Serbia tobacco action plan leads to CEFTA ratification in September

06/06/2007

After adopting an action plan to regulate domestic tobacco laws earlier this year, Serbia has now cleared the way to ratify the CEFTA treaty with the rest of the region.

By Davor Konjikusic and Georgi Mitev-Shantek for Southeast European Times in Belgrade -- 06/06/07

The main goal of CEFTA is to develop economic relations among member countries. [CEFTA]

The Serbian Economy Ministry announced earlier this week that the country would ratify the Central European Free Trade Agreement (CEFTA) in September, ending its status as the only country in the region not to have done so.

Serbian State Secretary at the Ministry of Economy and Regional Development Jasna Matic said on Monday (June 4th) that with the removal of the obstacles between Serbia and Croatia, Bosnia and Herzegovina and Macedonia -- which included import and export taxation -- Parliament can adopt the bill needed to ratify the agreement.

According to the agreement, CEFTA's main goal is to "establish a free trade area by gradual liberalisation of mutual trade relations, and by the removal of tariff and non-tariff barriers to trade during a transitional period."

"By becoming a member of CEFTA, Serbia will benefit the most from a so-called diagonal accumulation principle that enables privileged export regime into the EU market of goods produced in more than one of the CEFTA member states," Matic said.

In light of the export market, the CEFTA members -- Albania, Bosnia and Herzegovina, Croatia, Macedonia, Moldova, Montenegro and Kosovo -- have agreed to the Serbian government's action plan for the tobacco industry, which was adopted in March.

The plan envisions equalising the excise duty on domestic and foreign cigarettes from January 1st, 2008, increasing the customs duty from 15% to 57.6%, and will run from 2008 to 2012 to regulate relations between the state and the tobacco industry. The document aims to improve the agricultural tobacco industry, increase exports of tobacco products and improve agricultural tobacco production.

The plan abolishes discriminatory excise taxation, providing the same treatment for domestic and foreign brands of cigarettes. It also eases the present obligation to buy domestic tobacco -- companies can purchase up to 20% of their tobacco from abroad.

Tobacco factories in Serbia are satisfied by the move, saying it encourages continued investment in Serbia. Eugenio Sidoli, general manager of the DIN cigarette plant in Nis, owned by Philip Morris, said the plan will be more costly to cigarette makers, but the costs will be offset by the introduction of market conditions and business policy changes.

"The aim is to earn a considerable excise revenue profit by 2012, as there should be an increase of the export in the tobacco industry, and encourage farmers to grow larger tobacco quantities and manufacture better tobacco leaves," Minister for Economic Affairs Milan Parivodic said.

Since 2003, four tobacco companies have invested about 1 billion euros in Serbia's tobacco industry.

Parivodic said the plan allows the ratification of CEFTA, and lets the country open negotiations on joining the World Trade Organisation.