A JOINT EUROPEAN VISION:FREE MOVEMENT FOR GOODS AND PEOPLE

IN KOSOVO AND SERBIA

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TABLE OF CONTENTS

# FORWARD 4

# EXECUTIVE SUMMARY 6

# CONTEXT 9# METHODOLOGY 10

# CHAPTER I 11SHATTERING THE ILLUSION OF FREE TRADE BETWEEN KOSOVO AND SERBIA

# AND SOME OF THE CONSEQUENCES… 18# CONCLUSIONS AND RECOMMENDATIONS 19

# CHAPTER II 22IMPLICATIONS OF A GHETTO WITHIN A BALKAN GHETTO

# AND SOME OF THE CONSEQUENCES… 29# CONCLUSIONS AND RECOMMENDATIONS 30

# CONCLUSION 33

# APPENDIX A 34# APPENDIX B 35

# JOINT RESEARCH TO INFORM JOINT VISIONS

Kristie Evenson - Freedom House

Identifying and taking on constructive andmutual-interest research is never an easy task. Inthe current environment of Southeast Europe,the research endeavors put forward by theEuropean Movement in Serbia and KIPRED inKosovo are particularly notable in their effort toarticulate the shared interest of people in Kosovoand Serbia to achieve European standards on themovement of people and goods.

The efforts of both organizations and theiradvisors from the Civic Dialogue should be com-mended not only for their first step in producingjoint research, but in their efforts to address thisresearch to policy makers from the region, as wellas the international community. Regional leader-ship and ownership of the many reforms that areneeded is critical to achieve the stated objective ofeventual European integration.

This report is a first step of not only informingpolicy makers, but in engaging the general publicin advocating for reform measures. Working withlocal partners, it is hoped that this report willserve as a basis for the communities to advocatefor concrete policy recommendations and worktowards adoption and implementation of theseprovisions. And as this report gets debated anddiscussed, we hope it can serve as a model forother regional efforts that use research-based pol-icy advocacy as their basis for shared visionstowards European standards and integration.

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# FORWARD

# GETTING OUT OF THE GHETTO

Ivan Krastev - Regional Advisor to the project (Centre for Liberal Strategies)

The policies of the international communitywith respect to the Balkans sometimes grimlyresemble the story of the man who lost his key inthe middle of the night and started to look for itunder the street lamp - not because he lost itthere, but because searching under a lamp is easi-er than searching in the dark. Similarly, the inter-national community tends to look for the key tosolve the Balkan crisis not where it was lost.

For the last decade, most of the policies of theinternational community in the Balkans have beensupply driven. Conversely here comes a report writ-ten jointly by two of the most respected think tanksin the region in cooperation with Freedom Housethat urges the policy makers to look at the demandside. The report is thoughtful and forward lookingand its recommendations are based on solid empir-ical research and respect for local knowledge.

The Report proves some of our worst fears. Itis not simply that the Western Balkans risk turninginto a ghetto on the outskirts of the EuropeanUnion: even worse, they risk becoming a ghettoconsisting of ghettos. Throughout the years fol-lowing the Kosovo war, both Serbs and KosovoAlbanians have felt more isolated and inward look-ing than in the beginning of the 90s. The feeling ofmarginalization and lack of perspective is particu-larly strong among the young generation: theEurope they see is defined by the Schengen wall.

This report does not fuel the illusion that fix-ing the Balkans could be a short-term effort. It is,however, far from gloomy in its evaluation of thepossibilities for change. It suggests that reconcil-iation between Serbs and Kosovo Albanians ispossible, but only in the framework of Europeanintegration. Regional integration is not an alterna-tive to European integration: it is by opening tothe EU that Serbs and Albanians will open toeach other. And it is through the free movementof people and goods that reconciliation can takeplace.

Shocked by the riots in France and the bomb-ings in London, key European policy makers maybe tempted to put this report aside for quietertimes. Doing so would miss an opportunity torealize that the problem of the Balkans and theproblem in the outskirts of Paris are one and thesame: integration versus marginalization. Youngand ambitious Europeans are trying to get out ofthe ghetto.

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# EXECUTIVE SUMMARYAs the European Union (EU) focuses its efforts

on streamlining the four freedoms of its single mar-ket, its neighbors to the southeast conversely expe-rience a daily reality of a further restriction ofmovement even as the region edges closer to theEuropean Union integration processes. Theserestrictions are the product of years of unclear poli-cies between and vis-a-vis Belgrade and Pristina andhave resulted in an increasingly ghettoized Balkanswithin the West Balkans. Freedom of movement ofgoods and people of Serbia1 and Kosovo is not har-monized, transparent, or sustainable in its currentarrangement. And irrespective of the outcomes of

the Kosovo status talks, a clearer and coordinatedapproach on freedom of movement of goods andpeople by the respective administrations in Pristinaand Belgrade and from the EU is urgently needed inorder to ensure that economic and social considera-tions support rather than undermine the ongoingpolitical negotiations.

This report developed jointly by think tanks, theEuropean Movement in Serbia (EMinS) inBelgrade, and the Kosovar Institute for PolicyResearch and Development (KIPRED) in Pristinabrings together for the first time comparative tradeand movement data which highlight a number ofclear areas of concern for authorities in the regionand the International Community.

1 Since a different set of regulations is in place in Montenegro in relation to Kosovo, this paper specifically focuses on theGovernment of Serbia and the Kosovo Administration rather than on the State Union of Serbia and Montenegro and Kosovo.

# REZIMEU trenutku kada Evropska unija (EU) svoje napore

usredsre|uje na unapre|ivanje ~etiri slobode na svomjedinstvenom tr`i{tu, njeni susedi na jugoistoku imajupotpuno suprotno iskustvo - svakodnevno se suo~avajusa daljim ograni~enjima kretanja, uprkos tome {to jeregion sve bli`e u integrativnim procesima Evropskeunije. Ograni~enja su plod dugogodi{nje nejasne poli-tike izme|u Beograda i Pri{tine i prema Beogradu iPri{tini i dovela su do poja~ane getoizacije Balkanaunutar Zapadnog Balkana. Sloboda kretanja robe i ljudiu Srbiji1 i na Kosovu nije harmonizovana, nije transpar-entna niti je odr`iva u svom sada{njem vidu. Sem toga,bez obzira na ishod razgovora o statusu Kosova, hitno

je potrebno da vlasti u Pri{tini i Beogradu, kao i u EU,prihvate jedan jasniji i koordinisani pristup slobodi kre-tanja robe i ljudi, kako bi ekonomski i socijalni razlozibili podr{ka aktuelnim politi~kim pregovorima, umestoda te pregovore podrivaju.

Ovaj izve{taj su zajedni~ki sa~inili Evropski pokret uSrbiji (EPuS) u Beogradu i Kosovski institut za politi~kaistra`ivanja i razvoj (KIPRED) u Pri{tini i u njemu seprvi put na jednom mestu mogu na}i uporedni podacio trgovini i kretanju; ti podaci osvetljavaju izvestan brojproblema koji izazivaju o~itu zabrinutost vlasti uregionu i me|unarodne zajednice.

# Status quo u viznom i trgovinskom re`imu ne}epredstavljati podr{ku po~etku razgovora o statusuKosova i ostvarenju {irih ciljeva regionalne saradnje

1Budu}i da je u Crnoj Gori na snazi druga~iji niz odredaba i propisa u odnosu na Kosovo, u ovom radu smo se konkretno usred-sredili na Vladu Srbije i administraciju Kosova, a ne na dr`avnu zajednicu Srbije i Crne Gore i Kosovo.

# PËRMBLEDHJENe kohën kur Bashkësia Evropiane përqëndron

mundimet e saja në reformimin e katër lirive tëtregut të saj të vetëm, ne anën tjetër fqinjët e saj nejug-lindje përjetojnë një realitet ditor të kufiz-imeve të mëtutjeshme të lëvizjes, edhe pse regjioniështë duke u afruar proceseve të integrimit nëBashkësinë Evropiane.

Këto kufizime janë produkt i viteve të tëra mepolitika të paqarta ndërmjet dhe përgjatëBeogradit dhe Prishtinës dhe kanë rezultuar në njëBallkan të getoizuar përbrenda Ballkanit përëndi-mor. Liria e lëvizjes e mallrave dhe njerëzve tëSerbisë dhe Kosovës nuk është e harmonizuar,

transparente apo e qëndrueshme nën rregulliminaktual. Dhe pa marr parasysh rezultatet e bised-imeve për statut të Kosovës, një qasje më e qartëdhe e koordinuar në lirinë e lëvizjes të mallravedhe njerëzve të Serbisë1 dhe Kosovës nga admin-istratat përkatëse në Prishtinë dhe Beograd dheprej BE-së është urgjentisht e nevojshme nëmënyre që të sigurohet që mendimet ekonomikedhe sociale të përkrahin më shumë se sa që i pen-gojnë negociatat politike të vazhdueshme.

Ky raport i zhvilluar nga dy “think tenka”,Lëvizja Evropiane në Sërbi (EMinS) dhe InstitutiKosovar për Hulumtime dhe Zhvillime tëPolitikave (KIPRED) në Prishtinë gërsheton përherë të parë të dhëna krahasuese në tregëti dhelëvizje që theksojnë një numër të qartë të lëmive

1Pasi një terësi e veçantë e rregullave është në fuqi në Mal të Zi në relacion me Kosovën, ky punim përqendrohet në legjislacionin e Serbisë dhe tëKosovës, dhe jo në atë të Unionin shtetëror të Serbisë dhe Malit të Zi.

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# Status quo in the visa and trade regimes willundermine rather than support the start of theKosovo status talks and larger objectives of region-al integration and European standards.

# The mechanisms for "free trade" betweenKosovo and Serbia are not producing free tradebut, rather, limited trade.

# The trade policies are not meeting objectiveseither for free trade or in supporting economicdevelopment as further criminalization of the twoeconomies is partly a result of this totally unregulat-ed trade.

# The current visa regimes discourage travelbetween Kosovo and Serbia and the region,

strengthening stereotypes and further isolating thepopulations of Kosovo and Serbia from the regionand Europe.

The actual trade regime encourages increasingexpansion of the gray economies on respective sidesof the administrative border, leading to a further eth-nic-based middleman rather than economic incen-tives for entrepreneurs to develop legal businesses.This hampers regional development perspectives anddistorts the competitive advantages of the Kosovarand Serbian economies.

Considering the movement of people, opinion-poll findings from both Serbia and Kosovo demon-strate a remarkably isolated set of populations,which have the inevitable stereotyped perceptions oftheir neighbors and which contribute to the psycho-

i evropskih standarda, ve} }e podriti te razgovore ite ciljeve.

# Mehanizmi za "slobodnu trgovinu" izme|u Kosovai Srbije zapravo ne omogu}avaju slobodnu, ve}ograni~enu trgovinu.

# Mere trgovinske politike ne doprinose ostvarivanjuslobodne trgovine, niti pru`aju podr{ku ekonomskomrazvoju, budu}i da je dalja kriminalizacija dveju privre-da jednim delom rezultat ba{ te potpuno neregulisanetrgovine.

# Sada{nji vizni re`im obeshrabruje putovanjeizme|u Kosova i Srbije i putovanje u regionu,osna`uje stereotipe i jo{ vi{e izoluje stanovni{tvoKosova i Srbije od ~itavog tog regiona i od Evrope.

Postoje}i trgovinski re`im ohrabruje ekspanziju siveekonomije i s jedne i s druge strane administrativnegranice, {to potom dovodi do pojave posrednika naosnovu etni~ke pripadnosti, a ne do ekonomskih ini-cijativa koje bi podsticale preduzetnike u razvijanjuzakonitog poslovanja. Ovo ko~i perspektive region-alnog razvoja i umanjuje komparativne prednostikosovske i srpske privrede.

Sa stanovi{ta kretanja ljudi, rezultati istra`ivanjajavnog mnjenja i u Srbiji i na Kosovu ukazuju na izraz-ito izolovana stanovni{tva koja neminovno imajustereotipne percepcije o svojim susedima, a to samopo sebi doprinosi psiholo{kom pesimizmu najve}egdela stanovni{tva. Mladi ljudi i obrazovani stru~njacisve su vi{e izolovani ne samo od svojih kolega u EU,ve} i od kolega u Jugoisto~noj Evropi (JIE). Ta daljagetoizacija ve} getoiziranog regiona Zapadnog

për shqetësim për autoritetet në regjion dheBashkësinë Ndërkombëtare.

# Status kuoja në regjimet e vizave dhe tregëti dotë pengojë, në vend që të përkrahë, fillimin ebisedimeve të statusit të Kosovës si dhe qëllimevemë të mëdha të integrimeve regjionale dhe stan-dardeve Evropiane.

# Mekanizmat për “tregëti të lirë” ndërmjetKosovës dhe Sërbisë nuk janë duke prodhuartregëti të lirë mirëpo tregëti të kufizuar

# Politikat e tregëtisë nuk i takojnë objektivat përtregëti të lirë osë për përkrahjen e zhvillimeveekonomike, me kiriminalizimin e mëtutjeshëm tëdy ekonomive dhe shteteve që është pjesërishtrezultat i kësaj tregëtie plotësisht të parregulluar.

# Viza regjimet aktuale dekurajojnë udhëtiminndërmjet Kosovës dhe Sërbisë dhe regjionit, për-forcojnë stereotipet dhe izolojnë mëtutje popul-latat e Kosovës dhe Sërbisë nga regjioni dheEvropa.

Regjimi aktual i tregëtisë inkurajon ekspanzion-in në rritje të ekonomive gri në anët përkatëse tëkufirit administrativ, duke drejtuar edhe mëtutjenë ndërmjetësuesit në baza etnike se sa në stimu-lanse ekonomike për ndërmarrës të zhvillojnë biz-nese legjitime. Kjo pengon perspektivat zhvil-limore të regjionit dhe deformon përparësitkonkuruese të ekonomive Kosovare dhe Sërbe.

Duke pas parasysh lirinë e lëvizjes, rezultatet ehulumtimit të opinionit publik nga Sërbia dheKosova demonstrojnë terësi të jashtzakonshme tëpopullatave të izoluara, që pashmangshëm kanë per-

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logical pessimism felt by a majority of the popula-tions. Young people and skilled professionals areincreasingly isolated not only from their EU col-leagues but from counterparts within SoutheastEurope (SEE). This further ghettoization of thealready ghettoized region of the West Balkans pro-vides little opportunity for domestic populations tomodify political extremism or to advocate for amiddle course in their respective efforts to adoptEuropean standards.

Recommendations focus on encouragingEuropean-standards implementation in bothBelgrade and Pristina, with the facilitation of thisprocess targeted at Brussels and the Contact Group.

Recommendations include the:# Placement of trade and visa regimes at the topof the negotiations agenda. Discussions on trade

regulations and ID standards and visa regimesshould start as soon as possible.

# Commitment by the governments of Serbia andKosovo to enact and/or harmonize existing tradeand visa regime legislation according to the princi-ples of Freedom of Movement and Trade in theSEE region.

# Commitment by SEE regional governmentsand the EU to support the political and techni-cal needs of both Kosovo and Serbia to harmo-nize trade and visa regimes to European stan-dards, including the introduction of positive dis-crimination in allowing the movement of peoplefrom Kosovo and Serbia within the region andto the EU.

Balkana, ne daje mnogo mogu}nosti doma}emstanovni{tvu da modifikuje svoj politi~ki ekstrem-izam ili da se zala`e za srednji kurs u svojim napori-ma za usvajanje evropskih standarda.

Preporuke su fokusirane na podsticanje primeneevropskih standarda i u Beogradu i u Pri{tini, uzistovremeno obra}anje Briselu i Kontakt grupi spozivom da olak{aju taj proces.

Preporuke obuhvataju slede}e:

# Stavljanje trgovinskog i viznog re`ima u sam vrhprograma pregovora. Diskusije o trgovinskoj regula-tivi i standardima za li~na dokumenta, kao i o viznimre`imima trebalo bi da po~nu {to je pre mogu}e.

# Opredeljenje vlada Srbije i Kosova da donesu i/ili

harmonizuju postoje}e zakonodavstvo kojim su reg-ulisani trgovinski i vizni re`im u skladu sa na~elimaslobode kretanja i trgovine u oblasti Jugoisto~neEvrope.

# Opredeljenje regionalnih vlada jugoisto~neEvrope i EU da podr`e politi~ke i tehni~ke potrebe iKosova i Srbije u usagla{avanju trgovinskih i viznihre`ima sa evropskim standardima, uklju~uju}i tuuvo|enje pozitivne diskriminacije kako bi se ljudimasa Kosova i iz Srbije omogu}ilo da putuju po regionui da putuju u EU.

cepcione me stereotype për fqinjët dhe që kontri-bon ne pesimizmin psikologjik që ndjehet nga shu-mica e popullatës. Njerëzit e rinj dhe profesionistëtjanë mëtutje të izoluar jo vetëm nga kolegët e tyre tëEvropës Përëndimore mirëpo edhe nga homologëte tyre të Evropës Jug-Lindore. Ky getoizim i mëtut-jeshëm i një regjioni edhe ashtu të getoizuar tëBalllkanit Përëndimor ofron pak mundësi pëe pop-ullatat vendase të modifikojnë ekstremizmin politikdhe të avokojnë për rrugë të mesme në tentimet etyre përkatëse të adaptimit të standardeve evropiane.

Rekomandimet përqëndrohen në inkurajimin eimplementimint të standardeve Evropiane si nëBeograd ashtu edhe në Prishtinë me mundësimine këtij procesi nga Brukseli dhe Kontakt Grupi

Rekomandimet përfshijnë:# Vendosjen e regjimeve të tregëtisë dhe të vizavenë maje të agjendës të negociatave. Diskutimet

mbi rregulativat e tregëtisë dhe stadardeve tëdokumenteve personale dhe regjimi i vizave duhettë fillojnë sa më shpejtë.

# Premtim për dedikim nga qeveritë e Sërbisë dheKosovës që të aktivizojnë dhe/apo të harmonizo-jnë legjislaturën egzistuese të regjimeve të tregëtisëdhe të vizave sipas parimeve të Lirisë së Lëvizjesdhe Tregëtisë ne regjionin e Evropës Jug-Lindore

# Premtim për dedikim nga qeveritë e regjionit tëEvropës Jug-Lindore dhe të BE-së të përkrahinnevojat politike dhe teknike të Kosovës dheSërbisë në harmonizimin e regjimeve të tregëtisëdhe vizave në nivel të standardeve Evropiane,përfshirë këtu edhe futjen e diskriminimit pozitivnë lejimin e lëvizjes të njerëzve nga Kosova dheSërbia përbrenda regjionit dhe në BE.

United Nations Security Council Resolution1244 put Kosovo under UN administration afterthe conflict of 1999, creating a UN administration(UNMIK) for basic oversight of Kosovo. TheResolution was designed as an interim solution inorder to bring peace, stability, and democraticinstitutions, as well as pave the way for status talks.In the meantime, the relations between Kosovoand Serbia1 have not seen any noticeable improve-ment, even while both administrations have madeseparate economic and political agreements withtheir SEE neighbors.

This paper addresses one of the most difficultissues on the Western Balkan European agenda-thatof the relations between Kosovo and Serbia. As sta-tus talks begin, considerations on both sides areaimed at delivering political solutions deemedacceptable by constituencies in Kosovo and Serbia.Yet the everyday lives of residents are mostlyfocused on socioeconomic concerns, which areunlikely to improve in the near future if the statusquo persists. Without specific attention to providingenabling legal environments that encourage socioe-conomic development with an eye towardsEuropean standards and integration, real positivechanges in the everyday lives of the people ofKosovo and Serbia are likely to be minimal.

Even as the Western Balkan countries remainfragmented and present a major challenge for thegrowing European Union, they have explicitlyshown their dedication to future integration intothe EU. Political support for integration on allsides provides a unique opportunity to now put inplace a number of key building blocks ofEuropean standards, even as the process of even-tual integration is likely to take many years.Besides stability, democratization, and overall eco-nomic development in the region, committedregional cooperation is critical to the Europeanintegration process. The region, faced with similaror identical challenges, must act in close coopera-tion and share experiences in order to reach thelevel of development necessary to finally achievelong lasting stability, peace, and join the Europeanfamily of nations.

Given this context, the concept underpinningthe joint research is that the establishment of EUstandards in the liberalization of the movement ofgoods and people in Serbia and Kosovo is an

incentive for the economic growth and normaliza-tion of the region and its integration into EUstructures.

The research project focuses on two areas ofmovement. One is the identification of the cur-rent scope of trade flows between Kosovo andSerbia, as well as existing regulations and possibleobstacles in its intensification.

Secondly, researchers explore peoples' percep-tions on a number of issues related to the conceptand practice of free movement of people, as wellas the administrative restrictions between Kosovoand Serbia, within the Western Balkan region, andwith the EU.

Finally, the research reflects the region's firmdetermination and expectation to join theEuropean family, an aspiration shared by themajority of the population as shown by ourresearch and many others. The research set theEU as the reference point and model of peacefulcooperation regarding regional development andintegration, identifying problems that demandEurope's greater attention. Through offering anumber of practical policy and technical sugges-tions on how to create political good will on bothsides, the project aims to decrease difficulties intravel and trade, which are vital to the largerprocess of reconciliation, stabilization, and inte-gration of the West Balkan region.

The research targets various stakeholders butprimarily attempts to reach the Government ofthe Republic of Serbia, UNMIK, and the KosovoGovernment, as well as the InternationalCommunity, most importantly the EU and theUnited States. Also, since it deals with the prob-lems and perceptions of several subsectors-suchas youth, expert community, and business-it pro-vides useful information for scholars dealing withthese sectors of the societies in question. It is thehope of the researchers that these findings willalso be useful to civil society in helping to serve asa basis for public campaigns in order to fostermutual exchanges, understanding, and coopera-tion between Kosovo and Serbia.

The idea for the research occurred during theactivities of a regional civil society initiative, the CivicDialogue2, the aim of which was to unite the civilsociety efforts for the benefit of a commonEuropean perspective of the region. KIPRED and

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# CONTEXT

1Serbia is part of the State Union of Serbia and Montenegro; however, for purposes of this research, the term Serbia is used to describe the relations ofthe Republic of Serbia and the Kosovo Administration given that Montenegro, to some extent, has conducted parallel relations with Kosovo.2Civic Dialogue (CiD) is a nonpartisan, multiethnic initiative of nongovernmental organizations (NGOs) from Serbia and Kosovo established by theCenter for Regionalism from Novi Sad and the Mother Theresa Society from Pristina. It engages over 250 NGOs from Kosovo, Serbia,and other parts of the former Yugoslavia. http://www.civil-dialogue.org

EMinS made an effort to research the commonproblems in the perspective of future EU member-ship-more specifically, the free movement of goodsand people. This pioneering research has employedlocal capacities to explore the problems of immedi-ate interest to the residents of Kosovo and Serbiaand the issues fundamentally important for thefuture European perspective of the region.

The strength of this report rests on the accura-cy and efforts of its authors. This project couldnot be realized without the ongoing advice ofIvan Krastev of the Centre for Liberal Strategies(CLS) of Sofia, the partnership of FreedomHouse Europe in Budapest and Freedom HouseSerbia in Belgrade, and the support of regionaland bilateral USAID missions, the Charles StewartMott Foundation, as well as the Balkan Trust forDemocracy.

# METHODOLOGYResearchers jointly set out to develop and gather

information through both quantitative and qualita-tive mechanisms on a parallel basis. A key objectiveof the research was to provide comparable infor-mation from both Kosovo and Serbia. While agood portion of the data collected has been stud-ied previously, this is the first time that data sets ontrade regimes of import and export between Serbiaand Kosovo could be cross-compared. This, com-bined with a perceptions-based survey on themovement of people conducted with the samemethodology in Kosovo and Serbia, field surveysof businesspeople in the Sandzak region, and alegal review of existing legislation on border andtrade regimes, provides a comprehensive assess-ment of what is at best a murky and highly change-able on-the-ground situation.

The extent of current trade flows betweenKosovo and Serbia and the existing impedimentsfor further development in the area of customs,regulations, and trade regimes were analyzedthrough an in-depth analysis of the customsdatabase and an extensive legal review of theexisting customs regulations in Kosovo/Serbia.While trade data gathered from Serbian bordercontrol and UNMIK were not exactly identical(UNMIK data were more complete and identi-fied according to EU standards), they providedenough comparable data to identify a number oftrade trends as well as identify gaps where exist-

ing data sets on both sides fall short of describ-ing the trade flows reality.

And in order to supplement the analysis of theofficial sources on trade flows between Kosovoand Serbia and examine the qualitative aspect ofthe current regime and obstacles, EMinS engagedregional trade experts in producing the case study.

The methodology included field interviewswith local transporters, producers, and business-people from the southwestern Serbia/Sandzakregion. It aimed to explore the extent of businesswith Kosovo in local trade and identify percep-tions regarding the main obstacles in legal, cus-toms, and administrative aspects to the intensifi-cation of economic cooperation, as well as givean estimate on the scope of illegal trade andsmuggling. The researcher interviewed 98respondents (via questionnaires and parallel sur-veys) in June and July 2005.

Research on the practice and perceptions of theresidents of Kosovo and Serbia regarding freedomof movement between Kosovo and Serbia, as wellas towards EU countries, was conducted by theStrategic Marketing and Media Research Institute(SMMRI) from Belgrade and Index Kosova fromPristina, according to the methodology agreedupon by EMinS and KIPRED. Besides generalpopulation interviewing, it focused particularly onthree basic social groups: students, experts, andbusinesspeople who were identified as drivers ofsocioeconomic development and the main socialgroups supporting European integration. The per-ceptions survey gathered data from both the gener-al public as well as the specific subgroups of uni-versity students, experts, and businesspeople andwas devised to shed light on the issues of freedomof movement, awareness of the existing regula-tions and their beneficial or detrimental effect, andother perceptions that presented the researcherswith a picture of both the current perceptions onthe issue and hopes for the future. In-depth knowl-edge on research issues was provided via focusgroups. In total, a representational sample of 1,200people in Serbia and 1,100 in Kosovo were inter-viewed in public-opinion polls and focus groups.3

And, finally, a team of legal experts fromEMinS and KIPRED provided assessments ofthe technical and legal requirements for the freeand secure movement of persons of both Serbiaand Kosovo.

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3Respondents in Kosovo were generally Kosovo Albanians, whereas in Serbia they were a mixture of residents of Serbia.

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CHAPTER I

SHATTERING THE ILLUSIONOF FREE TRADE BETWEEN

KOSOVO AND SERBIA

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# OVERVIEWFree trade tests governments' ability to govern

their territories functionally and to the benefit oftheir economic development and residents. BothKosovo and Serbia have managed to strike free-tradeagreements with other neighboring countries.Residents of the region and beyond have few prob-lems in goods transfers to Kosovo or to Serbia.These factors suggest that both governments havethe ability to regulate and manage movement ofgoods. Yet current legislative frameworks and gov-ernment practices hamper residents of Kosovo andSerbia from trading with and through each other andfrom using this legitimate trade as a basis for mutu-ally beneficial economic development. The assump-tion of free trade, accordingly, is more accuratelydescribed as 'limited trade.'

Kosovo and Serbia are two separate customs ter-ritories and separate subjects of international trade,with trade policy of Kosovo remaining under thecontrol of the UN. UNMIK treats Serbia as a sep-arate customs territory, while the Government ofSerbia treats trade issues with Kosovo as part of thelarger frame defining Kosovo's final status. At thesame time, the political status of Kosovo as current-ly governed by UN Resolution 1244 implies thatmutual trade flows between Kosovo and Serbia areexempt from any customs duties except value-added tax (VAT) payments. This has created in prac-tice a situation where these two customs territoriesdo not have regulated trade relations.

Trade regimes of Serbia andKosovo in mutual trade

Serbia# From the division of customs territory of

Kosovo in mid 1999 until 2001, there was noregulation of trade between Serbia and Kosovoon the part of Serbia. Only police serviceswere present on the Serbian sides of crossingpoints. Customs duties were not charged onproducts; rather, they were considered part ofintra-Federal Republic of Yugoslavia trade.

# In 2001, the first regulation on trade betweenSerbia and Kosovo was adopted in Serbia. Itregulated only tax matters and the tax equaliza-tion fee of 5 percent without addressing thecustoms issue. (On the crossing points with

Kosovo, only police and the TaxAdministration of Serbia were present).

# In 2004, a regulation was adopted in Serbia whichregulated the transit of foreign goods throughKosovo and defined domestic Kosovo products.

# With the introduction of VAT, which is deduct-ed when the goods are exported to Kosovo, thetax equalization rate was abolished at the begin-ning of 2005.Kosovo

# On August 31, 1999, UNMIK issued UNMIKRegulation No. 1999/3 "On the establishmentof the Customs and other Related Services inKosovo." Due to the legal status of Kosovo, anAdministrative Direction levied no customsduty for the goods originating from Serbia andwith Kosovo as the final destination.

# This specific feature is regulated under UNMIKAdministrative Direction No. 2001/7 on"Implementing UNMIK Regulation No. 1999/3on the establishment of the customs and otherrelated services in Kosovo," issued by UNMIKon May 29, 2001.

# The provision implies that all goods originatingfrom Serbia were exempt from customs dutypayments and were only subject to value-addedtax (VAT) of 15 percent, which is collected atthe border. Because the legal status of Kosovois still unchanged, the customs regime remainsthe same, with no customs duty and only VATlevied on imports from Serbia to Kosovo. Thesame applies symmetrically to exports, andtherefore no duty or tariff was levied by theUNMIK authorities for products exported toSerbia from Kosovo.

The lack of clear trade relations comes as nosurprise to actors in the region and theInternational Community. Clarity and coordina-tion have not been politically possible as long asactors have directly connected examination ofthis phenomenon with the status issue. And whilethere has been some progress in eliminating ambi-guity through subsequent legislation, coherenttrade regimes are not yet in place. What is strikingfrom a comparison of UNMIK and Serbianadministration data is that avoiding coherence andconvergence of trade policies has systematicallyundermined the respective administrations of

1 The data from IMF were originally in USD and was converted to EUR using the exchange rate on 31.12.2004. (1EUR = 1,3538 USD).2 Kosovo does not have any external debt as it yet does not know the debt amount to be inherited from the SCG succession,to be determined after the status resolution.

Table 1. Basic economic indicators

needed revenues and contributed to the shakyprospects of legitimate economic development inboth Serbia and Kosovo.

Economic and trade-flow backdrop

Trade between the smaller Kosovo and largerSerbia remains starkly lopsided and, in many ways,represents the distinct economic realities faced byKosovo and Serbia. Each was part of a larger eco-nomic unit within the former Yugoslavia, buteven as they took divergent paths at the beginningof the 1990s, the effects of conflict, isolation, andslow or incorrect privatization processes and gov-ernment administrations burdened both Serbiaand Kosovo4 with stymied production-capacitypotentials and trade deficits with the region andthe outside world.

Economic profiles of Serbia and Kosovo

Serbia is an emerging economy with an annualGDP that places it in the lower-middle group ofworld economies (World Bank categorization).The period of transition and economic stagna-tion from 1990 to 2001 has now been replacedby a period of slow economic development.

Serbia has not yet reached the economic levelsof 1990. GDP growth in 2004 was substantial,but the unemployment rate is also on the rise-18.5 percent in 2004. One of the main problemsof the Serbian economy is a permanent and ris-ing trade deficit. The external debt of Serbia isrising as well; in 2004 it reached nearly 15 billionUSD, which categorizes Serbia as a severelyindebted economy.

Kosovo is an emerging economy with an annualGDP that places it in the lower-middle group ofworld economies. Kosovo's GDP recorded veryhigh growth in the first years after the conflict,mainly due to large amounts of donor-relatedinputs. Kosovo has a very young populationwith an unemployment rate estimated at 30 per-cent. The unemployment rate is still increasingdue to the economy's inability to generateenough jobs to absorb new entries into the jobmarket. Due to its underdeveloped economy,Kosovo is an import-driven economy, and itsexports are so minimal that they cover only 3.6percent of its imports. Besides donor aid, a veryimportant indicator is workers' remittances,which finance the consumption that leads to themassive trade deficit noted above.

13

4Over 80 percent of consumer products were imported in the period after the conflict, and this share of imports in total consumption still remainshigh. This situation has lasted longer than initially anticipated due to the slow development of UNMIK Pillar IV, decisions concerning former sociallyowned enterprises (SOEs), and supporting an environment that will initiate the development of a new private sector.

INDICATORS Serbia and Montenegro1 Kosovo

GDP (bill. EUR) 15,264 17,725 2,426 2,516GDP growth (rate in %) 2.7 7.2 4.7 3.7Average net wage (EUR per month) 175 192 276 275Unemployment (rate in %) 14.6 18.5 30 31Exports f.o.b. (bill. EUR) 2.2 3.1 0.196 0.199Imports c.i.f. (bill. EUR) 5.8 8.6 1.0 1.1Trade balance (bill. EUR) - 3.6 - 5.5 - 0.812 - 0.848External debt (bill. EUR) 10.5 11.0 -2 -Source: International Monetary Fund

(excluding Kosovo)

2003 2004 2003 2004

With Serbia having an export surplus withKosovo, there has been a consistent upwardtrend in documented trade between Kosovo andSerbia since its low point during the conflict in1999. According to UNMIK Customs Servicedata, trade volume reached its peak in 2004,when Serbian exports reached EUR 134 million,while Kosovo exports were only at EUR 4.7 mil-lion. This trend seems likely to continue basedon the projections of the firstquarter of 2005.

Followed by the destruction ofthe production sector during theconflict, Kosovo ended up as a con-sumer society dependent on theimporting of anything and every-thing. A good portion of theseimports have come from or throughSerbia to Kosovo.5 Serbian productscomprised approximately 10 per-cent of the total imports of Kosovoin 2004, with approximately 17 per-cent of total imports into Kosovocoming through Serbia.At the same time, in key industriessuch as construction, which waspreviously mostly imported fromSerbia, Kosovo is building its pro-duction capacities. The volume of Kosovo'simports has changed rapidly in favor of thedomestic production of construction materials,where an overall assessment indicates that about40 percent of the domestic demand for con-struction materials was supplied within Kosovoin 2004.6

When speaking about Serbia's imports fromKosovo or Kosovo exports to Serbia, this trade

flow is much lower than the trade flow fromSerbia to Kosovo, but it is growing as the twobecome more important trading partners. In 2001,imports from Kosovo to Serbia, according to dataprovided by the Tax Administration of Serbia,were only around EUR 780 thousand, but in thenext year they reached nearly EUR 3 million. In2004, Kosovo's exports to Serbia reached nearlyEUR 7 million, which is almost 9 times higher

than in 2001 but still 9 times lower than Serbia'sexports to Kosovo (and substantially differentfrom corresponding UNMIK data).

Kosovo's exports of goods to Serbia, as partof the trade flow, are much lower but show agrowing trend. In 2004, exports of goods fromKosovo to Serbia covered 3.5 percent ofimports. Exports of Kosovo products to Serbiawere far less diversified than imports of Serbianproducts to Kosovo, but the 2005 data show agreater diversification of production in Kosovo,including its exports. Yet it is far from a desir-able level.

These data present only part of the largergoods transfer between Serbia and Kosovo.Comparable trade data from Serbian andUNMIK authorities were collected and analyzed,and even with allowances made for data coming

14

Kosovo exports to Serbia wererecorded as EUR 6.9 million in2004, according to Serbian statistics, and only EUR 4.7 million according to UNMIK

5UNMIK Customs data for 2004 and the first quarter of 2005 show that the share of imports of Serbian products in the total imports of Kosovo in2004 was 10.32 percent. Another indicator of the close trade relationship between these two customs territories is that the share of trade-related border crossings (imports only) from Serbia to Kosovo amounts to 17.56 percent of the total.6Please see Appendix A for a list of the top 10 imports/exports of Serbia and Kosovo.

70

Millions

60

50

40

30

20

10

0

2001 2002 2003 2004Serbian exports to KosovoSerbian imports from Kosovo

Trade between customs territories of Serbia and Kosovo

from slightly different periods and categories,7they show clear discrepancies that suggest a thriv-ing illegal trade scene between Kosovo andSerbia. The two different data sets analyzed (a)the Serbian Tax Administration (for 2003 and2004) and Serbian Customs Administration (forthe first quarter of 2005) and (b) UNMIKCustoms service from 2004 and the first quarterof 2005, which reveal a large discrepancybetween the values of goods exchanged betweenKosovo and Serbia (especially Serbian exports)recorded by the two administrations. To a certainextent, this discrepancy may be due to the differ-ent systems of data collection.8

UNMIK has organized a classic customsservice with a detailed system to collect tradedata, while the Serbian authorities have treatedthis as a tax-payment issue. Usually, a higherpercentage of duty-payment evasions occurs in

tax-payment procedures than in the payment ofcustoms duties, suggesting that UNMIK dataprovide a more complete picture of the tradeactivities.

According to the data, this problem seemsmore prevalent on the Serbia side of the customs.Less than 38 percent of Serbian exports toKosovo recorded in the UNMIK CustomsService database seem to have paid their taxes inSerbia. There is also a discrepancy in data onKosovo exports to Serbia, which was recorded asEUR 6.9 million in 2004, according to Serbianstatistics, and only EUR 4.7 million according toUNMIK evidence. Even if the trade flowsbetween the two customs territories are free ofany customs duties, the tax or tax equalization feemust be paid; it appears that many of the busi-nesses that traded with Kosovo bypassed thisrequirement.

15

7Through cooperation with the Tax Department Regional Centre Pristina, UNMIK, and the Customs Administration, Ministry of Finance, Republic ofSerbia, the researchers cross-compared data. The data analyzed come from different sources and cover different periods-the UNMIK Customs data are from2004 and the first quarter of 2005, and the Serbian data cover the period of 1999 to March 2005. The differences between the analyzed data stem from thefact that while UNMIK Customs has a centralized data gathering system, depicting each border-crossing point, the Serbian data collected after 1999 on tradebetween Serbia and Kosovo are only for the tax payment purposes of the Tax Administration of Serbia.The Serbian government, possibly due to status implications, treated Serbia's trade with Kosovo as internal trade, which is not included in the foreign-tradestatistics data gathering system. However, starting from 2005 the Customs Authority of Serbia started to collect data on trade between Serbia and Kosovo,which is one reason why there are more detailed and precise data available now. Accordingly, for the period before 2005, the more reliable data prove to bethat collected from the UNMIK Customs.8For example contrary to the data provided by the Serbian administration, according to UNMIK the major export of Kosovo is not scrap metal or paper butwine, which represented the chief export from Kosovo to Serbia in the amount of EUR 725,000 in 2004. It was followed by exports of carpets (EUR646,000) and heaters (EUR 609,000). All other exports are below half a million euros each but more or less well diversified by products.

Difference in Serbian data and UNMIK data on trade flows between Serbia and Kosovo in millions of EUR

1In absolute terms.2UNMIK data for 2004 include trade of Serbia and Montenegro with Kosovo.3Data for the first quarter of 2005.

Year Difference1 Difference

Serbian exports to Kosovo /Kosovo imports from Serbia

Serbian imports from Kosovo /Kosovo exports to Serbia

Serbian dataSerbian data UNMIK dataUNMIK data2

2003 35,5 142,1 106,6 5,4 6,0 0,62004 50,9 134,4 83,5 6,9 4,7 2,220053 63,7 23,8 39,9 1,8 0,6 1,2

This can be explained partly by inappropriateevidence on re-export activities and partly by ille-gal trade. This has clear implications in the abilityof the administrations in Kosovo and Serbia toderive revenue from the trade flows as describedin the table below.

Trade crossings, transit areas,and trade flows

Alternative border crossing points (BCPs) inmutual trade contribute to this discrepancy in data.In recent years, the number of crossings hasbecome more stabilized with the establishment offive BCPs between Serbia and Kosovo, four ofthese designated as commercial crossing points.Yet, according to Serbian data sources, the numberof border crossings negatively correlates with thetrend in exports. The number of crossingsincreased when exports fell and vice versa.

The role of Montenegro and MacedoniaThis negative correlation can partially be

explained by the use of additional border cross-ings with Montenegro and Macedonia. The vol-

ume of imports originating from Serbia is EUR21 million higher if one counts the goods enter-ing Kosovo through BCPs that link Kosovo withother countries.9 The same phenomenon,although in miniscule monetary volumes, isrecorded with Kosovo exports to Serbia. Most ofthese goods cross the border in Hani i Elezit(Djeneral Jankovic) or Peja/Pec (Kulla/Brnjacki)border crossing points.

Kosovo as a point of entryfor third-country goods to Serbia

Another trend is the use of Kosovo as a transitarea for legitimate trade. Many goods that areimported to Serbia come in transit throughKosovo. These include sugar, meat and meatproducts (especially poultry), cigarettes, and evenvegetables and fruits from Turkey and Greece.

16

From seller in Sandzak to buyer inKosovo, the numerous controls andcustoms checks can mean that theprocess takes more than 40 hours fora distance slightly more than 100km

9A comprehensive look at comparable data from Montenegro and Macedonia was not possible during this initial report, but it is hoped that subsequentstudies can include this additional data.

KOSOVO SERBIA

IMPORT fromKosovo/Serbia

EXPORT toKosovo/Serbia

TRANSITIMPORT/Export fromKosovo/Serbia

VAT

Customs Duties

Customs Duties

Excise

VAT

15%

None

None

Charged and later refunded

None

None

10% in general, but 0% for Serbian products

Depends on specificgoods

18% general8% preferential rate

VAT None None

No customs duties exceptwhen a part of a shipmentfor Serbia

NoneCustoms Duties

Revenues from import and export under current regime

Many of these products are not properly con-trolled when they enter Serbia at crossing pointswith Kosovo. This is because only customs canprovide all the necessary controls needed forthese products, and such controls have onlybegun to be applied by Serbian Customs begin-ning in 2005.

Mitrovica is the most used border crossing

Out of the five BCPs between Kosovo andSerbia, according to 2004 data, the crossing pointwith the highest frequency of commercial cross-ings was Mitrovica (including Zubin Potok,Leposavic, and the Terminal in Mitrovica), withover EUR 53.7 million in goods crossing fromSerbia to Kosovo during the observed period.

The trends indicate that border crossings inMitrovica (including Zubin Potok, Leposavic, andthe Terminal in Mitrovica) have increased theirshare by 6 percent in overall imports in the firstquarter of 2005, both in number of crossings andvalue of imported goods. This trend might bepartially explained by the fact that the majoritypopulation of the region is the Serbian communi-ty, suggesting that local Serbs are trading withSerbia.10

The reality for those using the designated bor-der crossings and procedures means engagingwith multiple borders and customs regimes thatregularly lead to confusion, lengthy delays, and alack of predictably. To bring this all into perspec-tive, producers from Sandzak describe the envi-ronment for doing business with Kosovo.

Perceptions of transporters/producers fromSandzak regarding trade with Kosovo11

Regardless of the volume and mode of trans-portation of goods to and from Kosovo, allinterviewees (98) stated that the present, indirectway is unsustainable. Contributing to this posi-tion is a summary of the comments made by thetransporters about the business environment inwhich they operate:# The flow of goods between these two areas is

carried out in an indirect way without direct

contact between the buyer and the seller. Theowners of the cargo vehicles have, due tosuch circumstances, changed their professionsand become tradesmen.

# The free flow of people and goods is serious-ly hampered by administrative practices. Thereis an obligation to record goods when theseenter Kosovo, numerous controls by the traf-fic police on the way to the administrativeborder crossings to Kosovo, waiting, unload-ing and loading on the administrative cross-ings, numerous controls by the traffic policein the part of Kosovo mainly populated bySerbs, long waits at customs, unloading andloading again, numerous controls by theKosovo police officers, UNMIK and KFORinternal controls, which therefore to reach theend buyer takes more than 40 hours for a dis-tance slightly more than one hundred kilome-ters. With the exception of UNMIK andKFOR, professional standards for officials inKosovo and Serbia are low.

# The goods exported from Kosovo are mainlypaid in cash. The money transfer is done bybanks located in the Serbian-controlled partof Kosovo, which do business with very highcommissions and take up to seven days totransfer payments.

# The volume of trade with Kosovo donethrough the grey channels, according to theperceptions of the transporters, is between30-40 percent. This occurs as a result of theexploitation of various loopholes, such as for-eign trade currency, usage of non-controlledroads, etc.

# Serbian products in Kosovo are very wellpositioned mostly because of lower prices dueto proximity and low transport costs. Due tothe lack of money-transfer channels withKosovo and the lack of bank guarantees asinsurance for payments, everything is donebased on trust.

The illegal trade phenomenon due to legalloopholes, multiple borders, border infrastruc-ture, and a general lack of governance and coop-eration is unlikely to surprise many given the cur-

17

10In a similar fashion, residents of Albanian ethnicity in municipalities of Southern Serbia tend to trade with counterparts in Kosovo.11Field interviews were conducted in the Sandzak region with 98 business people, in addition to polling and focus groups, in order to provide insightinto peoples' experiences in doing business between Kosovo and Serbia.

rent literature and investigative reporting on theissue. The porous borders of the past decade arebecoming more regulated every year, but unregu-lated trade remains a considerable portion of thepresent trade activities between Serbia andKosovo.

Yet few have closely analyzed the impact ofthis unregulated trade both on building healthytrading relations and in using trade as a meansfor connecting and stabilizing the fragile eco-nomic and political situations in Serbia andKosovo.

# AND SOME OF THE CONSEQUENCES…

The disincentive of buildinglegal businesses

The current trade regime does not allow forstrong incentives for the institutionalization ofeconomic development: the current situation istrade between people, not between companiesand/or economies, providing no incentive forsmall companies to legalize.

For example, with the current trade regime it isnow common practice for many businesspeoplefrom Kosovo to go to factories in Serbia, buygoods in cash instead of payments through for-eign banks, and independently transport thegoods to Kosovo. This suggests some level offree movement of people, ironically, but not thesupport of financial institutions which facilitatethe free movement ofgoods. For many banks,transfers are consideredinternational within thetrade region of Serbia andKosovo, even when thesame bank branch is pres-ent in both Serbia andKosovo. Within Kosovo, most banks useGerman swift codes, while banks in Mitrovicaare affiliated with Belgrade branches, having thedistinction as internal transactions. Accordingly,the cost of transactions is artificially high and

encourages a cash-only economy whereby busi-nesspeople purchase goods with cash and under-take transport based on trust rather than setbusiness mechanisms. While the 'trust only' cul-ture is not bad, it stymies attempts to put in placepredictable financial and administrative channelsfor conducting business and provides little basisfor developing a strong set of legal small enter-prises.

The middleman phenomenon

Common experience and wisdom in the WestBalkans suggests that doing business togetherdoes not necessarily depend on ethnicity.During the past decade, some of the most effi-cient and profitable businesspeople were thosewho cooperated with their supposed enemies,often in illegitimate business but based on com-mon interest rather than larger philosophicalconsiderations. The premise of common inter-est is also cited as a base for rebuilding or build-ing mutually useful businesses between nationsand peoples. Larger internationally supportedplans for greater energy interconnection withinthe region are based on a mutual level of needand interest.

Yet the middleman phenomenon, which hasdeveloped to find ways to do relatively legiti-mate business between Kosovo and Serbia,appears to reinforce mono-ethnic linkagesrather than create an opportunity for multieth-nic partnerships. For example, Albanians thatlive in southern Serbia and Serbs that live innorthern Kosovo often act as the interlocutors

for their respective busi-ness interests, which theincrease in the Mitrovicaborder-crossing traffic atleast seems to suggest.

And perhaps even moreimportantly, the middle-man phenomenon is creat-

ing a class of people who have an interest in theethnically tense and murky status quo situation.The institutionalization of the middleman haskept prices lower and maintained a certain struc-ture of the economy with trading as the main

18

The absence of direct paymentarrangements is a seriousimpediment to legal trade

business. This it is not the way to create a realand diverse economy, nor is it a way to fosterbusiness interests free of ethnic considerations.As long as ethnic-based business deals requirethe Serbs of Mitrovica and the Albanians ofSouthern Serbia, the potential for a softening ofpolitical positions by these parties is unlikely.

Missed government revenue

The current trade regime provides customs-freeexchange, but VAT is levied on imports. Andwhile the current system does provide some levelof tax revenue to benefit both governments, thediscrepancies in border data suggest that a goodportion is missing. Both Serbia and Kosovo haveit in their best interest to more accurately trackand control the flow of goods between Kosovoand Serbia for the practical issue of revenue col-lection. While the trade flows are clearly uneven,accurate attribution of taxes to the relevantauthorities will contribute to improving the taxcollection regimes of Serbia and Kosovo andallow government coffers to attribute these fundsto challenged budgets.

Designing economic plans without fundamental data

Not only do these types of informal transfersclearly represent lost revenue for the tax authori-ties in Serbia and authorities in Kosovo, they dis-tort the true trade, present and potential, for eco-nomic development. Government officials inKosovo and Serbia are unlikely to have moredetailed information than has been made availablefor this report. And without a clearer picture ofeconomic development potentials, planners havelittle inspiration for new and innovative ways tothink about economic development. Thisbecomes a self-perpetuating cycle where the cur-rent policies encourage and contribute to the grayeconomy in both Kosovo and Serbia. Yet the lackof real understanding of the interactions and lev-els of the gray economy hinder the governmentsfrom providing incentives to legalize these com-panies, which bodes ill for longer-term economicdevelopment perspectives.

Additional incentives for trafficking of illegal goods

Finally, the current trade situation not only pro-vides a disincentive for legitimizing business butalso an incentive for the further criminalization ofbusiness, including the use of the region as a con-venient smuggling corridor for illegal goods. Themuch discussed Balkan gateway into Europeremains a very real concern, and the current traderegime only encourages unaccountable players tosee the region as a transit area for illegal goods tothe EU. While far from complete, the trend dataon Kosovo and Serbia as transit areas for legaltrade to the EU suggests that there is real poten-tial for the region to be an important transit corri-dor beyond the current transit area for primarilyGreek and Turkish goods. At the same time, thegeographical position of Serbia and Kosovoremains attractive for illegal goods as long as thetrade regimes and border crossings foster unregu-lated trade.

# CONCLUSIONS AND RECOMMENDATIONS

Serbia and Kosovo had long been part of asingle economy, which resulted in complemen-tarity of economic needs and trade potential foreach entity in former Yugoslavia. Since the con-flicts of the 1990s, separate policies have led theeconomies of Serbia and Kosovo in two distinctdirections.

Different conditions have been created fortrade in Serbia and Kosovo. Different traderegimes have influenced evident divergences inthe development of the economic structures ofKosovo and Serbia, and mutual trade has natural-ly suffered.

The regulatory framework, providing freemovement of goods between Serbia andKosovo, as well as its enforcement haveimproved. But there are still many obstacles toharmonized trade regimes, most of which arenot directly dependent on the legal status ofKosovo.

Each customs territory, with the autonomous

19

creation and execution of its trade policy, tends toregulate its trade relations with the most significanttrading partners. Contrary to expectations estab-lished under the Stability Pact for SEE, tradebetween Serbia and Kosovo has not been regulat-ed and is not liberalized. Serbia has made some ini-tial steps by adopting regulations that apply tocompanies from Serbia when they trade withKosovo. But the lack of regime harmonization,together with the lack of financial and administra-tive systems to ease this trade, has resulted in lim-ited regular trade and the strengthening of grayeconomy trade and economic activities.

Harmonization and eventual adoption of theacquis communautaire of the EU is the objectivefor both Serbia and Kosovo. As each customsterritory has the ability to reform towards theseEuropean standards, clear steps towards reachingthese trade standards in coordination with deep-er involvement and integration into the regionalarrangements and structures (trade, energy, andtransport) will give a new impetus to mutualtrade.

The Serbian government is treating trade issueswith Kosovo as part of the larger frame definingthe final status for Kosovo. However, regardlessof the status of Kosovo's external sovereignty, ithas been recognized as a distinct customs entity;hence, its trade relations are not expected tochange in respect to the negotiation process.

Trade between Kosovo and Serbia needs to beregulated in order to serve the interests of entirecommunities, not just those of certain businessgroups. And while the introduction of a VATsystem in Serbia appears to be serving as a betterregulator of many trade flows between Serbiaand Kosovo, it is also opening up another com-plicated set of issues impeding liberal trade rela-tions between the two sides.

According to the IMF, Kosovo will most likelyface a tight budget situation with a large budgetconstraint and the possibility of facing a pay-ment crisis in 2006.12 Also, since Kosovo is aseparate customs territory, it technically couldput in place customs duties on goods coming

from Serbia that could potentially add aroundEUR 10-15 million of revenues to its coffers.This is not in the spirit of the Free TradeAgreement (FTA) signed between all SEE statesunder the auspices of the Southeast EuropeanStability Pact.

The interest of both is to more accurately haveoversight over trade flows for revenue and eco-nomic planning. Serbia and Kosovo's significanttrade imbalances are not viable in the long run,and economic ties need to be deepened anddiversified. The interest of Serbia is to improveeconomic ties with Kosovo because it is animportant export market. The interest ofKosovo, although similar in nature, comes froma different perspective. Kosovo is improving itsindustrial capacities, and while they currently arefocused on the local market, in the near futurethere will be an interest in launching products tothe regional market as well.

Accordingly, the improvement of trade tiesbetween Serbia and Kosovo will help in the res-olution of the political problems between theseentities. Subsequently, trade could once againprove to be a powerful tool in providing andstrengthening security, stability, and politicalcooperation.

With this in mind, the following recommenda-tions are put forward:

To officials in Belgrade and Pristina…

# Adhere to and implement the spirit of SEEFree Trade Agreements: Officials on bothsides should agree in principle that technicaltrade relations should be disentangled fromthe results of the Kosovo status talks. Anyfuture arrangements in the trade regimebetween Serbia and Kosovo should be inaccordance with the implementation of theFree Trade Agreements among SEE countriesand establishment of the multilateral freetrade area in South Eastern Europe (as agreedin Sofia at the end of 2004).13

20

12AIDE MEMOIR of the IMF Staff Mission to Kosovo, July 14-25, 2005; page 2.13Kosovo, as a separate customs territory with no political sovereignty, complicates the matters of its inclusion into the Free Trade Area created in SouthEast Europe under the auspices of the Stability Pact for Southeast Europe (Stability Pact). The Stability Pact defined Kosovo as part of Serbia andMontenegro under international administration in the preamble of the free trade agreement, but later in the text of the agreement Kosovo is treated as allother contracting parties. In this way, Kosovo is included in the free trade area in Southeast Europe.

# Consider trade relations as a technical notpolitical portion of status talks: The traderegime between Kosovo and Serbia should beliberal regardless of final political status. Theprocess and outcome of status negotiationsshould not hinder work towards creating a lib-eral economic regime.

In practice this means that officials in bothKosovo and Serbia need to apply the trade agree-ments in the spirit of a liberal economic regime,where they will seek to:

# Develop administrative mechanisms for jointborder cooperation: Clear steps in this direc-tion are initializing draft agreements for thecooperation of security bodies in the zone ofthe administrative line; forming a contactservice for the cooperation of the police, cus-toms, and the service for administrative con-trol; and restructuring the regime for adminis-trative line crossing.

# Standardize and regularly cross-check tradeflow data: In order to combat illegal trade,there is a need to improve and coordinatedata collection and technical provisions whichcan be put in place to better track and coordi-nate approaches.

Put in place regular comparisons of data-customs authorities on both sides shouldestablish a regular quarterly cross-check ofdata on the main volumes of imports andexports in order to reduce the dispropor-tions shown in this paper.

Data collection methods should be fur-ther harmonized with EU standards.

As well, both administrations should see theircommitments to trade as part of a larger commit-ment to improving the environment.

# Direct payment facilitation: Direct paymentfacilitation: As there are no clear and consis-tent direct payment arrangements and legalpayments primarily go through international

banks, which charge high commissions, wesuggest the establishment of direct paymentrelations between the banks of Kosovo andthe banks in Serbia to be considered; andthus, there would be no necessity for interna-tional intermediary banks, significantly lowerthe costs of foreign trade payments in tradebetween Kosovo and Serbia

# Encouragement of regional investments:Economic ties need to be deepened anddiversified-not only in trade but also invest-ments and common production, which shouldbe encouraged through the chambers of com-merce or similar bodies.

And to the EU governments and International Community…

# Support the technical improvements of traderegimes: Contact Group members shouldsupport a structure for the status talks wheretrade issues between Kosovo and Serbia canproceed in a timely manner and are part ofearly technical discussions rather thandependent on political agreement on final sta-tus outcomes.

# Support trade transfer upgrades and harmo-nization: The International Community,through its regional and intergovernmentalmechanisms, should ensure that free traderegimes are strengthened by:

Support to upgrade the EU standards indata collection.

Simplify the transit of goods throughKosovo and Serbia to third markets bymore closely linking larger regional transitplans and projects, such as REBIS (theRegional Balkans Infrastructure Project), theTrade and Transport Facilitation inSoutheast Europe Program (TTFSE), andIntegrated Border Management.

21

CHAPTER II

IMPLICATIONS OF A GHETTO WITHIN A

BALKAN GHETTO

22

In this globalized and post-1989 world, thepeople of the West Balkans are part of theminority of Europe that has experienced a con-stricted ability to move. Residents of formerYugoslavia, unlike populations to the north andeast, were accustomed to moving more or less asneeded for business and pleasure. And the loss ofthis freedom of movement, even within the SEEregion, cannot be overemphasized when describ-ing the state of the West Balkans today. Inessence, the current visa regimes have not onlycreated a now much-cited Balkan ghetto but aBalkan ghetto within a ghetto.

The number of conflicts in the region duringthe 1990s had an impact on the entire society. Itworsened the social distances between Albaniansand Serbs, as well as increased the perceived dis-tance regarding other neighbors as well.Freedom of movement of people-as a basichuman right and European Community free-dom-remains a significant and multifacetedproblem in the postwar Balkans. Enclaves ofsmall communities scattered among differentethnicities and increased difficulties for travelingin the region and abroad-two new circumstancesfor most inhabitants of former Yugoslavia-fur-ther reduce the possibility of contact with otherethnicities and result in the creation of prejudiceand mistrust towards others.

And while the residents of Kosovo and Serbiaare generally aware of the importance of free-dom of movement, there is a growing trend thatmany have not personally experienced this free-dom. Not only have older generations lost theirprevious mobility, but a whole generation of res-idents of Serbia and Kosovo see their regionalidentity, not to mention their European identity,as an abstract idea rather than a means ofengagement.

The most striking conclusion of the opinionpolls and focus groups conducted in Kosovo andSerbia is that contacts within the region aredecreasing. This is strengthening stereotypes anddeeply rooted prejudices about neighbors even asmost acknowledge the need for good relations.And contrary to expectations, regional integra-tion has slowed. In other words, the pockets of

states and peoples within the region are becom-ing more and more isolated from the rest ofSoutheast Europe, as the region itself experi-ences a limited ability to engage with Europe.

General importance of the freedom of movement

The enormous social problems that are preva-lent in both Serbia and Kosovo, from high unem-ployment to a lack of basic health services andmany others, often make freedom of movementless of a priority.14 Pessimism was the predomi-nant feeling regarding the future of Serbia: morethan half questioned Serbia's direction. The situ-ation on the Kosovo side holds a more optimistictone yet still yields similar questions. Given over-whelming domestic problems, it is not surprisingthat freedom of movement was not spontaneous-ly mentioned among the problems respondentsare most concerned with. Overall, the level ofoptimism was strongly related to householdincome per capita and age. Students, experts, andespecially businesspeople usually come fromgroups of higher income compared to the gener-al population and exhibit more concern for otherproblems. There was significant agreement thatfreedom of movement should be enjoyed by all,not only to visit relatives but as a necessary con-dition to acquire new knowledge about other cul-tures.

Links with people from other countries, bethey EU countries or regional countries, wereevaluated as important by the vast majority ofrespondents. This perception is importantbecause the fundamental right for freedom ofmovement is actually part of addressing thelarger socioeconomic challenges. For example,the survey showed over two-thirds of therespondents in Serbia believed that looseningcontrol at the borders would speed up econom-ic development.

As well, most respondents in both Kosovo (90percent) and Serbia (80 percent) perceived thatlinks with people from other countries areimportant for the future of Serbia and Kosovo.And for Kosovo respondents, cooperation is not

23

# OVERVIEW

14According to opinion polls, respondents from both Serbia and Kosovo are mostly concerned with social issues, particularly unemployment. In Serbia,respondents were predominantly concerned with unemployment (< 60 percent), low living standard (< 35 percent), various aspect of the economy (< 25percent), and crime and corruption (16 percent and 15 percent respectively).

only a term that experts understand but one thathas become important for all participants offocus groups and the general public, who seethat Kosovo is in need of the exchange of expe-riences with countries of the region. For partic-ular stakeholder groups, such as students,experts, and businesspeople, cross-border linkswere even more important, compared to the gen-eral population.

Most of the respondents interviewed in Serbiaand Kosovo evaluated the improvement of rela-tions with all neighboring countries as quiteimportant for the future. Respondents in Serbiasaw current relations with Macedonia, Romania,Bulgaria, and Hungary as good, somewhat lessgood with Bosnia and Herzegovina, bad withCroatia, and extremely bad with Kosovo andAlbania. But the importance of improved rela-tions was evaluated high for all of the countries,with the exception of Albania. Similarly, respon-dents in Kosovo saw relations with all theirneighbors as largely positive, with the exceptionof Serbia. And while these exceptions on bothsides are troubling, most would generally wish totravel more, but the current issuing and recogni-tion of identity documents is dissuading effortsfor movement and interaction.

Travel and visa regime backdrop-three levels of freedom of movement

Research for this study focused on both free-dom of movement within the region and with theEU, but actually when speaking of freedom ofmovement in relation to Kosovo and Serbia, theresearch found that there are three levels ofmovement that must be considered.15

# Firstly, there is the freedom of movementwithin Kosovo and Serbia and to and fromKosovo and Serbia.

# Secondly, the freedom of movement fromeither to other countries in Southeast Europe.

# And, thirdly, freedom of movement should beconsidered as the ability for movement fromKosovo and Serbia to EU countries.

Freedom of Movement between and within Kosovo and Serbia

On the first level, respective laws in Kosovo andSerbia regulate travel documents and travel in andthrough Kosovo and Serbia. Taken separately, thevarious regulations seem quite straightforwardand predictable, but when compared to eachother, as with trade regime regulations, clear gapsin complementary regulations exist that renderfreedom of movement less free than legallydescribed.

For example, legal movement in and out ofKosovo is primarily governed by the UnitedNations administration (UNMIK) as outlined inthe Constitutional Framework for Provisional

Self-Government in Kosovo. As such, movementis subject to UNMIK regulations and secondarylegislation including border and boundary cross-ing points with the line of division betweenKosovo and Serbia classified as a boundary.16

UNMIK documents are valid documentation fortraveling but are received with various levels ofenthusiasm by regional and EU governments.

The situation for the people of the Republic ofSerbia is slightly more straightforward. TheRepublic of Serbia defines that residents of theRepublic of Serbia, regardless of their ethnicity,acquire the citizenship of the Republic of Serbiaand are governed by travel documents of Serbiaand Montenegro (SCG) residents.17 However, con-sidering the fact that the current Law onCitizenship does not define circumstances whichexist in the territory of Kosovo, residents ofKosovo are at the same time citizens and nationalsof the Republic of Serbia, according to the legalsystem. In practice this means that many residents

24

15Please see Appendix B for a legal overview of the freedom of movement of the people of Serbia and Kosovo.16Regulation no. 2001/10, amended with Regulation 2003/18.17Law on Citizenship of the Republic of Serbia ("Official Gazette of SRJ" no. 24/94, 28/96, 68/2002 and "Official Gazette of SCG" no. 12/2005).

61% of Kosovo Albanians havenever been to Serbia, and 63% ofthe citizens of Serbia have neverbeen to Kosovo

of Kosovo hold two identity documents, one SCGand one UNMIK, for their travel needs.

However, if SCG documents are expired, havebeen lost, or Kosovo Albanians do not wish touse them or have misinformation about theiruse18-35 percent of Kosovo Albanians surveyedthink that it is necessary to have a passport to visitSerbia-then going to Serbia is out of the questionsince Serbia does not recognize UNMIK docu-ments. This affects both Kosovars' ability to trav-el within Serbia and to go through Serbia in tran-sit to a third country. Most Kosovo Albanians (56percent) surveyed, regardless of travel documents,felt that traveling to Serbia is a risky journey ingeneral. And this was backed up by the fact thatKosovo Albanians (30 percent) consider the cur-rent border regime with Serbia a necessity. Theycite fears of suspicious goods and persons mov-ing through border crossings.

Residents of Serbia, on the other hand, have theability to travel to Kosovo, but most avoid thisdue to perceived security problems or lack ofinterest. For example, most survey respondents(from Serbia) expressed the wish to visit neigh-boring countries, but most were reluctant to go toKosovo (63 percent) or Albania (80 percent).More informed subgroups were less reluctant todo so (55 percent and 76 percent of students, 55percent and 65 percent of experts, and 63 percentand 72 percent of businesspeople). At the sametime, the current administrative border regimewith Kosovo was perceived as detrimental bymost respondents19-almost 60 percent thoughtthe border regime with Kosovo had detrimentaleffects, while less than 10 percent thought theeffect was beneficial.

And it should also be noted that freedom ofmovement within Kosovo itself is perceived verydifferently by the respective communities. Freedomof movement is one of the eight standards set forthe government of Kosovo; yet, Kosovo Serbs stillface an immense perceived insecurity when travel-ing outside of their enclaves, a feeling shared byKosovo Albanians when traveling through or toSerbian populated enclaves. And while it is difficultto assess the real rates of ethnically motivatedcrime, the perceptions of insecurity have discour-aged many from not only traveling to but withinKosovo except when necessary.

All of these perceived and real obstacles haveresulted in two populations that do not want to visiteach other, do not understand each other, and donot recognize each other's common interests.

Freedom of movement in the SEE region

Apart from problems with respect to internalmovement, the populations of Serbia and Kosovoconsider that movement outside Serbia andKosovo is difficult. For example, most of therespondents claimed the current border regimeswith neighboring countries have detrimentaleffects. Between 40 and 50 percent in Serbia and36 percent in Kosovo claim that current borderregimes with Macedonia and Bulgaria have detri-mental effects on their respective economies, edu-cation, social system, as well as art and culture,compared to less than 20 percent in Serbia and 14percent in Kosovo who thought the effect wasbeneficial.

On the side of the residents of Kosovo, traveldocuments issued by UNMIK clearly do not solve

25

18There are designated places in Kosovo for residents of Kosovo to apply for new SCG documents, but these are generally not utilized except by theKosovo Serb and other minority populations.19The crossing of the administrative line between Kosovo and Serbia is possible at nine locations: Peceno brdo, Madere,Devojacka cuka, Vrapce, Medevce, Merdare, Susnjak, Rudnica and Tabalije.

Relations

Prejudices

Past Travel

Wish to Travel

Kosovo Albanians think it is important for Kosovo to improve relations with SerbiaResidents of Serbia think it is important for Serbia to improve relations with KosovoKosovo Albanians think Serbs are dangerousSerbs think Kosovo Albanians are dangerousKosovo Albanians have never been to SerbiaResidents of Serbia have never been to KosovoKosovo Albanians do not wish to travel to SerbiaResidents of Serbia do not wish to travel to Kosovo

29 %

58 %

84 %67 %61 %63 %84 %63 %

the problem of free movement in countries of theregion, since in order to enter some countries(Croatia, Bulgaria, Hungary, Romania, and Bosniaand Herzegovina) they need a visa which is oftentime consuming, costly, and unpredictable. Forresidents of Serbia, travel throughout the region isgrowing easier with the dropping of visa require-ments for such countries as Croatia, BiH, andMacedonia, even while visas must be obtainednow for travel to Romania, which is likely to befollowed by Bulgaria as it puts in place EU borderrequirements.

Opinion-poll and focus-group results reflectthese difficulties. Respondents from Serbia hadmore contact with the people from formerYugoslav republics, and respondents from Kosovohad a lesser level of contact with immediate neigh-bors. For example, a majority of respondents fromSerbia have encountered members of other eth-nicities from former Yugoslavia, but less than halfhave ever met a resident of Kosovo.Approximately half of the population has metBulgarians, Romanians, and Hungarians, and only26 percent have met Albanians. Students werefound to be the group having the least contactwith the population of Kosovo (37 percent) andAlbanians (21 percent). Respondents fromKosovo have most often encountered Albanians,followed by people of Serbia and Macedonians.Respondents from Kosovo have mostly traveled toMacedonia and Albania.

Existing visa regimes were named by 18 percentof the general population in Serbia, 23 percent ofstudents, 23 percent of experts, and 19 percent ofbusinesspeople as a primary reason for not travel-ing to neighboring countries. And while the mostoften cited reasons for not traveling were lack ofmoney (64 percent), motivation (every thirdrespondent), and security concerns (every fifthrespondent), obtaining the necessary visas is close-ly linked with the other most cited reasons.

Even more troubling is the trend of decreasingtravel for residents of both Kosovo and Serbia inthe last three years due mostly to documentissuance, financial considerations, or security rea-sons. Only 15 percent of the residents of Serbiain 2004 traveled to any of the countries in theregion. Unlike Kosovo, the number of people

who traveled in neighboring countries in the lastthree years is increasing,20 but the figures are stillfar behind the number of travelers in the past, anddestinations are also changing. Former Yugoslavdestinations have been replaced with other neigh-boring countries-Hungary, Romania, and Bulgaria.Overall, despite occasional ups and downs,regional integration has slowed.

And lack of contact with neighbors fuels estab-lished negative perceptions. When asked to char-acterize national features of their neighbors,

respondents from both Serbia and Kosovo rarelyresponded with "don't know." This is more worri-some considering that even those that had nevermet a person from a neighboring country readilylabeled their neighbor with an adjective.

Consistency in evaluations and the high agree-ment in perceptions between the general popula-tion, students, experts, and businesspeople give aclear indication of the strong presence of stereo-types. In the case of Serbia, with the exception ofMacedonia and Albania, neighboring countrieswhich were not part of former Yugoslavia weremore positively evaluated than those that were.Macedonians, Bulgarians, Romanians, andHungarians got a top-neighbor rating, Albaniansand residents of Kosovo (whom they know least)were evaluated as bad neighbors, while Croatiansand Bosnians were in the middle.

Kosovo respondents gave similar views, ratingAlbanians and Macedonians (those neighborswhom they encountered most frequently) as bestand residents of Serbia as worst. Other neighborsmostly received medium scores, confirming theprevalent lack of personal experience. As the datashow, respondents from both Kosovo and Serbiarated neighbors of countries they traveled to mostfrequently as the best and each other consistently asthe worst, the latter conclusion due perhaps to con-tinuous disputes and lack of information.

26

Even respondents who have nevertraveled to neighboring countriesreadily accept stereotypes about them

20According to respondents, 2002 travel was at 6 percent, 2003 at 11 percent, and 2004 at 15 percent.

And with the EU?

It is travel to EU countries that is at the heart ofthe common interests of residents of Serbia andKosovo. Whether it is travel to new EU membersclose by like Hungary, soon-to-be EU memberslike Bulgaria and Romania, or to any of the otherEU25, obtaining the necessary permissions totravel to these countries, either holding a SCG orUNMIK passport, is often impossible.

Schengen as a disincentive

On Serbia:The special visa policy of the Schengen states

is applied to residents of Serbia andMontenegro because it belongs to the so-calledthird countries, whose residents must possess avisa when entering the Schengen zone. Theprocess of acquiring a visa puts a limitation onfreedom of movement. Prospects for improvingthe situation are not good because it cannot besaid with certainty when the visa regime will bechanged, given the slow process of Serbia andMontenegro's European integration.21

On Kosovo:Residents of Kosovo who possess a UNMIK-

issued travel document are required to have avalid Schengen visa for traveling to the countriesof the Schengen zone. The process is very similarto the one that SCG residents go through apartfrom the fact that in most cases it is more diffi-cult due to some countries (12) of the Schengenzone not having diplomatic offices in Kosovo.

In some ways, residents of Kosovo have beenmore connected with the EU in the recent past.With the large Albanian Diaspora in EU countriesand the significant international presence in post-war Kosovo,22 survey respondents from Kosovowere found to have contact more often with peo-ple from the EU than with those of the region(i.e., Romanians).

On the other hand, Serbia has a substantiallysmaller percentage of the population that has hada chance to meet EU citizens or travel to EUcountries. Of those surveyed, 56 percent of thepopulation had never traveled to any of the EU

countries, and most of those who had, did so inthe past (before 1990). Only 5 percent of the pop-ulation had a chance to travel to EU countries in2003 and 2004.

And the possibility of traveling to the EU hasnot been evenly spread amongst the population,even as a majority of the population is familiarwith the visa requirements and regulations.23 Asone might expect, experts and businesspeople hadmore chances to travel to EU countries, with onlya quarter of students having never met any EUcitizen and around one-third having met peoplefrom only one or two EU countries.

Yet, even for those most likely to travel, theunpredictability in securing a visa has played arole in discouraging attempts to travel. For exam-ple, almost half of the general population inSerbia (and 76 percent of students, 70 percent ofexperts, and 54 percent of businesspeople) statedthat they had plans to travel to EU countries inthe last five years but were unable to do so. Mostof them cited lack of money as the main reasonfor giving up their plans, but a substantial numbernamed the visa regime as well (35 percent of thegeneral population, 25 percent of students, 43percent of experts, and 60 percent of business-people).

And for Kosovo, respondents cited the lack ofa visa in more than 40 percent of the cases as a

27

Between 18-23 percent of the people of Serbia and 40 percent of the people of Kosovo cite thecurrent visa regime as the primaryobstacle for travel to EU countries

21Above all, it is necessary to establish efficient and functional mechanism for coordinating the institutions in Serbia and Montenegro at the level of mem-ber states and at the level of state community with respect to the visa policy.22The exodus of more than one million Albanians during the conflict of 1999 and large assistance efforts of the International Community exposed themto EU nations to a higher degree.23The majority of the population is aware of the visa regimes for neighboring and EU countries. Most of the people were aware that a visa is required forall EU countries (69 percent of respondents from Serbia and 78 percent of respondents from Kosovo, 81 percent and 89 percent of students in Serbia andKosovo respectively, 84 percent and 92 percent of experts respectively, and 90 percent and 94 percent of businesspeople respectively).

reason for not traveling to EU countries. Realexperience on the Kosovo side suggests that ofthose planning to travel to an EU country in thepast five years, 48 percent were unable to do so.When looking at the breakdown among specificsegments of the population, the difficulties areeven clearer-refused visas were cited by 60 percentof students, 53 percent of experts, and 55 percentof businesspeople.

Perceptions about difficulties have added to thispartly self-imposed ghetto. Although only 11 per-cent of the population of Serbia had experience ofbeing refused a visa, most thought that it was diffi-cult for an average person to obtain a visa for EUcountries. The percentage of respondents fromKosovo that have been rejected for an EU visa isslightly over 24 percent, while the general consen-sus is that it is very difficult to obtain a visa. Thehigh figures illustrate that there is a clear opinion onthe difficulties in obtaining a visa regardless of per-sonal experience. This is particularly true for stu-dents; the perception is that this group is mostfeared by immigration officials in western coun-tries, hence, students have the most difficulty inobtaining visas. 82 percent of all respondents inSerbia and 78 percent of Kosovo Albanians think

that it is hard to get a visa for EU countries, 72 per-cent of respondents from Serbia and 84 percentfrom Kosovo think the main problem is collectingall the documentation needed for applying; 69 per-cent of Serbia respondents and 58 percent ofKosovo respondents claim that the key problem isthe shortage of money.

According to respondents in both Kosovo andSerbia, required documentation and money arethe most important elements in securing a visa,while embassy clerks were found to be the leastimportant. Collecting necessary documents (along procedure) and waiting in line to apply for avisa were evaluated as difficult by almost half of

the general population and by a substantially high-er percentage of students, experts, and business-people. For the last three groups, waiting in line toapply for a visa was the most difficult part of theprocedure, most likely due to concerns aboutmeeting their obligations and the often ratherhumiliating procedures and attitudes theyencounter in particular.

These difficulties lead to the search for alterna-tive identification documents. Whether it is anUNMIK holder obtaining SCG documents out-side proper channels or a SCG passport holderobtaining a passport from neighboring countries

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A. Z., a student from Belgrade,was accepted to study Swedish as a foreign language at theFolkuniversitetet of Stockholm.The course ran from July 2005 toJanuary 2006 and consisted of 60academic hours over a four-weekperiod, full-time studies, at a costof 4,500 SEK. A. Z. provided theSwedish Embassy in Belgradewith all relevant documentation,including proof of ownership ofreal estate. A. Z.'s visa applica-tion was rejected with no expla-nation or legal remedy

V. B. was admitted in February of2003 to the Hochschule furMusik Detmold AbteilungMunster in piano studies. She wasrequired to start her studies inOctober of the same year. Fromthe moment she was admitteduntil the end of September, shecontinuously applied for a visaand was refused without furtherexplanations. Consequently, shelost her chance to attend studiesin a prominent institution offer-ing a high-quality education

with more accessibility to the EU25, this con-tributes to the lack of effective monitoring of themovement of people and supports an ever greatertendency for the EU to perceive the need forbeing "Fortress Europe."

The reality that obtaining a Schengen visa is adifficult task, even when sought for higher educa-tion purposes, is unfortunately not surprising. Yetthe very people who can serve as the agents ofchange and integration for the region are the onesmost often seeking and accordingly being deniedvisas, a practice that goes against EuropeanCouncil directives to promote the mobility ofthird-country nations to the Community forstudy.24

Accordingly, it is no surprise that the effects ofthe border regime with EU countries were evalu-ated as detrimental almost unanimously by all therespondents in Kosovo and Serbia, in all areas-from the economy to sports. Most people statedthat not needing a visa to go to neighboring coun-tries would make a lot of difference to them per-sonally, and even more if they would not need avisa to go to EU countries.

The key benefits of visa-free travel in the regionand to EU countries were of a pragmatic nature(increased possibility to travel, visiting friends andrelatives more frequently, saving time, etc.), as wellas of general value (more freedom of movement,feeling of being a citizen of the world, moreopportunity for development of society) andimportant to professional/business opportunities.Although pragmatic reasons were cited mostoften, a substantial percentage of respondentsnamed general values and professional reasons asmost important. Visa-free travel to EU and neigh-boring countries would bring about the greatestvalue for younger residents.

There was a high level of agreement amongstthe general population that the biggest losers inthe current border regime issue are people whohave relatives and friends in neighboring or EUcountries. Students, experts, and businesspeopleoften perceived themselves as the biggest losers ofthe current visa regime with neighboring coun-tries, with an emphasis on EU countries.

# AND SOME OF THE CONSEQUENCES…

The impact of different perceptions

The current border regime and lack of legalcoherence on movement between Kosovo andSerbia has hampered free movement of all resi-dents of Kosovo and Serbia. This has contributedto one of the largest discrepancies in attitudesfound in the survey, namely that of the safety oftravel or in maintaining the status quo. The feelingof insecurity to travel in Kosovo or Serbia or asminorities in Kosovo coupled with unclear borderpolicies contribute to the perception that resi-dents of Kosovo see the current border regime asa protection while residents of Serbia see it asdetrimental.

A market for false documents

At least on the Kosovo side, the UNMIK pass-port is not as useful as an SCG passport, an SCGpassport not as useful as the Croat passport, andso forth. The lack of recognition of UNMIKpassports by Serbia, combined with the still stig-matized status of SCG passports, has contributedto a gray market of travel documents. This doesnot benefit any of the governments of the regionin their attempts to achieve EU ID standards.

Slowing of regional integration

The number of people who traveled in neighbor-ing countries in the last three years is increasing, butthe figures are still far below the number of travel-ers in the past, and the destinations are also differ-ent. Regional integration as a prerequisite for thelarger process of European integration is slowingdown. The dramatic decrease of communicationwithin the region and the slowing of regional coop-eration are evident. Most residents of Serbia andKosovo have not recently traveled in any of thecountries in the region. This bodes ill for knowingand interacting with neighbors.

29

24 European Council directive 2004/114/EC says:(6) One of the objectives of Community action in the field of education is to promote Europe as a whole as a world centre of excellence for studies andvocational training. Promoting the mobility of third-country nationals to the Community for the purpose of studies is a key factor in that strategy.The approximation of the Member States' national legislation on conditions of entry and residence is part of this.

Under the given circumstances, and parallel tothe regional ghettoization, the presence of nega-tive stereotypes and prejudices is extremely strong.These cannot be overcome without communica-tion. The situation can hardly be changed underthe condition of isolation.

Negativity breeds negativity

Social pessimism is a predominant feeling in theregion and in Serbia specifically. At the same time,respondents show a high awareness of the impor-tance of links with people from other countries(regional and EU). And people who had thechance to travel more were found to be moreoptimistic with regard to the future of the coun-try. While those who could travel were likely toalso have better education and socioeconomicstandings, this is a good indicator of what freetravel can do for a population's attitudes.Conversely, restriction of travel opportunities fur-ther feeds the feeling of the majority of the pop-ulation in Kosovo and Serbia that the future holdslittle that is positive to take a stake in.

Negative selection in the freedom of movement

Deterring or discouraging travel of business-people, students, and those with legitimate familyand professional reasons further decreases thechances of a moderate course of developmentand European integration for the societies ofSerbia and Kosovo. Most respondents feel thatthey are the biggest losers in the current borderregime, while the biggest winners are smugglers,corrupt customs officers, and politicians. Andthose particularly cited as being on the losing sideare young people. Without a reversal of this neg-ative selection, there are few incentives to "play bythe rules" in order to get ahead.

# CONCLUSIONS AND RECOMMENDATIONS

The inability of residents to travel betweenKosovo and Serbia, within the region, and outof the region contributes to stereotypes, pes-simism, and the difficult financial realities. Theresearch suggests some disturbing trends inSerbia and Kosovo and more generally in theregion. The day-to-day concerns of survivaland a general feeling of pessimism about thefuture dominate. A region that was beset by warand dislocation continues to disintegrate onmany other levels. The absence of regional inte-gration is by far the biggest dilemma. Inessence, people in Serbia and Kosovo do notknow one another. The deep-seated stereotypesprevail owing to a lack of information and com-munication.

Residents of Serbia do acknowledge that thereis great importance in strengthening links andcooperation in the region and with the EU.However, there is less importance attached tobreaking down regional barriers. As a result, res-idents of Serbia are increasingly getting to knowtheir northern neighbors and developing agreater distance from other neighbors from for-mer Yugoslavia. The situation in Kosovo is sim-ilar, where residents are getting to know theirsouthern and EU neighbors rather than theirnorthern neighbors. In addition, the absence ofa developed regional infrastructure ensures thatpeople find it difficult to move around theregion.

The EU visa regime is a problem for a num-ber of reasons: professional and business con-cerns, practical reasons, and an obstacle to cre-ating "shared values." This last reason can bedescribed as a feeling of belonging to the world,of a common European perspective, and aninterest in the democratic as well as economicdevelopment of the region. People continue tofeel trapped within their borders, and withoutmore opportunities to experience life as part ofEurope, the community of European valueswill continue to be more rhetoric than realityfor a majority of residents of Serbia andKosovo.

30

With this in mind, the following recommenda-tions are put forward:

To officials in Belgrade and Pristina…

Movement between Serbia and KosovoThe discrepancy in attitudes between respon-

dents from Kosovo and Serbia suggests thatboth governments need the political will to solvepractical problems hampering the current move-ment of people in and from Kosovo and Serbia.There is an evident common interest in regulat-ing the issuing and recognition of personal doc-uments, which is critical for the free movementof people, prevention of illegal migrations andhuman trafficking, and for improving the posi-tion of Kosovo and Serbia in negotiations withthe EU.

# Make freedom of movement of people atechnical, not political, issue in Kosovostatus talks: A dialogue between the authori-ties of Serbia and Kosovo regarding the har-monization of domestic laws with Europeanones and improving conditions related tofreedom of movement must start as soon aspossible and should be seen as a complement,not an outcome, of Kosovo status talks. Inthis regard, we urge both governments to:

Adopt new packages of legislation rules (inthe areas of visas regime, migration, asylum,and integrated borders management andinformation system), according to theEuropean standards, and develop thereform agenda to be implemented bySerbian and Kosovo authorities simultane-ously with the status talks.

# Recognition of UNMIK documents:Residents of Kosovo are hemmed in by theirtravel documents. Serbia's refusal to recognizeUNMIK travel documents is by far the great-est problem. Serbia's recognition of thesedocuments would greatly facilitate travelbetween and in Kosovo and Serbia (Kosovardocuments are already recognized by othercountries of the region).

Steps towards this include:

Legislation of the Republic of Serbia shouldbe adapted to address actual circumstancesthrough the adoption of new laws on pass-ports and citizenship.Recognition by the Republic of Serbia ofUNMIK documents.Clear reciprocal measures by Kosovarauthorities to provide for an improvementin the safety of Kosovo Serbs and otherminorities, as well as Serbs entering andremaining in the territory of Kosovo.

# Introduction of biometric identity docu-ments: The experience from Bulgaria andRomania has shown that the introduction ofmore stringent standards for identity docu-ments can significantly contribute to reconsid-eration of visa regimes by the EU. We encour-age Serbia and Kosovo to take advantage ofand learn from the positive experience ofneighboring countries that have made clearadvancement in the field of border control,visas, and regional cooperation, which enabledthem to be placed on the "white Schengen list."

To governments in the SEE region…

# Facilitation of the visa regime in theregion: Easing of current UNMIK and SCGvisa requirements for travel within the regionshould be the key priority of regional govern-ments in demonstrating their support ofregional and European integration. The abol-ishment of lengthy and costly processingtimes for neighborhood travel would greatlycontribute to increased travel within the SEEregion.25

The countries in the region, subject to thestrict EU visa regime, should create a com-mon front and platform for liberatingmovement intra-regionally and in region-EUrelations.

# Regional support for liberalization of theEU visa regime: The SEE region would

31

25The authors fully support CEPS' recent recommendation 'to devise a regional Schengen arrangement, whereby the whole of Southeast Europe, memberstates or not, would become a visa-free area,' CEPS Neighborhood Watch, Issue 9, October 2005, as well as similar views expressed in the forthcoming ICG report.

benefit as a whole if the "ghetto within theghetto" were to be disassembled. Accordingly,we urge the countries in the region (especiallyEU member states-Hungary, Greece, etc.) tosupport residents of Serbia and Montenegroand Kosovo in their endeavors to lobby forthe liberalization of the EU visa regime.

# Regional government support forincreased social group interaction:Governments in the region should supportand encourage their respective educationaland cultural institutions to engage with theircolleagues in the region. The key people toengage are youth, as they show the highestreadiness to reject stereotypes. Simple meas-ures like organizing group tours would be anaffordable step towards creating regionalunderstanding. The problem should beapproached through better communicationand identification of common interests in dif-ferent fields and strengthening of the regionalcontext for solving shared problems. Regionalgovernments can also support and initiateprojects of regional interest at the govern-mental, NGO, and university levels.

And to the EU governments…

# Support a parallel and technical process ofvisa harmonization as status talks begin:Provide a clear mechanism for status talks tofocus on visa harmonization for Kosovo andSerbia as part of an early confidence-buildingportion of the status talks.

# Adopt a positive discrimination policy forEU visas: All residents of the region shouldnot be punished for the behavior of criminalgroups in their society and deprived of freemovement in EU countries.26 Accordingly, weurge the EU to introduce a "smart visa" poli-cy for Serbia and Kosovo, which would givepreference to students, businesspeople, andthose who will be key in building their respec-tive countries. A more relaxed visa regime for

EU countries-especially for experts, business-people, and students-would help alleviate thefeeling of dislocation, isolation, and wouldfacilitate and speed up the process ofEuropean integration in the region. Theprospects of free movement of people (evenof some key target groups) in the region andwith the EU would be highly instrumental inimproving control of the borders and dimin-ishing illegal flows of goods and people.

# Provide technical and financial resourcesfor visa regime upgrades: The introductionof biometric identity cards and other borderand visa regime controls will require signifi-cant input from EU countries. We encouragethe EU, whether under the guise of theStability Pact or other regional mechanisms,to assist in the parallel harmonization andupgrades.

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26As the International Commission on the Balkans in its Report "The Balkans in Europe's Future," published in 2005, concludes: "A smart visa policy ofthe EU that opens its borders to Balkan youth and Balkan businesses while closing them for criminals should be at the very centre of policies that willmobilize popular support for building EU member states in the Balkans."

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The walls of the Balkans are legendary, whether it is the stone wallsof Kosovo or the fence lines of Vojvodina. These walls have served apurpose and are, in themselves, not a problem. Yet the barriers andregimes that supposedly protect and facilitate are actually impeding theinterconnections necessary for development and European andregional integration.

Lack of free trade has limited trade and economic opportunities forthe region, providing little incentive for legal goods transfer, responsi-ble customs and border regimes, or a base for growing the much-need-ed businesses of the region. At the same time, the inability of the res-idents of Serbia and Kosovo to travel within Kosovo and Serbia,throughout the region, and to the European Union reinforces theghetto mentality that encourages national extremism and populism,thus offering more incentives for divisive regional relations than con-structive common-interest connections.

The beginning of status talks in Kosovo is a historical opportunityto build highways that connect rather than walls that divide. Thesetalks should be seen as the opening of a larger process of negotiatingcommon interests in trade and the movement of peoples. Since thestatus talks are likely to be part of a longer-term process, it is particu-larly critical that Serbia and Kosovo take ownership of their respectiveparts of the current impasse on the movement of good and people. Itis likely that the status talks will consist of stages that represent out-comes neither of one preference or another, suggesting that a contin-uation of the status quo in relation to the visa and trade regimes willcontribute to undermining the progress the status talks are purportingto promote.

Political will to change the inconsistencies of the current trade andvisa regimes by the governments of Kosovo and Serbia is crucial. Butthis needs to be supported by clear regional will to accept and assistKosovo and Serbia in their efforts for greater regional integration andthe achievement of European standards. The EU and theInternationalscx Community also remain critical players for theincreased liberalization of the region. Support for making the negoti-ation process one of clear objectives and gains resulting in regionalwinners will ultimately serve the best interests of Serbia, Kosovo,SEE, and the EU. Using status talks to go beyond the status quo is crit-ical for breaking down the ghetto within the Balkan ghetto.

# CONCLUSION

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# APPENDIX A

Top 10 product groups in the trade of Kosovo and Serbia in 2004 and Q1 2005, in 000'euro

Kosovo imports from SerbiaProduct group 2004 - annual No. Product group 2004 - annualBlocks and bricks 16,236 1 Wine 725Wheat and flour 10,946 2 Carpets 646Fertilizers 9,025 3 Heaters 609Beverages 8,376 4 Scrap metal 463Other construction 7,712 5 Medicaments 404Cement and lime 6,324 6 Furniture 189

Tiles 6,322 7 184

Plastic products 4,929 8 150

Source: UNMIK Customs database

Hygienic products 2,344 10 Scrap paper 77

4,225 9 Iron pipes 127

Kosovo exports to SerbiaNo.123456

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10

Shock absorbers

Recording and other equipment

Corn andAnimal Food

# LEGAL REVIEWOF FREEDOM OF MOVEMENT

Legal framevork of the freedom of movement in Kosovo

There is a numerically modest yet solid andclear legal foundation pertaining to the movementof persons into and out of Kosovo. According tothe letter of the Constitutional Framework1 thequestion of movement of persons falls within thedomain of reserved powers of international(United Nations') administration. In light of thisconstitutional solution, movement of personsinto and out of Kosovo is regulated with UNMIKregulations and secondary legislation.Furthermore, in light of the division of responsi-bilities between civilian and security sectors ofinternational administration, it is the SpecialRepresentative of the Secretary General who inconsultation with the Commander of KFOR andthe UNMIK Police Commissioner designatesauthorized border and boundary crossing points.

According to the Regulation no. 2001/10,2 theline of division between Kosovo and Serbia isclassified as a boundary and crossing of the sameoutside of crossing points is sanctioned as acrime. Regulation no. 2005/16 is the key legal actwhich in more detail regulates movement of per-sons into and out of Kosovo including thosegoing through crossing points along the boundarywith Serbia. It stipulates the conditions to be metfor entry into Kosovo, different categories ofentry and stay, remedies in cases of a denial ofentry, etc. In addition, the Regulation spells out indetail the conditions for refugee status and relatedissues.

Aforementioned Regulation (2005/16) is gen-erous when listing classes of persons who mayenter Kosovo and remain there indefinitely,including all those who either hold an UNMIKtravel document, hold an identity card indicatingthat the bearer is a resident of Kosovo, is adependent or under the age of 18, a spouse orother, or by relevant government authority is

authorized to rest indefinitely in Kosovo. In addi-tion this Regulation lists another category of per-sons with no practical distinctions as to the effectsof their entry and the right to indefinite stay inKosovo with those already mentioned-all thosewho hold a travel document or identity card ofthe State Union of Serbia and Montenegro arepractically entitled to the same rights as residualinhabitants of Kosovo.

All other categories of persons may, at a pointof entry, request authorization to remain and staytemporarily in Kosovo. While Regulation 2005/16stipulates requirements that such categories shallmeet, it also outlines the framework that shallgovern discretionary powers of border point offi-cers and grounds on which certain actions relatedto movement into and out of Kosovo may bedenied. Furthermore, legal remedies are guaran-teed for those denied entry or authorization toenter and remain in Kosovo, those that are deniedor terminated refugee status, or individuals whosetravel documents are seized. All the categories inquestion are entitled with the right to have deci-sions in question reviewed by the court.

Legal Framework on the Freedom of Movement in Serbia

Regulations of the State Union of Serbia andMontenegro (SCG) and the Republic of Serbiawhich deal with the freedom of movement are:Law on Citizenship, Law on Traveling Documentsof Yugoslav Citizens, Law on Movement and Stayof Foreigners, SCG Law on Asylum, andRegulation on Control of the Crossing of theAdministrative Line.

Law on Citizenship of the Republic of Serbia("Official Gazette of SRJ" no. 24/94, 28/96,68/2002, "Official Gazette of SCG" no. 12/2005)defines that the citizens of the Republic of Serbia,regardless of their ethnicity, acquire the citizen-ship of the Republic of Serbia by origin, birth inthe territory of the Republic of Serbia, accept-ance, and according to international treaties. Thecessation of the citizenship occurs by release,

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1Regulation No.2001/9 on a Constitutional Framework for Provisional Self-Government in Kosovo.2Amended with Regulation 2003/18.

# APPENDIX B

renouncement, acquiring the citizenship ofanother member state and according to interna-tional treaties. Considering the fact that the cur-rent Law on Citizenship does not define circum-stances which exist in the territory of Kosovo, itcan be considered that according to the legal sys-tem, the citizens of Kosovo are at the same timecitizens and nationals of the Republic of Serbiaunless the reasons for cessation of citizenshiphave occurred. Practically, this means that, as citi-zens of the Republic of Serbia, they have the rightof the freedom of movement and all other rightsguaranteed by the Law and the Constitution.

Law on Traveling Documents of YugoslavCitizens ("Official Gazette of SRJ" no. 24/94,28/96, 68/2002, and "Official Gazette of SCG"no. 12/2005) regulates the questions of travelingdocuments and visas for Yugoslav citizens travel-ing abroad, types of traveling documents andvisas, and the way of issuing them.

Article 15 of the Law stipulates that the bodyresponsible for internal affairs issues the passport,group passport, and visas according to regula-tions. The body responsible for internal affairsissues the passport valid for ten years. Documentsthat a citizen needs to present to the internal unitof the Ministry of Interior or diplomatic-consulardepartment of SCG abroad are: birth certificate,proof of citizenship, previous passport of SRJ (incase the citizen owns one, i.e. if he/she is notapplying for the passport for the first time), threephotographs and two completed applicationforms for the issuing of the traveling document.

Passports are issued for the period of 10 years(since the age of 14), 5 years (conscripts), and 2years (children and children in the parent's pass-port). The precondition for acquiring a passport ishaving an ID for which it is needed to submitdocuments in the place of residence. This matteris regulated by the Law on Identity Documents.

The body in charge of internal affairs is obligedto answer the application in a period of 15 days.Rejection of the application is possible when: anindividual applying for the traveling document isprosecuted, if an individual is convicted to anunconditional prison punishment longer thanthree months, if an individual is denied freedom

of movement in order to prevent an epidemic,and if it is necessary in order to defend the coun-try in case of a proclaimed state of war, state ofimminent danger, or emergency.

Yugoslav citizens (term used by the law whichin fact implies citizens of the State Union ofSerbia and Montenegro) can have only one travel-ing document of the same type. Considering theabovementioned solutions from the Law onTraveling Documents of Yugoslav Citizens, it canbe seen that there is a clear procedure of issuingtraveling documents, and that in the limited framedefined by law, a person applying for the travelingdocument can be denied one.

Since the largest number of birth registers havebeen dislocated from the territory of Kosovo,Kosovo inhabitants who need or want to have thedocuments necessary for the issuing of a pass-port, replace or extend the validity of alreadyissued documents (IDs and traveling documents),or to acquire the blue passport can do so in dislo-cated organizational units of the Ministry ofInterior of the Republic of Serbia, which are situ-ated on the territory of Serbia.

For the traveling documents issued by the SCGdiplomatic-consular departments, consular feesaccording to the Law on Federal AdministrativeFees ("Official Gazette of SRJ" no. 81/94, 61/95,63/96, 29/97, 12/98, 59/98, 44/99, 74/99,73/2000, 21/2001 and 71/2001) are charged.

Law on Movement and Stay of Foreigners3

regulates the questions of defining a foreigner,stay of foreigners, registration of residence, docu-ment for establishing identity, evidence andauthorities of the bodies which deal with theseissues (offices for internal and foreign affairs). Aforeigner can be denied access to the SCG (thelaw uses the old name SFRJ), which can limit andforbid movement for reasons of protection ofpublic order and interest in defending the countryas well as reasons which come from internationalrelations.

Regulation on Control of the Crossing of theAdministrative Line ("Official Gazette of SRJ"no. 41/2002) defines places where it is allowed tocross the administrative line. Permits for move-ment and stay of individuals are issued only for

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3("Official Gazette of SFRJ" no. 56/80, amended by the amendments published in "Official Gazette of SFRJ" no. 53/85, 30/89, 26/90; "OfficialGazette of SRJ" no. 24/94, 28/96, 68/2002; "Official Gazette of SCG" no. 12/2005).

working on land, pasture of cattle, hunting andfishing, and exploitation of forests and other nat-ural resources. An individual who crosses or stayson the administrative line is obliged to act accord-ing to the order of the authority (Ministry ofInterior of the Republic of Serbia) and JointSecurity Forces.

Crossing of the administrative line betweenSerbia and Kosovo is possible on nine locationscontrolled by the Ministry of Interior of theRepublic of Serbia. Although the Serbian policecontrol these crossings, as well as other bordercrossings, the coordination of the work of statebodies and other affairs related to the borderregime is done by the SCG Ministry of ForeignAffairs together with the Ministries of Interior ofthe Republics.

When the set of laws dealing with the freedomof movement is considered, it is necessary to dis-cuss the Regulation which deals with the issue ofasylum. The Federal Parliament adopted onMarch 21, 2005, a Law on Asylum ("OfficialGazette of SCG" no. 12/2005), which regulatesthe questions of asylum, foreigners, individualsasking for asylum, and individuals with a recog-nized refugee status. The law gives the right toforeigners to apply for asylum and the applicationis decided by the authority within a period stipu-lated by the Law. During the procedure of granti-ng asylum, any kind of discrimination is forbid-den; deportation or restitution, and the security ofdata is assured; as well as the unity of family andcooperation with the High Commissionaire forRefugees. It is defined that the individuals askingfor asylum and refugees are to be guaranteed theright of stay and complete protection accordingto the law, integration in the society, and humani-tarian protection, which undoubtedly adds to therealization of the right to the freedom of move-ment.

In the area of visas, the key decision wasbrought by the SCG Council of Ministers on May29, 2003. The Decision on the Abolishment ofVisas for entering and stay in Serbia andMontenegro defines the current visa policy ofSCG. By the Decision of the SCG Council ofMinisters, visas are abolished for entering and stayin SCG for the period of 90 days for all traveling

documents for the citizens of all 25 EU countriesand Switzerland, Norway, Iceland, Monaco,Lichtenstein, Vatican City, Andorra, San Marino,Israel, Croatia, USA, Canada, Singapore, Republicof Korea, Australia, and New Zealand.

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PublishersFreedom House European Movement in Serbia Kosovar Institute for Policy Research and Development

AuthorsJelica Mini} Predrag Bjeli} Maja Bobi} Svetlana Logar Bisera [e}eragi} Dragan Lukovi}

EditingKristie Doric Evenson

Copy eeditingJohn Ewing

Design aand llayout Milo{ Sindeli}

Printed bby DataponsSkopje, Macedonia

Printed 500 copies

Genc Krasniqi Agim Demukaj Ilir Dugolli Leon Malazogu Lulzim Peci

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