Analytical Report

In the following we copy the relevant chapters for WBC-INCO.NET

3.25. Chapter 25: Science and research
In principle, the EU acquis in the field of science and research does not require transposition of EU rules into the national legal order. Successful implementation of the EU acquis in this domain mainly requires fulfilling the conditions necessary to participate effectively in the EU's Research Framework Programmes, to integrate into the European Research Area (ERA) and to contribute to the Innovation Union (IU). Good administrative capacity (adequate staffing and knowledge of research cooperation) is necessary, as is scientific excellence, in order to carry out research and innovation projects successfully, together with research entities from the EU Member States and international partners. This, in turn, requires welldeveloped research and innovation capacity to produce scientific excellence to support a sustainable economy and knowledge-based society.
The SAA establishes cooperation in civil scientific research and technological development. As a potential candidate country, Serbia has been associated with the Seventh EU Research Framework Programme (FP7) since January 2007.
Science and research policy has been under the authority of the Ministry of Education and Science since March 2011. The Ministry is responsible for both policymaking and funding. It cooperates closely with other relevant ministries, the Vojvodina Provincial Secretariat for Science and Technological Development, the National Council for Scientific and Technological Development and the Academy of Sciences and Arts.
The National Council for Scientific and Technological Development, reformed in 2010, is made up of 16 members representing the scientific, academic and business communities. It acts as an independent expert and advisory body. A separate agency for the field of nuclear safety was established in 2009.
A National Strategy for Scientific and Technological Development for the period 2010-2015 was adopted in February 2010. The strategy is the result of broad consultations with all stakeholders and aims at turning Serbia into an innovative country, in order to reach EU standards and advance its technological development. The overall aim is further integration into the European Research Area and alignment with the EU acquis on research and innovation policy. It is built on the principles of focus and partnership. It also establishes the strengths and weaknesses of the scientific landscape in Serbia and prepares the ground for action to address the challenges which lie ahead: increasing investment in research, modernising infrastructure, increasing human capital and building innovative capacity. However, the Action plan implementing the 2010-2015 Strategy remains to be adopted.
Investment in research is very low: only about 0.30% of GDP in 2010. As part of the strategy, the aim is to increase the level of investment by 0.15% in each of the next five years, taking it up to 1.05% by 2015. The lack of reliable statistics, in particular on investment by the private sector, makes it very difficult to monitor the targets set.
Human research capacity is available, but suffers from an ageing population. Serbia had 11,534 full-time scientists in 2009 or 0.6 % of the total workforce. As another part of the strategy, Serbia aims to increase the number of scientists. It is already taking a number of measures to attract young people to science studies and to address the brain drain from which it is still suffering. In line with the legislation on scientific and research activities, a Centre for Promotion of Science was established in 2010. Investments have been made in research capacity to improve the infrastructure, including science centres and state-of-the art laboratories. A fund for innovation activities has been established which, amongst other things, provides early-stage financing and supports transfers of technology. Since Serbia has been participating, as an associated country, in the Seventh EU Research Framework Programme (FP7), it has created good administrative capacity and drawn up measures to promote research cooperation. Serbia has shown a good take-up of FP7 projects throughout the programme but further efforts are necessary. In particular efforts are necessary to increase participation by SMEs.
Serbia has expressed interest in becoming associated with the Seventh Euratom Research Framework Programme (2013-2014).
Regarding policy initiatives to facilitate integration into the European Research Area (ERA), the 2010-2015 strategy is fully in line with the objectives of the ERA. Serbia is actively participating in the work of all ERA governance bodies. This demonstrates Serbia's administrative capacity and determination to integrate into the ERA and contribute to the Innovation Union. International cooperation, particularly with EU partners, is high on the national agenda. Serbia has concluded numerous bilateral cooperation agreements with several neighbouring countries and other international partners. It is also involved in key international research organisations (COST and Eureka) and has started accession negotiations with CERN. However, serious efforts are needed to achieve the targets set in the 2010-2015 strategy, in particular the investment target, to integrate into the European Research Area as well as regarding the Innovation Union.

Conclusion

Serbia has been actively involved in EU research policy through its association to the Seventh EU Research Framework Programme. The National Strategy for Scientific and Technological Development for the period 2010-2015 is fully in line with the objectives and targets of the European Research Area and the Innovation Union. However, consistent implementation and close monitoring of the targets set at national level, in particular on investment in research and on mobility of researchers are of key importance.
Overall, if it continues its efforts, Serbia should, in the medium term, have the capacity to comply with the requirements of the EU acquis.

3.20. Chapter 20: Enterprise and industrial policy
The EU acquis under the enterprise and industrial policy chapter consists largely of policy principles and policy recommendations, which are reflected in communications, recommendations and Council conclusions. The EU's enterprise and industrial policy, including its small and medium-sized enterprises (SME) policy, seeks to promote the competitiveness of the economy. It is strongly driven by the Europe 2020 Strategy and by the 2008 Small Business Act for Europe. Enterprise and industrial policy instruments include financial support and regulatory measures. The acquis also includes sectoral policies, such as recommendations for more targeted policy analysis and for new initiatives and consultations at sectoral level.
The SAA establishes cooperation to promote modernisation and restructuring of industry and individual sectors, in particular tourism, and to develop and strengthen SMEs.
With regard to enterprise and industrial policy principles, Serbia is pursuing privatisation and restructuring of the formerly socially-owned and to some extent State-owned enterprises and, in parallel, is aiming to develop a thriving SME sector (See Economic criteria).
The main component of Serbian industry is manufacturing with a share of 15% of GDP in 2009. Manufacturing in Serbia is well diversified with numerous sub-sectors. Among them, food and beverages is the biggest single sub-sector with a share of 4.6% of GDP in 2009, with chemicals, rubber and plastics second on 2.7% of GDP and 15% of total exports.
A new industrial strategy was adopted in June 2011. It is largely aligned with EU policy principles. The strategic goal of Serbia is to form export-oriented and competitive industry.
The share of SMEs in employment, GDP and exports has increased in recent years. Serbia has taken the European Charter for Small Enterprises, and later the Small Business Act, as a reference framework for shaping its own SME policy, In October 2008 Serbia adopted the Strategy for development of competitive and innovative small and medium-sized enterprises for the period 2008-2013. This strategy is largely in line with the principles contained in the Small Business Act and focuses on five principles: promoting the spirit of enterprise, improving human resources, facilitating access to finance, improving the competitiveness of SMEs and improving the general business environment. The Ministry of Economic Affairs and Regional Development and the National Agency for Regional Development are the main institutions involved in SME policy, but many others are included in implementation of the strategy, such as the Development Fund, the National Employment Service (NES) and the Serbia Investment and Export Promotion Agency (SIEPA). In addition, the government established the SME Council in 2006, a body in charge of coordination of formulation and enforcement of SME policy. Its members are drawn from various ministries and agencies and also from the most important institutions representing the interests of SMEs such as the Serbian Chamber of Commerce, the Serbian SME Association and the Union of Employers.
Furthermore, a Business Council was founded in March 2010, bringing together representatives of SMEs from all over Serbia. Serbia uses a definition of SME which is not fully in line with the EU recommendation.
Serbia has started to develop an innovation policy. In addition to the Strategy for development of competitive and innovative small and medium-sized enterprises for 2008-2013, in 2010 the government adopted a Strategy for scientific and technological development. It is based on the concept of a national innovation system, which networks enterprises, universities, research and development institutes, financial institutions and the public research community.
Organisational innovation in the services sector, which includes, for example, tourism, logistics and knowledge-intensive business services, is only marginally covered by this strategy. Private investment in research and development remains low, at around 0.2% of GDP according to unofficial estimates. Public investment is only 0.1% of GDP. Serbia has set itself an ambitious target of investing 1.5% of GDP in research and innovation by 2020.
As regards the European enterprise and industrial policy instruments, Serbia signed a Memorandum of Understanding allowing accession to the Entrepreneurship and Innovativeness Programme (EIP) under the Competitiveness and Innovation Framework Programme (CIP). Since the signature, Serbia has been successful in several calls (Play and Learn as Young European Entrepreneur, European Network of Female Entrepreneurship
Ambassadors, among others) and participates actively in the Enterprise Europe Network, with several partnership agreeements signed and the organisation of several events.
Access to finance is a big obstacle to development of the private sector. On the one hand, the procedures for obtaining loans are long and the collateral requirements and interest rates are very high. On the other, access to finance for SMEs is constrained by demand-side weaknesses. The government plays an active role in stimulating SMEs' market development via credit and guarantee facilities. A first Business Angel network was created at the end of 2009. Although progress has been achieved, further efforts are needed to improve the design and impact of credit guarantee schemes.
Serbia will need to align its legislation with the Directive on combating late payment in commercial transactions. The issue of late payment to companies is not regulated by any specific piece of legislation but, instead, by general rules in several pieces of legislation, including the Law on contracts. During the economic crisis, this has recently led to substantial delays in payments between economic operators and resulted in chronic illiquidity that is hitting suppliers of various goods and services particularly hard.
Serbia has no specific sectoral policies, except on tourism for which a strategy was adopted in 2006, giving priority to commercialisation of a number of tourist products. Most of the remaining specific sectors are covered by the industrial strategy adopted in summer 2011. The following sectors have been identified by the Serbian authorities as having growth potential, especially for exports and in attracting foreign investors: food production, production of transport equipment, information and communication technologies, metal production, and pharmaceutical industries.

Conclusion
Serbia has developed key aspects of an industrial policy. Both the industrial strategy and the SME strategy are broadly in line with EU principles in this area. As part of its EU obligations, Serbia will need to align with the Directive on combating late payments, which will also benefit its SMEs.
Overall, Serbia should, in the medium term, have the capacity to comply with the requirements of the EU acquis in the area of enterprise and industrial policy provided it continues its efforts.

Conclusions and Recommendations

Among other conclusions

The Commission therefore recommends that negotiations for accession to the European Union should be opened with Serbia as soon as it achieves further significant progress in meeting the following key priority:
- Further steps to normalise relations with Kosovo in line with the conditions of the Stabilisation and Association Process by: fully respecting the principles of inclusive regional cooperation; fully respecting the provisions of the Energy Community Treaty; finding solutions for telecommunications and mutual acceptance of diplomas; by continuing to implement in good faith all agreements reached; and by cooperating actively with EULEX in order for it to exercise its functions in all parts of Kosovo.

Sources: 

http://ec.europa.eu/enlargement/pdf/key_documents/2011/package/sr_rapport_2011_en.pdf

http://ec.europa.eu/enlargement/pdf/key_documents/2011/package/sr_analytical_rapport_2011_en.pdf

http://ec.europa.eu/enlargement/pdf/key_documents/2011/package/sr_conclusions_2011_en.pdf

• EC Press Release: European Commission recommends moving onto next stages towards EU entry [news]