Serbia: EU May Extend Sugar Ban

A European Union team is so unhappy with Serbia's attempts to deal with sugar export scammers that it is unlikely to overturn a recent ban on the industry, IWPR has learned.

The EU clamped down hard on Serbia and Montenegro when it emerged earlier this year that suppliers had been importing cheap foreign sugar and repackaging it to make it appear to be a Serbian product.

This sugar was then exported to EU countries, taking advantage of generous preferential trade conditions and subsidies. Millions of dollars of extra profit is believed to have been made in this way.

When the scam was uncovered, the international community insisted that the recently-formed state of Serbia-Montenegro take steps to tighten its legislation and customs controls, and imposed a three-month moratorium on the preferential tariffs granted to Serbian sugar exporters.

But an expert EU team, which visited Serbia from July 8-11, has not been satisfied that the authorities have done enough to stop the practise. They are privately hinting that the ban may not be lifted - which could have serious implications for the region's sugar beet growers.

An IWPR source said that the team was particularly unhappy with the customs situation. And individual members of the squad, speaking on condition of anonymity, confirmed that Serbia would not have been given such preferential treatment if the EU had been aware of the situation back in 2001.

An extension of the moratorium would force the Belgrade government to take serious steps toward closing the loopholes which allowed the scam to flourish, the team argued. Proper anti-fraud measures had to be introduced, and a serious overhaul of the customs system was needed.

Since the scam was uncovered in April, Belgrade has formed a special custom service team tasked with issuing certificates confirming the origins of export goods.

One customs official is in charge of monitoring export sugar, special stamps have been prepared for the EU market and chemical analysis of sugar samples is being introduced.

At the same time, the EU Customs and Fiscal Assistance Office, CAFAO, has opened offices in Belgrade and Podgorica, and is currently training customs officials.

However, while these measures will restrict further fraud, the EU believes that the danger has not yet been eliminated - citing Serbia's continued inability to put proper customs legislation in place as the greatest failure.

Although a draft law was announced at the beginning of the year, it is yet to be presented to parliament.

This bill would give customs officials free access to companies in order to check the origin of their export goods - a significant change from the status quo, where officers have to rely on certificates issued by the various manufacturers.

The second serious problem involves personnel. One member of the EU team admitted to IWPR that education, reform and implementation of a new system could take at least three years to complete.

Another stumbling block on the road to regaining preferential export terms is the slow and ineffectual progress toward harmonisation of Serbia and Montenegro's trade relations.

The EU insists that future integration with other European states is dependent on the country forming a unique market within its borders. Therefore, it has imposed a SCG customs directorate to control the whole territory.

However, the Serbia and Montenegro customs commission, though very important, does not yet exist. While the decision to create such a body was taken at the beginning of 2003, the process has stalled because Podgorica does not appear to be interested in forming unified institutions.

The customs commission has been unable to form as Montengro has only provided one of the required three representatives, blocking progress further.

Belgrade is yet to reveal the companies who have been implicated in the sugar export affair. But at a July 4 press conference, Serbian economic relations minister Goran Pitic named only two companies and confirmed that charges had been brought against only one so far - Interfrigo from Cacak.

Pitic also confirmed that the government would continue to investigate exports to the EU, telling the media that the authorities had their suspicions that some other firms were implicated in the scandal.

Sijka Pistolova is a journalist working with TVB92 in Belgrade.