: - In 2005 three banks with state ownership have been sold, with proceeds equaling EUR 273.8 million. - Three banks have just begun privatization. - EBRD Turn Around Management Programme (ТАМ): - EUR 1.5 million program (early 2004) supporting restructuring of 25 potentially viable SMEs and management capacity building during a two-year period, including direct cooperation of experienced EU managers with local company management. ### Regulatory reform, competition policy, and anti-corruption - Council for Regulatory Reform established beginning of 2004 as an inter-ministerial body to monitor private entrepreneurship development, discuss legislative changes and draft new laws. - Law on Protection of Competition submitted to the National Assembly to establish a Committee for the Protection of Competition. - Proposal of the Law on Consumer Protection, Proposed Law on Trade and Proposed Law on Prices in legislative process. - National Anti-corruption Strategy presented to the National Assembly, addressing political system, state administration and public services, judiciary, economy and public finance systems. - Anti-corruption institutional measures and legal instruments referenced: - Law on Prevention of Conflict of Interest in Execution of Public Functions. - Law on Free Access to Information of Public Interest. - Establishment of an Anti-corruption Council and presentation of the National Anti-corruption Strategy. - Anti-corruption Action Plan should be adopted by the end of 2005. - Forthcoming challenges (selected): - Restructuring and privatizing large socially owned and state-owned public companies to achieve organizational separation, employee reductions and eventual privatization as preconditions for sustainable fiscal policy. - Creating institutional capacity for efficient protection of competition, especially for privatization of natural or administrative monopolies. - Removing remaining administrative and legal obstacles to private sector development (example cited: constitutional provision that urban construction land cannot be privately owned). - Increasing involvement of local self-governments in economic growth strategies and cooperation (socio-economic plans/local PRSs/local sustainable development strategies). ### Public administration reform and judiciary - Public Administration Reform Strategy (adopted late 2004) aims to build a democratic, citizen-centered state administration based on decentralization, depolitization, capacity building, rationalization and modernization. - Key reforms and measures: - Introduction of incentive-based salary reform for public administration employees as of April 2005; systematization review finalized; rationalization of public administration up to 10%. - Establishment of human resources management units; central unit in the Ministry for Public Administration and Local Self-Government; unified training center for professional improvement to be established by the end of 2006. - Modernization efforts to update technical and technological capacity and introduce e-government. - Pilot Joint Project: Towards a More Efficient Implementation of Reforms (nine state institutions participating; pilot phase lasts until October 2005) to build capacity in operational planning, monitoring and reporting and to introduce programmatic budgeting. - Decentralization and fiscal decentralization: - Standing Conference of Towns and Municipalities (SCTM) involved in preparation of regulations defining municipal property and new approaches to financing local communities. - Municipal authorities view absence of fiscal decentralization as main obstacle to city and municipal economic and social development. - 17 municipalities have founded citizen assistance centers. - Governance and legal access: - Law on Local Elections adopted in 2002 requires mandatory 30% of candidates be from the less represented sex. - Amendments to laws to ensure defendants may not bear defense costs if it would endanger their subsistence; Law on Legal Assistance being drafted. - Law on Civil Proceedings and Law on Executive Proceedings harmonized with EU legislation and Council of Europe standards; novelties include direct review, procedures for resolving disputable legal issues and accelerated executive procedure. - Judicial Center for Training and Professional Improvement established. - Social inclusion initiatives: - Employment of Roma Coordinators in Local Self-Governments project began, encompassing 12 municipalities in first phase, aiming to employ Roma representatives in all 120 Serbian municipalities where Roma live. - Work on Law on Gender Equality and National Action Plan has begun; Government established Serbia’s Council for Gender Equality; 54 gender focal points established in local administrations since 2002. - Forthcoming challenges (selected): - Introducing regulatory impact assessments; current legal framework does not require comprehensive regulatory impact analysis. - Continuing judiciary reform to improve efficiency, property rights protection and transparency; reforms in courts financing. - Reforming the system of public and national security and defense, including downsizing. - Improving overall policy coordination at central government level and institutional capacity for programmatic planning in line ministries. ### Regional and global integration, EU accession, and trade liberalization - EU accession process and related milestones: - On April 25, 2005, Serbia and Montenegro received a positive Feasibility Study for initiation of negotiations on the Stabilization and Association Agreement from the European Union. - Serbian National Strategy for Serbia-Montenegro EU Accession adopted by Government of Serbia in June 2005 and by the Serbian Parliament Committee for European Integration in July 2005. - Action Plan for the Harmonization of National Draft Laws with EU legislation for 2005 adopted in March 2005 encompassing 41 laws; 11 adopted by August 15, 2005, with six adopted by the Parliament. - WTO membership expectation: - Membership of the Republic of Serbia in the World Trade Organization may be expected in the course of 2008. - Trade and customs measures: - Law on the Action Plan on the Harmonization of Economic Systems adopted in June 2003; amended in February 2005 to omit provisions relating to tariff rates, the foreign trade system, the WTO (joint accession) and the Joint Competition Commission. - Agreement to liberalize the trade of textiles signed with the EU in early 2005. - Law on Customs Tariffs adopted in July 2005. - Signing of agreement on free trade under the Stability Pact for South East Europe aims to create a regional free trade zone by 2008 including liberalization in the service sector. - EU assistance and neighborhood cooperation: - Serbia granted asymmetrical trade preferences and access to significant assistance aligned with PRS priorities; the European Commission’s Multi-Annual Indicative Program 2005-2006 underlines complementarity with Serbia’s PRS. - Neighborhood programs foster regional cross-border cooperation (example: cooperation with Hungary; planned cooperation with Bulgaria and Romania). - Refugee and IDP resolution: - Local integration of refugees (granting of SAM citizenship), bilateral agreements on two-way return of refugees with the Republic of Croatia and Bosnia and Herzegovina, and local integration or return of IDPs to Kosovo cited as indispensable steps for regional integration. - IMF financing: - Extended financing arrangement signed with the IMF in 2002 totaling approximately SDR 650 million aims to attain sustainable economic growth, improve living standards, lower inflation and stimulate reserve growth. - By the end of July 2005 USD 587.5 million (approximately USD 860 million) has been spent, with the remaining sum to be spent by December 31, 2005. - Forthcoming challenges (selected): - Dampening effects of foreign trade liberalization on the poor in rural regions related to WTO and EU accession; need for coordinated government approach. - Initial negotiations on the Stabilization and Association Agreement expected in the fall of 2005. - Harmonizing SAM’s legislation with the EU acquis, particularly in key areas of the Union’s internal market. - Speeding up SAM’s negotiation progress contingent on adoption capacity for European regulations and standards. - Ensuring full cooperation with the Hague Tribunal. - Addressing lack of line ministry capacity to link budget funds and international assistance with European Partnership priorities. - Building public administration capacity for future use of the new Instrument for Pre-Accession of the EU. ### Employment trends and national employment strategy - Employment changes: - Employment increased by 0.5% in 2004 compared to the previous year. - Over the first seven months of 2005 the average number of the employed increased by 0.1% in comparison to 2004. - Factors supporting employment improvements: - Economic reforms, active employment measures, favorable loans to private SMEs, stimulation of foreign direct investments, investments in private agricultural sector. - Policy and institutional responses: - 2005-2010 National Employment Strategy adopted in April 2005. - Organizational, human resources and information system reform within the National Employment Service is under way. - Historical employment context: - During 2001-2003 a declining trend in overall employment was recorded as a result of company privatization and restructuring. - In 2004 a 0.5% growth in employment was recorded in comparison to the previous year; in the first seven months of 2005 the average number of employed increased by 0.1% in comparison to 2004. *Source: _cr06141 - 1.5 billion for the capital increase of the Guarantee Fund. See www.gf.co.yu.* ### 2004. A significant 16.5% real growth in net earnings was achieved in 2001, followed ### _cr06141 - 2004. A significant 16.5% real growth in net earnings was achieved in 2001, followed ### National Employment Strategy (adopted April 2005) — aims and 2010 targets - Strategy aims: increase employment, investment in human capital, labor quality and productivity; reduce differences between regional labor markets; support gender equality and fight against discrimination in employment. - National Employment Action Plan for 2006-2008 is being drafted with EAR support. - Target values to be reached by 2010 (Table 3.6.a.): - Employment rate: Current STATUS 58% ; Current EU STATUS 65% ; YEAR 2010 67% - Unemployment rate: Current STATUS 14.6% ; Current EU STATUS 6-8% ; YEAR 2010 10.5% - Participation rate: Current STATUS 68% ; Current EU STATUS 69% ; YEAR 2010 72% - Youth employment rate: Current STATUS 15% ; Current EU STATUS 40% ; YEAR 2010 20% - Women employment rate: Current STATUS 48% ; Current EU STATUS 56% ; YEAR 2010 90% of men’s employment rate - Reduced regional disparities in NES unemployment rates: Current STATUS 1:3 ; YEAR 2010 10% difference - Reduced regional disparities in average wage: Current STATUS 1:3 ; YEAR 2010 20% difference ### Active labor-market programs: participation and activity types - Participation growth: number of persons involved in active job-search programs doubled between 2002 and 2004 (22,740 persons in 2002 and 50,586 in 2004). - Table 3.6.b. — Number of persons in active employment programs (TOTAL PERSONS by TYPE OF ACTIVITY): - Job clubs: 2002 - - ; 2003 - - ; 2004 120 ; 2005* 1,586 - Training for active job searching: 2002 6,238 ; 2003 12,362 ; 2004 14,471 ; 2005* 7,126 - Job fairs: 2002 4,086 ; 2003 8,207 ; 2004 13,324 ; 2005* 6,710 - Job centers: 2002 692 ; 2003 - ; 2004 15,508 ; 2005* 20,000 - Training for business start-ups: 2002 - ; 2003 - ; 2004 - ; 2005* 1,200 - Stimulation of new employment: 2002 1,861 ; 2003 - ; 2004 98 ; 2005* 250 - Self-employment programs: 2002 1,305 ; 2003 - ; 2004 2,646 ; 2005* 2,500 - *Planned number of persons ### Funding, allocations, and SME support - 2004 CSD allocations: - Total 2004 allocation CSD 900 million; CSD 410 million were spent on active employment programs; almost CSD 250 million for additional training and education. - 2005 budget of the Republic of Serbia allocated CSD 750 million for these purposes. - Ratio of funds spent on active and passive measures reported as 10% to 90% (unfavorable), with improvement when including Development Fund and international donors. - Development Fund of the Republic of Serbia (2004 and 2005 plans): - Approved CSD 4 billion in loans to small and medium-sized enterprises and entrepreneurs in 2004; programs expected to create 5,000 new jobs. - 2005 plan: CSD 3.9 billion for SME development; CSD 220 million for individual small shops; CSD 600 million in loans to would-be entrepreneurs registered as unemployed with the National Employment Service. - Micro-loans offer favorable conditions (lower interest rates, higher share of Fund financing) for businesses from underdeveloped regions. - Other 2004 allocations: - CSD 12.5 billion paid in compensation and temporary compensation to employees from the territory of the Autonomous Province of Kosovo and Metohija; another CSD 410 million allocated to active employment policy. - Financial compensation share in total expenditures reached 86.54%. ### Internationally funded and targeted employment projects - EUR 9 million employment support program implemented in Belgrade, Bor and Pirot — aims to reduce unemployment and promote social cohesion. - Employment promotion pilot project in Lazarevac, Pančevo, Kraljevo and Niš — total value USD 4.75 million. - Vocational training and additional education programs: 7,792 participants in 2002 and 7,007 participants in 2004. - EU-funded "Beautiful Serbia" project: trained 185 persons in targeted groups; 122 found employment; 37 in process of concluding employment contracts; 2005-2006 project supports public works in Banat, Šumadija, Pčinj and Jablanica districts. ### Formalization and labor-inspection results - Measures to reduce gray economy include preventive, stimulation and penal measures. - Labor market inspectors findings: - 2002: 18,564 persons working but not registered as employed → formal employment of 12,695 persons. - 2004: 46,635 persons working but not registered as employed → formal employment of 30,754 employees. ### Labor law, incentives, and NES reforms - 2005 Labor Code introduced new forms of flexible employment (contracts for representation or mediation, additional work, professional education and development) that do not constitute employment contracts but lead to awarded financial compensation and other rights. - Labor Law improvements: better position of employees in cases of bankruptcy, change of employer and termination of employment. - Employment promotion measures in Law on Income Tax: entrepreneurs entitled to tax exemptions when permanently employing new employees; two-year subsidies and exemptions from paying contributions on employing workers over 45 and 50. - NES capacity building: - Permanent training of National Employment Service employees in three pilot municipalities (Sombor, Valjevo and Novi Beograd) in cooperation with the Federal Employment Bureau of Germany. - NES Work Program for 2005 (Table 3.6.c. — TYPE OF ACTIVITY; Number of people; Allocated Funds (EUR)): - Active job search: 8,912 ; 63,898 - Employment fairs: 6,710 ; 69,700 - Additional education and training program: 8,260 ; 4,540,812 - Developing entrepreneurship and employment incentives: 25,650 ; 4,672,500 - Center for professional information and counseling: 28,081 ; (no allocated funds listed) - TOTAL FUNDS FOR ACTIVE LABOR MARKET PROGRAMS: 49,532 people ; 9,374,992 EUR ### Institutional development and forthcoming employment challenges - Decision on Establishing the Republic Employment Council came into effect in 2004; Local Employment Councils are in the establishment phase. - 900,000 EUR Labor Market Institutional Building project (funded by SIDA) being implemented in Belgrade, Novi Sad and Šabac to improve public employment service functioning. - Forthcoming challenges (section 3.6.20): - Developing efficient programs for employing redundant employees in privatization and restructuring of public enterprises in the period 2005-2007 (emphasis on active measures instead of passive measures). - Developing more efficient programs for employing the most affected and vulnerable groups, including long-term unemployed, youth, under-qualified and older workers, persons with disabilities, Roma, refugees and IDPs. - Establishing regional and local employment councils targeted toward efficient local development and employment strategies based on risk and potential analysis, especially in least developed regions. - Continuing reform of the National Employment Service toward a full client-centered approach, including contacts with employers, efficient active job searches based on a unified information system, and establishment of monitoring and evaluation systems. --- ### More efficient social protection (reforms, coverage, and funds) - 2004 introduction of a minimum social security level for all of Serbia improved access to social allowances, raised amounts and increased number of recipients in the poorest municipalities. - Expected effects: more efficient social welfare mechanisms, implementation of Poverty Reduction Strategy, revival of economic activity and increased employment rate are expected to slow growth of overall social benefits in relation to GDP. - Social Innovation Fund (SIF/FIS) finances local projects testing innovative social welfare services through public, NGO and private cooperation. ### Family Financial Support (MOP) and social transfers - Amendments to Law on Social Welfare and Social Security of Citizens introduced a minimum social security level as criterion for receiving MOP. - MOP beneficiary numbers and transfers (Table 3.7.a.): - 2002: Average number of Families 39,430 ; Beneficiaries 90,336 ; Total 921,296,000 (CSD) - 2004: Average number of Families 45,254 ; Beneficiaries 108,793 ; Total 1,709,951,000 (CSD) - 2005: Average number of Families 52,000 ; Beneficiaries 127,000 ; Total 2,800,000,000 (CSD) - Children's allowances (Table 3.7.b.): - Number of families receiving children’s allowances: 2002 324,650 ; 2004 262,693 - Number of children: 2002 573,187 ; 2004 489,803 - Total amount of children’s allowances: 2002 6,598,308,482 ; 2004 6,567,688,714 (CSD) - Budget: 2002 214,801,643,633 ; 2004 308,798,239,522 (CSD) - Share of children’s allowances in the budget: 2002 3.07% ; 2004 2.13% ### Inclusion of displaced persons and social work centers - 2004 program for including displaced persons in social welfare: - 4,551 families turned to social work centers for assistance; 1,961 families submitted applications; 919 families were included in MOP. - Over 140 centers for social work (CSW) provide local welfare services; further training and development of social standards are ongoing. - Amendments transferred competencies to municipalities for certain social-welfare rights (e.g., reception centers and stations). ### Social Innovation Fund (SIF) and disability projects - SIF support and allocations: - 2003: 88 projects approved; EUR 1.2 million from Kingdom of Norway donation and 44 million dinars from Serbian budget. - 2004: 39 continuing projects approved; EUR 150,000 donation by Kingdom of Norway and 24 million dinars from Serbian budget. - April 2005: new call for applications; EUR 900,000 from EAR donation and CSD 32 million from budget allocated. - Third competition for projects by organizations representing persons with disabilities (August 2004): 84 projects approved; total amount 34 million dinars. ### Targeted relief and accommodation programs - 30% discount on electricity costs for socially vulnerable categories; new relief program after July 2004 electricity price increase subsidized electricity payments for 142,000 families. - Programs for family accommodation and protected social accommodation: - Out of 4,471 assisted children without parental care: 2,705 with foster families and 1,766 in orphanages. - Around 1,500 foster family candidates prepared and trained; around 900 fulfill conditions of general eligibility for foster parentage. - Protected housing: in 18 municipalities, buildings constructed for roughly 900 elderly refugees and IDPs; some apartments provided for formerly institutionalized persons with disabilities. - Improvements in institutions (2004): - All 37 homes for elderly persons saw expanded capacities, maintenance, rehabilitation, reconstruction and new equipment. - All 15 homes for persons with developmental disorders benefited from less crowded facilities, improved living conditions and new equipment. ### Legal reforms affecting social protection and families - Criminal Code (2002): treats domestic violence as a criminal offense. - Family Law (2005): treats violence against women as a social problem; defines protective measures; introduces emancipation of minors over age 15, mediation in marital relations, joint execution of parental rights, marriage contracts, deed of gift; grants centers for social work additional family-protection responsibilities. - January 2004 government decision: protective measures for economically vulnerable households in the process of building individual residential facilities and legalization of illegally constructed buildings; program for housing and permanent integration of refugees started in seven municipalities/towns — 670 housing units to be constructed. ### Forthcoming social protection challenges - Providing access to the social protection system to persons without identification documents, especially Roma living in slums or displaced from Kosovo. - Creating space to better target MOP social transfers and reconsideration of existing model unfavorable for multi-member households. - Continuing reform projects and further improving the SIF as the single most important mechanism for implementing reforms, including mainstreaming lessons into government policies and stimulating local authorities to develop alternative social welfare services. - Developing control mechanisms to prevent misuse, which currently represent an obstacle for further decentralization. - Building links between employment, education, health and social protection at central and local levels to ensure an integrated social welfare approach with emphasis on active social policy measures. --- ### Improved status of pensioners and the elderly — pension system reforms and indicators - Most elderly receive pensions; pension insurance is mandatory for the largest part of the economically active population. - Progress: pension payments became more regular, with pensioners receiving 12 payments in 2004. - Draft law on debt reprogramming envisages solving remaining delay in pension payments in the next three to five years for different categories of pensioners. - Amendments to the Law on Pension and Invalid Insurance increased the lowest pension protective level and provided legislative framework for consolidation of the three pension and disability insurance funds (Fund of the Employed, Fund of the Self-employed and Fund of Farmers). - Consolidation expected to contribute to sustainability of overall pension system. - Payment delays noted: Fund of the Employed delayed 1.5 months; Fund of Farmers delayed 20 months. - Around EUR 215 million necessary for paying farmers’ pension arrears (20.5 pensions). - Deficit of all three pension funds in 2004 was 5.12% GDP. - Budget subsidizes around 40% of the pension fund’s income (and for the Fund of Farmers, even more). - World Bank support: at the end of May 2005, World Bank granted USD 25 million to support a related project. - Table 3.8.a. (partial extract — Basic Fund indicators in 2004): - Fund of the Employed: Number of persons 1,241,082 ; Average pension 9,578 dinars ; Subsidies from the budget (value not fully listed in supplied content) *Italic source attribution: IMF staff report content unit _cr06141 (selected sections provided).* ### 62.67 billion dinars (34.14% of ### _cr06141 - 62.67 billion dinars (34.14% of ### Pension and social insurance funding (key figures) - 62.67 billion dinars (34.14% of total Fund incomes) - Fund of the Self-Employed - 43,938 - 9,360 dinars - Fund of Farmers - 215,086 - 2,780 dinars* - 5.66 billion dinars (60.28% of Total Fund incomes) - *Pensions paid in the period April 2002- April 2003 - Income into the Fund of Farmers includes transfers from the budget of the Republic of Serbia (60.28%), plus the obligations of the Republic of Serbia for solidarity veteran’s service (26.09%), a total of 86.37% of the Fund’s income. ### Developments in pension policy and voluntary pensions - The National Action Plan for the Provision of Social Security and the Humanization of Living Costs of the Elderly—currently under preparation—will define how services and assistance will be offered to elderly persons. - The draft law on voluntary pension funds and plans, in its final stage, is expected to be adopted in the course of 2005, to be followed by the adoption of by-laws related to its implementation. - Introduction of the third pillar (voluntary private pension insurance) is expected to create conditions for additional income for the elderly in the future. - The working group for the implementation of voluntary private pension insurance is established within the council for the reform of the pension insurance system. ### Services and institutional changes for the elderly - Programs include de-institutionalization and piloting alternative services (family accommodation, home care and assistance, etc.) for elderly persons at the local level. - Housing under protected conditions encompasses around 900 elderly persons, refugees and displaced persons in a total of 18 municipalities. - The pilot project of integrated home care includes 100 (elderly) families in Knić, Kragujevac and Knjaževac. - Home care services development: - Home assistance is provided for 2,500 beneficiaries. - Clubs for the elderly rally around 20,000 users and provide meals for around 6,000 people. - Two-day centers for the elderly serve citizens in Kragujevac and Novi Sad. - Six collective centers for refugees have been transformed into homes for elderly persons with donor funds; conversion of yet another collective center with capacity for 100 is currently being completed. - The Ministry of Labor, Employment and Social Affairs has issued the first three licenses for private homes for the elderly, while a fourth decision is being prepared. ### Infrastructure investment and decentralization - Quality of living conditions in institutions for the elderly, refugees and mentally disabled persons improved through building investments, expanded capacities, basic maintenance and investment, rehabilitation and reconstruction, as well as equipment, totaling around CSD 280 million in 2004. - With decentralization of the social welfare system, competencies will be transferred to local self-governments, which will ensure services provided in cooperation with the not-for-profit and private sector meet citizens’ needs. ### Forthcoming challenges (enumerated) - Further reforming the pension and disability insurance system in order to decrease the burden both on the overall economy and on the republic budget, while preventing the impoverishment of the elderly whose living standards depend exclusively on pensions. - Consolidating the pension funds along with improving the information system and reorganizing the register of the insured (Maticna evidencija osiguranika) (data collection, registration of insured and data management). - Further improving control of contribution payments and discouraging contribution evasion. - Further developing alternative forms of social protection for the elderly at the local level, especially home care and assistance. ### Health care reform and access for vulnerable groups - Changing the model of financing primary health care and introducing a new model of payment by the end of 2006 is a precondition for the essential reform of the primary health care system in the Republic of Serbia. - Policy goals: access to basic health services of an appropriate quality without financial barriers for the whole population, particularly refugees, IDPs, Roma, poor people and other vulnerable populations. - Measures and instruments: - National health programs and strategies (Vision of Health Care System Development, Strategy of Health Care Reform, National HIV/AIDS Strategy, Tobacco Control Strategy, Public Health Strategy, Food Safety Strategy, National Blood Safety Strategy, National Mental Health Program, National TB Control Program). - Restructuring health care institutions, introducing a health benefit package, changing provider payment methods, introducing reductions or exemptions of out-of-pocket expenditures for vulnerable groups, and establishing a public/private mix in the health care system. - The Draft Health Care Law seeks to better define health rights, strengthen the gate-keeping function of general practitioners, decentralize management, and increase productivity and quality of care; it contains a list of vulnerable groups and possibilities for protecting their health rights. - Introducing a new positive drug list financed by the Health Insurance Fund, strengthening protection of patient health rights, improving inspection control for detrimental health consequences, and better cooperation with NGOs. - External support: - Through the project Development of the Health Care System in Serbia, the World Bank is financially and technically supporting the Serbian health care system, with a loan of USD 23.5 million until 2008. It is planned that the largest share of resources will be spent on restructuring health care centers including new information and communication technologies, changes in methods of hospital payments and the... *Source: _cr06141 - 62.67 billion dinars (34.14% of* ### introduction of accreditation and licensing. ### introduction of accreditation and licensing. ### 3.9. Health sector reforms, accreditation, and licensing - 3.9.4. Evidence based clinical practice guidelines based on the National Burden of Disease Study were developed and are being implemented. - New standards for health personnel, performance and hospital provisions were proposed and an action plan for capacity building for the Ministry of Health and health professionals is in the preparation phase. - A national plan for training health care professionals and associates in health management, continuous quality improvement and development of an information system for public health is consistently implemented in accordance with the needs of the system. - 3.9.5. The health information system should also increase efficiency in the health care sector. - A pilot project of basic health services in the Kraljevo municipality resulted in a software solution for supporting the work of a team in primary health care. - The Kraljevo pilot will be implemented in Belgrade municipalities and a cluster of other municipalities in Serbia through a new EAR project. - An existing EAR project, focusing on the development of a health information system for basic health and pharmaceutical services, will improve the Kraljevo software package and help develop an electronic health record as well as a national clearinghouse. - 3.9.6. The pilot project of basic health services in Dom Zdravlja Kraljevo was completed in June 2005. - In 2006 results and experiences from this project will help develop a capitation formula that will be used to finance service providers in primary health care as a pilot of a new model of payment. - 3.9.7. The development of the basic health benefit package is in progress, and has been included in the Draft Law on Health Insurance. - The Draft Law introduces new methods for financing service providers, better management of financial resources, the decentralization of the Health Insurance Fund, as well as voluntary and private health insurance. - Strengthening health promotion and preventive health services through concrete activities of an EAR project implemented in 25 health centers and public health institutes. - Tobacco control activities are developed within the National Strategy for Tobacco Control, still to be ratified, and intensive anti-smoking campaigns. - 3.9.8. Developing a private/public mix is progressing only gradually due to financial constraints. - The Health Insurance Fund is now recognizing the prescriptions of private practitioners and contracts between private practice providers and the Republic Health Institute Fund are now possible for certain health care services that are not available in the public sector. - 3.9.9. Activities for developing a process for licensing medical personnel and accrediting health care institutions and programs have intensified. - 3.9.10. An expert group for youth is closely cooperating with UNICEF to improve the functioning of health care institutions working with young people. - The Strategy for Improving the Health of Young People has been prepared and implemented, as have been the Mental Health Strategy and a law for its implementation. - These activities will be initiated after adoption of the Health Care Law, which represents a precondition for the adoption of regulations in the field of mental health. - The HIV/AIDS and TB Control Program in Serbia is supported by a donation from the Global Fund and realized according to the planned dynamic. ### 3.9.11. Forthcoming challenges (health) - Health care financing reform including health insurance reform and development of a new model of provider payment in primary, secondary and tertiary care. - Rationalization of health workers, starting from administrative and technical staff to nurses and medical doctors and dentists with the implementation of new standards of provision and performance. - Searching for options and possibilities for privatizing the health care sector, particularly dental services, rehabilitating spa centers and increasing mixed public/private solutions in the health care sector. - Restructuring clinical centers through EIB credit. - Establishing and developing independent national bodies for licensing, health technology assessment, accreditation and continuous quality improvement in the health care sector. ### 3.10. Education and Poverty — key findings and reforms - The 2002 SLSP shows: 69% of poor people in Serbia had only elementary or incomplete secondary education, while only 2% had university degrees. - The share of education expenditure in GDP: 3.9% in 2005 and set to rise to 4% in 2007. - Reforms include streamlining and reorganization of the educational institution network at all levels, implementation of teacher training and additional training programs and the review of school programs. - The start of a nine-year compulsory education program is scheduled for the 2006-7 school year. - Increased adult education, learning programs and projects, and development of distance education programs are planned. ### 3.10.1–3.10.6. Education implementation details - 3.10.1. Nine-year compulsory education scheduled for the 2006-7 school year, with a compulsory, free-of-charge preparatory grade for children 6 to 7 years of age. - Development of alternative half-day programs for children 5-7 years of age, particularly from vulnerable and marginalized groups. - Coverage of pre-school education is increasing each year; assessment of existing facilities, programs and services in preschool institutions and creation of a database are under way. - Training for creation of development plans in pre-school institutions is planned until the end of 2007. - 3.10.2. Republic of Serbia Education Improvement Project (Ministry of Education and Sport and the World Bank) with a school grant component targets poorest regions and children from IDP and Roma families. - 3.10.3. Curriculum revisions: curricula for elementary school grades I, II, III and teaching programs for grades I, II and III revised; programs for grade IV under preparation. - Retrained teachers to teach foreign languages and civic education in lower grades; training programs for bilingual classes underway. - 3.10.4. Preparatory activities for projects on democratization of education, prevention of trafficking, protection of child rights, and prevention of delinquent behavior. - UNICEF project Schools without Violence trains school teams to create safe and stimulating school environments. - 3.10.5. Secondary Vocational Education Strategy draft in public debate. - During reorganization, 40 profiles were abolished and 27 new profiles introduced in pilot schools, with training of 650 teachers and a new modular principle. - Plans to determine levels, character and duration of vocational education and training in accordance with ISCED 1997. - Since 2003, a pilot Secondary Vocational Education Reform Program has operated in 55 secondary vocational schools. - 3.10.6. By signing the Bologna Declaration, Serbia joined the group coordinating higher education policies to establish the European Higher Education Zone by 2010. - A draft Law on Higher Education, prepared in accordance with Bologna principles, will soon be adopted. ### 3.10.7–3.10.9. Adult education, student support, and resource reallocation - 3.10.7. Providing systemic possibility for adults to obtain qualifications is in public debate. - Plans include increasing adults in education, establishing a wide network for adult education (including five regional training centers organized in Belgrade, Zrenjanin, Niš, Bor and Kragujevac) and developing distance education programs. - 3.10.8. Student financial support statistics: - Number of student loans remained the same during the 2004-5 school year (with 240 allocated for occupations that are in short supply). - Number of scholarships was reduced to 10,793. - Number of student loans increased (about 18,000). - Aim to further increase the amount of loans and scholarships and increase the number of beneficiaries. - 3.10.9. Reallocation of budgetary resources towards poorer regions and municipalities is gradually being implemented, with completion planned for 2010. - Decision on Criteria for the Definition of a Kindergarten and Primary School Network adopted to rationalize use and reallocate savings into building repairs, material needs and school equipment, with local self-government responsible for implementation. - Continuous professional education program for teachers for 2004-5 and 2005-6 allocates the highest budgetary resources towards the poorest regions (territories of regional school administration offices in Leskovac, Vranje, Kraljevo, Niš and Požarevac). ### 3.10.10–3.10.13. Teacher training and inclusion measures - 3.10.10. Teacher training is conducted through public and social institutions and NGOs, via projects for quality assurance, school development planning and decentralization; seminars for descriptive grading, student safety, civic education, religious instructors and school principals. - Education Promotion Institute and Education Quality Assessment Institute have been established. - 3.10.11. Teacher training activity counts: - 220 seminars were organized in 2003 with the attendance of 8,300 teachers. - 280 seminars were organized in 2004 with the attendance of 4,000 teachers. - Social inclusion sensitivity seminars conducted for 1,200 education employees, parents and representatives of social work centers. - 800 seminars organized in the previous two years for introduction of the teaching program in the first grade of primary school, attended by 1,600 teachers and expert associates. - The plan in 2005: train about 2,000 teachers for religious instruction, about 1,200 teachers for the optional "From Toy to Computer" subject and 600 teachers to work with children with special needs. - 3.10.12. Inclusion of marginalized groups and Roma education statistics: - Free-of-charge textbooks provided for about 6,000 pupils in primary schools in 2002-3 school year and for 5,886 pupils in 2003-4 school year. - For poor Roma children, 74 school projects relating to the improvement of Roma education for 6,500 children were supported financially on the basis of the 2002-3 tender, as well as about 70 projects in 2003-4 school year. - Affirmative action led to enrollment of 42 Roma pupils in secondary schools and 51 students in two-year colleges and universities (2002-3); 70 pupils enrolled during the 2004-5 school year, while 89 students were enrolled in two-year colleges and universities. - An action plan for promoting Roma education in Serbia was adopted in January 2005. - 3.10.13. Special support for Roma teachers: - Inclusion in professional training, promoting teaching colleges, the department of Romonology and the optional subject of Romany language with elements of national culture (introduced into 29 schools), and seminars Challenges of Education in Minority Languages. - Activities planned in the Strategy for Roma Education not fully implemented (introduction of Roma assistants and a Roma coordinator delayed by laws and bylaws); pilot activities are being developed. - Positive discrimination measures applied to enrollment procedures for secondary and high schools and faculties. ### 3.10.14–3.10.15. Special needs education and forthcoming challenges - 3.10.14. Education Strategy for Persons with Special Needs is underway following an analysis of the current situation. - A three-year OECD/CERI project for disabled pupils and pupils at risk. - Two pilot projects: an inclusive model at preschool level and a model for partial inclusion and new special schools. - Vocational education for pupils with special needs regulated by the Law on Education System Fundamentals; schools allowed to organize adapted school programs for disabled pupils. Two schools have realized such programs thus far, with the help of donations from the Norwegian government and the City Education Secretariat. - 3.10.15. Forthcoming challenges (education): - Improving the quality of education through rationalization of programs, introducing quality standards in specific scientific and educational areas, training teachers in primary and secondary schools and approving new school books in cooperation with the Institute for the Improvement of Education and Upbringing and the Institute for Quality Control in Education. - Reforming vocational education, primarily by the Center for Strategic Planning (within the Institute for the Improvement of Education and Upbringing) and the Union of Gymnasiums and Vocational Education Schools; pilot programs introducing new profiles will be evaluated. - Including marginalized groups and persons with special needs into the regular education system based on affirmative action measures proposed by expert teams, including simultaneous implementation of seminars for teachers who will work with children with special needs. ### 3.11. Regional, Rural and Urban Aspects of Poverty - Regional discrepancies in Serbia’s development are the most pronounced in Europe and continue to increase from one year to the next. - Traditionally undeveloped south of Serbia and Old Raška; newly impoverished areas include east Serbia, parts of central Serbia and regional centers of the mining and traditional industry. - The network of regional agencies for SME and entrepreneurship development continues to expand; at the end of 2004 the network covered over 80% of the territory of the Republic of Serbia. - The Development Fund of the Republic of Serbia stimulates entrepreneurship and employment with a special focus on underdeveloped areas. - Draft Strategy for Agricultural Development seeks to increase competitiveness by reallocating resources from price support to investment and structural support. - Strategy of Local Sustainable Development (delivered for adoption to local self-governments in May 2005) is aligned with the PRS and provides basis for local community development planning. ### 3.11.1–3.11.2. Institutional measures and Development Fund activity - 3.11.1. Adoption of the Law on Balanced Regional Development (final drafting stage) will create institutional framework for establishing the National Agency for Regional Development and a special financial institution for promoting regional development, implementing goals and tasks defined in the Poverty Reduction Strategy for Serbia. - Implementation would be ensured through a network of regional agencies and offices for regional development. - In May 2004 the Ordinance on the Criteria and Indicators for Determining the Devastated Areas of the Republic of Serbia and the Decision on the Determination of Devastated Areas (Municipalities) of the Republic of Serbia were adopted. - The Law on Underdeveloped Areas (UDA) has been proposed for the period until 2010. - 3.11.2. Development Fund objectives and lending terms: - Goal: more balanced regional development through granting soft loans to SMEs and entrepreneurs. - Short-term export and liquidity loans are granted, with a repayment period of six months and an annual interest rate of 5%. - During 2004, 1.38 billion dinars were extended, with another 520 million in short-term export loans planned for *Source: _cr06141 - introduction of accreditation and licensing.* ### 2005. Long-term loans are granted with a repayment period of five years and a one- ### _cr06141 - 2005. Long-term loans are granted with a repayment period of five years and a one- ### Lending by the Development Fund and lending terms - Long-term loans are granted with a repayment period of five years and a one-year grace period and interest rate depending on the development level of the municipality, based on the GDP average (Table 3.11.a.). - During 2004, 7.86 billion dinars were extended, with 4.72 billion dinars to be extended in 2005. - Apart from long-term loans from the Fund capital, long-term commission loans for promoting primary agricultural production were also extended. - A total of 164 loans were granted for these purposes, in the total amount of 1.74 billion dinars. - The Fund aimed to distribute the loans equally in the various regions and areas of the Republic. - Table 3.11.a: Lending terms of the Development Fund of the Republic of Serbia (Development level of municipalities based on GDP / % share of the Fund’s loan in the estimated value of investment / Annual interest rate) - < 33% / up to 80% / 1% - 33% - 50% / up to 60% / 3% - 50% - 70% / up to 50% / 4% - > 70% / up to 40% / 5% ### Regional development, SME support, and incubators - The Regional Development Agency of Šumadija and Pomoravlje was established in Kragujevac; others in progress for Banat in Zrenjanin and Southern Serbia in Leskovac; another in development for east and west Serbia. - Expansion of the network of regional agencies for SMEs and entrepreneurship development continues. - Since 2004 regional agencies in Leskovac and Vranje have been established, as well as the offices of regional centers in Apatin and Odžaci. Process of opening an office in Bujanovac is under way, with plans to establish an office in Medveđa as well. - At the end of 2004 the Republic network covered over 80% of the territory of the Republic of Serbia (without Kosovo and Metohia), with a goal to cover the entire territory of the Republic. - The Republic Agency for SMEE Development and the Republic Network of Regional Agencies: - Organized 67 seminars attended by over 2,000 participants in 2004. - Implemented promotions and projects (including 13 promotions attended by roughly 1,000 entrepreneurs in 2004). - Table 3.11.b.: Work of the Republic Agency for SMEE Development and Republic Network (Training / Help line / Consulting (financial and legal) / Business plan (assistance and preparation) / E-mail responses / No. of seminars / No. of participants) - 7,619 / 4,283 / 190 / 2,509 / 278 / 5,837 - Pilot project for supporting cluster development defined by Ministry of Economy and Ministry of International Economic Relations; Autoklaster Srbije established. - Business incubators planned to open in 2005 in Knjaževac, Niš, Bor, Subotica and Smederevska Palanka. - ENTRANS pilot project launched in October 2004 to establish a business incubator in Niš and related support activities. - The Serbian Investment and Export Promotion Agency (SIEPA) organized training of local self-government bodies in over 90 municipalities; common databases being established to improve communication with investors. ### Agriculture, rural development, and agrarian policy - The Draft Strategy for Agricultural Development recognizes goals including building sustainable, efficient and competitive agriculture; ensuring food quality and safety standards; supporting agricultural producers affected by economic reform; encouraging sustainable rural development; protecting the environment from effects of agricultural production; preparing the agriculture sector for EU integration and adjusting trade policies to WTO rules. - Agrarian budget increased from 8 to 21 billion dinars through two previous budget cycles. - Budget resources directed to price support were significantly decreased (from 80% of the budget of the Ministry of Agriculture in 2003 to 40% in 2005). - Table 3.11.c.: Total investment in the period March 2004-August 2005 (Measure / No. of beneficiaries / Amount (in 000 of dinars) / Average amount) - Credit support - Short-term credits / 51,467 / 3,187,337 / 61,929 - Long-term credits / 2,957 / 3,455,875 / 1,168,709 - Rural development measures - Grants for young agricultural producers, cooperatives and local communities / 578 / 949,355 / 1,642,482 - Other rural development measures* / — / 1,240,000 / — - *Various types of rural development measures such as grants for investments, introducing standards and rural infrastructure, support to elderly households, improving soil quality, etc. - Short-term negative effects of transition to a market economy addressed through increased social transfers to farmers not competitive on the market; success depends on adequate monitoring and evaluation and the registry of agricultural households established to provide more complete information. - The Agency for Rural Development (in establishment) should assist in regionally conducted activities: market analysis, planning production, diversifying the economy and providing financial support. Until established, ordinances on fostering agricultural production development and rural development in 2005 are implemented. ### Housing, local government financing, and forthcoming governance challenges - The Rulebook on the Distribution of Partial Funds from Special-Purpose Revenues of the Republic Budget Collected from the Organization of Games of Chance seeks to assist the most vulnerable and poorest local self-governments and support modernization of local self-government bodies. - By mid-2005 the Housing Sector Study will be completed, presenting analysis and recommendations for future national housing policy. The Draft Law on Social Housing seeks to improve the legal framework and is being harmonized with other ministries. - Forthcoming challenges: - Creating conditions for attracting investment to underdeveloped regions; poor public infrastructure often a key obstacle. - Regional development requires political commitment and a coordinated approach across government levels, based on best EU practices to prepare for future use of EU structural and regional funds. - Sharing authority and responsibility with the local level: decentralization of power and fiscal decentralization will require substantive legal and constitutional changes; the Law on Assets Owned by the Republic needs to be changed to allow local self-governments to own and manage public property on their territory. - Developing a payment system in accordance with EU regulation to ensure support to rural development. ### Environmental aspects of poverty reduction - The state of the environment disproportionately affects the poorest population through impacts on health and quality of living; strategy is to minimize consequences and prevent degradation to ensure long-term environmental sustainability. - Investments in water supply facilities, wastewater treatment plants and environmental hotspot clean-up programs have direct impact on poverty reduction and have contributed to employment of semi-qualified, poorer workers. - Water management: - Continued unsatisfactory water quality in some regions, unprotected potable water sources, summer water shortages and excessive groundwater extraction in the Autonomous Province of Vojvodina. - Co-financing in the total of CSD 237 million for continued construction of three dams and reservoirs and the construction of water supply facilities in 23 municipalities. - During 2005 the Government will finance development of documentation for preparing investments where documentation exists. - Wastewater treatment and flood control: - Out of a total of 152 existing wastewater treatment plants, it is estimated that currently less than 15% are operating with satisfactory results. - In 2003 investments were co-financed for wastewater treatment and collector canals in 11 municipalities; in 2004 activities implemented in total value of CSD 85 million. - Reconstruction and rehabilitation of flood control facilities financed on 13 rivers in 2003; natural disaster in April 2005 in central Banat underscored need for higher investments in maintenance. - Environmental hotspot remediation and energy sector measures: - Remediation of contaminated soil completed in Pljačkovica near Vranje and Bratoselce near Bujanovac. - Clean up of Borovac near Bujanovac planned during 2005, and Reljan near Preševo during 2006. - Plan envisages development of a radioactive waste management program, completed decontamination of soil contaminated with depleted uranium by 2008 and establishment of depleted uranium environmental impact monitoring and assessment in Bujanovac, Preševo and Vranje. - Remediation projects in Kragujevac (4) and in Novi Sad (6) were completed. - Feasibility study Serbian Thermal Power Plant Emission Reduction finished; financing provided for top-priority problems in Nikola Tesla B Thermal Power Plant and Thermal Power Plants Kostolac A and B. - Waste management and financing: - CSD 61 million was allocated in 2004 to co-finance 30 projects in 61 municipalities for waste management, including rehabilitation and remediation of municipal landfills and construction of regional landfills. - Support provided to waste management solutions in Zubin Potok, Zvečan and Leposavić. - Public Invitation for Co-financing Waste Management Projects for 2005 completed. - Inception of the World Bank project Serbian Danube River Enterprise Pollution Reduction, in the total value of approximately USD 20 million, was agreed and planned for September 2005. - Institutional and legislative developments: - Feasibility Study for Hazardous Waste in Serbia prepared, including medical waste, with support of the European Agency for Reconstruction (EAR). EAR also supported first phase in construction of Hazardous Waste Treatment Center. - Preparatory activities for mobile ecotoxicological units completed. - Agency for Environmental Protection established in December 2003, taking over some activities of the Directorate for Environmental Protection. - Sustainable Development Council of the Government of the Republic of Serbia established, as well as the Fund for Environmental Protection as of the beginning of 2005. - Drafts or final versions of Local Environmental Action Plans (LEAPs) finalized in 13 municipalities; LEAP being developed in six municipalities with Ministry financial support and in another twenty with own resources and donor support. - Draft National Environmental Action Plan (NEAP) prepared with EAR support to be submitted by the end of the year to the Serbian Parliament for adoption. - Preparation of numerous action plans expected by December 2006, including spatial planning and development; soil protection; water protection; air and atmosphere protection; forest protection; ecosystem protection; protected areas; chemical management; protection against ionizing and non-ionizing radiation; protection against accidents; protection against noise and vibrations; sustainable energy management; information system development; development of scientific research, education and training; and development and implementation of economic instruments. - Forthcoming environmental challenges: - Setting up an independent Agency for Environmental Protection as outlined in the EU Feasibility Study. - Effectively implementing new and existing environmental legislation and action plans. - Building capacity of local-level administrations for implementation of new obligations stipulated by laws adopted in December 2004. *Italic: Source document _cr06141 (2005) from the supplied IMF content.* ### 4. ANALYSIS OF BUDGET AND INTERNATIONAL ### 4. ANALYSIS OF BUDGET AND INTERNATIONAL ASSISTANCE RESOURCES ### 4.1. Analysis of budget resources allocated to poverty reduction-related programs - Main obstacle: absence of a model for systematic monitoring of resource allocation based on programmatic goals, preventing assessment of overall resources allocated for poverty reduction (domestic or foreign). - Effort in this report: estimate funds from the 2004 and 2005 Budgets of the Republic of Serbia allocated to activities in public administration institutions directly or indirectly aimed at poverty reduction. - Key constraints preventing explicit conclusions on resources allocated to PRS goals: - Timing of PRS adoption: PRS adopted in October 2003, too late to affect 2004 budget planning; PRS included in the Budget Memorandum for 2005 (adopted May 2004) but activities of public administration institutions were not directly linked to PRS priorities. - Budget character: a line type budget (organizational classification by beneficiaries and economic classification by type of expenditure) that does not provide insight into links between programmatic priorities and allocation of budgetary resources. - These constraints prevent precise identification of the category of expenditures directed at poverty reduction, or an estimation of the amount of allocations directed at implementation of the PRS. - Methodology adopted: under the assumption that certain state functions contribute entirely to poverty reduction (e.g., social welfare, education, health care), a special methodology was developed to identify funds directed at state functions whose activities can indirectly influence poverty reduction (see Annex 6.1). - State functions included in analysis as directly or indirectly contributing to poverty reduction: economy, labor and employment; social welfare and insurance; health; education. - Aggregate shares of allocations directed at these state functions (share in total public spending): - 2003: 67.7% - 2004: 70.3% - 2005: 71.0% - Note in table source: TOTAL row shows 67.6, 70.2, 69.9 (see detailed table entries below and source note). - Interpretation: - Large share of public spending in social welfare and insurance (39%) and health care (14,5%) in 2004 indicates a social rather than developmental character of public spending during the first years of transition. - Planned medium-term change (2006-2008): shift in strategic focus from social welfare and health care toward economy and education to prevent new poverty and reduce existing poverty. - Adoption of programmatic budget expected to enable detailed definition, implementation and monitoring of programs and projects within PRS strategic fields and precise presentation of planned and allocated resources directed at PRS goals. - Table 4.1.a. Spent budget funds according to state functions (share in total public spending) - Budget funds — State functions — 2003 — 2004 — 2005 - Economy, labor and employment — 9.5 — 9.2 — 9.3 - 41 General economic and commercial affairs and jobs related to the issue of labor — 2.6 — 2.0 — 2.2 - 42 Agriculture, forestry, hunting and fishery — 1.5 — 2.5 — 2.2 - 45 Transport — 3.4 — 2.2 — 2.2 - 62 Community development — 0.1 — 0.1 — 0.1 - National employment service — 1.9 — 2.4 — 2.6 - Social welfare and insurance — 36.7 — 39.0 — 38.9 - 01 Illness and disability — 1.3 — 1.4 — 1,5 - 04 Family and children — 2.7 — 2.4 — 2,5 - 07 Social welfare for vulnerable populations — 1.1 — 1.1 — 1.4 - 09 Social welfare not classified elsewhere — 1.3 — 1.2 — 1.2 - Pension and disability pension funds (PIO) — 30.3 — 32.8 — 32.3 - PIO for the employed — 28.2 — 30.2 — 29.7 - PIO for farmers — 0.9 — 1.5 — 1.6 - PIO for self-employed — 1.1 — 1.1 — 1.1 - Health care — 13.5 — 14.5 — 14.4 - 76 Health care not classified elsewhere — 0.6 — 0.8 — 0.8 - RHIU — 12.9 — 13.8 — 13.6 - Education — 7.9 — 7.5 — 8.3 - 91 Pre-school and primary education — 3.9 — 3.8 — 4.2 - 92 Secondary school education — 2.0 — 1.8 — 2.1 - 94 Two-year post-secondary school and university education — 1.2 — 1.2 — 1.3 - 96 Auxiliary services in education — 0.7 — 0.6 — 0.6 - 98 Education not classified elsewhere — 0.1 — 0.1 — 0.1 - TOTAL — 67.6 — 70.2 — 69.9 - Source: The Treasury System on budget execution for the previous period, i.e. data on the planned budgetary resources for the current fiscal year. ### 4.1.x Key findings and implications - The line type budget presentation prevents clear establishment of links between specific expenditures and their effects on poverty reduction. - Programmatic (functional/performance) budgeting is recommended to enable precise monitoring of PRS-related resource allocation and program implementation. --- ### 4.2. Realization of international assistance to the Republic of Serbia - Data limitation: Republic of Serbia lacks data that would provide an accurate report on international assistance allocated specifically for poverty reduction (applies to funds received for public administration activities and non-governmental organizations). Therefore, the summary refers to overall international assistance received by Serbia. - Role of external financing: In the last three years external financing contributed significantly to economic growth; without it, problems in sectors (energy, health, social sector, refugee and IDP assistance) would have been considerably worse. Efficient use achieved through continuous consultations between donor community and Serbian institutions. - Donor assistance totals for 2000-2005: - Total allocated to Serbia: EUR 5.3 billion. - Approximately EUR 3.1 billion used during 2000-2004. - In 2005, allocation of an additional EUR 620 million is planned. - Outstanding funds approx. EUR 1.6 billion will be used within programs currently in various stages of implementation. - Transition in assistance modality: - 2004 marked transition from humanitarian to development phase of financing; complete withdrawal of humanitarian support expected by 2006. - Overall international assistance gradually decreasing, with steady decrease in the share of grants relative to assistance approved as concessional credits. - Table 4.2.a.: Ratio of received grants and concessional credits (in EUR million) - 2000 — Grants: 187.21 — %: 100% — Concessional Credits: - — %: 0% — Total: 187.21 - 2001 — Grants: 592.86 — %: 69% — Concessional Credits: 269.80 — %: 31% — Total: 862.66 - 2002 — Grants: 554.27 — %: 68% — Concessional Credits: 261.28 — %: 32% — Total: 815.55 - 2003 — Grants: 354.12 — %: 55% — Concessional Credits: 287.69 — %: 45% — Total: 641.81 - 2004 — Grants: 124.60 — %: 22% — Concessional Credits: 431.26 — %: 78% — Total: 555.86 - 2005 — Grants: 72.94 — %: 12% — Concessional Credits: 551.98 — %: 88% — Total: 624.92 - TOTAL — Grants: 1,886.00 — %: 51% — Concessional Credits: 1,802.01 — %: 49% — Total: 3,688.01 - Source: MIER - Weakness identified: unsatisfactory coordination of international assistance by both donors and the Republic of Serbia during the previous period. - Priority actions for forthcoming period: - a) Coordination and harmonization of international assistance directly allocated for achieving goals defined in the PRS. - b) Harmonization of resources intended for PRS implementation using EU resources allocated for the Republic of Serbia. - c) Further efforts to harmonize international assistance resources with budgetary resources allocated for PRS implementation. - Institutional action: In cooperation with the Development and Aid Coordination Unit under the Ministry of International Economic Relations, development of an international assistance classification system has been planned to monitor expenditures related to PRS objectives within existing reporting system (ISDACON). --- ### 5. CONSULTATIVE PROCESS—ACTIVITIES OF THE POVERTY REDUCTION ADVISORY COMMITTEES - The PRSp preparation process was the first national process involving governmental, non-governmental and business institutions at national and local level in Serbia. Seven representative Advisory Committees were established to make consultation comprehensive: - Parliamentary Committee for Poverty Reduction in Serbia - Civil Society Advisory Committee - Local Self-Governments Advisory Committee - International Development Partners Advisory Committee - Trade Unions Advisory Committee - Business Advisory Committee - Inter-Ministerial Operational Advisory Committee - Result: wide support for the PRS and recognition as a genuine national document. - Reconstitution of Committees for PRS implementation monitoring initiated by the Deputy Prime Minister’s PRS Implementation Focal Point (DPM PRS IFP). Reconstitution priorities: Parliamentary Committee, Civil Society, Local Self-Governments, International Development Partners; subsequent support to reconstitute Trade Unions, Business, and Inter-Ministerial Operational Advisory Committees. ### Parliamentary Committee for Poverty Reduction in Serbia - Established May 30, 2003; became active April 8, 2004. - Composition: 15 members from six parties represented in Parliament: - 3 members—Democratic Party of Serbia - 1 member—Serb Renewal Movement - 2 members—Serbian Socialist Party - 5 members—Serbian Radical Party - 2 members—G17 Plus - 2 members—Democratic Party - Mandate: define Parliament participation in PRS implementation; review drafts of laws and regulations from PRS implementation perspective; monitor budget preparation and allocation related to PRS; provide comments and assessments; work on institutionalization and citizen participation in PRS decision-making. - Activity by June 2005: 13 sessions; promoted PRS among MPs; participated in numerous meetings with institutions and organizations in PRS implementation; implementing a project with OSCE on new legislative solutions to reduce child poverty. - Cooperation with UNDP: organized a seminar on PRS implementation in November 2004; study visit to the Parliament of Israel in June 2005. - Planned activities: monitor and analyze effects of adopted laws and new legislation on poverty reduction and prevention; expand cooperation with other parliamentary committees; learn from other countries’ parliamentary committees; organize a regional conference on means for fighting poverty. - UNDP support: following DPM PRS IFP and Parliamentary Committee initiatives, UNDP will provide financial support for an expert to assist municipalities flooded in April 2005 with drafting project proposals for economic development of flooded areas. ### Civil Society Advisory Committee - Composition: representatives of 11 NGOs nominated by three largest NGO networks in Serbia (Civic Initiatives; Center for the Development of the Non-Profit Sector; Network Serbia Without Poverty). - Main goal: improve dialogue between government and non-governmental sector; enable civil sector participation in development and implementation of strategic documents related to poverty reduction. - Established in autumn 2002; facilitated involvement of around 250 NGOs in PRSp preparation. - Members represent poor and vulnerable social groups and are regionally distributed throughout Serbia. - Activities in 2004–2005: - Continued active promotion of PRS as national development document. - January 2005: organized nine round tables across Serbia to promote PRS and mobilize actors; resulting brochure on opportunities for civil society participation in poverty reduction (with DFID support). ### Local Self-Governments Advisory Committee - Coordinates between Government and towns/municipalities in PRS preparation and implementation. - Established with support of the Committee on Social Policy of the Standing Conference of Towns and Municipalities (SCTM). - Enables towns and municipalities to raise relevant questions and influence central government attitudes on local issues. - January 2005: SCTM published brochure “Poverty Reduction Strategy—challenges and opportunities at the local level,” proposing activities for local strategies. - SCTM prepared Strategy on Local Sustainable Development within Program for Environmental Protection and Sustainable Development in Serbian Towns and Municipalities; recommendations integrated and presented at National Conference on Local Sustainable Development on May 26, 2005. ### International Development Partners Advisory Committee - Comprises multilateral and bilateral donors and international NGOs; actively participated in PRSp preparation. - After PRS adoption, donor organizations supported integration of PRS measures into their plans and coordinated activities with DPM PRS IFP and the Ministry of International Economic Relations. - International NGOs coordinated poverty reduction activities with Government efforts and created a database on current and planned programs containing PRS-related programs with regional distribution to improve targeting of support to sectors and regions with greatest needs. *Source: _cr06141 - 4. ANALYSIS OF BUDGET AND INTERNATIONAL* ### 6. ANNEXES ### 6. ANNEXES ### Classification and scope of tables - The budget presentation follows: - Organizational classification (distribution of funds according to budget beneficiaries). - Economic classification (distribution according to type of expense: salaries, material costs, purchase of fixed assets, etc.). - Functional classification (IMF’s functional classification of state functions by type of service provided). - Tables present expenditures according to the functional classification from different financing sources: budgetary resources, other sources (own incomes, donations, borrowing), own incomes separately, donations separately, and domestic and foreign borrowing separately. ### Expenditures by priority functions — Budget resources (Table 6.1.a) - Total budget resources: - 2003: 6.086.001.118,82 - 2004: 7.332.231.222,29 - 2005: 7.921.323.604,18 - Selected function-level budget-resource amounts: - Economy, Labor and Employment: 2003: 853.520.125,50; 2004: 960.833.323,66; 2005: 1.037.232.325,02 - General Economic and Commercial Affairs and Labor Affairs: 2003: 233.409.045,47; 2004: 213.369.096,35; 2005: 250.869.090,91 - Agriculture, Forestry, Fishing and Hunting: 2003: 131.170.256,80; 2004: 264.059.441,16; 2005: 241.048.189,86 - Transport: 2003: 306.123.666,54; 2004: 227.355.242,90; 2005: 242.565.953,34 - Community Development: 2003: 13.369.335,89; 2004: 6.722.718,99; 2005: 10.320.884,96 - National Employment Service: 2003: 169.447.820,80; 2004: 249.326.824,25; 2005: 292.428.205,95 - Social Protection (total): 2003: 3.299.302.625,62; 2004: 4.065.670.311,51; 2005: 4.338.761.078,04 - Illness and Disability: 2003: 113.008.095,80; 2004: 148.921.130,62; 2005: 164.958.165,73 - Family and Children: 2003: 246.257.687,39; 2004: 253.393.897,16; 2005: 278.443.121,48 - Social Welfare for Most Vulnerable Groups: 2003: 98.488.770,75; 2004: 116.025.386,22; 2005: 155.833.081,26 - Social Welfare Unclassified Elsewhere: 2003: 119.568.435,30; 2004: 125.971.544,93; 2005: 137.174.658,09 - Pension and Disability Insurance Funds (total): 2003: 2.721.979.636,38; 2004: 3.421.358.352,59; 2005: 3.602.352.051,49 - Of employees: 2003: 2.539.823.927,77; 2004: 3.150.017.300,45; 2005: 3.307.092.067,58 - Of agricultural producers: 2003: 83.517.439,02; 2004: 161.028.153,75; 2005: 177.205.229,28 - Of the self-employed: 2003: 98.638.269,60; 2004: 110.312.898,39; 2005: 118.054.754,63 - Health Care (total): 2003: 1.211.860.331,56; 2004: 1.513.974.290,66; 2005: 1.605.274.432,82 - Health Care Unclassified Elsewhere: 2003: 54.696.708,29; 2004: 78.796.633,50; 2005: 83.694.384,55 - Republic Health Insurance Institute: 2003: 1.157.163.623,27; 2004: 1.435.177.657,16; 2005: 1.521.580.048,27 - Education (total): 2003: 712.227.791,74; 2004: 785.128.677,91; 2005: 930.297.940,47 - Preschool and Primary Education: 2003: 353.724.277,94; 2004: 393.483.115,84; 2005: 468.082.783,59 - Secondary Education: 2003: 178.382.899,79; 2004: 191.946.697,10; 2005: 229.630.136,77 - Higher and University Education: 2003: 112.046.413,37; 2004: 128.161.072,92; 2005: 150.076.958,97 - Additional Services to Education: 2003: 59.364.368,32; 2004: 65.633.260,23; 2005: 71.989.557,52 - Environment (total): 2003: 9.090.244,40; 2004: 6.624.618,55; 2005: 9.757.827,84 - Waste Management: 2003: 397.781,61; 2004: 263.738,77; 2005: 457.988,74 - Environmental Protection unclassified elsewhere: 2003: 8.692.462,79; 2004: 6.360.879,78; 2005: 9.299.839,10 ### Expenditures by priority functions — Other sources (Table 6.1.b) - Total other sources (own income, donations, domestic and foreign borrowing): - 2003: 2.151.168.451,35 - 2004: 289.577.749,46 - 2005: 654.225.929,26 - Selected function-level other-source amounts: - Economy, Labor and Employment: 2003: 793.024.948,92; 2004: 272.454.854,47; 2005: 377.398.364,18 - General Economic and Commercial Affairs and Labor Affairs: 2003: 255.714.304,20; 2004: 8.227.277,19; 2005: 4.798.558,44 - Agriculture, Forestry, Fishing and Hunting: 2003: 134.667.250,63; 2004: 6.231.625,98; 2005: 6.148.833,47 - Transport: 2003: 389.014.004,63; 2004: 257.476.146,92; 2005: 365.804.150,07 - Social Protection: 2003: 580.277.633,93; 2004: 8.695.905,35; 2005: 10.157.181,22 - Illness and Disability: 2003: 113.008.095,80; 2004: 0; 2005: 0 - Family and Children: 2003: 246.257.687,39; 2004: 72.156,31; 2005: 160.901,05 - Social Welfare for Most Vulnerable Groups: 2003: 99.728.008,68; 2004: 7.913.941,25; 2005: 4.411.131,34 - Social Welfare Unclassified Elsewhere: 2003: 121.283.842,06; 2004: 709.807,80; 2005: 5.585.148,83 - Health Care (other sources): 2003: 56.547.832,36; 2004: 4.503.287,51; 2005: 54.002.221,24 - Education (other sources): 2003: 712.227.791,74; 2004: 2.771.995,58; 2005: 209.612.967,53 - Environment (other sources): 2003: 9.090.244,40; 2004: 1.151.706,55; 2005: 3.055.195,09 ### Expenditures — Own incomes of budgetary recipients (Table 6.1.c) - Total own incomes: - 2003: 91.575.089,33 - 2004: 194.058.012,26 - 2005: 293.473.933,99 - Selected own-income amounts: - Economy, Labor and Employment: 2003: 86.776.332,70; 2004: 187.459.456,21; 2005: 182.455.349,96 - Transport (own incomes): 2003: 82.890.338,09; 2004: 180.708.025,86; 2005: 174.951.729,69 - Education (own incomes): 2003: 0; 2004: 0; 2005: 102.410.876,91 - Preschool and Primary Education: 2005: 6.518.938,05 - Secondary Education: 2005: 7.125.374,09 - Higher and University Education: 2005: 71.137.827,84 - Additional Services to Education: 2005: 17.604.601,77 - Health Care (own incomes): 2003: 1.851.124,07; 2004: 2.573.673,47; 2005: 1.541.230,49 - Environment (own incomes): 2004: 1.097.619,55; 2005: 314.457,32 ### Expenditures — Donations (Table 6.1.d) - Total donation resources: - 2003: 22.183.323,65 - 2004: 15.944.451,83 - 2005: 109.620.733,38 - Selected donation amounts: - Economy, Labor and Employment (donations): 2003: 22.176.311,52; 2004: 7.829.138,68; 2005: 4.090.593,84 - General Economic and Commercial Affairs and Labor Affairs: 2003: 22.176.311,52; 2004: 7.720.564,82; 2005: 4.090.593,84 - Social Protection — Social Protection for Most Vulnerable Groups (donations): 2003: 7.012,13; 2004: 5.768.642,33; 2005: 3.405.161,91 - Health Care (donations): 2004: 1.068.287,79; 2005: 356.002,82 - Education (donations): 2004: 1.224.296,02; 2005: 99.028.237,04 - Preschool and Primary Education (donations) 2005: 57.776.991,15 - Secondary Education (donations) 2005: 27.381.834,27 - Higher and University Education (donations) 2005: 12.554.384,55 - Environment (donations): 2004: 54.087,00; 2005: 2.740.737,77 ### Expenditures — Domestic and foreign borrowing (Table 6.1.e) - Total borrowing: - 2003: 2.037.410.038,37 - 2004: 79.575.285,38 - 2005: 251.131.261,89 - Selected borrowing amounts: - Economy, Labor and Employment (borrowing): 2003: 684.072.304,70; 2004: 77.166.259,57; 2005: 190.852.420,38 - General Economic and Commercial Affairs and Labor Affairs: 2003: 233.409.045,47; 2004: 506.712,37; 2005: 0 - Agriculture, Forestry, Fishing and Hunting (borrowing): 2003: 131.170.256,80; 2004: 0; 2005: 0 - Transport (borrowing): 2003: 306.123.666,54; 2004: 76.659.547,20; 2005: 190.852.420,38 - Community Development (borrowing): 2003: 13.369.335,89; 2004: 0; 2005: 0 - Social Protection (borrowing): 2003: 577.322.989,25; 2004: 0; 2005: 0 - Illness and Disability: 2003: 113.008.095,80; 2004: 0; 2005: 0 - Family and Children: 2003: 246.257.687,39; 2004: 0; 2005: 0 - Social Welfare for Most Vulnerable Groups: 2003: 98.488.770,75; 2004: 0; 2005: 0 - Social Welfare Unclassified Elsewhere: 2003: 119.568.435,30; 2004: 0; 2005: 0 - Health Care (borrowing): 2003: 54.696.708,29; 2004: 861.326,25; 2005: 52.104.987,93 - Education (borrowing): 2003: 712.227.791,74; 2004: 1.547.699,56; 2005: 8.173.853,58 - Preschool and Primary Education (borrowing): 2003: 353.724.277,94; 2004: 287.853,25; 2005: 2.098.149,64 - Secondary Education (borrowing): 2003: 178.382.899,79; 2004: 28.871,93; 2005: 337.892,20 - Higher and University Education (borrowing): 2003: 112.046.413,37; 2004: 0; 2005: 151.520,51 - Additional Services to Education (borrowing): 2003: 59.364.368,32; 2004: 0; 2005: 3.218.020,92 - Education unclassified elsewhere (borrowing): 2003: 8.709.832,32; 2004: 1.230.974,38; 2005: 2.368.270,31 - Environment (borrowing): 2003: 9.090.244,40; 2004: 0; 2005: 0 *Source: _cr06141 - 6. ANNEXES* ### 6.2 ANALYSIS OF THE STATUS OF PRS RELATED LAWS ### 6.2 ANALYSIS OF THE STATUS OF PRS RELATED LAWS ### Adopted laws (Table 6.2.a.) - Law on Mandatory Social Insurance Contributions (PRS envisages the Law on Mandatory Social Insurance Contribution Bases and Rates) — Ministry of Finance — Official Gazette of the Republic of Serbia No. 84/04 and 61/05 - Law on Free Access to Public Information — Ministry of Culture — Official Gazette of the Republic of Serbia No. 120/04 - Law on Drugs and Medical Items — Ministry of Health — Official Gazette of the Republic of Serbia No. 84/04 - Bankruptcy Law — Ministry of Economy — Official Gazette of the Republic of Serbia No. 84/04 - Law on Registration of Commercial Entitities — Serbian Agency for the Development of Small and Medium Sized Entreprises and Entrepreneurship — Official Gazette of the Republic of Serbia No. 55/04 and 61/05 - Law on Value Added Tax — Ministry of Finance — Official Gazette of the Republic of Serbia No. 84/04, 86/04 and 61/05 - Law on Tourism — Ministry of Trade, Tourism and Services — Official Gazette of the Republic of Serbia No. 45/05 - Law on Еnergy — Ministry of Mining and Energy — Official Gazette of the Republic of Serbia No. 84/04 - Law on National Housing Credit Corporation — Ministry of Finance — Official Gazette of the Republic of Serbia No. 55/04 - Law on Business and Enterpreneurship Registration — Ministry of Economy — Official Gazette of the Republic of Serbia No. 55/04 - Law on Electronic Signature (envisaged as the Law on Electronic Business Transactions and Digital Signature + bylaws) — Ministry of Science and Environmental Protection — Official Gazette of the Republic of Serbia No. 135/04 - Law on the Amendments to the Law on the National Bank of Serbia — Ministry of Finance — Official Gazette of the Republic of Serbia No. 55/04 - Law on the Republic of Serbia’s Budget for 2004 — Ministry of Finance — Official Gazette of the Republic of Serbia No. 33/04 and 115/04 - Law on the Level of Funding and the Shares in Payroll Tax and Sales Tax by Municipalities and Towns and the City of Belgrade for 2004 — Ministry of Finance — Official Gazette of the Republic of Serbia No. 33/04 - Law on Insurance — Ministry of Finance — Official Gazette of the Republic of Serbia No. 55/04, 70/04 and 61/05 - Law on the Amendments and Additions to the Law on Payment System — Ministry of Finance — Official Gazette of the Republic of Serbia No. 43/04 - Law on the Amendments and Additions to the Law on Excise — Ministry of Finance — Official Gazette of the Republic of Serbia No. 43/04, 55/04, 135/04 and 46/05 - Law on the Аmendments and Additions to the Law on the Rights of Veterans, Military Invalids, Civilian War Victims and their Survivors — Ministry of Labor, Employment and Social Affairs — Official Gazette of the Republic of Serbia No. 137/04 - Law on the Amendments to the Law on Publications (PRSp envisages the Law on Publishing) — Ministry of Culture — Official Gazette of the Republic of Serbia No. 135/04 - Law on the Prevention of the Conflict of Interest in Performance of Public Functions (Ministry of Finance and Economy was envisaged in PRSp) — Official Gazette of the Republic of Serbia No. 43/04 - Law on Forest Trees Reproductive Material — Ministry of Science and Environmental Protection — Official Gazette of the Republic of Serbia No. 135/04 and 8/05 - Law on the Amendments to the Law on Health Insurance — Ministry of Health — Official Gazette of the Republic of Serbia No. 45/05 - Law on Postal Services — Ministry of Capital Investment — Official Gazette of the Republic of Serbia No. 18/05 - Serbian Investment and Export Promotion Agency of the Republic of Serbia was founded by the Law on Ministries as a separate organization (PRS envisages the Law on Serbian Investment and Export Promotion Agency-SIEPA) — Ministry of International Economic Relations — Official Gazette of the Republic of Serbia No. 84/04 - Law on the Annulment of the Law on the Foundation of Public Air Transport Company — Ministry of Capital Investment — Official Gazette of the Republic of Serbia No. 18/05 - Law on Rail — Ministry of Capital Investment — Official Gazette of the Republic of Serbia No. 18/05 - Family Law — Ministry of Labor, Employment and Social Affairs — Official Gazette of the Republic of Serbia No. 18/05 - Law on Economic Societies — Official Gazette of the Republic of Serbia No. 125/04 - Law on the Amendments to the Law on Social Protection and Provision of Citizens’ Social Security — Ministry of Labor, Employment and Social Affairs — Official Gazette of the Republic of Serbia No. 84/04 - Law on Prices — Ministry of Trade, Tourism and Services — Official Gazette of the Republic of Serbia No. 79/05 - Law on Tertiary Education — Ministry of Education and Sport — Official Gazette of the Republic of Serbia No. 76/05 - Law on Consumer Protection — Ministry of Trade, Tourism and Services — Official Gazette of the Republic of Serbia No. 79/05 - Law on Advertising — Ministry of Trade, Tourism and Services — Official Gazette of the Republic of Serbia No. 79/05 - Law on Bank Rehabilitation Agency — Ministry of Finance — Official Gazette No. 61/05 - Law on Bankruptcy and Liquidation of Banks and Insurance Societies — Ministry of Finance — Official Gazette No. 61/05 - Law on the Amendments and Additions to the Law on Banks and Other Financial Institutions — Ministry of Finance — Official Gazette No. 61/05 - Law on Public Debt — Ministry of Finance — Official Gazette No. 61/05 - Law on Amendments and Additions to the Law on Passenger Road Transfer — Official Gazette of the Republic of Serbia No. 61/05 - Law on Amendments and Additions to the Law on Pledge on Registered Movables — Official Gazette of the Republic of Serbia No. 61/05 - Law on the Protection of Competition (Antimonopoly Law) — Ministry of Trade, Tourism and Services — Official Gazette of the Republic of Serbia No. 79/05 - Law on Amendments and Additions on the Law on Financial Leasing — National Bank of Serbia — Official Gazette of the Republic of Serbia No. 61/05 - Law on the Strategic Environmental Impact Assessment — Ministry of Science and Environmental Protection — Official Gazette of the Republic of Serbia No. 135/04 - Law on Reporting and Keeping Record of Confiscated Property (PRS envisages the Law on Confiscated Land and Restitution and Compensation) — Ministry of Finance — Official Gazette of the Republic of Serbia No.45/05 - Law on Political Parties Financing — Ministry of Finance — Official Gazette of the Republic of Serbia No. 72/03 - Local Self-Governance Infrastructure Development Agency was established as a separate organization in the Law on Ministries (PRS envisages the Law on Local Self-Governance Infrastructure Development Agency) — Official Gazette of the Republic of Serbia No.19/04 and 84/04 - Law on Public Administration — Republic Secretariat for Legislation — Official Gazette of the Republic of Serbia No. 79/05 - Law on Civil Servants — Republic Secretariat for Legislation — Official Gazette of the Republic of Serbia No. 79/05 - Law on Ombudsman — Ministry of Public Administration and Local Self-Government — Official Gazette of the Republic of Serbia No. 79/05 ### PRS related draft laws in the Parliamentary procedure (Table 6.2.b.) - Law on Health and Safety Regulations at Work — Ministry of Labor, Employment and Social Affairs — Draft Law in the Parliament procedure since December 24, 2004 - Law on Health Protection — Ministry of Health — Draft Law in the Parliament procedure since May 20, 2005 (adoption envisaged for the second half 2003) - Law on Public Skiing Venues — Ministry of Trade, Tourism and Services — Draft Law in the Parliament procedure since January 11, 2005 (adoption envisaged for the middle of 2003) - Law on Roads — Ministry of Transport and Telecommunication — Draft Law in the Parliament procedure since February 18, 2005 (adoption envisaged for the middle of 2003) - Anti Money Laundering Law — Ministry of Finance — Draft Law in the Parliament procedure since November 29, 2004 (adoption envisaged for September 2003) - Law on Amendments and Additions to the Customs Law — Ministry of Finance — Draft Law in the Parliament procedure since June 2, 2005 - Law on Prevention of Doping in Sport — Ministry of Education and Sport — Draft Law in the Parliament procedure since November 19, 2005 - Law on the Amendments and Additions to the Law on Artistic and Other Activities in the Area of Culture — Ministry of Culture — Draft Law in the Parliament procedure since March, 24, 2005 (Draft Law was submitted to the Parliament on November 15, 2002) - Law on the Amendments to the Law on Misdemeanour Penalties — Ministry of Justice — Draft Law in the Parliament procedure since January 31, 2005 (planned for the second half of 2003) - Draft Law on Amendments and Additions to the Law on the Registration of Commercial Entities — Draft Law in the Parliament procedure since February 16, 2005 - Draft Law on Medial Workers’ Chambers — Draft Law in the Parliament procedure since May 20, 2005 - Draft Law on Substances that are used in Illegal Production of Narcotics and Psychotropic Substances — Draft Law in the Parliament procedure since May 20, 2005 - Law on Goods and Services Market Inspection — Ministry of Trade, Tourism and Services — Draft Law in the Parliament procedure since July 22, 2005 - Law on Veterinary Medicine — Ministry of Agriculture, Forestry and Water Management — Draft Law in the Parliament procedure since July 22, 2005 - Law on the Amendments and Additions to the Law on Employment and Unemployment Insurance — Ministry of Labor, Employment and Social Affairs — Draft Law in the Parliament procedure since July 22, 2005 ### Laws envisaged by the PRS that are in the preparation process (Table 6.2.c.) - Law on Foreign Trade — Ministry of International Economic Relations — In the preparation phase - Law on Special Anticorruption Institution — Ministry of Justice (instead of the envisaged Ministry of Finance and Economy) — In the preparation phase - Law on Trade — Ministry of Trade, Tourism and Services — On a public debate (planned for the end of 2003) - Law on Sports — Ministry of Education and Sport — Draft has been prepared - Law on Waste Management — Ministry of Science and Environmental Protection — Draft has been prepared - Law on Professional Associations (Chambers) — Ministry of Health — In the preparation phase - Law on Protection against Non-Ionic Radiation — Ministry of Science and Environmental Protection — In the preparation phase - Law on Fisheries — Ministry of Science and Environmental Protection — Draft has been prepared - Geology Law — Ministry of Science and Environmental Protection — In the preparation phase - Law on Preprimary Education — Ministry of Education and Sport — In the preparation phase (envisaged for mid 2003) - Law on Student Associations — Ministry of Education and Sport — In the preparation phase (envisaged for mid 2003) - Law on Voluntary Pension and Disability Insurance — Ministry of Social Affairs — In the preparation phase (adoption envisaged until the end of 2003) ### Other laws envisaged by the PRS (Table 6.2.d.) - Law on Administrative Proceedings — Ministry of Public Administration and Local Self-Government — (envisaged adoption period not specified) - Law on Administrative Procedure — Ministry of Public Administration and Local Self-Government — (envisaged adoption period not specified) - Law on Citizen Associations — Ministry of Public Administration and Local Self-Government — (envisaged adoption period not specified) - Law on Public Defence — (relevant ministry not specified) - Law on Judicial Budget — (relevant ministry not specified) - Law on Non-Governmental Organizations — Draft Law has been prepared. On a public debate. - Law on Conditions for Employing a Foreign Citizen — (relevant ministry not specified) - Law on Trade Societies — (relevant ministry not specified) - Law on Contributions — (relevant ministry not specified) - Law on Underdeveloped Regions — (relevant ministry not specified) - Law on Resources for Stimulating the Development of Underdeveloped Regions — (relevant ministry not specified) - Law on Gender Equality — In Parliamentary procedure in September 2005 - Anti Discrimination Law — On a public debate - Law on Mortgage — Ministry of International Economic Relations — Adoption envisaged by the end of 2003 - Law on Passenger Road Transport — Ministry of Transport and Telecommunications — Adoption envisaged by the end of 2003 - Law on International Trade Arbitration — Ministry of International Economic Relations — Adoption envisaged by the end of 2003 - Law on Transport and Road Safety — Ministry of Transport and Telecommunications — Adoption envisaged by the end of 2003 - Law on Cargo Road Transport — Ministry of Transport and Telecommunications — Adoption envisaged by the end of 2003 - Law on Hazardous Substances Transport — Ministry of Transport and Telecommunications — Adoption envisaged by the end of 2003 - Law on Internal Navigation — Ministry of Transport and Telecommunications — Adoption envisaged by the end of 2003 - Law on Physical and Technical Security — Ministry of Internal Affairs — Adoption envisaged by the end of 2003 (in the Parliament procedure) - Law on Amendments and Additions to the Law on Mining — Ministry of Mining and Energy — Adoption envisaged by the end of 2003 - Law on Sanitary Inspection — Ministry of Health — (envisaged adoption period not specified) - Law on the RS Aviation — Ministry of Transport and Telecommunications — Preparation being finalized during September 2003 - Law on Agriculture — Ministry of Agriculture, Forestry and Water Management — (envisaged adoption period not specified) - Law on Amendments and Additions to the Law on Primary Education — Ministry of Education and Sport — (envisaged adoption period not specified) - Law on Amendments and Additions to the Law on Secondary Education — Ministry of Education and Sport — (envisaged adoption period not specified) - Law on Privatization in Sport Industry — Ministry of Education and Sport — Adoption envisaged by the end of 2003 - Law on Police — Ministry of Internal Affairs — Being prepared during 2003 - Law on Police Education Institutions — Ministry of Internal Affairs — Preparation being finalized during September 2003 - Law on Social Protection System — Ministry for the Protection of Natural Resources and Environment — Government of the Republic of Serbia adopted the Draft Law on May 15, 2002 - Law on Academic Research — Ministry of Science, Technology and Development — Adoption envisaged by the end of 2003 - Law on Innovation System — Ministry of Science, Technology and Development — Adoption envisaged by the end of 2003 - Law on Amendments and Additions to the Law on Foreign Currency Transactions — Ministry of Finance and Economy — Proposal submitted to the Parliament in September 2003 - Law on Biomedical Artificial Insemination — Ministry of Health — Draft Law submitted to the Government of the Republic of Serbia at the end of 2003 - Law on Harvesting and Transplatation of Human Organs — Ministry of Health — Draft Law submitted to the Government of the Republic of Serbia at the end of 2003 - Law on Health Safety of Food Products and General Goods — Ministry of Health — (envisaged adoption period not specified) - Law on Records, Development and Maintenance of Memorial Cities and Serbian Veteran Cemeteries in the Country and Abroad and Foreign Soldiers Cemetaries in the Territory of the Republic of Serbia — Ministry of Labour, Employment and Social Affairs — (envisaged adoption period not specified) - Law on the Protection of the Family Members of the Military Service Conscripts — Ministry of Labour, Employment and Social Affairs — (envisaged adoption period not specified) - Law on Cultural Heritage — Ministry of Culture and Public Information — Draft Law developed during 2003 - Law on Cinematography/ Law on Cinematography Fund — Ministry of Culture and Public Information — Adoption envisaged by the end of 2003 - Law on Libraries — Ministry of Culture and Public Information — (envisaged adoption period not specified) - Law on Inspection Supervision and Administrative Inspection — Ministry of Public Administration and Local Self-Government — (envisaged adoption period not specified) - Law on Spas — Ministry of Trade, Tourism and Services — Adoption envisaged by the end of 2003 - Law on Amendments and Additions to the Law on Terms and Conditions of Approving Rights and Restituting Land Transferred in Social Ownership on the Basis of Agricultural Land Fund and Confiscated on the Basis of Unfulfilled Obligations of Mandatory Buyout of Agricultural Production — Ministry of Finance and Economy — Draft Law developed during 2003 - Law on Agency for Rural Development — Ministry of Agriculture, Forestry and Water Management — (envisaged adoption period not specified) - Law on Agency for Serbian Academic Computer Network — Ministry of Science, Technology and Development — Adoption envisaged by the end of 2003 - Law on Rehabilitation of Political Convicts and Prisoners — Ministry of Justice — Adoption envisaged by the end of 2003 - Law on Terms and Conditions for Performance of Court Expertise — Ministry of Justice — Adoption envisaged by the end of 2003 - Law on Narcotic Precursors — Ministry of Health — Adoption envisaged by the end of 2003 - Law on the Production and Trading of Narcotics — Ministry of Health — Adoption envisaged by the end of 2003 ### Laws not envisaged by the PRS but recognized as relevant by line ministries (Table 6.2.e.) - Law on Environmental Protection — Ministry of Science and Environmental Protection — Official Gazette of the Republic of Serbia No. 135/04 - Law on the Strategic Environmental Impact Assessment — Ministry of Science and Environmental Protection — Official Gazette of the Republic of Serbia No. 135/04 - Law on Integrated Pollution, Prevention and Control — Ministry of Science and Environmental Protection — Official Gazette of the Republic of Serbia No. 135/04 - Law on Amendments to the Law on Local Self-Government — Official Gazette of the Republic of Serbia No. 33/04 - Law on the Amendments and Additions to the Law on Local Self-Government — Official Gazette of the Republic of Serbia No. 135/04 - Law on Amendments and Additions to the Law on Public Income and Expenditures — Official Gazette of the Republic of Serbia No. 33/04 - Law on Regulating Duties of the Republic of Serbia regarding the Borrowings for Economic Development — Official Gazette of the Republic of Serbia No. 43/04 - Law on Amendments and Additions to the Law on Guarantee Fund — Official Gazette of the Republic of Serbia No. 43/04 and 61/05 - Law on Amendments to the Law on Taxes for Using, Keeping and Carrying Goods — Official Gazette of the Republic of Serbia No. 43/04 and 132/04 - Law on Addition to the Law on Securities and Other Financial Instruments Markets — Official Gazette of the Republic of Serbia No. 55/04 and 45/05 - Law on Amendments and Additions to the Law on Public Procurement — Official Gazette of the Republic of Serbia No. 55/04 - Law on Amendments and Additions to the Law on Tax Procedure and Tax Administration — Official Gazette of the Republic of Serbia No. 55/04 and 61/05 - Law on the Serbian Business Registration Agency — Official Gazette of the Republic of Serbia No. 55/04 - Law on Amendments and Additions to the Law on Sales Tax — Official Gazette of the Republic of Serbia No. 84/04 - Law on Amendments and Additions to the Law on Corporate Income Tax — Official Gazette of the Republic of Serbia No. 84/04 - Law on Games of Chance — Official Gazette of the Republic of Serbia No. 84/04 - Law on Amendments and Additions to the Law on Broadcasting — Official Gazette of the Republic of Serbia No. 42/02 и 97/04 - Law on Mediation in Labour-Related Disputes — Ministry of Labor, Employment and Social Affairs — Official Gazette of the Republic of Serbia No. 125/04 - Law on the Budget of the Republic of Serbia for 2005 — Official Gazette of the Republic of Serbia No. 127/04 - Law on the Citizenship of the Republic of Serbia — Official Gazette of the Republic of Serbia No. 135/04 - Law on Amendments and Additions to the Law on Income Tax — Official Gazette of the Republic of Serbia No. 135/04 - Law on Amendments and Additions to the Law on Property Tax — Official Gazette of the Republic of Serbia No. 135/04 - Law on Fiscal Cash Registers — Official Gazette of the Republic of Serbia No. 135/04 - Law on Fulfilling the Duties of the Republic of Serbia towards the National Bank — Official Gazette of the Republic of Serbia No. 135/04 - Law on Non-life Insurance Premium Tax — Official Gazette of the Republic of Serbia No. 135/04 - Law on the Distribution of Transfer Resources from the Budget of the RS and the Shareс of Towns and the City of Belgrade in the Payroll Tax in 2005 — Official Gazette of the Republic of Serbia No. 135/04 - Law on Amendments to the Law on the Privatization Agency — Official Gazette of the Republic of Serbia No. 135/04 - Framework Law on Education System — Official Gazette of the Republic of Serbia No. 62/03 - Law on Amendments and Additions to the Framework Law on Education System — Official Gazette of the Republic of Serbia No. 58/04 - Law on Amendments and Additions to the Law on Criminal Procedure — Ministry of Justice — Official Gazette of the Republic of Serbia No. 58/04 - Law on Civil Proceedings — Ministry of Justice — Official Gazette of the Republic of Serbia No. 125/04 - Law on Extra-Judicial Proceeding — Official Gazette of the Republic of Serbia No. 18/05 - Law on Mediation — Ministry of Justice — Official Gazette of the Republic of Serbia No. 18/05 - Law on Executive Procedure — Ministry of Justice — Official Gazette of the Republic of Serbia No. 125/04 - Law on Agency for Licencing of Bancruptcy Trustees — Ministry of Justice — Official Gazette of the Republic of Serbia No. 84/04 - Law on Prosecutor's Office — Ministry of Justice — Official Gazette of the Republic of Serbia No. 51/04 - Court Organisation Bill — Ministry of Justice — Official Gazette of the Republic of Serbia No. 29/04 - Law on Public Agencies — Serbian Agency for the Development of Small and Medium Sized Entreprises and Entrepreneurship — Official Gazette of the Republic of Serbia No. 18/05 - Law on Amendments and Additions to the Law on Financial Transactions Tax — Ministry of Finance — Official Gazette of the Republic of Serbia No. 43/04 - Law on the Cessation of the Law on Income Fund Tax — Ministry of Finance — Official Gazette of the Republic of Serbia No. 33/04 - Law on the Amendments to the Law on the Action Plan of Serbia and Montenegro for the Harmonization of Economic Systems of Member States in order to Prevent and Remove Obstacles to Unimpeded Flow of People, Merchandise, Services and Capital — Ministry of International Economic Relations — Official Gazette of the Republic of Serbia No. 18/05 - Law on Amendments and Additions to the Law on Privatization — Privatization Agency — Official Gazette of the Republic of Serbia No. 45/05 - Labour Law — Ministry of Labor, Employment and Social Affairs — Official Gazette of the Republic of Serbia No. 24/05 and 61/05 - Law on Socio-Economic Council — Ministry of Labor, Employment and Social Affairs — Official Gazette of the Republic of Serbia No. 125/04 - Competitiveness Law — Ministry of International Economic Relations — Law Proposal in the Parliamentary procedure since May 30, 2005 - Law on Red Cross — Ministry of Health — Law Proposal in the Parliamentary procedure since May 6, 2005 - Law on Precursors — Ministry of Health — Law Proposal prepared - Law on Insufficiently Developed Regions — Republic Development Bureau — Draft prepared - Law on Protection against Non-ionic Radiation and Nuclear Safety — Ministry of Science and Environmental Protection — Draft prepared - Law on Chemicals — Ministry of Science and Environmental Protection — Draft prepared - Law on Legal Assistance — Ministry of Justice — In the preparation phase - Law on Public Notaries — Ministry of Justice — In the Parliament procedure - Social Residence Law — Ministry of Capital Investment — In the preparation phase - Law on Amendments and Additions to the Planning and Constructing Law — Ministry of Capital Investment — In the preparation phase - Arbitration Law — Ministry of International Economic Relations — In the preparation phase - Law on Industrial Parks — Ministry of International Economic Relations — In the preparation phase - Law on Even Regional Development — Republic Development Bureau — In the preparation phase - Refugees Law — Comissariat for Refugees of the Republic of Serbia — In the preparation phase - Strike Law — Ministry of Labor, Employment and Social Affairs — In the preparation phase - Law on the Protection of Citizens of the Republic of Serbia Working Abroad — Ministry of Labor, Employment and Social Affairs — In the preparation phase - Law on Employing Disabled Persons — Ministry of Labor, Employment and Social Affairs — In the preparation phase - Law on Record Keeping within the Field of Labor and Employment — Ministry of Labor, Employment and Social Affairs — In the preparation phase - Antidiscrimination Law against Disabled Persons — Ministry of Labor, Employment and Social Affairs — In the preparation phase - Law on Package and Package Waste Material — Ministry of Science and Environmental Protection — In the preparation phase - Law on Nature Protection — Ministry of Science and Environmental Protection — In the preparation phase - Law on Air Protection — Ministry of Science and Environmental Protection — In the preparation phase - Law on Schoolbooks and Other Teaching Equipment and Methodology — Ministry of Education and Sport — In the preparation phase - Law on Pupil and Student Standard — Ministry of Education and Sport — In the preparation phase - Law on Financing Water Management — Ministry of Agriculture, Forestry and Water Management — In the preparation phase - Standardization Law — Ministry of Trade, Tourism and Services — (status not specified) - Law on Unions and Employers Society — Ministry of Labor, Employment and Social Affairs — In the preparation phase *Source: _cr06141 - 6.2 ANALYSIS OF THE STATUS OF PRS RELATED LAWS* ### 1. Ministry of Education and Sport, Poverty Reduction Strategy Implementation Report, ### _cr06141 - 1. Ministry of Education and Sport, Poverty Reduction Strategy Implementation Report, ### Introduction and context - The Government of the Republic of Montenegro adopted the Development and Poverty Reduction Strategy (DPRS) in November 2003; preparatory work started in May 2002 and an Interim Poverty Reduction Strategy was adopted in July 2002. - The DPRS covers the period 2003-2006. - The Economic Reform Agenda in Montenegro 2002-2007 (adopted May 2002) is described as completely complementary to the DPRS; the Economic Reform Agenda emphasizes sustainable macroeconomic stability and rapid private sector growth, while the DPRS emphasizes development parallel with poverty reduction and gives special treatment to social protection, health, and education. - The DPRS drafting process included government officials, NGOs, trade unions, academics, donors, and regional experience with an emphasis on EU integration. - Donor involvement: preparatory support from WB, DFID and UNDP; the DPRS was presented at the Donor Conference in Bruxelles in November 2003 where international donors promised part of the funds for implementation. ### Poverty data sources and timing - Primary poverty diagnostics used: - Poverty Assessment for Montenegro (2003) using two rounds of 2002 ISSP household surveys. - Focused ISSP survey of the poorest strata in 2003 (with UNDP support). - ISSP 2004 survey (supported by the World Bank), implemented in April 2004, conducted four months after PRSP implementation began and therefore cannot reflect PRSP-induced changes. - ISSP refers to The Institute for Strategic Studies and Prognosis, www.isspm.org. ### Key findings from ISSP 2004 and earlier diagnostics - The 2004 ISSP survey confirmed and validated the poverty diagnostics on which the PRSP is based. - Main diagnostics validated: - Absolute poverty in Montenegro affects a relatively small percentage of the population (between 8.4 and 13.6 percent), with the poor concentrated in Center and North and in rural areas. - Some groups are extremely poor and socially excluded; for these groups poverty is severe and multi-dimensional, spanning housing, access to and quality of education, and health (Roma, IDPs, some rural poor). - A significant fraction of the population is vulnerable to poverty; many more are subject to shocks that will make them poor. One source of such shocks and uncertainty are unreformed systems of public service provision. - The new ISSP data with a panel component (same households re-interviewed in 2002-03 and 2004) revealed: - Chronic and extreme poverty outside socially excluded groups (such as Roma and IDPs) is minimal with only a negligible share (about one percent) of non-Roma and non-IDP households staying chronically poor between 2002 and 2004. - Economic vulnerability—elevated risk to become poor—affects about one third of the population. - Vulnerability to poverty remained large especially among farmers and families outside regular employment throughout the period. ### Observed trends and constraints on poverty reduction (2002–2004) - Poverty remained stable in Montenegro between 2002, 2003 and 2004. - Factors explaining lack of progress in reducing poverty: - Economic growth remained anemic, about 2.5 percent per year in the period 2002-2003; such low rates of growth are shown to have minimum impact on poverty. - Prior to adoption of the PRSP, Government policies were not intentionally pro-poor and were not targeted to the poor. ### PRSP strategic focus and policy priorities - The Poverty Reduction Strategy targets multiple facets of poverty through: - Focus on economic growth via private sector development to reduce the number of people close to the poverty line (vulnerable to poverty). - Reforms of social sectors to provide safety nets for the poor and vulnerable and to reduce risks from poorly functioning infrastructure, health, and education. - Addressing pockets of severe poverty and social exclusion of marginalized groups. *Source: _cr06141 - 1. Ministry of Education and Sport, Poverty Reduction Strategy Implementation Report, Belgrade 2005* ### 1.2 How many poor? ### 1.2 How many poor? ### Key findings on poverty incidence - Between 8.4 and 13.6 percent (with best approximation of 10.9%) of the population live in absolute material poverty. - Poverty pockets: Roma 48%; recipients of social assistance 39.3%. - One third of the population can be classified as economically vulnerable, living below 150% of the poverty threshold. - Chronic and extreme poverty outside the group of socially excluded is minimal with negligible share (about one percent) of non-Roma and non-IDP household staying chronically poor between 2002 and 2004. - Stability of poverty is attributed to limited changes in the employment situation, concentration of gains among those already employed, and an increased gap between those with jobs and those without. - Employment status is associated with poverty risk: households headed by non-working, non-retired persons have the highest risk of poverty; having a household head employed is associated with lower poverty. Pensioners’ position remained stable (poverty risk around average). - Inequality: Gini index for consumption per capita estimated at 0.28. - Poverty gap and poverty severity indicate the gap between the poor and the rest did not change, reflecting negative distributional changes for the poor. ### Social protection coverage - Social protection net (including pensions) is wide, but poor are not well covered: only 20 percent of the poor receive targeted benefits. ### Regional patterns - North continues to have higher poverty rate, although it has somewhat receded by 2004. - South, initially the richest region, benefited most from economic growth with poverty falling to almost zero by 2004. ### Consumption poverty and survey-based estimates (2002–2004) - 2002 data (rounds 5 and 6 of ISSP survey)*: - Poverty rate: Head Count 9.4 (7.5-11.3) - Poverty gap 1.3 - Severity of Poverty 0.3 - 2003 ISSP household survey: - Poverty rate: Head Count 12.2* (6.8-17.6) - 2004 ISSP household survey: - Poverty rate: Head Count 10.9 (8.4-13.6) - Poverty gap 2.1 - Severity of Poverty 0.7 - Source note in table: Radevic and Beegle (2003) ISSP Household Survey 5 and 6, ISSP&UNDP report “Household Survey on RAE, refugees and internally displaced persons”, 2003 for 2003 data and Staff estimates using 2004 data; 95% confidence intervals provided for poverty rates in brackets. - * Note: 2002 data are not fully representative of the population for the reasons mentioned. ### Multidimensional poverty indicators (from Table 2) - Consumption poverty: - absolute poverty 10.9 percent of population; 31.6 percent of poor (table format indicates % of population and % of poor) - economically vulnerable 31.6 percent (percent of population) - Education poverty: - 16-24 years: not in school and did not attend secondary school: 13.8 percent of population; 39.6 percent of poor - Health poverty: - any illness/injury in last 30 days that precluded usual activities or disabled: 5.7 percent of population; 9.0 percent of poor - Employment poverty: - ages 20-65: not working but ready to work if given a job opportunity: 23.7 percent of population; 46.5 percent of poor - Housing poverty: - drinking source for dwelling is not piped water (ex: pump well) or dwelling has no bathroom*: 18.3 percent of population; 22.8 percent of poor - dwelling has less than 10m² per person: 22.6 percent of population; 57.3 percent of poor ### Poverty and environment - 2004 ISSP survey results on heating fuel use: - 51.3% of Montenegrin households are using fuel wood for heating. - Rural areas: 86.6% - Northern part of the country: 88.3% - Environmentally hot spot areas: 87.6% - Roma households: 88.0% - Poor households relying on fuel wood for heating: 85.7% - Monitoring use of fuel wood for heating is proposed to link poverty with the environment and to supplement PRSP environment indicators. ### Vulnerability, panels, and chronic poverty - One third of the population is highly sensitive to economic shocks; economic vulnerability between 2003 and 2004 was reduced marginally. - Panel experiment tracing 100 households from 2002/03 to 2004: - Only one household remained poor in both rounds. - 7 households poor in 2002 moved out of poverty. - 5 originally non-poor households fell into poverty. - Conclusion: for this small biased panel there was some reduction in overall poverty and minimal risk of chronic poverty, but sample too small for precise assessment. ### Poverty monitoring and data recommendations - PRSP monitoring system expected to switch to HBS data as main monitoring tool when available. - As HBS survey data for 2005 become available (analysis in early 2006), it will be necessary to carry out comparative analysis of HBS and ISSP survey data to calibrate poverty estimates. - To complement gaps in HBS data, continuation of some ISSP surveys is recommended, including a panel element to measure chronic poverty and changes in economic vulnerability and to evaluate impact of reforms and specific programs on the poor and population at large. - Current challenges: limited data comparability across surveys; pre-2004 ISSP survey samples biased toward middle class; household consumption surveys had sampling limitations and seasonal effects. - More precise poverty assessment expected only upon completion of the Household Budget Survey performed by MONSTAT using new methodological approach. *Source: _cr06141 - 1.2 How many poor?* ### 1.1 Introduction ### 1.1 Introduction ### Macroeconomic objectives and headline projections - Maintaining macroeconomic stability, accelerated growth of private sector and new job creation are the top priorities of the Development and Poverty Reduction Strategy. - By the beginning of 2005 the Government of the Republic of Montenegro adopted a refreshed Economic Reform Agenda 2002 – 2007. - The Economic Reform Agenda provides a revised macroeconomic projection that also serves as the macroeconomic framework for the Development and Poverty Reduction Strategy and for achieving Millennium Development Goals. ### Basic macroeconomic indicators and projections (selected figures from table) - Real economy (In mil. €) - GDP in current prices: 2002: 1.301,5; 2003: 1.433,0; 2004: 1.535,0; 2005: 1.644,0; 2006: 1.759,0; 2007: 1.873,3 - GDP per capita: 2002: 2.109,1; 2003: 2.317,9; 2004: 2.473,0; 2005: 2.635,6; 2006: 2.808,8; 2007: 2.979,5 - Percentage changes - Real GDP growth: 2002: 1,7; 2003: 2,3; 2004: 3,7; 2005: 4,1; 2006: 4,5; 2007: 4,5 - Nominal GDP growth: 2002: 19,1; 2003: 10,1; 2004: 7,1; 2005: 7,1; 2006: 7,0; 2007: 6,5 - Retail price index: 2002: 9,4; 2003: 6,7; 2004: 4,3; 2005: 3,0; 2006: 2,5; 2007: 2,0 - Unemployment rate: 2002: 30.45; 2003: 25.82; 2004: 22.6; 2005: 21.6; 2006: 20.6; 2007: 19.3 - Informal economy (% of GDP): 2002: 30; 2003: 20; 2004: 15; 2005: 15; 2006: 15; 2007: 15 - Employment and social indicators - Number of the employed: 2002: 140.100; 2003: 142.679; 2004: 143.479 - Number of the unemployed: 2002: 76.293; 2003: 68.625; 2004: 59.002 - Retirees: 2002: 88.835; 2003: 90.183; 2004: 93.033 - Average wage: 2002: 193.0; 2003: 271.0; 2004: 302.8 - Average pension: 2002: 108.8; 2003: 113.0; 2004: 122.0 - Financial sector (% In GDP) - Total deposit: 2002: 1,7; 2003: 3,1; 2004: 5,3; 2005: 26,8; 2006: 31,3; 2007: 33,2 - Total credit: 2002: 9,6; 2003: 14,0; 2004: 18,5 - Annual active interest rate: 2002: 15.16%; 2003: 14.07%; 2004: 13.50% - Annual passive interest rate: 2002: 0.50%; 2003: 1.84%; 2004: 3.39% - Consolidated government finance (percent of GDP) - Consolidated public revenues: 2002: 36,5; 2003: 37,1; 2004: 38,0; 2005: 38,3; 2006: 37,0; 2007: 36,1 - Tax revenues: 2002: 34,2; 2003: 34,5; 2004: 35,5; 2005: 35,4; 2006: 34,2; 2007: 33,4 - Consolidated public expenditures: 2002: 40,6; 2003: 41,0; 2004: 40,6; 2005: 40,4; 2006: 38,5; 2007: 37,1 - Total balance prior to grants: 2002: -4,0; 2003: -4,1; 2004: -2,6; 2005: -2,1; 2006: -1,5; 2007: -1,0 - Foreign direct investments: 2002: 6,7; 2003: 2,7; 2004: 3,3; 2005: 9,1; 2006: 10,2; 2007: 10,7 - Balance of payments (In mil €) - Current account in mil €: 2002: -176.00; 2003: -101.98; 2004: -142.97; 2005: -160,0; 2006: -170,0; 2007: -190,0 - Foreign debt in mil €: 2002: -498,8; 2003: -582,4; 2004: -650,0; 2005: -700,0; 2006: -730,0 - Trade balance in mil €: 2002: -334; 2003: -247,7; 2004: -291,0; 2005: -280,0; 2006: -260,0; 2007: -250,0 - Ratios (In % GDP) - Foreign debt in % GDP: 2002: -36,28; 2003: -39,48; 2004: -39,5; 2005: -39,8; 2006: -39,0 - Current account in % GDP: 2002: 13,5; 2003: -7,1; 2004: -9,3; 2005: -9,73; 2006: -9,67; 2007: -10,14 - Trade balance in % GDP: 2002: -25,7; 2003: -17,3; 2004: -19,0; 2005: -17,03; 2006: -14,78; 2007: -13,34 Sources noted in the original table: Economic Reform Agenda 2005, ** Ministry of Finance 2005, *** Economic Reform Agenda and projections of the Central Bank of Montenegro. ### Priority actions defined in the Development and Poverty Reduction Strategy - Macro-economic framework - Target projected real economic growth rate: 2004: 3.7 percent of GDP; 2006 projected to reach 4.5% of GDP. - Inflation targeted to fall from approximately 6.7 percent to around 2.5 percent in 2006. - Foreign investments expected to grow from 3% of GDP in 2003 to 10% of GDP in 2006. - Trade balance projected to drop from 17% of GDP to 14% of GDP in 2006. - Current account deficit expected to be sustained right below 10% of GDP. - Investment share in GDP projected to grow from 18% in 2003 to 19.5% of GDP in 2006. - Domestic savings projected to grow from 3% of GDP in 2003 up to 4.3% of GDP in 2006. - Public revenues share targeted to reach 38% of GDP in 2006; public expenditures anticipated to fall to around 38,5% of GDP in 2006. - Fiscal consolidation aim: decrease total fiscal deficit (prior to grants) from 4% of GDP in 2003 to 1% of GDP in 2006. - Share of capital expenditures in GDP envisaged to grow from 1% of GDP in 2003 to 2% in 2006. - New job creation - Unemployment rate: 2002: 30%; target to fall to 20% in 2006. - Private sector (SMEs) expected to drive new employment, notably in tourism, agriculture, transport and wood industry. - Business climate improvement, privatization acceleration, and financial (banking) sector stability prioritized. - Reduction of informal economy: 2002 level 30% of GDP intended to be halved to 15% of GDP by 2006. - Restructuring of companies and acceleration of bankruptcy proceedings highlighted to improve business climate. - Support for micro financing to encourage employment of the poor. - Support provided to collective bargaining and work of Economic and Social Council. ### Implementation and outcomes (2000–2004 developments and short-term effects) - Growth and production - Real GDP growth: 2001-2003 between 1-2% of GDP; 2004: 3.7%. - Contributions in 2004: light industry growth greater by 13% relative to 2003 (contributing about 1.5% to GDP); electricity and gas production increased by 21% (contributing about 1.5% to GDP). - External debt and servicing - Foreign debt increased from 438 mil EUR in 2003 to 502 mil EUR in 2004. - Servicing of foreign debt remained below 4% of total import of goods (3,7%), consistent with DPRS projections. - Labor market and incomes - Unemployment rate decreased to 22.6% in 2004; number of unemployed reduced by 11.000 people compared to 2003. - Methodological problems in measuring unemployment are noted. - Average wage increased: 2002: 193 €; 2003: 271 €; 2004: 302,81 € - Average pension increased: 2002: 108,8 €; 2003: 113 €; 2004: 122 € - Inflation - Retail price index inflation: 2002: 9,4%; 2003: 6,7%; 2004: 4,3% - Consumer price index inflation in 2004: 1.5% - Monetary reform and EURO as legal tender contributed to decreasing inflation since 2001 (23.8% in 2001). - Further inflation reduction depends on limiting market power of monopolistic and oligopolistic suppliers and accelerated adoption of anti-monopolistic legislation. - Fiscal outcomes and public finance management - Fiscal deficit (as % GDP): 2002: 1,93%; 2003: 3,29%; 2004: 2,18% - Fiscal deficit in 2004 was 2.6% of GDP (noted elsewhere as lower than the DPRS projection of 4.7% of GDP). - Share of public expenditures in GDP projected to fall from 41.0% in 2003 to 37.1% in 2007. - Number of employees in state administration reduced in 2004; share of budget resources for salaries reduced (from 11.28% of GDP in 2004 to projected 9.3% of GDP in 2007). - Short-run negative effects on poverty expected from public administration reductions; Government decision to finance attending social programs from privatization revenues to mitigate social consequences. - Establishment of the Department for internal auditing in the Ministry of Finance and introduction of financial reporting provisions to improve transparency and efficiency in public revenues allocation. *Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2006/_cr06141.pdf* ### 1.4 Implementation of the priorities of the Development and Poverty Reduction Strategy ### 1.4 Implementation of the priorities of the Development and Poverty Reduction Strategy ### Private sector and export-oriented growth - The share of private sector in GDP increased from around 37% of GDP in 2002 to 44 % of GDP in 2004 (Agenda, 2005). - Industrial production growth rate: - 2002: 0,6 - 2003: 2,4 - 2004: 13,8 - Informal economy share of GDP: - 2002: 30 - 2003: 20 - 2004: 15 (close to the projected goal planned for 2006 of 11%). - Export structure and sectors (2004): - Raw aluminum: 60,7% of total export of goods; generally stated as making 60-70% of total export of goods. - Drinks (wine, beer and brandy): 1,85% of total export of goods. - Wood processing: 1,3% of total export of goods. - Agricultural products (fruits and vegetables, medical herbs, mushrooms, some food products) have significant shares. - External balances and trade indicators (2004): - Foreign trade exchange reached 81% of GDP; together with services it reached 104%. - Export/import ratio: 47% in 2004. - Export of services/goods ratio according to GDP: 42.4% in 2004 (higher by 2% than in 2003). - Consumers’ goods prevail in import structure with 69%. - Goods planned for reproduction: 25%. - Import of equipment: 5.4% in 2004. - Constraints to competitiveness and export growth: insufficient competence of domestic products, low capacity exploitation, technological backwardness, excessive domestic demand for consumers’ goods, and rise in oil price. - Investment dynamics: - Domestic investments described as insufficient; strong export-oriented production primarily depends on foreign investments. - Net FDI (mil €): - 2002: 87 - 2003: 38,72 - 2004: 50 ### Banking sector, credit, deposits, and interest rates - Banking sector structure and reform: - Ten banks operating in Montenegro; eight private; foreign investors are majority shareholders in three banks. - Privatization of Podgoricka and Niksicka bank and further privatization of state property expected in 2005. - Achievements: regulation and resolution of banks in accordance with Basel principles and EU Directives, adoption of provisions for money laundering prevention, payment system reform. - Credit and bank capacity (2004): - Annual lending growth: 42% in 2004 (Central Bank, 2005). - Banks’ potential increased by 27% in 2004. - Credit risk is a potential significant problem going forward; excessive credit expansion can imperil macro stability via increased domestic demand, current account deficit, and pressure on fiscal sustainability. - Loans (mil €) to population and companies (2002-2004) — implicit from graphs: - Loans to population and loans to companies and entrepreneurs increased between 2002 and 2004 (exact year-by-year graph values provided in source visuals). - Credit structure and deposits (2004): - Share of short-term credits: 60% in 2004. - Most credits given to citizens and service sector companies. - Deposit growth in 2004: 30% (recorded). - Deposit structure: sight deposits 55%; time deposits 45% of total deposits. - Domestic savings in 2004: 80 mil € (approx. 80% increase related to 2003). - Population deposits (mil €): - 2002: 22,21 - 2003: 45,08 - 2004: 80,68 - Total deposits and loans (mil €): - Deposits and loans values shown for 2002-2004 in source graphs (e.g., deposits: 205.5, 211.01, 273.78 across years as depicted; loans: 124.66, 200.63, 284.08 as depicted). - Interest rates (annual active and passive): - Active interest rate: - 2002: 15.16% - 2003: 14.07% - 2004: 13.50% - Passive interest rate: - 2002: 0.50% - 2003: 1.84% - 2004: 3.39% - Measures taken in 2004 to strengthen confidence and supervision: - Establishment of the Agency for money-laundering prevention. - Bond issuance on the basis of old foreign currency savings. - Severe bank supervision by the Central Bank of Montenegro. - Government deposit transferred to the Central Bank by end-2004. - Commercial banks fully took over the payment system as of January 1, 2005. - Deposit Protection Fund anticipated to start operating during 2005. ### Trade liberalization, business environment, and privatization - Trade and investment liberalization: - Tax Law and the Law on Foreign Trade harmonized with WTO rules; removal of licenses, prohibitions, and quotas. - Harmonization with Serbia led to an increase of the avergare tax rate from 2.8% up to 7.1% in 2003. - Business environment reforms and taxation: - Simplification of company establishment: process now takes two days. - Income and contribution tax rate decreased by 10%. - Profit tax rate decreased from 20% and 15% to 9%. - Laws enacted to improve business environment: Law on bankruptcy, Law on private sector participation in delivering public services, Law on electronic trade, Law on Mortgage, Law on insolvency of companies, Law on Pledges. - Small and Medium-sized Enterprise Development Agency and NGOs (e.g., Center for entrepreneurship and economic development) act as catalysts. - Privatization and restructuring: - New privatization framework adopted 1998/99; methods include mass voucher privatization (MVP), direct tender sale, and auctions. - Around 70% of share capital possessed by private owners after MVP and tenders. - Restructuring and privatization of 16 large industrial companies (making 45% of industrial property, including KAP) are coming to an end. - Capital structures often disaggregated with no clear majority in many companies. - New legal procedures to hasten bankruptcy and liquidation, with limited fiscal resources for subsidies, will accelerate restructuring. ### Reform of state administration and judicial system - State administration reform achievements: - Adoption of the Law on civil servants and initial implementation. - Establishment of the Human Resource Directorate. - Adoption of the Law on civil servants' salaries and the Law on inspection and accompanying by-laws. - Judicial reform achievements: - Harmonization of jurisdiction legislation with EU standards; high independence measures (permanence of judge function, competence and structure of judicial council). - Adoption of new legislation on civil suits and executive proceedings. - Adoption of the Law on mediation and the Law on notary. - Establishment of new Administrative and Appellate Court to disburden the Supreme Court. - Establishment of the Commission for testing bankruptcy managers, Center for training judges, Judicial Council, new financing model enhancing independence. ### Stabilization and Association Process (SAP) and EU integration - Government strategic determination: gradual harmonization with EU standards and systems (SAP). - Action plan for unique foreign trade policy and concept of free internal market adopted by Parliament of Serbia and Montenegro in summer 2003. - Commission proposed a "dual track" approach in July 2004, approved by the EU Council of Ministry and politicians of Serbia and Montenegro. - SAP obligations pose challenges: significant political, administrative and financing dedication required; liberalization will require structural reforms to build capacity, improve export, and decrease current account deficit. - Montenegro assessed to have made considerable progress in implementing European partnership priorities and should provide liberalization of movement of goods, labor force, services and capital with EU, possibly with different liberalization schedule; regional liberalization with neighboring countries has started. ### Priority actions for the forthcoming period (targets and policy directions) - Macro targets to realize Development and Poverty Reduction Strategy goals: - Real economic growth rate should reach the level above 4 % of GDP. - Inflation rate should fall to 3%. - Fiscal deficit (prior to grants) should be decreased to 1,5% of GDP by the end of 2006. - Trade balance should reach 15% of GDP. - Current account deficit should be sustained below 10% of GDP. - Fiscal and public finance priorities: - Reduce total public expenditures. - Increase taxes and improve efficiency in collection of public revenues. - More efficient management of foreign debt. - Build transparency and state auditing. - Focus on the quality of government lending; reduce commercial banks’ lending to government. - Emersion into international capital market to access cheaper resources contingent on receiving a credit rating. - Fiscal balance as an imperative in the medium term; further rationalization of budget expenditures; more solid discipline on the expenditure side; improving conditions related to wages and subsidies. - Work on legalization of informal economy, constant improvement of tax collection, tax policy to increase tax basis and decrease tax burdens to allow strong private sector development. - Entrust certain public functions to private sector. - Fiscal discipline led to delay of announced tax decrease to avoid deterioration of fiscal position. - Acceleration of structural reforms, especially in public conglomerates in energy, telecommunication and railway sectors, to increase fiscal sustainability. - Institutional and planning improvements: - Additional capacity development to support future MTEF development aimed at better usage of key macroeconomic indicators, projection of revenues and expenditure plans, and further development of programming budget in phases. *Source: _cr06141 - 1.4 Implementation of the priorities of the Development and Poverty Reduction Strategy* ### 2007. Currently programming budget exists only in three ministries: Ministry of Education, Ministry ### IV SECTORAL PRIORITIES — 1 SOCIAL PROTECTION AND POVERTY REDUCTION ### Entrepreneurship, business climate, and privatization - Currently programming budget exists only in three ministries: Ministry of Education, Ministry of Maritime and Transport and Ministry of Tourism. - Further encouragement of entrepreneurship and improvement of business climate remained important priorities. - Priority legislative and institutional actions: - Implement the Law on mortgage. - Establish a legislation framework for intellectual property protection. - Improve work of courts for efficient settlement of commercial disputes. - Complete realization of privatization annual plans to contribute to rapid private sector development. - Accelerate bankruptcy proceedings and restructuring of companies to improve the business climate for domestic and foreign investors. - Establish the Agency for Foreign Direct Investments Promotion to increase attraction and remove obstacles for external capital. - Focus on future development of Montenegro and concepts of national treatment of foreigners and adjustment of legislation to strengthen competence of certain fields of the Montenegrin economy. ### Financial sector and capital markets - Within the financial system the priority will be follow-up of the privatization of banking sector as well as strengthening its supervision. - Emphasis on further development of the market of capital by: - Improving legislation for insurance sector. - Reorganization of investment funds. - Developing legal framework for trade with securities. ### Trade liberalization, customs reform, and integration - Liberalization of foreign trade and implementation of customs reform remain great priorities. - Conclusion of the Agreement on free trade in the region is expected to be a significant incentive because it ensures the emersion of 55 million of people into the market. - Trade liberalization must be supported by: - Structural changes. - Macroeconomic policy support. - Development of infrastructure. - Increasing investment. - Human resources development. - Rapid restructuring of enterprises. - Programs to increase competence of domestic products. - Negotiations for WTO membership, regional EU integration, and signing of bilateral trade agreements give new aspects to trade reform. ### State administration and jurisdiction reform - Follow-up activities on cost-effectiveness, strengthening of professional capability, and increase in work efficiency will be undertaken within state administration reform. - Jurisdiction reform will be streamlined toward implementation of adopted legal provisions and realization of administrative reform aiming at raising court efficiency to strengthen business atmosphere and confidence of businessmen and citizens in the judicial system. ### Poverty assessment and definitions - According to the survey by the Institute for Strategic Studies and Prognosis (ISSP) used for DPRS development, 12.2% of the population of Montenegro is poor. - The survey comprised domicile population, refugees and IDPs and RAE. - Absolute poverty line: total expenditure below expenses of the minimal consumer basket for a standard household (€ 116. 2 per consumer unit). - Economically vulnerable line set 50% above the poverty line (€ 173.4). - More than one third of the population is classified as economically vulnerable or without access to sufficient resources because they live below the level of 150% of the poverty line. - Approximately 30% of the population is concentrated close to the poverty line, creating risk of falling into poverty. ### Regional and group distribution of poverty - Regional distribution of poor: - Northern Montenegro: where 45% of poor live. - Central part: around 35% of poor. - South: around 19% of poor. - Poverty rates by group: - RAE population: around 52%. - Refugees and IDPs: around 40%. - Domicile population: around 10%. - The greatest part of poor within the total population consists of domicile population: 72%. ### Vulnerable groups (as defined by DPRS) - Persons in the state of social need - Pensioners and elderly without personal income - Children and youth - Persons with disability - Unemployed - Refugees and IDPs - Roma, Ashkealia and Egytians ### Causes and risks of poverty (as defined by DPRS) - Main causes of poverty: - Economic activity setback - Unemployment - Low level of education - Inequality (refugees, IDPs, Roma, Ashkealia and Egyptians) - Main risks of falling into poverty: - Increasing number of household members - Setback of country economic development - Job loss ### Priority activities on poverty reduction within social and child protection - National strategies and programs to be elaborated/adopted: - National Employment Strategy including regional, municipality and local-level Employment Action Plans. - National program on social protection of the elderly. - Policies and key principles towards the family and children, especially those without parental care. - Strategy on population development (Natality policy). - Strategy for resolving the status and problems of refugees and IDPs. - Strategy on social protection of people with special needs. - Programs for Roma protection. - A unique information system within the Ministry of Labor and Social Welfare. - Continue pension system reform. - Child protection sector priorities: - Define a national level approach on supporting children and youth at state level, and design regional and local strategies based on respect of human and child rights. - Realize decentralization of functions and responsibilities for social and child protection financing. - Strengthen personal responsibility of citizens for family social protection. - Develop competitiveness among different service providers within child protection and stimulate introduction of market criteria in financing programs and services. - Pension insurance priorities: - Restructure the existing obligatory insurance system on the basis of generational solidarity. - Introduction of obligatory insurance on the basis of capitalized savings. - Introduction of voluntary insurance. - Implement stricter criteria for access to age-based, disability and family pensions. - Reduction of gray economy and increasing the number of social insurance contributions. - Elderly protection priorities: - Strengthening the system of non-institutional protection. - Building of additional facilities for elderly accommodation. - Building of day rehabilitation centers. - Refugees and IDPs (including RAE) priorities: - Strengthen the process of repatriation of refugees and return of displaced people. - Create programs for employment and accommodation of refugees and IDPs. ### Implementation 2003–2004: strategic documents, laws, and reforms adopted - Adopted strategic documents and laws (end 2003–2004): - National Strategy for Permanent Resolving of issue of refugees and IDPs in Montenegro (prepared in 2004, but adopted in 2005). - Action plan for poverty reduction among Roma people (Roma Inclusion Decade 2005-2015). - National Action Plan for Children. - Action Plan for Substance Abuse Prevention among Children and Youth. - Housing Policy Action Plan (prepared in 2004, and adopted in 2005). - Law on Pension and Disability Insurance. - Law on War Veterans Disability Protection. - Law on social and child protection. - By-laws for legislation appliance of the above mentioned laws. - An educative campaign for women health protection and gender equality promotion was conducted. ### Social and child protection law and targeting - Adoption of the new Law on Social and Child Protection to improve targeting of social protection beneficiaries. - Some rights were restricted to introduce more effective assistance to the poor (personal disability allowance, foster-family allowance). - Conditions for exercising certain rights were altered for more effective use of funds (child allowance, allowance for care/assistant services). - Basic rights outlined in the Law include: access to family support, accommodation in social protection institution or family environment, support for covering costs of in-home care, access to health care, coverage of funeral expenses, access to services of social welfare centers, and one-time financial support disbursements. - Introduction of subsidies for guardian family to provide incentives for families to accept children or other persons into their environment. - Child protection rights defined: outfit for newly born child; child allowance; compensation based on childbirth; wage compensation for part time work hours and rest and recreation of children. - Change in methodology for setting and indexing amounts of rights (e.g., family financial support set with regard to possibilities of the state budget rather than net wage). - New Law enabled participation of private sector in providing social protection services via concessions for accommodation, recreation and rest for beneficiaries. ### Pension reform (progress and results) - Pension reform transition from PAY-GO to three-pillar system continued; first-stage measures implemented in 2004 included: - Increase of retirement age to 60 years for women and 65 years for men. - Introduction of so-called Swiss indexation. - New pension formula based on individual coefficients and increased number of years for pension calculation. - Pension deficit reduced from 1.1% of GDP in 2002 to 0.9% of GDP in 2004. - Preparations of legal framework for introduction of the third pillar started in 2004. - Average pension (in €) data shown for 2002–2004: - 2002: 108,8 - 2003: 113 - 2004: 122 - In 2004 contribution rate for pension insurance was reduced from 24% to 21.6%. - Revenues of the Fund PIO increased for 24% in 2004 compared to 2002. - World Bank granted loan (6.5 million US$) meant for reform of the Fund PIO to make preparations for introduction of the II and III pillar of the pension reform. - Regularity of payment of contributions by companies to Fund PIO (categories shown): - up to 3 months: 20% - up to 6 months: 40% - over 6 months: 40% ### Allocations for social protection and targeting (2002–2004) - Allocations for social protection (mil €): - 2002: 19.293 - 2003: 23.838 - 2004: 32.018 - Payment of social-protection entitlements was prioritized in 2004 and 12 monthly payments were provided. - In 2004 compared to 2003 more budget allocations were directed to child allowance and family financial support. - Regional targeting: because poverty is more spread in northern region, about 40 percent of payments on behalf of child allowance (about 1 million euros) were realized in this area in 2004; payments for family financial support in the northern region were about 3., 4 mil € in 2004. ### Public consumption on child allowance and family financial support (2003–2004) - Child allowance: - 2003: No. of families 6.896; No. of children 12.956; Total disbursements 2.452.324,24 - 2004: No. of families 7.299; No. of children 13.919; Total disbursements 2.627.542,70 - Family financial support: - 2003: No. of families 10.117; No. of members 29.132; Total disbursements 7.674.640,28 - 2004: No. of families 10.423; No. of members 30.541; Total disbursements 7.982.695,20 _Excerpt from IV SECTORAL PRIORITIES — 1 SOCIAL PROTECTION AND POVERTY REDUCTION (Montenegro, Development and Poverty Reduction Strategy materials)._ ### 1. Podgorica ### 1. Podgorica ### Municipal data (selected figures from listed municipalities) - TOTAL (aggregate at end of table): - 7.299; 13.919; 2.627.542,70; 10.423; 30.541; 7.982.695,20; 4.295; 1.538.840,00; 744; 464.850,00; 5.039,00; 2.003.690,00; 257; 405.571,49 - Examples of municipal line items (values preserved exactly as in source): - Podgorica: 1.969; 3.816; 718.140,20; 2.452; 8.078; 2.065.441,88; 644; 221.790,00; 75; 59.810; 719,1667; 281.600,00; 86; 132.736,00 - Nikšić: 1.106; 2.053; 396.247,50; 1.372; 4.260; 1.086.440,42; 397; 142.800,00; 114; 68.450; 510,75; 211.250,00; 38; 67.450,00 - Berane: 587; 1.234; 224.095,00; 947; 2.889; 743.376,81; 367; 132.710,00; 17; 11.400; 383,3333; 144.110,00; 13; 19.456,00 - B. Polje: 831; 1.612; 307.090,00; 1.171; 3.528; 867.823,80; 540; 195.810,00; 141; 86.550; 680,6667; 282.360,00; 11; 16.256,00 - Rožaje: 416; 854; 162.295,00; 740; 2.059; 562.992,90; 252; 90.780,00; 36; 21.800; 288,5; 112.580,00; 17; 26.624,00 ### Refugees, internally displaced persons, and support transfers - Refugees and internally displaced persons and RAE are included in the social and child protection system; Commissariat for Displaced Persons developed a program of support mainly for those in collective centers. - Government allocations and partner support: - Government doubled allocations for these programs in 2004 (77.923 €) compared to 2003. - Total support (approved in the balance and off-balance) for these categories: - 2003: about 162,000 € - 2004: about 900,000 € - UNHCR support: - 2003: about 1 mil € - 2004: about 730.000 € - Support of other international partners has been significantly reduced. - Unemployment compensation: - Total amount of compensations to unemployed persons: - 2002: about 960.000 € - 2004: about 1.5 million euros ### Indirect privileges (price subsidies) - Households pay on average 0,37 €/m3 for water and drainage of wastewaters; legal entities pay 1,07 €/m3. - Price of electricity for households is twice lower than for the economy; similar pattern for telephone services. ### Actions to be taken in the forthcoming period — Social protection (key recommendations) - Rationale: - In 2000-2005 total expenditures for social protection and insurance (pensions) amounted to about 15% of GDP. - About 8% of GDP was on average allocated only for social protection (without pensions). - Including indirect privileges, total allocations for social protection and insurance would amount to about 20% of GDP. - Recommended measures: - Additionally rationalize social protection system by eliminating all types of social payments to unsuccessful companies. - Establish system of monitoring and research in social protection system. - Continuously assess efficiency of social rights. - Create data base of social protection beneficiaries. - Promote system of self-support. - Ensure additional tax relieves for private sector and non-government organizations engaged in social protection provisioning. - Provide subsidized prices of electricity and water for the poorest categories while improving targeting of beneficiaries. - Reduce delays in payments and debts based on social transfers — current delays cited: - Child allowance delayed even for six months (and longer for other types); compensations for maternity leave delayed for 12 months; pensioners are owed one and a half pension. - Table of unpaid obligations based on social payments (preserved format): - UNPAID OBLIGATIONS 2003. / 2004. - Child allowance: € 1.652.478,34 / € 1.772.449,20 - Aid and Care Allowance: € 1.508.871,90 / € 1.520.318,80 - Family Financial Support: € 3.103.564,71 / € 3.384.622,23 - Additional fiscal policy note: - The Government adopted a decision that funds received from privatization are primarily used for social protection needs. ### Pension reform (priorities) - Adopt and prepare legal framework for implementation of the II and III pillar of pension reforms. - Continue reform of the Fund PIO. - Strengthen conditions for obtaining disability pensions. ### Institutional recommendation for poverty monitoring - Transform current DPRS unit for monitoring and evaluation into the Unit for Poverty Analysis and Monitoring of Policies for its Reduction. - Mandate: coordinate policy definition for poverty reduction and perform monitoring of implementation; develop indicators for poverty reduction (current indicators measure consumption not income). - Role: support implementation of Millennium Development Goals (MDGs) obligations. ### Labor market — DPRS priority activities and strategy - Program context: - Program “Stimulation of New Employment” adopted by the Government on March 24, 2005; an innovation of Economic Reform Agenda. - Program replaces “Legalization of Existing Jobs and Job Creation” (adopted March 20, 2003). - Key goals within DPRS for labor market: - Labor legislation reform. - Stimulation of new employment. - Development and strengthening of small and medium-sized enterprises (SMEs). - Labor legislation reform priorities: - Reform Labor Law, Law on Supervision, Law on Labor Supervision, Law on Employment Record, Law on Strike and Law on Protection on Work to align with ILO standards and EU regulations. - Encourage new employment — focus areas: - Stimulating entrepreneurship. - Increasing number of work places primarily in the private sector. - Enabling new, primarily foreign investments. - SME strategy main courses: - Increase number of SMEs registered in the private sector that officially operate. - Increase diversity and production/non-trading services share among SMEs. - Increase share of small and medium-sized enterprises relative to micro-enterprises. - Increase competitiveness of SMEs in sectors where Montenegro depends on imports. - Increase SME participation in foreign strategic alliances and joint ventures. - Increase SME share in GDP. - Increase SME share in overall employment. ### Implementation of priority activities (2003–2004) — Achievements and programs - Legislative progress: - Preparations for adoption of Labor Law and related laws (Labor Law, Law on Inspection Control, Law on Labor Inspection, Law on Labor Records, Law on Strike, Law on Protection at Work) are in progress. - Employment and training outcomes: - Project “Incentives to employment” resulted in legalization of about 42.000 jobs. - Unemployment fall: from 24% in 2002 to 22.3% in 2004 (attributed in part to legalization and other measures). - Training and re-training programs since 1999: over 9.000 unemployed persons encompassed. - Public works program: 57 projects implemented and 785 unemployed persons recruited since 2004. - Credit and entrepreneurship support: - Incentives to self-employment and entrepreneurship implemented through Program for continuous incentives since 1999. - Loans granted: period of three years with a “grace” period of one year; amount of loan is €3,000 for every newly opened job. - Program of Banking Support provides loans to unemployed persons, redundancies, small companies and entrepreneurs. - Project “Incentives to Dynamic Entrepreneurship” supports SMEs to purchase new technology, create “Made in Montenegro” products, and provides credit lines to fast-growing companies to increase exports and employment. - Sectoral competitiveness support: - Government support targets agriculture (meat industry, bee keeping, collection of plants and forest fruits, fishing and farm establishing), tourism (small private hotels, motels, rural tourism), and wood processing (furniture manufacturing). - Education and entrepreneurship promotion: - Establishment of entrepreneurship clubs in primary schools to develop creativity, entrepreneurship spirit and teamwork among students. *Source: _cr06141 - 1. Podgorica* ### 2.3 Actions to be Taken in the Forthcoming Period ### 2.3 Actions to be Taken in the Forthcoming Period ### Employment and labor policies - Adoption of the Employment Strategy in Montenegro is planned with purpose to successfully resolve the unemployment problem. - Adoption of the National Program of Protection at Work is anticipated. - Project "Opening of new jobs and increase of company flexibility" being prepared; primarily targeted towards resolution of problems of redundancies through measures and activities developed by the Employment Fund. - Project components include activities related to business incubators, industry parks, free zones and incentives to investments. - Measures to encourage employment of persons with disabilities: - Incentive measures for employers when employing persons with disabilities. - Granting micro loans under favorable conditions. - Construction of protective workshops for persons with disabilities. - Establishment of the Fund for Diaspora is being prepared to: - Strengthen business cooperation with Montenegrin Diaspora based on mutual economic interest. - Establish conditions for activation of Diaspora potential in the form of ideas, knowledge and capital. - Attract more investments of Diaspora in Montenegro. - Project “Incentives to the Successful” preparation includes two complementary activities/forms of promotion: - Compiling a list of the most successful companies. - Proclamation of the entrepreneur of the year on the national and regional level. - Establishing industrial zones, opening Internet Park and business incubators are being prepared to: - Encourage opening of new companies offered modern integral support. - Facilitate development of ICT sector. - Special attention in implementation of all projects to be given to: - Equal gender treatment. - Employment of youth. - Employment of people in undeveloped regions of Montenegro. ### Anticorruption and transparency — Actions to be Taken in the Forthcoming Period - Prepare and adopt outstanding legislation: - Law on Free Access to Information. - Law on Criminal Responsibility of Legal Entities. - Recognized need for amendments to existing laws: - Law on Conflict of Interest. - Law on Prevention of Money Laundering. - Law on Public Procurement. - Adopt Strategy for Fight Against Corruption and Action Plan for its implementation with maximum political consensus. - Implement public campaign for fight against corruption to be implemented by the Government and NGO sector as partners to: - Increase the level of information on the problem of corruption. - Increase level of trust between implementing institutions (Government and NGO sector). - Ratify the UN Convention on Fight Against Corruption within the shortest possible period. - Complete activities for accession to Egmont Group; Administration for Prevention of Money Laundering will become internationally recognized financial intelligence unit upon completion. - Short-term key activities for the Administration for Prevention of Money Laundering: - Training of employees in the Administration and obligors responsible to report to the Administration. - Upgrade of the data base in accordance with anticipated amendments to the Law on Prevention of Money Laundering. - Urgent need to establish a coordination body to monitor activities in the field of money laundering, financing of terrorism and corruption. ### Agriculture — Actions to be Taken in the Forthcoming Period - Legal and regulatory framework upgrades to be prioritized: - Law on Health Protection of Plants. - Law on Seeds. - Law on Plants. - Law on Wine, Brandy and other Alcohol Drinks. - Special priority: production of the Strategy of Agriculture Development and Strategy of Approaching Montenegrin Agriculture and rural Development to EU. - Redefinition of measures on protection of domestic agriculture including: - Removal of non-customs barriers. - Reconciliation of customs rates with requests of domestic producers. - Special import tariffs. - Goal: reconcile protection of young Montenegrin agriculture with WTO requests. - Institutional strengthening: - Preparations for establishing of information system in agriculture. - Establishing of Agency for Tobacco. - Reform of partnership and incentives to other types of association of farmers. - Support to competitiveness and exports of agricultural products: - Provide subsidies for certain products. - Special emphasis on production of fish and seafood. - Education of producers on significance of international standards and introduction of quality standards for all agricultural products. - Innovation and organic agriculture: - Build trademark for products of organic production: unique brand for Montenegrin organic products. - Establish Agency for Inspection Supervision and Certification of Organic Agriculture. - Support to programs of organic agricultural production to be provided for in the Budget. - Statistical and information systems to support policy and incentives: - Establish register of all agricultural producers as base for registration and incentive implementation. - Implementation of identification and registration of animals and implementation of system “from stable to table”. - Establish cadastre of agricultural plants (e.g., vineyards, olives). - Implement system of collection and analysis of market information in agriculture. - Relevant reported implementation outcomes for context (2003–2004): - Within five credit lines 154 requests were selected and banks approved the credit in the amount of over 3 million euros. - These programs resulted in opening of 280 new jobs. - Through the Directorate for Small and Medium Enterprises, credit support was approved to 5 entities in the amount of 2.3 million euros. ### Regional, rural and urban development — Actions to be Taken in the Forthcoming Period - Strategic goals: accelerate economic development of less developed sub-regions; create conditions for dynamic development of less developed areas; preserve and balance population in at-risk areas; implement sustainable development and preserve ecological balance. - Priority strategic directions for northern and undeveloped regions: - Development of transportation, technical and municipal infrastructure. - Development of social activities (health, education, judicial and other social institutions). - Development of agriculture (farming, cattle-breeding, fruit growing, mini farms, milk processing, bee keeping, fishing) and village revitalization. - Development of sustainable mountain tourism (winter and summer tourism, eco-tourism, sports tourism, agro-tourism, religious tourism, health tourism) and linking with coastal tourism. - Development of processing industry and entrepreneurship via SMEs (biological agriculture, processing of medical herbs and forest fruits, purchase and processing of fruits and vegetables). - Ecological revitalization and preservation of environment on ecological principles. - Implementation focus at republic and local level: - Continue state road construction and reconstruction/modernization of regional and main roads. - Ensure more reliable electricity supply, with emphasis on rural settlements inhabited year-round. - Continue efforts to ensure regular water supply to southern region and other rural areas. - Implement projects improving Thermal Power Plant “Pljevlja” system to positively impact local development. - Continue projects for agricultural development, village revitalization, SME strengthening and organized purchase of agricultural surpluses. - Advance mountain tourism projects to activate mountain region resources throughout the year. - Local government responsibilities and actions: - Municipalities, especially those with negative demographic flows, should bring programs for poverty reduction establishing measures under their competence to stop population reduction. - Local projects: construction of local roads, construction and maintenance of local water supply, ensuring reliable electricity, quality television transmission and telecommunication connections. - Improve coordination of sectoral activities to enhance quality and access to social, health, education and cultural institutions for urban and rural inhabitants. *Source: _cr06141 - 2.3 Actions to be Taken in the Forthcoming Period* ### 5.3 Actions to be Taken in the Forthcoming Period ### _cr06141 - 5.3 Actions to be Taken in the Forthcoming Period ### Regional development and infrastructure (Section 5.3) - Institutional measures: - Adoption of the Law on Development of Undeveloped Areas. - Establishment of a special Fund for Development of Undeveloped Areas. - Major infrastructure project: - Construction of highway Podgorica - Mateševo: - Part of future highway Bar - Belgrade to integrate Montenegrin transport space with the European one. - Connects Podgorica with the north, creating assumptions for faster development of the north and relieving the road through Platije (identified as a bottleneck for safety-security and frequency). - Sectoral economic policy: - Continue implementation of economic policy according to sectors with existing sources of funds for development enhancement. - Implement policy of faster development of small and medium size companies in less developed regions. - Infrastructure priorities (long run): - Resolution of transportation, technical, municipal and other infrastructure problems. - Continued construction of regional roads, improvement of electricity supply and water supply, system of removal and disposal of waste. - Fiscal and institutional measures: - Tax policy to provide more favorable conditions for activity in undeveloped areas, including tax exemptions for a certain period to new businesses and newly employed workers. - Review possibility to re-allocate a part of funds accrued based on VAT to local self-government on territory of accrual. - Reform of local administration to enable decentralization of competencies for regional development policy implementation. - Credit-monetary policy to support programs of employment and entrepreneurship in undeveloped regions. - External integration: - Inclusion of Montenegro in accession flows to EU expected to open new possibilities of access to instruments for regional development support. ### Housing (Section 6.3 — Actions to be Taken in the Forthcoming Period) - Legislative reform: - Preparation and adoption underway for: - The Law on Social Housing. - The Law on Housing Cooperatives. - The Law on Tenancy. - Social housing and vulnerable households: - Continuous housing construction planned for households with low incomes. - Ensure housing facilities for socially marginalized categories and improve tenancy conditions. - Informal settlements and urban integration: - Prevention of illegal construction. - Legalization and integration of existing informal settlements into the whole urban system, including infrastructural development and improvement of utility services. - Context from implementation and investment needs (2005–2008 indicative plan): - Around EUR 10 million estimated for temporary flats for socially vulnerable households (for app. 1,000 housing units). - Funds needed for construction of around 2,000 new housing units estimated at around EUR 50 million. - Funds needed for improvements in illegal settlements estimated at around EUR 46 million. ### Tourism (Section 7.3 — Actions to be Taken in the Forthcoming Period) - Spatial and classification measures: - Preparation of Special Coastal Zone Plan to address spatial development of coastal zone. - Adoption of Rules on Classification, minimum requirements and categorization of hotels and restaurants in progress. - WTO membership and standards: - Continue activities to meet requirements for full membership to WTO. - Product diversification and specific forms of tourism: - Implement projects strengthening rural tourism, nautical tourism, health tourism, cultural tourism, construction of golf playground and eco tourism to diversify tourist product. - Support for northern Montenegro: - Provide loans and donations and technical assistance to small and micro companies and larger investments in preservation of protected areas. - Promotion programs for specialized activities such as rafting, mountain climbing, paragliding. - Fiscal treatment and VAT: - Analyze amending the VAT Law to enable the tourism sector to treat foreign turnover as exports, aiming to remove or reduce VAT rate on this category of tourism turnover. - Marketing and education: - Continue and extend ongoing marketing campaign for promotion of Montenegrin tourism, particularly to Western Europe, and develop promotion of a national trademark. - Prepare modernization of education programs at University and high schools educating staff to work in tourism. - Context from Master Plan and indicators: - Master Plan targets: increase hotel capacities from current 26,000 to 50,000 beds in 2010 and 100,000 beds in 2020. - Plan to increase number of overnights from current 4.4 million to 11.4 million in 2010 and to 20.9 million overnights in 2020. - Directly or indirectly 75,000 new jobs expected to be opened based on tourism. - WTTC assessment for 2004: - Share of tourism in creation of gross domestic product was 15%. - Overall income was 214.7 million euros. - WTTC estimated capital investments in 2004 generated by tourism to 36.7 million euros or 19% of total investments. - WTTC anticipates growth of 10.3% per annum in overall demand of travels and tourism. ### Transport (Section 8.3 — Actions to be Taken in the Forthcoming Period) - Strategy and regulatory development: - Prepare transport strategy, including: - Road Infrastructure Development Strategy. - Railway Infrastructure Development Strategy. - Strategy on the privatization of Railways of Montenegro. - Series of new legislations within railway and maritime transport; development of necessary legislation in air transport. - Management and private sector involvement: - Improve management and increase efficiency in transport companies. - Diversify funding for transport infrastructure and encourage private sector involvement. - Priority projects and investments: - Program of urgent measures for backlog maintenance of main and regional roads determined as highest priority: - Total cost EUR 23.5 million (ongoing negotiations with potential creditors). - Rehabilitation of main road from Podgorica to the north assessed as high priority. - Other priority projects include regular road maintenance, rehabilitation and modernization of railways, and revitalization of maritime transport. - Institutional measures already taken (context): - Completion of Law on Railway and Law on Roads; Law on Road Transport in adoption procedure. - Establishment of State Road Directorate and Maritime Safety Directorate. - Reconstruction and modernization of the airport started; investments in maintenance and reconstruction of roads. ### Energy (Section 9.3 — Actions to be Taken in the Forthcoming Period) - Legislative and regulatory measures: - Adoption of by-laws related to the Law on Energy. - Adoption of legislation to regulate establishment of energy facilities. - Energy efficiency and demand-side measures: - Implement series of measures and projects to encourage more cost-effective energy use, energy saving and increase energy efficiency. - Conduct education campaign targeted at population and industry. - Prepare National plans for saving and energy efficiency (continuation of earlier preparations). - Privatization and market reforms: - Privatization of Pljevlja Thermal Plant and Pljevlja Coal Mine to be carried out soon. - Further reforms in market relations, including design and establishment of electricity market, seen as prerequisites for sustainable development and self-financing of the sector and for attracting necessary investments. - Social protection and targeted subsidies: - Develop program of protecting the poor via targeted subsidies to cover a portion of their consumption, to be designed and monitored based on household surveys (monitor share of electricity expenses in budgets of households below and/or around poverty line; heating method and quality of heating will also be monitored). - Capacity and data improvements: - Strengthen Monstat and Ministry of Economy capacities to ensure precise and continuous monitoring of consumption data for all types of energy sources (overall consumption and by sector). - Context from implementation and investments: - Ongoing restructuring of energy sector enterprises (Electricity Company of Montenegro - ECM, Pljevlja Coal Mine). - Tariffs approaching market levels; subsidies for key consumer (APP) being addressed. - Project for renewal of power grid (especially transmission network) with total investment of EUR 13 million (EIB loan accounts for 11 million). - Pilot project on wind energy utilization completed. - Establishment of independent Regulatory Agency and preparation of Strategy for energy development underway. *Source: _cr06141 - 5.3 Actions to be Taken in the Forthcoming Period* ### 10.1 DPRS Priority Activities ### _cr06141 - 10.1 DPRS Priority Activities ### Water supply and sewage — objectives and principles - Reforms are based on the principles of equity, access to drinking water (both quantity and quality), water resources preservation and environmental protection. - Market conditions will be introduced alongside changes in legislative and institutional frameworks, with the state acting as regulator and protector of interests of the economically most deprived population categories (through well structured tariff and subsidy policy). - Application of “user” and “polluter pays” principles and the EU accession process are stated as crucial for sector reform. - Basic PRSP objectives for water supply and sewage: - To improve the legislative framework and to start the process of harmonizing it with the EU legislation, - To improve the efficiency, management and financial operations of service providers, - To enhance the accessibility and quality of water supply services, and - To protect human health and the environment ### Water supply and sewage — 2003–2004 implementation - Strategy Master plan for waste management adopted at republic level; strategic Master plan for wastewater in the coastal region adopted, estimating priority investments in the period 2004 – 2008 at around EUR 28 million. - Strategic document for wastewater in central and northern regions is in the final stages. - Collection of water recompense is significantly improved; activities in this field are prolonged. - Important investment projects implemented or ongoing during 2004 and 2005, mainly in coastal municipalities. - Urgent measures for better water supply in the coastal region (including reduction of losses) invested around EUR 7 million (from domestic sources). - Project for upgrading water supply and sewage systems in Budva and Kotor municipalities is ongoing (an international donation of USD 8 million). - Smaller-scale projects implemented in rural areas, informal settlements, and settlements where some marginalized population groups live. ### Water supply and sewage — actions forthcoming - Complete legislation for restructuring and commercializing Public utilities; create legislative prerequisites for private sector involvement; identify disparities to harmonize with EU directives. - In 2005 development of Master Plan for water supply in Montenegrin coastal region. - Build Public utility capacities, develop regional cooperation, and prepare an investment strategy. - Public utility prices will be gradually increased up to the level of real costs coverage. - Priority projects: - Construction and rehabilitation of water supply and sewage systems in the coastal region and parts of settlements with marginalized population groups, - Projects related to reduction of losses in water supply systems, - Capacity building for service providers, - Necessary changes in relevant laws and regulations, - Improvements of water supply in rural areas. - Initial phase of implementation of strategic Master plan for wastewater in the coastal region and municipality of Cetinje has started; adoption of strategic Master plan for central and northern parts anticipated. ### Environment — objectives and priorities - Right to healthy environment and sustainable development principles underpin environmental and natural resources management. - Strategy objectives: - Improvements in legislative and institutional frameworks for environmental management, - Improvements of the environmental management system efficiency, - Implementation of priority projects aimed to reduce pollution and environmental degradation, - Strengthening of policies and practices for sustainable use of natural resources. ### Environment — 2003–2004 implementation - Series of activities linked to preparation of new laws: environmental impact assessment (including strategic assessment), air quality, and waste. - Preparation of integrated pollution prevention and control act and the law on environmental fund. - Establishment of Environmental Protection Agency planned for 2006. - Strategic master plan for waste management adopted; necessary investments for 2005 – 2009 period estimated at EUR 47 million. - Funds for rehabilitation and construction of regional landfill for coastal municipalities provided earlier (total investment until 2008 is USD 9.5 million, out of which an IDA World Bank loan accounts for 7 million). - Feasibility study for rehabilitation of Mojkovac and Gradac tailings disposal site completed. ### Environment — actions forthcoming - Amend the Law on Environment Protection upon adoption of new separate legislations; harmonize and implement by-laws under Ministry of Environment Protection and Urban Planning. - Develop Strategy for monitoring environment issues. - Establish Agency for Environment in 2006, comprising all existing specialized institutions. - Build capacities in the Ministry and local government services; improve cooperation among ministries (over National Council for sustainable development and by establishing thematic bodies). - Other priority projects: - Continuation of planning system reform; - Preparation of sustainable development strategy; - Projects related to biodiversity and protected areas management; - Further harmonization of regulations with EU standards; - Institutional capacity building and strengthening environmental management via better law enforcement, better access to information and increased public participation; - Regulating past pollution in privatization; - Strengthening information and monitoring systems. - Significant infrastructure projects: rehabilitation and building of regional waste disposal sites at the coast, reconstruction of wastewater treatment plant in Niksic, sanation of most dangered waste disposal sites. ### Forest and water resources management — objectives and priorities - Improvement requires significant legislative and institutional changes; for water resources, harmonization with EU standards and river basin integrated management are emphasized. - In forestry, legislation and institutional reform are more advanced though major changes remain. - Financing issue: set concessions and other compensations to ensure sustainable resource use. - Strategy objectives: - Improvement of legislation and institutional frameworks; enhancement of measures and instruments used in forest and water resources management, - Strengthen sustainable management of forests and other forestry resources, and obtain certificate for sustainable forestry, - Provide support to economic sectors and activities based on controlled and sustainable use of forest and water resources, - Strengthen sustainable management of water and other water resources. ### Forest and water resources — 2003–2004 implementation - Introduction of standards according to Forest Stewardship Council (FSC) methodology initiated. - Activities for improving fire protection system and rehabilitation of degraded forest areas implemented or ongoing. - Regulatory agency for water resources established. - Study for rehabilitation of eroded areas and management of torrents prepared. ### Forest and water resources — actions forthcoming - Priorities: - Introduction of FSC standards and preparation of forestry strategy, - Adoption of new water law harmonized with the EU Water Framework Directive, - Further development of project on integral management of risks from erosion and torrents in Tara and Lim river basins. - High-priority measures: better law enforcement against unauthorized exploitation of forest and water resources; introduction of geographic information system for forests; forest illnesses prevention measures; projects for rehabilitation of degraded forest areas. - Support measures for economic forest and water utilization under sustainable development: - Restructuring of companies for forest cutting and wood-processing, - Encouraging seedling production development, - Introduction of water management information system. ### Education — objectives and principles - Education reform began in 1999 to build a system providing quality education for all children and improving adult education. - Principles: decentralization, equal right to education regardless of gender, social-cultural origin, religion, physical and psychological characteristics; choice according to personal capacities. - Reform elements: introduction of standards, quality assurance system, human resource development, lifelong education, flexibility, vertical and horizontal movement, program adjustments, intercultural education, gradual changes. - Focus on groups at high risk: refugees, children from rural environment, Roma, children with special needs, those under constant care. - Social goals: - Training population contributing to economic growth, - Building attitudes for civil and democratic society, - Creating awareness of lifelong learning to meet labor market needs, - Improving connection between education and labor market. - Education goals: - High degree of graduation of students who acquired quality knowledge, - Increase rate of students enrolled in high schools following completion of primary education, - Increase number of students that will acquire, keep, understand and apply acquired knowledge and skills, - Increase admission rate to pre-schooling institutions, particularly for population in social need, - Provide incentives and satisfaction to teachers. ### Education — targets and measures - Activities of Ministry of Education and Science, on-site school, association of parents and local community for implementing new primary school program (duration 9 years) will result in increase of admission rate from 96.9% in 2002i, 97,6% for 200, to 99% by 2015. - Graph data (Admission rate in primary schools in the period 2002-2004) shows series: 95,5; 96; 96,5; 97; 97,5; 98; 98,5; 99 for years 2002 2005 2015 (as presented). ### Education — higher and vocational education reforms - University reform includes: - Introduction of European Credit Transfer System (ECTS), - Development of scientific and professional criteria for academic qualifications and indicators for academic promotion, - Providing of quality, - Membership in COEBS (Computerized studies on Environment), - Training of teachers before service, - Furnishing of workshops, classrooms, and computer rooms. - In vocational education, practical teaching share in three-year vocational schools increased to 50-60%; further reforms to include social partners in management, decision-making and financing. ### Education — 2003–2004 implementation - Adoption of Law on Upbringing and Education of Children with Special Needs; adoption of accompanying enabling regulations in progress. - Draft project for increasing scope of children in pre-schooling, primary and secondary education prepared; terms of reference and provision of funds for construction in progress. - Measures facilitating completion of primary school and continuation of education implemented: enabled access to primary education for all children and education encouraging respect for national values, history and culture. - Increase of high school student scope significantly implemented. - Establishment of centers for training and re-training of adults; agreement with social partners and employers for space and purchase of modern curriculum; teacher training for adult education underway. - Improved conditions for additional training of teachers and school directors. - Rationalization of Ministry of Education and Science and establishment of new institutions: Institute for Education and Center for Vocational Education being implemented. ### Education — actions forthcoming - Adoption of the Law on Certification System is an important forthcoming activity. - According to Draft Law on Amendments to the General Law on Upbringing and Education, Montenegro Examination Center will be established in 2005 as autonomous institution for external assessment and test of students’ achievements. - Expansion of space capacities of pre-schooling institutions, including restoration of existing objects, to increase scope of children from poor categories, Roma children and children with special needs; enable space for private pre-schooling institutions and local community participation in financing. - Construction of new primary and secondary schools to start; activities to rationalize school network and reconcile number of schools with demographic flows and standards. - Measures for reduction of number of employees and mechanisms for local community participation in financing education to follow. - Implement concept of inclusive education for children with special needs; develop database to follow education and community inclusion. - Develop activities to enable larger scope of Roma children in primary education. - Establish scale taking into account financial and social status of a family for assistance in financing education. - Modernization measures: greater integration of general knowledge in vocational subjects; adoption of problem approach in training; establish modular structure for existing and new education programs. - Planned preparation of education programs: 4 for civil construction sector, 4 for wood processing sector, 3 for agricultural sector and 1 for tourism. - Establish system for evaluation of informally acquired knowledge and qualifications. *Source: _cr06141 - 10.1 DPRS Priority Activities (excerpts as provided).* ### Introduction of optional subjects that will be taught all four years in high schools is also to follow. ### _cr06141 - Introduction of optional subjects that will be taught all four years in high schools is also to follow. ### Education: optional subjects, capacity strengthening, and ICT inclusion - Introduction of optional subjects that will be taught all four years in high schools is to follow. - Education of new generation of managers and introduction of management information system will follow in the sphere of capacity strengthening of teachers and management staff. - Inclusion of ICT in education process: - ICT inclusion is already being carried out through inclusion of ICT in teaching plans and programs. - Plan: enable all participants in the education system to acquire basic ICT skills and to train the teachers and trainers for implementation of ICT in teaching. - By the year 2010, all schools will get computers and access to Internet. - Particular emphasis on facilitating access to ICT for children with special needs and poor children. ### Higher education: study duration, incentives, and student accommodation - Duration of studies is identified as a visible symptom of the situation in University education; conditions are being created so students complete their studies within the deadline. - A system of incentive measures for students graduating in time is being prepared. - Attention will be paid to improvement of accommodation capacities in student dormitories. - Introduction of measures for incentives to participation of private initiative in education is in progress and will be intensified with appropriate attention to ensure the quality and control of standard. ### Health sector: DPRS Priority Activities (Chapter 14) - Basic goals of DPRS in the health sector: - Preserve and improve health of population - Define national goals for reduction of inequality in health - Improve health protection of population groups that are in unfavorable position - Reduce inequality in health by improving health of vulnerable categories of society - Strategy alignment: - Goals harmonized with Millennium development goals and WHO documents “World Health Declaration” and “Health for All in 21 Century”. - Montenegro Strategy for Health Development anticipates equal access to health services under basic contents with respect for principle of solidarity. Every citizen of Montenegro will be entitled to services included in the basic package under equal terms. - Health reform will include: - Development of sound public policy that needs to make the citizens responsible for their health - Improvement of equality in access to health services and improvement of access to health protection in the most acceptable and equal manner - Increase of effectiveness and efficiency of health system - Improvement of quality services in health, particularly for groups in social need - Strengthening of financial system stability to provide financially accessible health services for groups in social need; implementation requires reorganization of the Republic Health Fund to finance and administer basic package of health protection ### Implementation of Priority Activities for the Period 2003 - 2004 - Reform of Primary Health Protection has started; many projects implemented or in progress. - Legal framework developments and outcomes: - Law on Health Protection and Law on Health Insurance laid foundations for continuation of health system reforms. - Basic Package of Measures of Health Protection and Rules on Exercise of Rights from Health Protection accompany these laws. - New Law on Health Insurance significantly improved flexibility of financing health protection for population categories in social need. - Law on Medications and Medical Instruments adopted; regulations on production, trade and control of medications, list of medications and guidelines for purchase and use are to be adopted. - Law on Mandatory Records in health sector is being prepared to improve statistical data collection and monitoring. - Adopted laws include: Law on Control of Smoking, Law on Rights of Mental Patients, Law on Contagious Diseases, and Law on Protection from Noise. - Primary health protection reform: - Adoption of programs for improvement of structural organization of primary health protection. - Program of reform of primary health protection system aimed at providing improvement of primary health protection and reallocating funds toward first level of health protection. - Documents still in procedure: - Action plan of the reform implementation in health system - Network of health Institutions - Master plan of health development - Master plan of human resources – plan of specializations - Financing and planning: - Reform of financing aims at defining stable sources of funds for health protection of uninsured displaced persons and refugees. - Project of defining criteria for financing health protection is being carried out. - Planning methodology in health is being prepared; basic package of measures for II and III level is being reviewed along with standards and norms for secondary and tertiary levels. - Institutional development: - Establishment of the Institute for Public Health as initiator and institution in charge of further reform and modernization activities. - Strategies in procedure or preparation: Strategy for prevention and smoking control (to be adopted soon); Strategy for prevention of HIV/AIDS (in procedure); strategies for reproduction health and safe food (in preparation). - Programs for vulnerable groups: - Continued development of national programs and strategy for vulnerable groups, including Decade of Roma Inclusion with the Action plan, Strategy for Health Improvement of Mother and Child, Strategy for Violence Prevention, Program “Violence and Health”. - Elderly care: - Due to burden on health units and prominent health needs of old people, solution sought in integration of services of social and health protection for the old in forthcoming period. ### Actions to be Taken in the Forthcoming Period (Health) - Legislation to be adopted: - Law on Ambulance Service - Law on Transfusion - Law on Safe Food - Law on Pregnancy Termination - Law on Assisted Reproduction Technologies - Law on Prevention of Use of Narcotics - Law on Protection from Ionic Radiation - Reform of provisioning health services / strengthening preventive and primary health protection: - Establishing of Health Council - Establishment of Administration for Medications - Work to begin on Strategy “New Public Health”, Strategy of Safe Blood, Strategy for Providing of Safe Food, Strategy for Prevention of Traffic Traumas, Communication strategy, and others - Establishment of the Commission for Accreditation and Control of health protection quality in RM - Planned projects: improvement of quality services in health; project of professional standards, protocol and clinical guidelines - Significant forthcoming programs and projects: - Program of rationalization in health on secondary and tertiary level - Project of reorganization and privatization of dental and pharmaceutical sector - Expected: by the end of 2006 conditions will be created for introduction of private health insurance, expected to contribute to improvement of quality of health services and cost reduction - Projects targeting elderly and vulnerable populations: - Improvement of health of the old - Establishing of nurseries for care of old persons - Establishing of daily centers for this category - Projects to follow: improvement of health of handicapped; protection and improvement of health of persons in marginal situations; project ”Violence and Health”; projects for prevention of AIDS and tuberculosis ### Action Plan on the Implementation of the Development and Poverty Reduction Strategy — Selected implementation status and outputs - Macro-economic fiscal framework and public administration reforms (selection of entries and realization status): - 1 Adopt the Law on amendments of the Income Tax Law — Ministry of Finance — Realized - 2 Adopt the Law on Profit of Corporations — Ministry of Finance — Realized - 3 Adopt the Law on Excises and VAT — Ministry of Finance — Realized - 4 Adopt the Law on Real Estate Tax — Ministry of Finance — Realized - 5 Adopt the Law on State Auditing Institution — Ministry of Finance — Realized - 6 Adopt the Law on indebtness and management of public debt — Ministry of Finance — Realized - 7 Develop statistical and information system in Montenegro — MONSTAT — Realized - 8 Introduce GDP calculation system in accordance with SNA system — MONSTAT — Realized - 9 Enable the Customs Directorate for monitoring international exchange — Ministry of Finance — Realized - 10 Introduce income model / Abolish the Payment Bureau and implement new income model — Ministry of Finance, Tax Administration, Customs, Ministry of Internal Affairs — Realized - 11 Restructuring Tax Administration / Implementation of IT system in Tax Administration — Tax Administration — Realized to significant extent - 12 Introduce provisions on financial operations (IFAC cash accounting regulation, Adoption of the Law on civil servant’s salaries, Budget programming) — Ministry of Finance — Realized to significant extent; Expenditures management and control (internal and external audit) — Realized; Establishment of National Auditing Institution — Realized - 13 Improve fiscal policy (GFS reporting systems, budget execution, regular monthly reporting, taxation reform, Tax policy annual audit, Medium Term Expenditure Framework (MTF)) — Ministry of Finance — Realized to significant extent / Realized / Realized to significant extent / Realized to significant extent / Realized / Realized - 14 Improve planning of public resources allocation (programming budget, Treasury system and accounting, reorganization of Ministry of Finance) — Ministry of Finance — Realized to significant extent - 15 Improve transparency (involvement of off-budget funds, regulation of payment system with foreign countries, regulation of money market) — Ministry of Finance — Realized / Realized to significant extent / Realized to significant extent - 16 Improve monetary policy (further cooperation with international financial institutions) — Central Bank of Montenegro — Realized - 17 Implement state administration reform (laws, personnel directorate, training) — Government of Montenegro et al. — Realized to significant extent / Partly realized / Realized / In preparation / Partly realized / Partly realized / In preparation - 18 Implement local government reform (decentralization) — GoM, Parliament, Ministry of Justice, Ministry of Finance, Ministry of Internal Affairs, Treasury, Municipalities — Partly realized - 19 Adopt the Law on inspection — Ministry of Justice — Realized - 20 Carry out due information campaigns on the work of the government / Creation of flexible and efficient web page of the Government of Montenegro and the majority of other state authorities — PR Agency, GoM — Realized - 21 Introduce efficient, transparent, flexible judicial system (constitutional and legislative reform, Law on Courts, Administration and Appellate Court, judicial information system, vocational training) — Ministry of Justice et al. — Realized to significant extent - Employment and labor market programs (selection): - 23 Implement project on reforming labor legislation — Ministry of Labor and Social Welfare — In preparation - 24 Adopt the Law on protection at work — Ministry of Labor and Social Welfare — Realized - 25 Implement preparation programs for known employers — Training for 113 attendants — Employment Agency, Employers — Realized to significant extent - 26 Implement preparation programs for labor market — Training for 192 attendants — Employment Agency, Schools — Realized to significant extent - 27 Implement education program for the unemployed — Training for 849 attendants — Training centers, Employers — Realized to significant extent - 28 Implement stimulation program for employment of marginalized groups — Identification and training — Employment Agency — In preparation - 31 Implement program of running stimulation of employment — Approval of 342 loans for 542 work positions — Employment Agency — Realized to significant extent - 37 Decrease tax burdens for employers — Decrease in tax and contributions paid by employer by 10% — Ministry of Finance — Realized - 38 Implement program on public works — “Let it be clean” — employment of 135 persons from the list of Employment Agency; Care for the elderly — employment of 125 persons from the list of Employment Agency, covering 621 elder persons — Employment Agency, Ministry of Tourism, Ministry of Transport, Ministry of Internal Affairs, European Agency for reconstruction, 13 municipalities, Ministry of Labor and Social Welfare, Ministry of Health, Ministry of Education, PIO Fund, Health Fund, Association of the retirees, Red cross — Realized to significant extent - Business environment and banking: - Institutional reform of the banking sector in accordance with Basel principles II and EU directives — Realized to significant extent - Privatization of state banks — Realized to significant extent - Instruments for decreasing and equating interest rates — Realized to significant extent *Source: Montenegro Economic Reform Agenda excerpts as presented in the provided content unit.* ### Introduction of deposit insurance scheme ### Introduction of deposit insurance scheme ### Financial sector and legal framework reforms - 39: Introduce deposit insurance scheme — Realized to significant extent - Cease of work of the Payment Bureau and implement payment system reform — Ministry of Finance — Realized - Adoption of the Law on money laundering prevention — Realized - Establishment of the Directorate for money laundering prevention — Realized - 40: Adopt and implement regime for money laundering prevention harmonized with FATF — Reception of Montenegro into EGMONT (World organization for money laundering prevention) — Ministry of Finance — In preparation - 41: Adopt the Law on Mortgage — Ministry of Justice — Realized - 42: Adopt the Law on civil suits — Ministry of Justice — Realized - 43: Adopt the Law on administrative procedure — Ministry of Justice — Realized - 44: Adopt the Law on Insolvency of Commercial Companies — Ministry of Justice — Realized - 45: Adopt the Law on Pledge as Means for Securing Claims — Ministry of Justice — Realized - 46: Adopt the Law on Electronic Trade — Ministry of Justice — Realized - 47: Adopt the Law on Electronic Signature — Ministry of Justice — Realized ### Competitiveness and private sector development (SME focus) - 48: Increase competitiveness of domestic companies within agriculture, meat production, farms and bee-keeping - Create conditions for increasing competitiveness of domestic products in Montenegrin and international market, Provide conditions for market extension (export growth), Better and more efficient usage of domestic resources (natural, productive and personnel) — Small and Medium-sized Enterprises Development Agency; Ministry of Agriculture — Realized - 49: Increase competitiveness of domestic tourist companies - Improvement of the quality of services of private hotels and motels, improvement of private accommodation offer, increase in categorization of small hotels, introduction of EU standards, promotion of tourist offer of small hotels and motels — Small and Medium-sized Enterprises Development Agency; Ministry of tourism — Realized - 50: Increase competitiveness of domestic wood-processing companies - Increase in competitiveness of small and medium enterprises within wood-processing via professional consultation, increase in finalization of production, introduction of standards, improvement of standards, improvement of the quality of products and promotion — Small and Medium-sized Enterprises Development Agency; Ministry of Agriculture — Realized to significant extent - 51: Provide support for successful companies - Support for the most successful by announcing list of the most successful companies and proclaiming entrepreneurship of the year as a prominent individual based on defined criteria — Small and Medium-sized Enterprises Development Agency — Partly realized - 52: Improve industrial production - Establishment of new enterprises and job creation; Development of modern integral support to SME and entrepreneurs through coordination among state institutions, private sectors and large enterprises — Small and Medium-sized Enterprises Development Agency; GoM; Municipalities — In preparation - 53: Provide support for agricultural production Agropark – ransom and distribution of subtropical fruits - Designing model for developing one branch of agriculture comprising of organization of production, ransom of agricultural products – tropical fruits – education, management, financing, sale — Small and Medium-sized Enterprises Development Agency — Realized to significant extent - 54: Develop Internet park and provide support to IT sector - Development of applicative usage of information and communication technologies and auto development function of ICT. Based on modern ICT, development of new modalities into technology itself; Creation of business incubators and support for IT sector — Small and Medium-sized Enterprises Development Agency — Partly realized - 55: Establish Fund for Diaspora - General objective is to put a huge Diaspora potential (ideas, knowledge, experience, business contacts) into the function of economic development of pour country — Small and Medium-sized Enterprises Development Agency; Center for Emigrants — In preparation - 56: Establish entrepreneurs’ clubs in compulsory schools - Introduction of entrepreneurship as an obligatory subject in compulsory schools and start creating entrepreneurship society. In early schooling stage to recognize aspirations of children within tourism. — Small and Medium-sized Enterprises Development Agency — Realized ### Trade and regional economic cooperation - Law on foreign trade — Realized - Law on current and capital international transactions — Realized to significant extent - Law on free zones — Realized - 57: Complete institutional framework for foreign trade and foreign investment — Law on concessions — Ministry for International Economic Relations and European Integrations; Central Bank of Montenegro; Ministry of Finance — On-going - 58: Access to WTO — Preparation activities for negotiations with WTO including work of working authorities and groups — Small and Medium-sized Enterprises Development Agency — Realized to significant extent - 59: Create free trade zone for Balkan *Source: _cr06141 - Introduction of deposit insurance scheme* ### Conclusion of the Agreement on free trade with countries which have already signed Memorandum of Understanding, Liberali ### _cr06141 - Conclusion of the Agreement on free trade with countries which have already signed Memorandum of Understanding, Liberali ### Trade, EU integration, and SAP / Stabilization and Association - Item 60: Stimulate investments and export - Building institutional support to investments and export promotions by defining institutional framework for export promotion — Small and Medium-sized Enterprises Development Agency — Realized - Improvement of efficiency of customs administration — In preparation - Building institutional capacities for adoption of international regulations in trade including usage of trade privileges — Small and Medium-sized Enterprises Development Agency — Partly realized - Establishment of European Integration Council — Realized - Establishment of European Integration Commission, including 31 working groups for all areas envisaged by SAP — Realized - Development of communication strategy with EU — Realized - Further development of Cost-benefit analysis — Permanent activity - Development of Action Plans on the priorities for adjusting legislation with EU in accordance with SAP commitments — Partly realized - Activities for development of interim EU accession strategy — Partly realized - Preparation activities for development of documents necessary for participating in negotiations for conclusion of Stabilization and Association Agreement — In preparation - Item 61: Accelerate Stabilization and Association Process with EU - Development of annual program for implementation of Aquis Comunitea — Small and Medium-sized Enterprises Development Agency in coordination with other ministries and competent institutions; Commission for European Integration — Partly realized - Item 95: Implementation of obligations from temporary Agreement between Montenegro and EU — Partly realized ### Anti-corruption and transparency - Item 62: Adopt the Law on Witness Protection — Ministry of Justice — Realized - Item 63: Adopt the Law on the Conflict of Interests — Ministry of Justice — Realized - Item 64: Adopt the Law on Funding Political Parties — Ministry of Justice — Realized - Item 65: Educate local self-government staff on the modalities for corruption eradication in municipal services — NGOs; Anticorruption Agency — In preparation - Item 66: Develop the code of Conduct for Mayors, Councilors and High and Medium Rank Officers and conduct collecting signatures campaign — NGOs — In preparation - Item 67: Research on corrupting conditions and transparency of health institution performance – opinion of citizens and employees — NGOs — In preparation - Item 68: Public awareness campaign "Recognize the corruption" — NGOs; Anticorruption Agency — In preparation - Item 69: Development and adoption of the Law on free information access — Ministry of Culture and Media — Realized - Item 70: Development and adoption of the strategy for establishing cooperation between government and NGO sector — GoM; NGOs — In preparation - Item 71: Establishment of multidisciplinary task force to carry out the monitoring and evaluation of anticorruption policies — Ministry of Finance; Anticorruption Agency; NGO — In preparation - Items 72–83: Multiple measures (media capacity building; civil control of police; research/monitoring of privatization from corruption point of view; development of Public Procurement Law amendments; local anticorruption action plans; capacity building for conflict-of-interest commission; support to Office of Special Prosecutor; Law on Criminal Responsibility of Legal Entities; sectoral anticorruption policies; simplification of licensing procedures) — Statuses: In preparation, In drafting phase, Partly realized as specified per item ### Private sector development and privatization - Item 84: Accelerate sale of state shares of the companies and banks; Solution of requests for property restitution; Program on restructuring companies and support to institution development; Well-regulated capital market; Protection of property rights and economic freedom; Amendment of the Law on property institution; Economic legislation — GoM; Commission for Economic Policy and Development (KEP) and project teams; Privatization Council; Commercial Court; Ministry of finance; Ministry of Justice; Ministry of Economy; Commission for Securities — Realized to significant extent ### Agriculture and rural development - Items 85–87: Adopt Laws on Tobacco; Organic Agriculture; Veterinary Medicine — Ministry of Agriculture, Forestry and Water Management — Realized - Items 88–93: Adopt Laws on wine, brandy and other alcohol; Protective Herbs; Pesticide; Seedlings; Seedling Material; Freshwater Fishery — Ministry of Agriculture, Forestry and Water Management — In preparation - Item 94: Conduct encouraging policies in agriculture (support to product placement, village infrastructure, inspection services, lab modernization, cattle breeding allowances, young farmers program, export support, subsidized production for less favorable conditions, promotion of fish and sea culture breeding) — Ministry of Agriculture, Forestry and Water Management; Ministry of Finance — Partly realized - Item 95: Conduct protective measures for domestic agriculture (removal of customs free barriers; adjustment of customs duties; change of preferential levies into custom tariffs) — Ministry of Agriculture, Forestry and Water Management — Partly realized - Item 96: Conduct the reform on crediting policy (moving credit activity from the Ministry of Agriculture; Establishment of Joint commissions – councils with banks; Develop loan criteria in agriculture; Cooperation with the Employment Agency) — GoM; Ministry of Agriculture, Forestry and Water Management — Realized to significant extent - Items 97–101: Building institutions in agriculture (inspection, support to bee-keeping, herb production, Agency for Tobacco, fishery development, Agricultural Cadastre, labs, counseling services); Programs “Young farmers”, “Young couple in the village”; Reform on cooperatives; Develop brands for organic agricultural products — Mostly Partly realized or In preparation as specified - Item 102: Modernize existing and build new production plants (small plants for smoking, processing and packing fruits and medical herbs; completion of Distributive Center; enable slaughtering capacities for export; construction of new plants for high quality milk products) — Ministry of Agriculture, Forestry and Water Management; Small and Medium-sized Enterprises Development Agency — Realized to significant extent ### Tourism - Item 103: Establishing of legal and institutional framework for the work of Ministry of tourism — Ministry of tourism; Ministry of justice; Secretariat for legal affairs; Foreign consultants — Realized to significant extent - Item 104: Establishing conditions for full implementation of the new Law on tourism — Ministry of tourism; Ministry of justice; Secretariat for legislation; Foreign consultants — Realized to significant extent - Item 105: Establishment of the Montenegrin Council for tourism — Ministry of tourism — Realized - Item 106: Creating preconditions for introducing the system of integral managing of the coastal area (cooperation with GTZ and other institutions) — PC for the management of the state sea property; Ministry for environmental protection and physical planning; Ministry of Maritime Affairs and Transportation; Ministry of tourism; Ministry of Agriculture, Forestry and Water Management; GTZ; Six coastal municipalities — Partly realized - Items 107–116: Reorganization of promotion system; WTO membership initiation; harmonize tourist categorization; Satellite calculation of tourism effects; new marketing concept; improve specific types of tourism; reconstruct existing offer and privatization/tenders for hotels and complexes; support SMEs in tourism; campaigns to elevate quality of tourist municipalities; unify private accommodation quality; control over WTO symbol system — Mixed statuses including Realized, Partly realized, Realized to significant extent as specified - Item 113 specifics: Announcing tenders for selling hotels “Galeb”, “Mediteran”, “Lido”, “Bellevue”, “Olympic” (Ulcinj’s Riviera bankruptcy); tender for majority package in HTP “Boka”; long term lease of Sveti Stefan – Miločer – Kraljičina plaža; tender documentation for hotels Ljubovic and Zlatica — Privatization Council; Agency for economic restructuring and foreign investments; Ministry of tourism; Tourist entities — Realized to significant extent ### Transportation and infrastructure - Item 118: Adopt the Law on Road Transport — Ministry of Maritime Affairs and Transportation; State Road Directorate — Realized to significant extent - Items 119–120: Passing new legislation in aviation and railway transport — Ministry of Maritime Affairs and Transportation — In preparation - Items 121–126: Road projects (Kolašin-Ribarevina-Berane-Špiljani; Podgorica-Bioče-Kolašin; Velika-Čakor-Bjeluha; Gornja polje-Krstac; Plužine-Trsa-Virak; Sanation of existing climbing lanes) — State Road Directorate — Statuses: Not started, Partly realized, Not started as specified - Item 127: Maintain the roads in winter and off winter period (cleaning, sanation, sewage channels, signals) — State Road Directorate — Realized to significant extent - Items 128–130: Law on railways and establishment of Railway Directorate; Adopting the Law on Road transport — Ministry of Maritime Affairs and Transportation — Realized to significant extent - Item 131: Adopting the Law on maritime transport (divided into multiple marine laws) — Ministry of Maritime Affairs and Transportation — In preparation - Item 132: Establishing the Agency for maritime security; Directorate for maritime security established per Government decision — Ministry of Maritime Affairs and Transportation; Directorate for maritime security — Realized to significant extent - Items 133–136: Sea cleaning service (Not started); measures for reducing contamination from road/maritime traffic (In preparation); preparation of road development strategy (In preparation); urgent backlog maintenance of local and regional roads (In preparation) - Item 137: Control of the fuel quality (measures and analysis for % content of sulphur, content of lead) — Ministry of Maritime Affairs and Transportation — Not started ### Energy - Introducing sub legal acts for implementation of the Law on energy — In preparation - Harmonizing domestic legislative with international in the area of energy — In preparation - Introducing legal acts for construction of energetic and other objects — In preparation - Item 138: Improving legislation in energy; introducing legislation for small hydro centrals and other renewable energy — Ministry of economics — In preparation - Institutional strengthening of the Energy Regulatory agency for energy — Realized - Establishing of the Energy Efficiency Office within the Ministry of Economy and its capacity building — In preparation - Opening the market for the private sector/independent producers of energy — In preparation - Linking with regional energy market — Realized to significant extent - Item 139: Improving general conditions of functioning the energy sector; preparation of energy strategy; restructuring energy companies; tariff reforms; program for protection the poorest population (aimed subsidies); measures for reducing technical losses — Statuses: Inn preparation, Partly realized, Not started as specified - Item 140: Increasing reliability in electricity distribution; reducing commercial losses; introduce modern power consumption measurement and reading equipment in 1 - 1,5 % of TS areas — Montenegrin Electricity company; statuses: Partly realized; In preparation for measurement equipment - Establishing national plan on energy savings and efficiency — Realized to significant extent - Educational campaigns on energy saving — In preparation - Increase energy efficiency in public sector — In preparation - Promoting renewables and projects for small hydro centrals, solar, wind — Partly realized - Pilot project for using the wind energy — Realized - Pilot project for using the solar energy — In preparation - Projects for protection of environment for the Pljevlja TPP — In preparation - Item 141: Increasing energy efficiency and environment performance (Pljevlja TPP eco filter unit reconstruction; wastewater disposal; monitoring of fume gases; replace/reconstruct ash and slag discharge) — Ministry of economics; Montenegrin Electricity company — In preparation ### Water, sewage, environment, and forestry - Identification and harmonization with EU directives on drinking water (98/83 EC) and Urban Wastewaters (91/271 EEC) — In preparation - Item 142: Improving legal framework and harmonization with EU; restructuring and commercialization of utility entities; introducing private sector — Ministry of Environmental Protection and Physical Planning — In preparation - Capacity building of utility sector; preparation of investment sector strategy — Partly realized - Increase price of utility services gradually to cover costs and eliminate cross subsidies — Partly realized - Item 143: Increasing efficiency in managing and financial running of service providers; improving payment methods — Ministry of Environmental Protection and Physical Planning; Municipality public utility entities; Municipality community — Realized to significant extent - Subsidies for water using within the poorest households — Not started - Improve water supply in rural areas — Partly realized - Water supply projects for urban areas with marginalized groups (Roma, IDPs, illegal settlements) — Partly realized - Measures to decrease water interruptions and construct regional water system — Realized to significant extent - Measures to decrease losses on water network and improve quality (more reservoirs, automatic control equipment) — Realized to significant extent - Item 144: Protection measures for water springs and potential springs — Ministry of Environmental Protection and Physical Planning; Ministry of Labor and Social Welfare; Ministry of Agriculture, Forestry and Water Management; Public Facilities; Municipalities; PC Montenegrin Coast — Partly realized - Item 145: Support for constructing/reconstructing sewage disposal facilities for marginalized groups in tourist centers — Municipalities; Public utility entities; Ministry of Environmental Protection and Physical Planning — Partly realized - Items 146–152: Environmental management reforms (legal/institutional framework; Acts on influence and reimbursement; regulation on prior pollution responsibility; capacity building; inter-ministerial cooperation; Environmental Protection Agency and fund; monitoring; environmental education; physical planning reform; NEAP/LEAPs/NEHAP; polluters cadastre; hazardous waste inventory; rehabilitation projects; biodiversity strategy) — Mixed statuses: Realized to significant extent, In preparation, Not started, Partly realized as specified - Item 148: Priority projects to decrease pollution and prevent environmental degradation (rehabilitation of waste disposal sites; construction in coastal municipalities Kotor, Budva, Bar, Ulcinj) — Ministry of Environment Protection and Urban Planning; Coal Mine; Public Facility; Municipalities; PC Montenegrin Coast — Partly realized - Items 150–153: Forest and water resources (new Law on waters aligned with EU, Water regulatory agency, administrative river-basin bodies, forestry standards based on FSC, forestry development strategy, afforestation, support to wood processing, water IT system, pilot projects on Lim and Tara) — Statuses: Realized to significant extent, Partly realized, In preparation as specified ### Social protection, pensions, and vulnerable groups - Item 154: Pass the Law on Social and Child Protection — Ministry of Labor and Social Welfare — Realized - Item 155: Pass the Law on War Veterans Disability — Ministry of Labor and Social Welfare — Realized - Item 156: Develop and implement the National Strategy for Resolving the Issues of Refugees and IDPs; establish family material support for IDPs and refugees — Ministry of Labor and Social Welfare; Commissariat for Refugees; Red Cross — Partly realized - Item 157: Building capacity of institution for accommodating elderly in Podgorica (drafting project, permits, funds, start of construction) — Ministry of Labor and Social Welfare; Podgorica Municipality — In preparation - Item 158: Develop the National Action Plan for Children — Ministry of Labor and Social Welfare; Ministry of Education; Ministry of Health — Partly realized - Item 159: Establish the Unit for poverty analysis and poverty reduction policy monitoring (transform PRSP team) — Ministry of Labor and Social Welfare — Partly realized - Items 160–163: Ensure minimum funds for social protection beneficiaries; electricity and water cost subsidies for poorest categories; implement employment programs; reduce family material support for temporary impediment to work; increase municipalities’ responsibility for social care — Statuses: Partly realized, In preparation as specified - Item 164: Monitoring of poverty and vulnerable populations; development of indicators and integrated information system; establishment of research/evaluation unit — Ministry of Labor and Social Welfare; MONSTAT; Municipalities — Partly realized - Items 165–171: Improve quality and standards of social protection services; family accommodation and foster care; training of SWC staff and care staff; mobile teams for elderly — Mixed statuses: Realized to significant extent, Partly realized, In preparation, Not started as specified - Item 172: Economic and social empowerment of adults with disabilities (educational programs, fund for self-employment, incentives for protected conditions) — Ministry of education; Special Educational Institutions; Ministry of Labor and Social Welfare; NGOs; Employment Agency — Partly realized - Items 173–177: Support to families in crisis and single parents; safe houses for abused children and women; Roma children inclusion programs; fund of innovations in social and children protection; improving urban/residential aspects of poverty (building apartments) — Mixed statuses: Partly realized, In preparation as specified - Items 178–181: Pension reform and PIO (implementation of new pension law and by-laws; extending disability pension eligibility; providing stable pension system; revising role and organization of PIO; introduce pension system reform of the first pillar — increasing age limit to 60 for women and 65 for men; introduction of Swiss indexation) — Statuses: Realized, Partly realized, In preparation as specified *Source: _cr06141 - Conclusion of the Agreement on free trade with countries which have already signed Memorandum of Understanding, Liberali* ### Introduction of the new pension formula based on individual coefficients and increased age limit for retirement ### Introduction of the new pension formula based on individual coefficients and increased age limit for retirement ### Objectives and tasks - Comprehensive analysis and debate on second pillar introduction - Preparation of the legislation framework for second pillar reform - Analysis and creation of institutional conditions for second pillar introduction ### Responsible institutions - Ministry of Labor and Social Welfare - Ministry of Finance - Privatization Council ### Implementation status - In preparation ### Document references and pagination - 182 - 183 *Source: _cr06141 - Introduction of the new pension formula based on individual coefficients and increased age limit for retirement* ### Introduction of pension funds on voluntary basis - third pillar ### Introduction of pension funds on voluntary basis - third pillar ### Building legal framework for creation and regulation of the market of voluntary pension funds - Responsible institutions: Ministry of Labor and Social Welfare; Ministry of Finance; Commission for Securities - Status: In preparation ### Strengthening institutional and other services for the most vulnerable pensioners and the elderly - Actions: - Development of alternative forms of institutional protection including programs of daily centers, service delivery, home assistance and other initiatives of the local community. - Responsible institutions: Ministry of Labor and Social Welfare; Municipalities; NGOs - Status: Partly realized ### Providing support to poor families with children and youth - Measures and status: - Providing access to social services — Realized to significant extent - Development of quality services adapted to children and youth — Realized to significant extent - Providing the realization of children rights — Realized to significant extent - Developing preventive and curative programs as well as repressing socially unacceptable behavior of children and youth — Realized to significant extent - Drafting the National Strategy for Children — Partly realized ### Children and youth poverty reduction / Youth strategy - Action: Drafting the National Strategy for Youth - Responsible institutions: GoM; Ministry of Labor and Social Welfare; Municipalities; NGOs - Status: Partly realized ### Providing adequate social protection for people with disability - Actions: - Development of support program for disabled persons and their families - Performing the activities providing disabled persons with better access to environment - Development of urban standards for physical barriers removal - Development of specific education programs for disabled persons - Responsible institutions: Ministry of Labor and Social Welfare; Municipalities; Ministry of Environmental Protection and Urban Planning; NGOs; Ministry of Education - Statuses: - Development of support program — Partly realized - Activities providing access to environment — Partly realized - Urban standards for physical barriers removal — In preparation - Specific education programs — Partly realized ### Education — legal and institutional framework - Actions and statuses: - Adopt the Law on educational inspection — Realized - Introducing legal Acts — Realized to significant extent - Drafting Law on certificate system — In preparation - Drafting Law on upbringing and education the children with special needs — Realized - Responsible institutions: Ministry of education and science; Parliament; Montenegrin Government; Special training centers; Ministry of Labor and Social Welfare ### Early childhood and preschool inclusion - Objectives and measures: - Involve preschool children, poor social groups children, Roma children and children with special needs; involve local self-government in public preschool entities — Partly realized - Increase the number of children at preschool education process; renovate network and increase capacities of existent public kindergartens — Not started - Establish new space capacities for preschool entities (draft of the entity project; draft project documentation and licenses; beginning of entity construction) — Realized / Realized to significant extent / In preparation - Provide access for poor families children via paying scale based on family’s material and social status — Not started - Media campaign and project promotion for involvement of children from poor families, children with special needs and Roma children in kindergartens and elementary schools — Partly realized - Implement the inclusive education program (database on children with special needs; engineering adjustment of objects; monitoring) — Partly realized - Integration and special care for children with special needs — In preparation - Increase the number of Roma children that attend elementary school — Partly realized ### Elementary and secondary education — access, quality, curricula, infrastructure - Key measures and statuses: - Provide access to elementary education to all children — Realized to significant extent - Provide education and respect of national values, history and culture to all children — Realized to significant extent - Provide conditions for teacher improvement and training for school managers — Realized - Management and quality control improvements, informative system, evaluation of all educational segments — Partly realized - Prepare and edit books for elementary and secondary education — Realized - Draft books for special education, education of adults — Partly realized - Prepare book on Roma language — Not started - Prepare programs for additional education of Roma children and additional classes for learning the local population language — Partly realized - Prepare teachers and personnel for work in mother language with Roma children (initial and continuous training) — Partly realized - Draft new curricula for elementary education; for general secondary education and teacher training — Partly realized / Realized to significant extent - Build new spaces for elementary education — Not started - Equip classrooms of music and artistic schools; provide spaces, equip laboratories, cabinets and didactical material — Partly realized ### Vocational and professional education - Measures: - Implement stimulation measures for inscription of students at departments for agriculture, tourism and services — Partly realized - Separate educational program in modules to provide professional qualification — In preparation - Provide conditions for adjustment and modernization of special education to social changes and IT; increase number of people included in special education after completing elementary school — Realized to significant extent - Introduce choice subjects in four years professional schools — In preparation - Augment percentage of praxis in three years professional school (50-60%) — Realized - Involve social partners in management, decision making and financial process of professional education — Realized to significant extent - Build new spaces for secondary schools — Not started ### School network, rationalization, ICT and adult education - Actions and statuses: - Restructure and adjust infrastructure in areas where poor social groups live, including Roma children and children with special needs — Partly realized - Agreement with social partners — Realized - Provide space capacities and modern technology equipment — Realized to significant extent - Establish Training centers for teacher training — Partly realized - Harmonizing number of schools with demographic movements and educational process standards; reduce number of employees; rationalize the school network — Partly realized - Participation of local community in financing part of education — Not started - Provide ICT educational plans and programs; provide for all participants to gain basic ICT skills until 2005 year; provide computers and access to Internet in all schools until 2010 year; teacher and trainer trainings on modern techniques for learning using ICT — statuses range from Partly realized to In preparation or Not started - Drafting the strategy of education of adults — Realized to significant extent - Strengthening institutions for education of adults; teacher and trainer trainings for work with adults; provide conditions for functional literacy — In preparation / Not started ### Institutional support, exams, student accommodation and access - Actions: - Provide institutional support to the educational system (Schooling agency and Professional education Center) — Realized to significant extent - Provide the possibility of external graduation exam — In preparation - Increase space capacities up to 20% until 2006. year — Not started - Increase accommodation capacities in student homes; improve accommodation conditions — In preparation - Harmonizing public entity network with population needs; stimulate private initiative in educational area — Realized to significant extent / Partly realized - Reduce average time period for studying; motivate students to finish studies in time — In preparation / Partly realized ### Health — laws, strategies, and institutional development - Legislative achievements and statuses: - Adopting the Health care Law — Realized - Drafting the Book of regulations on providing Health care — Realized - Drafting the Book of regulations on rights on health care; on health care abroad; on participation of insurants in health care costs; on professional control in health entities — Not started - Adopting the Health insurance Law — Realized; drafting sub legal acts — Partly realized - Adopting the Law on the Restriction of the use of tobacco products — Realized - Drafting the Action plan for improving and care mental health — Realized - Adopting the Law on care and rights mentally ill persons; Drafting pilot project for Mental health Institute — Realized - Drafting regulations on production, commerce and drug controls; Adopting the Law on drugs; Establishing the Commission for drugs — Realized - Adopting Laws on protection from noise; protection of communicable diseases; obligatory catalog in health area — Realized - Drafting the immunity program; monitoring and evaluation — Realized - Strategy development and projects: - Drafting and adopting the Improvement of mental health strategy; establishing Mental health institutes (pilot and planned expansion to 7 institutes) — Partly realized / Realized - Drafting and adopting HIV/AIDS prevention strategy; Establishing the Center for HIV/AIDS prevention — Realized - Drafting and adopting reproductive health strategy — Realized to significant extent - Drafting and adopting “New Public Health” strategy; health blood strategy; traffic traumas prevention strategy; Safe food strategy — statuses range from In preparation to Not started - Drafting and adopting the Roma's health improvement strategy; Communication strategy — Realized - Drafting and adopting the growing old and age strategy — Partly realized ### Health infrastructure, public health institute and quality control - Capital and institutional projects: - Drafting and rehabilitation of health centers; establishing health point Stari Aerodrom — Not started / Partly realized - Drafting the investment project of the Public health Institute construction; performing construction works and adopting the object — Partly realized - Drafting the investment project of the Mental health Institute construction — In preparation - Drafting the program of improving the structure organization in primary health protection; planning follow-up reform process — In preparation - Drafting and adopting Master plan for health development — Realized - Drafting and adopting Master plan for human resource management; drafting plan of specializations — Not started - Examine health employees and possibility of pre qualification of non medical personnel — Not started - Establishing the network of health entities; drafting the network of health entities; drafting the Public health institute strategic plan; establishing the Public health institute — Not started / Partly realized / In preparation ### Service definition, standards, clinical guidelines and information systems - Actions and statuses: - Defining number-amount, type and contents of services at all levels of health protection — Realized - Defining and adopting obligatory services and rights package in the field of health care — Partly realized - Drafting methodology of work in health institutions related to human and space resources and equipment; drafting services registry based on levels — Realized / Partly realized - Defining standards and norms in line with obligatory service package for PZZ — Realized - Drafting professional standards project; standards and norms at secondary and tertiary level — Partly realized - Drafting guideline and clinical directions — Partly realized - Drafting information system project; development of whole IS in health system — In preparation / Partly realized - Application for support of registration process within the chosen doctor — Realized ### Public-health projects and targeted interventions - Projects and statuses: - Health research and projects focused on Rom population (mortality, morbidity, prevention, nutrition, reproductive health, epidemiological supervision, immunization) — Not started - Projects: “Violence and Health” and “HIV/AIDS Prevention” — Partly realized - Project “Tuberculosis prevention” — In preparation - Handicapped persons’ health improvement project — Not started - Project “Smoking Control of Youth”; Action plan of Rom health protection — Realized - Drafting projects of protection and health improvement of persons in marginalized situations; integration of Rom in protection programs and PZZ — In preparation - Drafting project of integration of social and health services for the aged people (Homes for the aged; Daily centers; Geriatrics centers) — Not started - Drafting research project determining environmental impact to overall health; national plan for monitoring environmental impact on children's health (NAPA) — Not started - Drafting mother and child health improvement project - NPA; drafting children's action plan — Partly realized - Drafting action plans for prevention addiction diseases; action plans for prevention of drug addiction in health area — Realized ### Monitoring, accreditation and quality assurance - Planned actions and statuses: - Monitoring the work quality in health institutions; listing measures and techniques for improving quality; monitoring health status indicators — Not started - Establishing the Quality Health Service Control and Accreditation Board — Not started - Drafting projects of rationalization in health care at secondary and tertiary level; defining personnel plans and redirecting personnel — Not started - Drafting project of establishing criteria for financing health care; drafting criteria for contracting — In preparation ### Acronyms used in the document - GDP Gross Domestic Product - ECTS European Credit Transfer System - Eco Electricity Company of Montenegro - EU European Union - FSC Forest Stewardship Council - ICT Information and communication technology - IDA International Development Agency - ILO International Labor Organization - ISPP Institute for strategic Studies and Prognoses - JIM Joint Inclusion Memorandum - MDGs Millennium Development Goals - MLSW Ministry of Labor and Social Welfare - MMF International Monetary Fund - MONSTAT Montenegrin Statistics - MTEF Medium Term Expenditure Framework - MVP Mass Voucher Privatization - NGO Non-governmental Organization - VAT Value Added Tax - PDI Pension and disability insurance - PHC Primary Health Care - RAE Roma, Ashkaelia, Egyptians - RM Republic of Montenegro - SAP Stabilization and Association Process - SME Small and Medium Enterprises - FDI Foreign Direct Investment - SNA System of National Account - SPAI Stability Pact Anticorruption Initiative - SWC Social Welfare Canters - DPRS Development and Poverty Reduction Strategy - WTO World Trade Organization - UNHCR United Nations High Commissioner Representative - WB World Bank - WTTC World Tourism and Travel Canter *Source: _cr06141 - Introduction of pension funds on voluntary basis - third pillar* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2006/_cr06141.pdf_