VZCZCXRO7261
RR RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHBW #0356/01 1001010
ZNR UUUUU ZZH
R 091010Z APR 08
FM AMEMBASSY BELGRADE
TO RUEHC/SECSTATE WASHDC 0150
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBW/AMEMBASSY BELGRADE 0232

UNCLAS SECTION 01 OF 04 BELGRADE 000356 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ECON SR
SUBJECT: SERBIA: LEGISLATION ON HOLD DURING ELECTIONS 
 
REF: A) BELGRADE 309 AND PREVIOUS, B) BELGRADE 206 AND PREVIOUS 
 
BELGRADE 00000356  001.2 OF 004 
 
 
Summary 
 
------- 
 
 
 
¶1. (SBU) While Serbia's political elite crunch the numbers in 
anticipation of forming coalitions after the May 11 elections, 
Serbia's caretaker government has stalled a mountain of critical 
legislation.  While this is business as usual for the 
politicians, legislation that would improve the day-to-day life 
for the ordinary citizen remains in limbo -- again -- until 
after a new government is formed.  End Summary. 
 
 
 
Politicians Focused on Campaign 
 
------------------------------- 
 
 
 
¶2. (U) Since the DS-DSS government dissolved, the incumbent 
ministers have remained in place as a caretaker government, but 
parliament has dissolved (ref B).  With no agreement among the 
caretaker government and no parliament to consider bills, the 
ministries have ceased work on a laundry list of important 
pieces of draft legislation in various stages of development. 
Ministries have also delayed implementing legislation that 
should have gone into force.  Instead of doing real work, the 
parties are absorbed with campaigning for the May 11 
parliamentary elections, the eighth national election since 
¶2000. 
 
 
 
Meanwhile Legislation Languishes 
 
------------------------------- 
 
 
 
¶3. (U) Draft legislation on hold includes economic reforms, 
development and infrastructure projects, criminal justice 
legislation, social welfare programs, and legislation required 
for a Stabilization and Association Agreement with the EU. 
Several of the pieces of legislation would implement projects 
funded by the International Bank of Reconstruction and 
Development, the World Bank, and the European Investment Bank. 
Pending criminal justice legislation is necessary to implement 
the Justice Ministry's judicial reform strategy and implement 
elements of the 2006 Constitution, such as establishing 
appellate courts and a selection process for judges and 
prosecutors.  In addition, implementation of other legislation, 
such as a new asylum law and establishment of an anti-corruption 
agency, remains on hold.  A full list of legislation and 
projects on hold follows. 
 
 
 
¶4. (U) Among the economic-related legislation stalled, there are 
a few bills that have significant economic and financial 
consequences for Serbia.  Although GOS continues to lament its 
Category 2 airport security rating, it still has not passed the 
required Law on Civil Aviation mandated by FAA to achieve 
Category 1 status.  The law giving the Civil Aviation 
Directorate independent authority over civil aviation affairs is 
integral to re-establishing direct flights between the U.S. and 
Serbia.  Serbia's proposed Law on Land Restitution, which aims 
to settle land claim disputes, establish post-socialism property 
rights, and pave the way for a competitive real estate market 
also lies in wait.  Finally, there are at least six 
environmental protection related laws ranging from fighting 
pollution to handling nuclear waste.  Many of these laws must be 
passed and implemented as pre-conditions for signing the 
Stabilization and Association Agreement with the EU. 
 
 
 
Consequences of a "Caretaker Government" 
 
--------------------------------------- 
 
 
 
¶5. (U) Investment activity in Serbia is "on hold" due to the 
lack of a fully functioning government and forthcoming elections 
with highly uncertain outcome.  Some privatization tenders have 
failed from lack of bidder participation (hotels Genex Kopaonik 
e.g.), while others are postponed until after the elections 
("Lasta" transportation company, "Zastava Cars").  Some winning 
 
BELGRADE 00000356  002.2 OF 004 
 
 
tender bidders are finding it difficult to secure funding (RTB 
Bor, concession for highway Horgos-Pozega) with banks like 
Deutsche Banking deciding not to provide financial backing. 
Belgrade Stock Exchange transactions fell by half from January 
to March 2008 compared to the same period in 2007.  Share values 
continue to drop steadily.  The most liquid shares, Belex15, 
dropped 30% from January 1 to April 8, 2008.  Foreign currency 
trade among banks declined, yielding only 10% of normal daily 
value by the end of March.  The dinar depreciated in the first 
two months of 2008 by 5.3%, but than reversed course in March 
only after the National Bank intervened. 
 
 
 
List of Stalled Legislation and Projects 
 
---------------------------------------- 
 
 
 
¶6. (U) Economic reforms: 
 
 
 
-Budget System: stricter control of public finances. 
 
 
 
-Tax Laws: various laws that simplify tax code, 10% decrease on 
the capital gains tax on securities, meet international 
accounting standards, cancel passport tax. 
 
 
 
-Securities Markets: reforms to meet EU standards. 
 
 
 
-Regional development: establishes GOS agency for regional 
development, improves assistance to underdeveloped regions. 
 
 
 
-Industrial parks: proposes GOS-funded infrastructure to attract 
greenfield FDI. 
 
 
 
Development and infrastructure: 
 
 
 
-Traffic Reconstruction (with International Bank for 
Reconstruction and Development). 
 
 
 
-Agricultural Reform, Rehabilitation of the Irrigation Systems 
(IBRD). 
 
 
 
-Regional Development of Bor (IBRD). 
 
 
 
-Energy Efficiency (IBRD and International Development 
Association). 
 
 
 
-Clinical Centers: a major hospital project (with European 
Investment Bank). 
 
 
 
-Road & Bridge Rehabilitation (EIB). 
 
 
 
Criminal Justice: 
 
 
 
-Asset Forfeiture: allows for seizure and forfeiture of 
criminally derived assets. 
 
 
 
-Organized Crime: clarifies the type of cases subject to 
prosecution by the newly formed special prosecutor and special 
court for organized crime. 
 
BELGRADE 00000356  003.2 OF 004 
 
 
 
 
 
-Prosecutors: contains provisions for the appointment and 
retention of prosecutors and implementation of standards for 
disciplining of prosecutors. 
 
 
 
-Judges: clarifies criteria for selection, advancement, 
retention and discipline of judges. 
 
 
 
-Courts: establishes appellate courts. 
 
 
 
-Criminal Procedure Code: implements plea bargaining and 
increases role of prosecutors in criminal investigations 
 
 
 
-Anti-Corruption: defines agency charged with fighting 
corruption. 
 
 
 
-Laws related to Justice Ministry's National Judicial Reform 
Strategy. 
 
 
 
Social Welfare: 
 
 
 
-Health Benefits: various laws that define and improve access to 
GOS-provided benefits for citizens, protect maternity leave and 
benefits, and address employment for the disabled. 
 
 
 
-Public Health: laws on nuclear safety, waste management, 
environmental protection to meet EU standards, occupational 
safety & health (to ILO standards), anti-gender violence. 
 
 
 
-Law on Associations 
 
 
 
-Law on Volunteerism 
 
 
 
-Freedom of Access to Information Law:  amendments for data 
classification and privacy. 
 
 
 
-Restitution and property rights: resolves property issues 
between the state, provinces, and local autonomies. 
 
 
 
-Civil Aviation: crucial, new reforms to reach Category I status. 
 
 
 
-Media: laws improving transparency on media ownership and 
anti-trust and to resume media privatization. 
 
 
 
Preconditions for SAA: 
 
 
 
-Public Procurement: improves transparency in public 
procurement/tendering process. 
 
 
 
-General Product Safety: protecting consumer safety. 
 
 
 
-Official Statistics 
 
 
 
BELGRADE 00000356  004.2 OF 004 
 
 
 
-Competition Protection: strengthens GOS ability to prevent 
unauthorized capital concentration, speeds entry of foreign 
companies. 
 
 
 
-State Assistance: defines financing of state companies. 
 
 
 
End List of Pending Legislation. 
 
 
 
Comment 
 
------- 
 
 
 
¶7. (SBU) Ordinary citizens in Serbia continue to search for 
signs that the government, and Serbian politicians, will focus 
on quality of life issues, while legislation that can improve 
infrastructure, attract investment, improve the legal system, 
and pave the way toward the EU languishes, a hostage to election 
politics.  Instead, politicians are absorbed with coalition 
calculus and campaign rhetoric, and not doing any work on any of 
these issues until after a new government is formed.  Even then, 
the movement will be dependent upon the will of the parties 
within the governing coalition.  End Comment. 
MUNTER