Strengthening local and regional economies with the help of improved framework conditions

Project completed
Financial support is being provided to promote the local and regional economies.
Since 2000 Serbia has been striving to establish a primarily market-oriented economy and democracy. © SDC

Switzerland is helping Serbia with the development of municipalities in structurally weak eastern Serbia. Municipalities are to be strengthened and the economic framework conditions improved with respect for the principles of good governance. Thanks to Switzerland‘s contribution municipalities now dispose of additional financial resources for the introduction and improvement of public services.

Country/region Topic Period Budget
Public finance management
15.06.2012 - 31.03.2017
CHF  3’565’000

Eastern Serbia is a structurally weak region, suffering from considerable emigration: 30% of the population of the region today lives and works in Germany, Switzerland or Austria. Incomes in the region are a mere 12% of those in the capital Belgrade. Most industry dates from the time of the former Yugoslav Republic, mainly in the fields of timber, mining, glass, textiles and agricultural vehicles. The region does however have potential, notably in agriculture  and tourism.

The role of local government

The municipalities have responsibility in the following areas: spatial planning, building regulations, kindergartens and preschools. They are also responsible for social services, youth, sport and culture, and protecting the environment. Local governments must also see to the maintenance and develo-pment of municipal infrastructures. Promotion and development of the local economy is of particular im-portance. Due to the high unemployment rates, the population has great expectations with regard to job creati-on.

Transfer of financial resources and responsibilities

The funds transferred from the state to local govern-ments are not sufficient to enable the latter to fulfil their responsibilities. Nor are the payments sufficiently regular. Municipalities are therefore well advised not to wait passively for the transfer of state funds but rather to generate their own income as efficiently and effectively as possible in accordance with the existing legal framework conditions.

Implementation of the programme of economic development for nine municipalities in eastern Serbia

The economic development programme assists the municipalities with tax reform. The aim is to imple-ment the property tax in a manner that is both fairer to the citizens and more efficient for the administration, supported by registration of the many properties that have not yet been registered. Development-related investments in local government, e.g. for the promotion of tourism and agriculture, are co-financed by the SDC and the German Federal Ministry for Economic Cooperation and Development. A competition has also been created: the municipality that harnesses the largest number of as yet unregistered taxpayers and generates the greatest amount of additional income from property tax will be rewarded with a further financial contribution for municipal investments. An all-purpose municipal office (“one stop shop”) provides citizens, companies, investors and others with improved advice and services, for example when it comes to obtaining a building permit quickly and legally.

Results and impact of programme

It has been possible to almost treble the number of properties subject to property tax in the partner municipali-ties, and income from the property tax increased by 50% between 2013 and 2014. The lessons learned from this tax reform have been incorporated into the draft of a new municipal finance law. The project has also had a positive impact on good governance: the owners of more than 400,000 properties who for the first time are paying direct taxes have demonstrated a greater interest in local politics and are demanding greater accounta-bility with regard to the use of public funds.

Thanks to improvements in the nature and reliability of planning instruments it has been possible to make new investments in tourism, agriculture and municipal infrastructure. Three examples from the tourism sector:

  • The Golubac Fortress, which has considerable tourism potential, has been renovated and developed further.
  • The promotion of agri-tourism, and of the Negotin Pimnica wine cellars in relation to tourism, has been made more professional.
  • The marketing of such local products as wine and honey has been improved, with greater focus on sales to passengers on Danube cruise ships.

Further information