Time to Stop and Think

Yugoslav National Bank (NBJ) Governor Dragoslav Avramovic said it's too early to talk about Program Three which will do away with the administrative economy, but added that he is insisting on it and that the program will focus on "democratizing ownership" or privatization under a model close to the thinking of the unions with workers and pension funds getting most of the remaining state owned property.

VREME: Will Program Three be directed by people like Ljubisa Ristic (leader of the Yugoslav United Left - JUL and theatre director) or people like you?

AVRAMOVIC: "(Laughing) I am sure that it will be implemented by people who think like me. There is a problem here. Peace has been achieved, the sanctions have been suspended but people feel no improvement. Instead of taxes dropping and life becoming easier, we increased the budgets and a brutal reaction came from businessmen who raised prices since state companies and their logic of transferring costs to others is still dominant. There is a number of stable inputs, stable monetary policy, stable exchange rate, stable food supplies, relatively stable salaries. But prices are rising. That's a sign of the need to examine the system."

Let's go back to Program Two which obviously hasn't been implemented entirely as you wanted. It won loud support and then stories of the protection of the local industry began.

"When you look at that terminology, we want integration into the world market. But when it comes to real decisions, production at world prices or cost prices that can't fit into normal prices, it's a different story. That is the heritage of the school of priority, the school of substitution. That issue hasn't been resolved by the state since there are powerful centers that can't survive without inflation and who feel that they can produce what they want at any price. So we get inflation strikes. We face a situation when we have to make ad hoc decisions on products and that is an impossible situation for economic policy."

There was no profit barometer to point the way for investments?

"There's no use in a rate that is based on false suppositions. That will have to be solved now. There will be no more big investments in companies that can't survive and have to be protected from the competition constantly. I think that's clear."

The public has a different impression. Protectionists aren't keeping quiet.

"We have to do that. We have to make a clean cut. We pushed some money left and right but in fact our banks have no money. Also, we won't be getting foreign money immediately. So there can be no protection since market protection has to be paid for."

You expected a lot from operations at the bonds market. How would you evaluate the start of NBJ bond sales?

"It's still early for a comprehensive answer but I believe we managed to bring down the interests that reached 20-30% a month on the illegal market. We brought that monthly rate down to 6-7%. But bear in mind that we went through a tax strike."

Let's get back to foreign investment. People understood that the sanctions prevented the inflow of foreign money. They're wondering when the money from Cyprus will be brought back. Is it coming back?

"We were slowed down very much by the fixed exchange rate. Illegal capital does not like illegal prices, people don't want to go from one illegal situation to another and no one wanted to sell foreign currency legally at lower prices. Now we broke that circle but foreign money can't come into a state company yet. They don't know who to talk to, what they're buying. Everyone is saying that, unofficial guests, official representatives, bankers."

We keep hearing that production has no loans, that there are no export loans. Do you feel the pressure on the primary emission?

"I became Governor as a man who believed the main cause of the crisis is expensive and scarce credit. And I got to the end of my term convinced that any expansion of NBJ credits would cause chaos in exchange rates and revive hyperinflation. The economy has to get real funds. That means banks have to have deposits, they have to get money from abroad (at least 1-2 billion dollars) and that money has to be created within companies. That has to be done for us to provide export loans. I repeat, the budget should not have been expanded. The governments aren't the only ones to blame for that, that's the system we have. We have to deal with ourselves.

It's high time for the population to be able to relax. It's time to stop and think. As for me, I believe we can reconcile privatization with our idea of social justice."

So Program Three. Third time lucky.

"I wouldn't discuss that yet. The central issue is allocation of funds. Leaving the mechanisms and logic of an administrative economy. Abandoning the idea of investments that work at half their capacity later and a reorganization of our management along with a return to cooperation with international institutions and a return to the world market not because we they need us but because it suits us.