COOPERATIONSTRATEGYSERBIA 2010–2013

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SERBIA 2010-2013

The Swiss Agency for Development and Cooperation (SDC) and the State Secretariat for Economic Affairs (SECO) have together drawn up the Cooperation Strategy Serbia 2010-2013 in association with development partners in Serbia and with various interested parties from the Swiss government. The Strategy represents Switzerland’s commitment to supporting Serbia’s transition towards a func-tioning democracy and a sustainable market economy.The Cooperation Strategy has been prepared in line with relevant national documents, such as the National Programme for Integration with the European Union, the Needs of the Republic of Serbia for International Assistance, social inclusion policies, and selected sector policies and strategies. It is fur-ther based on the experiences gained and lessons learned by Swiss Cooperation partners in the past.This is the third Cooperation Strategy for Serbia. Switzerland has been supporting Serbia since 1991. The initial focus on humanitarian aid activities has shifted to a support for the transition process. The present Strategy sets the framework and broad directions of Switzerland’s cooperation in Serbia from 2010 to 2013. The document contains six main parts. The first is concerned with how the context has developed and the current situation. The second focuses on a review of the cooperation from 2007 to 2009, and the third part outlines strategic orientations. The fourth part gives an overview of strategic principles, the fifth addresses budget and programme management, and the sixth part describes the monitoring and controlling system.While both SECO and SDC will work together closely on the implementation of the Strategy, each institution fulfils a specific role and remains responsible for the financing and execution of its part of the Swiss portfolio and for the achievement of the corresponding objectives and results.

The Cooperation Strategy Serbia 2010-2013 was approved in December 2009.

Swiss Agency for Development State Secretariat for Economic and Cooperation, SDC Affairs, SECO

Martin Dahinden Jean-Daniel Gerber Director-General State Secretary

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ACRONYMS

CG Corporate GovernanceEBRD European Bank for Reconstruction and DevelopmentEIB European Investment BankEFSE European Fund for Southeast EuropeEU European UnionFIAS Foreign Investments Advisory ServiceFOM Federal Office for MigrationGDP Gross Domestic ProductGI Geographical IndicationGLOBALGAP European retailers’ programme for good agricultural productsHEKS Hilfswerk der Evangelischen Kirchen der Schweiz (Swiss NGO)ICTY International Criminal Tribunal for the former YugoslaviaIDP Internally Displaced PersonIFC International Finance CorporationIMF International Monetary FundIPA Instrument of Pre-Accession AssistanceMoE Ministry of EducationMoJ Ministry of JusticeNCC National Control CentreNGO Non-Governmental OrganizationPRS Poverty Reduction StrategyPSD Private Sector DevelopmentREF Roma Education FundRPP Regional Police ProgrammeRRPP Regional Research Promotion Programme in Social SciencesSAA Stability and Association AgreementSCO Swiss Cooperation OfficeSCOPES Scientific Cooperation Programme between Eastern Europe and SwitzerlandSCP Swiss Cultural ProgrammeSCTM Standing Conference of Towns and MunicipalitiesSDC Swiss Agency for Development and CooperationSECO State Secretariat for Economic AffairsSIFEM Swiss Investment Fund for Emerging MarketsSIPPO Swiss Import Promotion ProgrammeSME Small and Medium EnterpriseTENT B Nikola Tesla Thermal Power Plant Btbd to be definedWB World BankWTO World Trade OrganizationWTO-TRIPS WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights

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TABLE OF CONTENTS

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iAcronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iiTable of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iiiExecutive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv

1 Context and Develovment Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.1 Political developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.2 Economic developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.3 Social developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31.4 International aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

2 Review of Switzerland’s cooperation 2007-2009 . . . . . . . . . . . . . . . . . . . . . . . . 42.1 Education (SDC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42.2 Public Infrastructure (SECO) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42.3 Local Governance (SDC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52.4 Private Sector Development PSD (SECO/SDC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52.5 Major lessons learned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

3 Strategic orientation 2010-2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73.1 Overall strategic framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73.2 Objectives framework and programme structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73.3 Economic Development (SECO and SDC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73.4 Rule of Law and Democracy (SDC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.5 Education (SDC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113.6 Energy Efficiency and Renewable Energy (SECO) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133.7 Regional programmes, Swiss NGO programmes and Migration . . . . . . . . . . . . . . . . . . . 143.8 Transversal themes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

4 Strategic principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

5 Budget and programme management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

6 Monitoring and controlling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

List of Annexes: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Annex 1 – Swiss Cooperation Strategy for Serbia 2010-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Annex 2 – Budget details . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19Annex 3 – Map of Serbia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20Annex 4 – Monitoring system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21Annex 5 – Serbia at a glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

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After years of positive trends, poverty has recently increased again to 7.9%. This affects the elderly, young people and children in particular. In addi-tion, as many as 20% of the population live just above the poverty line and are vulnerable to external shocks. As in other countries in the region, the Roma population and the other 20 recognized “national minorities” are in a diffi-cult situation, both economically and socially. As a response to these social challenges, the gov-ernment has decided to draw up and implement social inclusion policies as well as a comprehen-sive migration management strategy. Both are essential to the EU integration process.Switzerland established a humanitarian aid pro-gramme in Serbia in 1991. This was phased out only recently. In 2001, an emergency assistance programme was launched to support the incom-ing democratic government. This was followed by the development of a medium-term coopera-tion programme for 2002 to 2006. In addition, the Federal Office for Migration (FOM) financed significant return assistance and reconstruc-tion programmes throughout this period. The last Cooperation Strategy covered the period from 2007 to 2009. Its relevance with regard to national priorities was high, and implementation effective. Switzerland consequently continues to enjoy an excellent reputation, owing to its focus on achieving results, its flexibility of approach and its strong partnership orientation.The overall goals of the Cooperation Strategy 2010-2013, related to European integration, and the four domains (Economic Development, Rule of Law and Democracy, Education, Energy Efficiency and Renewable Energy), are well in line with the government’s priorities, as formu-lated in several strategic documents.

Executive Summary

Serbia has experienced considerable econom-ic growth in recent years and is now a country with a clear European orientation and strong will to take the social inclusion agenda forward. The Cooperation Strategy 2010-2013, there-fore, builds on past programme experience and makes use of new opportunities to align itself with Serbia’s policies and strategies. While the Strategy thus has elements of continuity, it is also designed to adjust to emerging challenges, including the repercussions of the global eco-nomic crisis on Serbia.Serbia has begun defining and implementing reforms in many sectors, with the aim of improv-ing state effectiveness and fulfilling the criteria for becoming a European Union (EU) candidate country. However, overall progress with modern-izing the judiciary, combating corruption and implementing decentralization has been slower than expected. Respect for human rights and the integration of minorities remain challeng-es, despite the fact that minorities are officially recognized and an anti-discrimination law has recently been passed.From 2006 to 2008, annual real Gross Domes-tic Product (GDP) growth rates ranged from 5.5% to 7.5%, while poverty rates decreased from 8.8% to 6.6% of the population. GDP per capita reached USD 7,000 in 2008, placing Serbia firmly in the upper bracket of middle-in-come countries. The official unemployment rate in 2008 remained at a high 14%, with vulner-able sections of society such as young people and minorities especially badly hit. As a conse-quence of the global economic crisis, Serbia’s economy has contracted by an estimated 3% in 2009 and it is anticipated that growth will resume in 2010.

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to be solid, but the opposition continues to block important reforms in parliament and regularly calls for new elections. The stability of the gov-ernment will depend largely on the effects of the global economic crisis on the country, and the response by the authorities.Serbia has begun defining and implementing reforms in many sectors, with the aim of improv-ing state effectiveness and fulfilling the criteria for becoming an EU candidate country. Overall progress with modernizing the judiciary, combat-ing corruption and implementing decentraliza-tion is slower than expected. Respect for human rights and the integration of minorities are still challenges, despite the fact that minorities are officially recognized and an anti-discrimination law has recently been passed.It remains to be seen how far the prevailing “dis-tributive” political discourse – on the fair alloca-tion of economic and social resources – will win over the previously dominant “symbolic” discourse aimed at uniting the people under the flag of a strong Serbia, including Kosovo. Serbia’s plea to refer Kosovo’s unilateral declaration of indepen-dence to the International Court of Justice has been accepted by the United Nations. The advi-sory opinion of the Court is expected in 2010.

1.2 Economic developmentsFrom 2006 to 2008, annual real GDP growth rates ranged from 5.5% to 7.5%, while poverty rates decreased from 8.8% to 6.6% of the popu-lation. GDP per capita reached USD 7,000 in 2008, placing Serbia firmly in the upper bracket of middle-income countries. The official unem-ployment rate in 2008 remained at a high 14%, with vulnerable sections of society such as young people and minorities especially badly hit.As a consequence of the global economic crisis, the Serbian economy has contracted in 2009 with an estimated 3% decline in GDP. An International Monetary Fund (IMF) stand-by arrangement (EUR 3 billion in 2009-10), new loans from the World Bank (WB) and the use of EU IPA (Instrument for Pre-Accession Assistance) funds in 2009 are all

1. Context and development policies

The evolution of the context in Serbia was encour-aging in recent years, after the difficult period in the nineties and the political changes in 2000. Between 2007 and 2009 – the time-frame of the previous Cooperation Strategy – the country made good progress in its transition process and placed itself firmly on the path to European integration. That said, two major developments – the seces-sion of Montenegro and Kosovo’s unilateral dec-laration of independence – significantly changed Serbia’s geo-political environment. During this period, Serbia was generally on track with the implementation of essential reforms. These result-ed in high economic growth rates and a decrease in poverty – factors which are now endangered by the global economic crisis.The Western Balkans region in general, and Serbia in particular, will continue to be of strategic priority for the Swiss foreign policy for reasons of proximity, closeness of interaction and a significant diaspora living in Switzerland. Bilateral relations between Serbia and Switzerland intensified in 2009 with a series of high-level visits, after a slow-down in 2008 when Serbia recalled its ambassadors from coun-tries, including Switzerland, which had recognized Kosovo’s independence. Cooperation between the two countries, which are in the same constituency within the Bretton Woods Institutions, has evolved very positively in recent years.

1.1 Political developmentsThe prospect of integration into the EU clearly remains the major driving force behind political and administrative reforms. However, while the Serbian parliament has ratified the Stabilization and Association Agreement (SAA), the EU has not yet done so, on grounds that Serbia’s coop-eration with the International Criminal Tribunal for the former Yugoslavia (ICTY) is still not fully satisfactory. Serbia’s accession to the Schengen “White List” in December 2009 – enabling visa-free travel to Europe – was an essential step towards Serbia’s European integration.Early elections in May 2008 brought a pro-Eu-ropean coalition government to power. It seems

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As a response to these social challenges, the government has decided to draw up and imple-ment social inclusion policies, as well as a com-prehensive migration management strategy. Both are essential to the EU integration process.

1.4 International aidSerbia currently receives around EUR 400 million in international aid annually, with IPA funding expect-ed to increase over the next years. Covering only 4% of overall public expenditures, this aid is mar-ginal, but its importance is increasing in the light of the current budgetary problems. In fact, the global crisis has further exposed the need to strengthen dialogue between the Serbian government and its international development partners.Serbia has signed the Paris Declaration on Aid Effectiveness and developed a National Aid Effectiveness Agenda. In cooperation with other ministries, the Ministry of Finance – through its Sector for the Programming and Management of EU Funds and Development Assistance – has made a significant effort in the implementation of the National Agenda. Nevertheless, many donors continue to pursue diverse priorities and approaches, leading to a fragmentation of aid.The government intends to align donor activities more closely with national priorities by means of the recently updated Needs Assessment of the Republic of Serbia for International Assistance. The document is focused on priorities linked to EU accession. The main instrument, the IPA funds (50% of international aid), are routed first and foremost through the government, while the local levels do not have direct access to them. Another effort undertaken by the Ministry of Finance is to provide support to line ministries in the process of planning and prioritizing international aid, as capacity in this area is still weak.Donor harmonization includes periodic coordina-tion meetings and information sharing between multilateral and bilateral agencies, as well as the co-financing of projects to an increasing degree. Donors and the government all agree that sec-tor-related policy dialogue and sector-based approaches should increase. However, in order to progress along this track, national capacities need to be improved to allow the government to assume full leadership. Existing sector coordina-tion groups are mainly donor-driven and do not yet work at a strategic level. The programming of IPA funds for the 2007-2013 period provides an excellent opportunity to enhance the administra-tive capacities of state institutions and to improve aid effectiveness in Serbia.

means of assistance that are required to stabi-lize the economy. These will most probably help maintain the relative stability of the domestic cur-rency. The public sector must revert to a rigorous austerity policy, which includes lowering public spending, as well as reducing transfers to local governments. Efforts to increase revenue levels are ongoing, but require measures in the politi-cally sensitive issue of taxation. The private sec-tor has been faced with a drop in demand and in foreign direct investment, leading to declines in production, imports and exports, as well as an increased unemployment.Despite significant withdrawals of domestic savings and foreign credit funds, the banking system has remained relatively stable, owing to the National Bank of Serbia’s discipline. Compared with neigh-bouring countries, Serbian banks have appropriate capital adequacy ratios and are not facing solvency problems. The government has set up a package of measures aimed at providing incentives to boost economic activity. Evidently, much will depend on whether the current global crisis abates soon, or the recession drags on.

1.3 Social developmentsAfter years of declining trends, poverty has recent-ly increased again to 7.9%, affecting the elderly, young people and children in particular. In addi-tion, as much as 20% of the population live just above the poverty line, and are vulnerable to external shocks such as the current global crisis. Regional disparities are pronounced, with rural areas (in the south-west and south) having the highest poverty rates. Serbia shows an acceler-ated process of demographic ageing, with a rural exodus emptying entire villages.As in other countries of the region, the Roma population and the other 20 recognized “nation-al minorities” are in a difficult situation, both economically and socially. Exclusion and dis-crimination persist, in particular with regard to housing and access to basic services such as health and education. The global crisis is likely to worsen the living conditions and prospects of marginalized groups.Overall, the civil society in Serbia is not very strong, and the well-established NGOs are mostly concentrated in Belgrade. Social dialogue and partnerships are advancing slowly, with diffi-culties, especially at the national level. Migration constitutes an important issue, as many refugees and internally displaced persons (IDPs) are still not really integrated in the society. The number of returnees from Western Europe is increasing.

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The overall effectiveness of the projects has been mixed, however, owing to the low status of edu-cation among national priorities and the ensuing lack of continuity at the political level. Examples of results are: a) Accreditation and professional teacher training system established, with 45,000 teachers trained in 2008; b) 12,000 beneficia-ries (Roma, children with disabilities, parents) supported in inclusive education in over 60 municipalities, resulting in a 20% increase in enrolment rates and almost 100% graduating to the next grade.

2.2 Public Infrastructure (SECO)Since 1999, SECO’s main investments have been in the electricity infrastructure, through various projects linked to emergency needs and, between 2003 and 2007, the renewal and mod-ernization of the National Control Centre (NCC).The project made the high-voltage transmission system in Serbia more secure, optimised and efficient. It also enabled the establishment of a regional electricity market, by enabling accurate measurements of the energy exchanged between neighbouring countries. The pioneer nature of the project, in terms of both its state-of-the-art technology (mostly of Swiss origin), and its cen-tral status, ensured high visibility. It ran in paral-lel with the modernization of the telecommuni-cations network for data transmission, funded by the Economic Bank for Reconstruction and Devel-opment (EBRD) and the European Investment Bank (EIB), which gave it a stamp of approval as an international effort.Based on the success of the NCC project, a follow-up project was developed with the same partner institution, the Electric Power Industry of Serbia. The modernization of the monitoring and control system at the largest thermal power plant, Nikola Tesla B (TENT B), was approved in 2008 and will be implemented over the next years. With mostly Swiss equipment, the project is expected to stabilize the electricity supply while improving environmen-tal conditions around the power plant.

2. Review of Switzerland’s cooperation 2007-2009

Switzerland established a humanitarian aid pro-gramme in Serbia in 1991. This was phased out only recently. In 2001, an emergency assis-tance programme was launched to support the incoming democratic government, followed by the development of a medium-term cooperation programme for 2002 to 2006. In addition, dur-ing this period the Federal Office for Migration financed significant return assistance and recon-struction programmes. The last Cooperation Strategy covered the period from 2007 to 2009. Its main achievements are discussed below.

2.1 Education (SDC)SDC began to support the education sector in 2000. Since 2006, it has concentrated efforts on three areas: (i) institutional support for the Min-istry of Education to develop international and EU-compliant policies and standards; (ii) direct system development for the professional train-ing of teachers in compulsory education; and (iii) the community-based inclusion of Roma and marginalized children in the formal education system.SDC’s activities in this domain have contributed significantly to the reform process at national, regional and local levels by improving the legal framework, strengthening institutions and direct-ly supporting beneficiaries. Across the portfolio of projects, a steady and coherent evolution is evident. It has progressed from internal minis-try reforms to sector reforms, from pilot models to their being anchored in educational systems and rolled out. Consequently, the support to education for Roma children has been rede-signed, shifting from a project to a programme approach. This is expected to position inclusive education better on the political agenda, and to increase harmonization between implementing partners. Related to this is the need for a more active role of the ministry in sector coordination. As the recognized lead donor in education, SDC is able to enhance joint policy dialogue, as well as alignment and the attainment of agreed mile-stones.

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municipalities raise their own funds and econo-mize on resources.

2.4 Private Sector Development (SECO/SDC)Economic development, based on the enhance-ment of private sector activity, has been one of the pillars of Switzerland’s cooperation with Ser-bia since 2000. Within the framework of a trade promotion programme, SECO has successfully supported Serbia in its WTO negotiations, bring-ing the country close to accession. In collabora-tion with the Swiss Import Promotion Programme (SIPPO), it has also boosted the export of prod-ucts in traditional sectors of the economy. Some elements of the trade programme, such as trade efficiency measures, produced mixed results and were discontinued.Switzerland’s aid has been expanded, from access to finance for Small and Medium Enter-prises (SMEs) and financial intermediaries to broader financial sector support, including the restructuring and privatization of banks and insurance companies, the strengthening of sys-tem stability, and the provision of access to insur-ance. A critical mass has been reached in terms of sector portfolio size and contributions were made to financial sector deepening, but also to employment creation.SECO has also been engaged in improving corporate governance (CG) and the business enabling environment. It has done so through the introduction of CG principles, as well as through legal and regulatory reforms – thereby moving from the regional and national level to the sub-national level, with an increased focus on policy implementation rather than policy advice alone.SDC has concentrated on promoting SME start-ups. However, the envisaged shift to a more sys-temic and more easily scalable approach did not materialize. This showed that reorienting programmes is time consuming. As a result, the SDC part of the portfolio was never in full swing. Therefore, innovative ways for reaching more scalability are being explored.Overall, the PSD portfolio has been compre-hensive and well-balanced, but there is a need to reduce the number of individual projects, to increase scale and to ensure full government ownership. Specific examples of results are: 43 companies accompanied to trade fairs, over EUR 3 million in exports contracted, CG manual published and a post-graduate CG course intro-duced, and several hundred SME start-ups initi-ated or supported.

In addition to energy, SECO organized the sup-ply of trams from the city of Basel to the public transport system of Belgrade. Accompanied by workshop modernization and staff training, this project met with high approval rates from pas-sengers and continues to give good visibility.Among the results achieved in this area are the acquisition of data about all electricity flows in Serbia and the reconnection of Serbia to the south-eastern European energy grid. While rel-evant and effective, interventions in public infra-structure have resulted in limited policy dialogue. In the future, these measures must be more firm-ly embedded in a defined energy sector strategy.

2.3 Local Governance (SDC)SDC has been supporting decentralization and democratization processes at the local level since 2000. An initial project involved seven municipalities in central Serbia, where local capacities were assessed and improved. Suc-cesses were replicated in eight municipalities in south-western Serbia, in a co-funding arrange-ment with the EU. Effectiveness was satisfactory and achievements are encouraging. Results are mainly related to the improved quality of public services (e.g. opening of 14 one-stop shops), the introduction of citizen participa-tion mechanisms (e.g. new municipal statutes in six municipalities and draft laws on popu-lar initiatives and referenda), the setting up of inter-municipal cooperation mechanisms (e.g. support for the establishment of three Regional Development Agencies), and the improvement in strategic planning at local and regional lev-els. However, the programme is still infrastruc-ture-driven (significant infrastructure projects implemented in 15 municipalities), and works only partly within the public financial and administrative systems.The main lesson for the future is to reinforce capacity-building in municipal administrations in order to increase the efficiency and effec-tiveness of public spending at the local level. Specific topics such as the cooperation between local governments, civil society and the private sector, and the preparation of project propos-als for external funding (especially EU funds) will be even more important in the context of the economic crisis. Also, a strong need has emerged to strengthen advocacy and lobbying for the interests of local governments at central government level and to foster a better integra-tion of local and central state levels. Finally, the global crisis has revealed the need to help

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Alignment with national and sector policies and strategies should be clearly defined and moni-tored, with a strong emphasis on support for the implementation of reforms. Serbia has recently drafted and passed many new laws, policies and strategies, but implementation often lags behind.Switzerland is one of the major bilateral donors, but does not have sufficient visibility. The poten-tial that exists to increase visibility and position Switzerland’s cooperation in policy dialogue should be utilized more effectively through more vigorous efforts to communicate results and suc-cess stories.

2.5 Major lessons learned

Overall, the Swiss portfolio displayed consider-able relevance in the light of national priorities, and implementation was effective. Switzerland’s cooperation consequently continues to enjoy an excellent reputation, owing to its focus on achiev-ing results, its flexibility and its strong partnership orientation.There is still some work to be done concerning aid effectiveness. National systems and joint aid implementation arrangements should be utilized to the extent possible, and parallel project struc-tures avoided wherever feasible.

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Europe provides the legal basis, and funding derives from the frame credit on the Continua-tion of Cooperation with Eastern Europe and the Commonwealth of Independent States approved in 2007. Finally, the international points of reference are the Millennium Development Goals and the Paris Declaration on Aid Effectiveness, with the related Accra Agenda for Action.Based on these parameters, the Cooperation Strategy 2010-2013 has been designed with the following objectives framework and related pro-gramme structure.

3.2 Objectives framework and programme structure

Overall goalSwitzerland will support Serbia’s efforts towards European integration, by contributing to (1) improving social inclusion and reducing pover-ty, and (2) increasing the competitiveness of its economy.

3.3 Economic Development (SECO and SDC)

National prioritiesWithin the Serbian government’s numerous eco-nomic priorities, SECO and SDC will align with the following: maintaining macroeconomic sta-

3. Strategic orientation 2010-2013

The overall goal of European integration and the four domains of the Cooperation Strategy 2007-2009 (see chapter 2) remain well in line with current government priorities, as formulated in several strategic documents and confirmed by the Serbian Ministry of Finance. This, along with long-term partnerships yielding tangible results and a relatively stable context, provides a sound basis for the future. Consequently, there is no need for the programme to be reoriented sub-stantially. What is required is rather a refinement of thematic priorities and certain adjustments in approaches and work modalities.

3.1 Overall strategic frameworkSerbia has experienced considerable economic growth in recent years and is now a country with a clear European orientation and a strong will to take the social inclusion agenda forward. This and the Swiss programme experience are strong assets on which to build the Cooperation Strate-gy 2010-2013, making use of new opportunities for alignment with Serbia’s policies. While the new medium term programme thus contains ele-ments of continuity, it is also designed to adjust to emerging challenges, including the repercus-sions of the global economic crisis on Serbia.Key national references are the National Pro-gramme for Integration with the European Union, the Needs of the Republic of Serbia for International Assistance, social inclusion poli-cies – which are to replace the Serbian Poverty Reduction Strategy (PRS) – and selected sector policies and guidelines. A “selective” alignment approach will help to focus on topics where Switzerland has a comparative advantage, and to keep a distance where no agreement can be reached on basic concepts or methods. Selective alignment may also refer to programmes of oth-er partners than the central government.On the Swiss side, the objectives of the Strategy for the Western Balkans of the Federal Council continue to provide the overall frame of refer-ence. The Law on Cooperation with Eastern

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addition, opportunities to help improve stability and integrity through regulatory measures will be explored.In the commercial domain, a sustained access to finance and related services for SMEs must be ensured. The main activity lines are (i) expand-ing financial intermediation in the banking and non-banking sectors and (ii) ensuring a greater depth of the financial sector and a stronger mar-ket infrastructure, in particular by restructuring the banking and insurance sectors. Measures to enhance the efficiency and effectiveness of pay-ment transfers to Serbia will be explored further as opportunities arise. The specific contribu-tion made by projects in this sub-domain will be measured in terms of employment creation, leverage, and the effects on the local economy. The government’s commitment to continue mac-ro-economic stability policies and to restructure the banking and insurance sectors will be the crucial context variables to be monitored.

Sub-domain: business environment reform (SECO)Economic competitiveness depends on a condu-cive business environment. SECO will continue to promote new reforms, especially at the sub-na-tional level in medium-sized municipalities, with an emphasis on implementing policies, enforc-ing the regulatory framework and building relat-ed capacities. Ten out of twenty leading munici-

bility, improving the competitiveness of SMEs, employment creation and regionally-balanced economic development.

Domain objectives (SECO/SDC)SECO and SDC’s domain portfolio contributes to (i) a functioning public and commercial finan-cial sector, (ii) a conducive business environment and regulatory framework, (iii) strengthening the export potential of private enterprises, and (iv) SME-driven pro-poor market growth.Interventions in this domain will build on emerg-ing needs and potentials in order to address the impact of the global economic crisis in a flexible manner.

Sub-domain: financial sector support (SECO)The current macroeconomic imbalances impact directly on the public sector’s fiscal position, as well as the private sector’s access to finance.In the public domain, activities relate first and foremost to improving public financial manage-ment in order to optimize the use of increas-ingly scarce budgetary resources. It is expected that the resulting changes will have a positive effect on the country’s management of public finances – as monitored by Public Expenditure and Financial Accountability (PEFA) indicators – in terms of improved fiscal discipline, alloca-tive efficiency, and operational performance. In

SERBIA 2010-2013

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addressed to increase the export potential of pri-vate enterprises. Main lines of intervention are (i) intellectual property rights through the enforce-ment of geographical indications (GIs); these are related to WTO-TRIPS and intended to designate product quality, highlight brand identity and pre-serve cultural traditions; (ii) the European retail-ers’ programme for good agricultural products (GLOBALGAP) quality standard for export-orient-ed commercial agriculture; and (iii) export pro-motion for specific traditional agricultural prod-ucts (in cooperation with SIPPO), as well as com-modities and services with a high technological value (development of specific export clusters).Expected outcomes are directly related to these activity lines. Exports by commercial entities which introduce GIs and quality standards should increase measurably. The wider context must be monitored in terms of government policies and regulations that impact on the export industry.

Sub-domain: making markets work for the poor/M4P (SDC)A systemic SME-focused market development approach is relatively new to Serbia. Conse-quently, the potential for alignment with exist-ing policies and strategies is limited. SDC has begun rolling out the innovative “Making Mar-kets Work for the Poor” (“M4P”) concept, which intends to develop market systems so that they function more effectively and, in particular, also

palities will be targeted in the short to medium term. Complementary activities will be explored at the national level.Interventions to enhance economic governance will include support for international standards and codes aimed at a sound institutional and market infrastructure.This sub-domain is aimed at producing direct improvements to generate competitive, trans-parent, and reliable regulatory environments at national and local levels, thereby allowing SMEs to formalize their operations, do more and better business, and create new jobs. The regular For-eign Investments Advisory Service/International Finance Corporation (FIAS/IFC) sub-national “Doing Business” surveys in selected benchmark municipalities will assess progress in relevant performance indicators. These surveys are co-fi-nanced by SECO. In addition, the government’s progress in implementing strategies such as the “regulatory guillotine” will be a core context development to be monitored.

Sub-domain: trade cooperation (SECO)Serbia’s traditional, large current account deficit calls for growth in sectors with export potential, hence an increased competitiveness of exports. To allow Serbia to capitalize on its WTO mem-bership – expected in 2010 and for which SECO’s support has been essential – trade-re-lated deficiencies and opportunities are being

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Domain objectives (SDC)SDC’s domain portfolio contributes to (i) foster-ing vertical integration between municipal and central state levels and promoting popular rights, as well as municipal support programmes, increasing the absorption capacity for decen-tralized responsibilities and competencies while respecting good governance principles and ii) drafting and implementing the social inclusion agenda and judicial reform.

Sub-domain: decentralization and local governanceMunicipal development remains the focus of the programme, which will support the implementa-tion of the recently-passed laws on municipali-ties, local self-government and regional devel-opment.Strategically, the programme will concentrate on (i) vertical integration and advocacy for munici-palities’ interests in central government and, (ii) strengthening management capacities and good governance practices of municipalities in line with their increasing tasks and responsibilities in the course of the current progressive decentral-ization in Serbia.SDC will provide an institutional support to the Standing Conference of Towns and Municipali-ties (SCTM), the association of Serbian munici-palities, with a view to contribute to improving interactions between the local and central levels

benefit the poor. To reduce regional imbalances, the focus of activities is to be in the southern and south-western regions, where five markets are to be developed. Cooperation with SDC and SECO activities in these regions – related to decentral-ization and local governance, as well as sub-na-tional competitiveness – will be actively sought. This new SDC programme thus complements the SECO programme.The expected outcome is that systematic approaches to market growth will be introduced, with local facilitators in five markets in southern and south-western Serbia. This will, in turn, result in substantial growth in terms of job creation, SME turnover, and fiscal revenue generation.

3.4 Rule of Law and Democracy (SDC)

National prioritiesFrom the many priorities of central and local governments, SDC will selectively align itself with the following: the introduction of social inclu-sion policies, local-level institutional capacity-building, regional development, decentralization (including fiscal decentralization and municipal property divestment), municipal advocacy and lobbying capacities at the central government level, institutional capacity-building in the judi-ciary.

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and civil society. This follows on from the success of mainstreaming the poverty reduction strategy as part of the regular activities of all relevant governmental and non-governmental institu-tions. As a means of lifting marginalized groups out of poverty, social inclusion complements SDC’s domain portfolio, and progress monitor-ing in this regard is essential for EU candidate countries and member states alike.

3.5 Education (SDC)

National prioritiesFrom a broad range of government priorities, SDC will selectively align itself with the following: an enhanced quality of education, the inclusion of the vulnerable population (minorities and per-sons with special needs), and reforms to enhance the efficiency and relevance of education.

Domain objectives (SDC)SDC’s domain portfolio contributes to (i) strengthening the capacities of the Ministry of Education (MoE) with regard to drafting and implementing EU-compatible, equality and qual-ity-driven reforms and policies; it also supports the full integration and formalization of all com-ponents of in-service teacher training in the Ser-bian compulsory education system, and (ii) the implementation of the national Roma inclusion action plan in education, through system devel-opment and lobbying for better integration in the government agenda.

of government, by enabling the SCTM to devel-op its advocacy function and implement its strat-egies and priorities.At the level of individual municipalities, the approach of working directly through local sys-tems will be emphasized. The current level of harmonization with other donors must be main-tained at least.Relevant context variables are i) the level of gov-ernment commitment to decentralization, in par-ticular related to a conducive legal framework, fiscal decentralization, as well as the transfer of municipal property and ii) the political willing-ness of municipalities to team up with the SCTM to advocate their interests at central level.

Sub-domain: judicial reform and social inclusionWhile Serbia has already developed a national judicial reform strategy, implementation has not progressed in earnest, and there is a continued lack of public trust and confidence in the judi-ciary. The Ministry of Justice (MoJ) is aware of these shortcomings and has requested that the donor community supports the updating and implementation of the reform strategy. SDC has agreed to co-finance a World Bank multi-donor trust fund. The expected outcome is a national judicial reform action plan for implementation.At the explicit request of the government, SDC has agreed to provide institutional support to the Social Inclusion Unit, which is responsible for drafting and implementing social inclusion poli-cies jointly with line ministries, local governments

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Key context variables to be monitored are the political willingness to start decentralizing edu-cation systems to a certain extent and to adhere to key principles such as quality and efficiency in education and lifelong learning.Furthermore, an existing programme of schol-arships for Serbian students will be expanded, thereby contributing to improve Serbia’s inter-national integration and access to international good practice.

Sub-domain: Roma educationThe inclusion of minorities in general and the Roma in particular in the public education system is a recurring challenge in most countries of the region. In Serbia, SDC can build on substantial experience and expertise. As part of the govern-ment’s Roma action plan, models for pre-school, primary and secondary levels have been success-fully developed and tested, and are now being implemented in 50 municipalities. The time is thus right to institutionalize and mainstream the system nationwide.Main activity lines are: (i) the strengthening of

Sub-domain: education system developmentSDC will provide further institutional support to the MoE in building a system to improve the quality of compulsory schooling in Serbia. Within the framework provided by the new law on basic education and the general educa-tion strategy, the MoE is being supported in its drafting and coordination of reform initiatives related to capacity building, the integration of quality standards and the decentralization of the education system, as well as planning, bud-geting and monitoring.In compulsory education, SDC will continue to support the institutionalization of a nationwide in-service teacher training system at the region-al and national levels. Main activity lines are (i) consolidating the network of regional centres, (ii) finalizing the relevant legislative frame-works and support for their full application, (iii) designing a system for professional teachers’ career development, and (iv) the vertical and horizontal strengthening of system monitoring and evaluation.

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integration, the government is carrying out regu-latory, organizational and technical preparations for Serbia’s inclusion in regional and European energy networks.

Domain objectives (SECO)SECO’s domain portfolio corresponds to the reform effort undertaken by the Serbian authori-ties by supporting projects that i) modernize power generation and improve energy efficiency and ii) introduce – as pilots – the use of renew-able energy sources.

Sub-domain: energy production and efficiencySECO will explore integrated approaches to increased efficiency in power generation, dis-tribution and use. Demonstration projects are expected to comprise technology transfers, finan-cial incentives and information campaigns and may be accompanied by a policy dialogue with the authorities in charge, in order to increase their sustainability.Activities in this sub-domain will focus primarily on the electricity sector and, more specifically, on the modernization of the monitoring and control system at Serbia’s largest thermal power plant, as a part of a wider upgrade effort. Opportuni-ties for further demonstration projects in this sub-domain will also be explored.

national and local capacities to implement the models, (ii) the introduction of best practices in regular curricula, (iii) ensuring skills development that is relevant to the job market, and (iv) design-ing reliable monitoring and evaluation tools.Activities are aligned directly with the education part of the government’s Roma action plan, and are harmonized effectively in the joint implemen-tation plan.The government’s commitment to the social inclusion agenda is the key context variable to be monitored leading to a sustainable inclusion of minorities, and in particular the Roma, into the education system.

3.6 Energy Efficiency and Renewable Energy (SECO)

National prioritiesSerbia’s electricity generation and distribution systems are outdated. Generation relies heav-ily on fossil fuels (mainly coal), and there is no functioning incentive system for customers to save energy. Consequently, Serbia is one of Europe’s least energy efficient economies, requir-ing 4-6 times more energy than EU countries for an equivalent output. Serbia is committed to address this situation and has passed legislation to this effect. Furthermore, in the process of EU

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3.7 Regional programmes, Swiss NGO programmes and migrationIn addition to the bilateral portfolios described above, SDC supports the following regional pro-grammes: (1) the Swiss Cultural Programme (SCP); (2) the Scientific Cooperation Programme between Eastern Europe and Switzerland (SCOPES); (3) the Regional Research Promotion Programme in Social Sciences (RRPP); (4) the Regional Police Programme (RPP); (5) the Roma Education Fund (REF) and (6) in micro finance the European Fund for Southeast Europe (EFSE).Some SECO projects are explicitly designed as regional programmes and implemented by international agencies such as IFC concurrently in Serbia and other western Balkan countries.Partners of SDC’s co-funding scheme for Swiss NGO programmes in Serbia are HEKS, the Pestalozzi Children’s Foundation and Swiss Labour Assistance.Given the importance of migration from the Western Balkans, Switzerland maintains migra-tion partnership relations with several countries in the region, and SDC implements operational programmes funded by the FOM. The Serbia migration programme concentrates on (i) insti-tutional support at central government level to draw up migration management policies and build up related capacities, and (ii) the social and economic integration of vulnerable groups in southern and south-western Serbia in order to reduce irregular migration from these areas.

3.8 Transversal themesThe Cooperation Strategy observes the two transversal themes of gender equality and good governance.A key element in gender is to address structural inequalities and the imbalance of power as both an aim and an essential part of development. Equal access to resources and services is to be promoted across all programmes to reduce exist-ing discrepancies between the social inclusion of women and men.Good governance aims to create an environment in which constitutionality and human rights, an appropriate division of power and macroeconom-ic stability are strengthened. Core good gover-nance principles that must be implemented in the programmes are accountability, transparency, the right to information, non-discrimination and par-ticipation. These are likewise suitable “vehicles” to induce specific Swiss values into the portfolio.

The expected outcome, in terms of measurably more reliable and efficient energy generation, distribution and/or use, is contingent on the gov-ernment’s willingness to implement tariffs that reflect production and distribution costs, and the Electric Power Industry of Serbia’s ability to collect revenues from its consumers and reduce non-technical losses.Another focus in this sub-domain will be an increase in energy efficiency in the transport sec-tor. SECO will continue to consider assisting the provision of second-hand trams to public trans-port companies should such vehicles become available in Switzerland.

Sub-domain: renewable energyAs part of a multi-donor approach, SECO will explore options for an innovative renewable energy demonstration project. This will make use of Serbia’s untapped renewable resources. Since hydropower has been known in Serbia for a long time, the focus will be on other renewable sourc-es such as wind, biomass or solar energy.The expected outcome is the sustainable genera-tion of energy from a renewable source, dem-onstrating one way that energy sources in Serbia might be diversified.

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Inclusion of minorities: The EU accession pro-cess, in particular the Lisbon and Copenhagen agendas, is the main incentive for integrating minorities more effectively and for increasing social inclusion in Serbia. With specific minority-focused activities, and by concentrating on the south-western and southern regions, with their relatively important minority populations, Swit-zerland intends to sharpen its profile and use its particular expertise in this field. At the central government level, this intention translates into support for the social inclusion strategy. Local-level instruments include, first and foremost, a focus on Roma education and efforts towards inclusive municipal services.

4. Strategic principles

Aid arrangements: The Swiss cooperation pro-gramme will continue to align itself with the government’s national and sector-related strat-egies. An active role will be played in specific thematic coordination groups, and alliances will be sought with like-minded donors to contribute to the implementation of the Accra Agenda for Action. Synergies between bilateral and multilateral donors will be used to achieve a greater leverage in policy dialogue. Pro-grammes will increasingly be implemented via national systems, and aid arrangements such as on-budget support and management for results will be promoted. In sectors like educa-tion, where Switzerland is the designated lead donor, SDC will be particularly active and play a strategic role.Complementary approach: A particular impor-tance is attached to the coordination and selec-tive harmonization with EU programmes, in order to ensure a complementary approach and to identify where Switzerland can provide an added value. The existing experience with joint SDC / EU programme financing in the Rule of Law and Democracy domain is an asset. In gen-eral, complementarity with the bi- and multilat-eral cooperation programmes of other donors helps to leverage limited Swiss funds. It enhanc-es the potentials for synergies at a strategic level (policy influence) and for scaling up innovative operational approaches.Levels of intervention and geographic focus: Interventions are complementary at the central and local levels, and include policies, strategies, system development and implementation. A spe-cific emphasis is given to the vertical integration between local and central programmes. Where local-level activities are concerned, SDC’s geo-graphical focus remains on south-western and southern Serbia owing to these regions’ remote-ness and relative underdevelopment. Both areas are also the origin of a substantial diaspora liv-ing in Switzerland. SECO`s instruments and interventions at the sub-national level will, when-ever possible and feasible, also focus on these disadvantaged regions.

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The envisaged slight budget increase over the period as compared to the Cooperation Strat-egy 2007-2009 and new demands to improve the effectiveness and efficiency of programme management indicate that the current level of expatriate and local staff must be maintained, at least. Management staff, in particular, in charge of policy dialogue, the supervision of operations, and financial and human resources, should be kept at the current level. The delegation of addi-tional tasks from head office to the field, as pro-posed in the SDC reorganization process, would require the corresponding human resources.

5. Budget and programme management

The overall Swiss programme budget for the period from 2010 to 2013 is approximately CHF 63 million. SDC plans with an annual budget of around CHF 7 million (without the contingent scholarship project). The envis-aged distribution of the operational budget is approximately 45% for Education, 35% for Rule of Law and Democracy, and 20% for Economic Development. A separate budget is provided to SDC by the FOM to cover activities related to migration partnerships.SECO has allocated an annual budget of approximately CHF 8 million for Serbia. This does not include the financing of regional (e.g. SIFEM) and global programmes (e.g. the SECO Start-Up Fund) which also target Serbia. Of its operational budget, some 60% are provisionally earmarked for Energy Efficiency and Renewable Energy and 40% for Economic Development.The following table provides an overview of the agencies’ budgets from 2010 to 2013. Further details are given in Annex 1.

Annual bilateral budgets (estimated disbursements in CHF million)

By agency 2010 2011 2012 2013 Total

SDC 7.0 7.0 7.0 7.0 28.0

SECO 7.1 8.1 9.1 9.1 33.4

FOM (SDC) 1.0 0.5 tbd tbd 1.5

Total 15.1 15.6 16.1 16.1 62.9

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6. Monitoring and controlling

The monitoring and controlling system has three components and levels of observation:The first component monitors the general devel-opment of the country context. Its tasks are (1) to assess the development of the economic crisis and its effects on the social and political situa-tion; and (2) to monitor the government’s activi-ties in the selected domains and sub-domains.The second component monitors the actual programme implementation to assess whether (1) the desired outcomes have actually been

achieved in the sub-domains; (2) this has con-tributed to the country’s priorities being met; and (3) the programme is thus contributing to the Cooperation Strategy’s objectives.The third component monitors the efficiency and effectiveness of programme management, as well as the overall visibility and positioning of Switzer-land in the donor and government context.Strategic steering is effected mainly through annual monitoring, reporting and planning, as well as operational reviews and evaluations.

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Annex 1: Swiss Cooperation Strategy for Serbia 2010-13

Overall goalSwitzerland will support Serbia in its efforts towards European integration, by contributing to (1) im-proving social inclusion and reducing poverty, and (2) increasing the competitiveness of its economy

Domains

Economic Development

Rule of Law and Democracy

Education Energy Efficiency and Renewable

Energy

National priorities

– (macro-economic stability)

– economic com-petitiveness

– regional development / decreasing disparities

– SME promotion strategy

– (fi scal) de centra li-zation & regional develop ment, mu-nicipal property manage ment

– democratic participa-tion & popular rights

– judicial reform– social inclusion

policies (SIP)

– quality of education (teach ing and learning)

– equal access to education (Roma Action Plan)

– EU-compatible reforms

– SIP

– construction and modernization of energy infrastructure

SDC / SECO portfolio contributions

SECO/SDC SDC SDC SECO

Economic competitive-ness enhanced and regionally balanced

Municipal manage-ment and lobbying and selected central capabilities increased

Quality and inclusive-ness of education improved

Sustainable energygeneration and envi-ronmentally-conscious consumption enhanced

– public and private fi nancial sector strengthened

– business environment & regulatory frame-work improved

– trade and export potential increased

– SME-driven pro poor domestic market growth in troduced

– vertical integra tion of municipal and central state levels improved

– municipal manage-ment and govern-ance practices enhanced

– judicial reform de-signed and action plan underway (co-fi nancing)

– social inclusion policies drafted and implementation un-derway (co-fi nancing)

– capacities for the design and imple-mentation of reforms and professional de velopment system consolidated

– inclusiveness of education system improved

– reliable energy generation improved

– energy effi ciency increased

– solutions for renew-able energy supply introduced

Transversal themes: gender & governance

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Annex 2: Budget Details

Planned disbursements (CHF millions)

2010 2011 2012 2013 Total

SDC Economic Development 1.0 1.2 1.2 1.2 4.6

SECO Economic Development 3.5 3.5 3.5 3.5 14.0

SDC Rule of Law and Democracy 2.0 2.2 2.2 2.2 8.6

SDC Education 2.9 2.5 2.5 2.5 10.4

SECOEnergy Effi ciency andRenewable Energy

3 4 5 5 17.0

FOM via SDC Migration (inter-sector) 1.0 0.5 tbd tbd 1.5

SDC SCO and Small Actions 1.1 1.1 1.1 1.1 4.4

SECO SCO 0.6 0.6 0.6 0.6 2.4

Total 15.1 15.6 16.1 16.1 62.9

Bilateral Domain Budgets (CHF millions)

Economic Develop-

ment

Rule of Law and

DemocracyEducation

Energy Effi ciency

and Renewable

Energy

Migration SCO Total

SDC 4.6 8.6 10.4 4.4 28.0

SECO 14.0 17.0 2.4 33.4

FOM via SDC

1.5 1.5

Total 18.6 8.6 10.4 17.0 1.5 6.8 62.9

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Annex 3: Map of Serbia

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The Cooperation Strategy (CS) is subject to a sys-tematic, ongoing Monitoring, basically serving a double purpose: (i) keeping on track the effective-ness and relevance of the Swiss portfolio (steer-ing); (ii) accounting for results (reporting), mainly between Swiss Cooperation Offices and head offic-es, indirectly vis-à-vis external stakeholders as well.

The applied monitoring concept basically consists of three levels of observation.a) country outputs and outcomes in fields rel-

evant for the CS;b) Swiss portfolio outputs and outcomes;c) portfolio management by the Swiss Coopera-

tion Office (SCO).

Additionally, an observation of changes in the wider development context (MERV) in [Serbia] is carried out, supporting an ongoing risks assess-ment for the Swiss portfolio.

Monitoring of Country outputs and outcomes means verifying whether:• [Serbia] is moving towards the set objectives

relevant for defined components of the CS (country level outputs and outcomes);

• these objectives keep their validity or need to be revised (from the donor’s point of view);

• the observed status of country outputs and outcomes provides a basis for a possible cor-relation with the Swiss portfolio outputs and outcomes.

Monitoring of the Swiss portfolio outputs and out-comes means verifying:• whether the portfolio is evolving in line with

the set objectives • whether the expected portfolio contributions to

the country level keep their validity or need to be revised

• if and how observed portfolio outputs and out-comes relate to country outputs and outcomes as possible contributions.

SCOPortfolioManagement

SwissPortfolioOutputs &Outcomes

Contribution

Levels of observation for CS monitoring

Harmonisation Alignment

Country-level outputs & outcomes(including specific contextelements relevant to Swiss Portfolio)

Wider CountryContext(MERV/scenarios)

Annex 4: Monitoring System

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Monitoring of the Portfolio Management by the SCO means verifying:• whether portfolio management supports result

achievement in the following dimensions:— approaches and strategies, including cross-

cutting issues;— relationship management;— aid modalities; — human resources; — learning and knowledge management; — allocation of financial resources— to what extent portfolio management

relates to national processes — whether portfolio management is sensitive

to risks and context/scenario development

Assessing results and Reporting: The mon-itoring process for the CS is tied to the annual reporting and planning process and is under the responsibility of the SCO. As far as possible country outputs and outcomes are assessed joint-

ly with the main stakeholder groups of the Swiss Cooperation. Project and programme imple-menting partners are included for the assessment of the Swiss portfolio outputs and outcomes.The monitoring is structured according to the main components of the CS. The key product of the monitoring process is the result state-ment, i.e. a critical overall assessment both on the extent and how the results are achieved with an emphasis on plausible “output and outcome” and “portfolio to country level” contributions.Reporting on CS monitoring, overall assessment of performance, and steering decisions are done by the means of the Annual Report delivered by the SCO to SDC and SECO head offices.

The Monitoring of the CS will be done against the following Result Framework (in synopsis), more detailed result frameworks per component or sub-component of the CS being elaborated separately.

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1015

Europe & UpperKey Development Indicators Central middle

Serbia Asia income(2008)

Population, mid-year (millions) 7.4 445 823Surface area (thousand sq. km) 77 23,972 41,497Population growth (%) -0.3 0.0 0.6Urban population (% of total population) 56 64 75

GNI (Atlas method, US$ billions) 41.6 2,694 5,750GNI per capita (Atlas method, US$) 5,650 6,051 6,987GNI per capita (PPP, international $) 10,220 11,116 11,868

GDP growth (%) 5.6 6.8 5.8GDP per capita growth (%) 5.7 6.7 5.1

(most recent estimate, 2003–2008)

Poverty headcount ratio at $1.25 a day (PPP, %) .. 5 ..Poverty headcount ratio at $2.00 a day (PPP, %) .. 11 ..Life expectancy at birth (years) 73 69 70Infant mortality (per 1,000 live births) 7 23 22Child malnutrition (% of children under 5) .. .. ..

Adult literacy, male (% of ages 15 and older) 97 99 94Adult literacy, female (% of ages 15 and older) 96 96 92Gross primary enrollment, male (% of age group) 99 98 112Gross primary enrollment, female (% of age group) 99 96 109

Access to an improved water source (% of population) 99 95 95Access to improved sanitation facilities (% of population) .. 89 83

Net Aid Flows 1980 1990 2000 2008

(US$ millions)Net ODA and official aid .. .. 1,134 1,586Top 3 donors (in 2006): European Commission .. .. 471 334

.. .. .. ..

.. .. .. ..

Aid (% of GNI) .. .. .. ..Aid per capita (US$) .. .. .. ..

Long-Term Economic Trends

Consumer prices (annual % change) .. .. 70.0 11.7GDP implicit deflator (annual % change) .. .. 79.3 13.5

Exchange rate (annual average, local per US$) .. .. 44.4 55.7Terms of trade index (2000 = 100) .. .. .. ..

1980–90 1990–2000 2000–08

Population, mid-year (millions) 7.7 7.6 7.7 7.4 .. 0.1 -0.5GDP (US$ millions) .. .. 8,963 50,061 .. -4.7 5.4

Agriculture .. .. 20.6 10.8 .. .. ..Industry .. .. 31.4 23.7 .. .. .. Manufacturing .. .. .. .. .. .. ..Services .. .. 48.1 65.5 .. .. ..

Household final consumption expenditure .. .. 88.7 78.1 .. .. ..General gov't final consumption expenditure .. .. 18.9 21.3 .. .. ..Gross capital formation .. .. 8.4 23.4 .. .. ..

Exports of goods and services .. .. 23.0 29.7 .. .. ..Imports of goods and services .. .. 39.1 52.4 .. .. ..Gross savings .. .. 3.7 6.2

(average annual growth %)

(% of GDP)

10

75-79

60-64

45-49

30-34

15-19

0-4

5 0 5 10

percent

Age distribution, 2007

Male Female

0

10

20

30

40

50

60

1990 1995 2000 2006

Serbia Europe & Central Asia

Under -5 mortality rate (per 1,000)

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1015

1995 2005

GDP GDP per capita

Growth of GDP and GDP per capita (%)

Annex 5: Serbia at a Glance

SWISS COOPERATION

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0 25 50 75 100

Control of corruption

Rule of law

Regulatory quality

Political stability

Voice and accountability

Country's percentile rank 0-100(higher values implay better ratings)

20072000

Governance indicators, 2000 and 2007

Source: Kaufman Kraa Mastruzzi, World, NY Bank

Composition of total external debt, 2008

2000

1,6453,227-1,441

-153-1.7

1,132

524

32.429.129.8

-0.2

..

..

10,830-65

−

120.8-1.9

145..

2008

10,84221,997-11,404

-8,557-17.1

4,579

11,477

40.935.839.0

-2.5

1510

30,708-4,927

−

63.6-24.2

2,717-132

Balance of Paymenta and Trade

(US$ millions)Total merchandise exports (fob)Total merchandise imports (cif)Net trade in goods and services

Current account balance as a % of GDP

Workers’ remittances and compensation of employers (recepts)

Reserves, including gold

Central Government Finance

(% of GDP)Current revenue (including grants) Tax revenueCurrent expenditure

Overall surplus/deficit

Highest marginal rate (%) Individual Corporate

External Debt and Resource Flows

(US$ millions)Total debt outstanding and disbursedTotal debt serviceDebt relief (HIPC, MDRI)

Total debt (% of GDP)Total debt sevice (% of exports)

Foreign direct investment (net inflows)Portfolio equity (net inflows)

2000

62.7

49

3.2

..

..

..

..

..

..

..

..

2007

..

107

4.3

..

..

..

..

..

..

..

..

Technology and Infrastructure

Paved roads (% of total)Fixed line and mobil phone subscribers (per 100 people)High tecnology exports (% of manufactured exports)

Environment

Argicultural land (% of land area)Forest area (% of land area)Nationally protected areas (% of land area)

Freshwater resources paer capita (cu. meters)Freshwater withdrawal (% of internal resources)

CO2 emission per capita (mt)

GDP per unit of energy use (2005 PPP $ per kg of oil equivalent)

Energy use per capita (kg of oil equivalent)

2000

1,538−−

104

0202

1

−−−

−

−−

2007

2,364−2

302

627945

249249

8

525

−−

World Bank Group portfolio

(US$ millions)

IBRD Total debt outstanding and disbursed Disbursements Principal repayments Interes payments

IDA Total debt outstanding and disbursed Disbursements Total debt service

IFC (fiscal year) Total disbursed and outstanding portfolio of which IFC own accountDisbursements for IFC own accountPortfolio sales, prepayments and repayments for IFC own account

MIGA Gross exposure New guarantees

2000

−−−

2000

..

..

4.618.3

2008

273.6111

2007

..

..

59.715.9

Private Sector Development

Time required to start a business (days)Cost to start a business (% of GNI per capita)Time required to register property (days)

Ranked as a major constraint to business (% of managers surveyed who agreed) n.a. n.a.

Stock market capitalization (% of GDP)Bank capial to asset ratio (%)

US$ millions

IBRD,2,237Short-term,

3,417

Private,19,578

IDA,650 IMF,

0

Other mulilateral,1,665

Bilateral,3,161