The Government Is Violating The Constitution

To the question of whether the new states can count on the contacts with the international monetary institutions before the property settlement, primarily with regard to its foreign debt, Oskar Kovac replies:

"The debt is the most complex part of the property settlement because all the contracts concerning foreign credits with the effective guarantee of the federation provide for the entire banking system to stand behind the each individual loan as a guarantor. So, the entire debt consists of one package, and our commissioners are sticking firmly to it.

* Does it mean that a long period of uncertainty regarding the inflow of fresh foreign capital is before us?

Yes, although it seems that the infrastructure projects which were earlier approved by the World Bank, will be launched. The IMF could be activated as well, since it knows only Yugoslavia as a partner: this could happen if the ones who are part of the single monetary area asked for, let's say, the consideration of the anti-inflationary programme or something like that. Theoretically speaking, such a possibility does exist.

* What do you think of the idea to put the National Bank of Yugoslavia under the control of the IMF?

I don't think that would be a good idea. That would mean pursuing an autonomous policy of good quality money, which would be totally independent of the given situation and of the other segments of the economic policy something which does not fit with the image of a sovereign state.

* How far has the negotiation process in Brussels gone concerning the economic relations of former Yugoslav republics?

Unfortunately, all this is becoming more vague, since there are numerous changes which date from the acceptance of the Brioni declaration. In fact, the part of the document referring to economics has been well devised, while the main controversial points are of political nature.

The economic part provides for a customs union, naturally for the parts of Yugoslavia that wish to join it. That implies a certain harmonization of economic policies as well as certain principled solutions, such as, for example, freedom of conducting activities on the entire territory covered by the customs union, circulation of people, production factors etc. For the ones who do not want this, there is always the possibility to arrange their relations with the customs union on the GATT principles, like any other sovereign state.

For example, Slovenia still offers only the free trade zone, which means that there would be no customs between the new Yugoslav states, although common institutions and harmonization of economic policies would no longer be in existence. The southern part of Yugoslavia is not interested in that, since with such customs free trade, economic laws inevitably lead to the pouring over from the less developed to the more developed states. The customs union would correct this in as much as there exists a unified customs tariff towards all third parties while customs receipts are distributed in such a manner as to compensate for this outpouring. In the past, Croatia had to consent to the formation of the customs union for several reasons, but it is detracting now with the explanation that so much blood has been spilled that it would not be realistic to expect any serious cooperation.

* Is there any good reason why Serbia should support this customs union fervently?

I don't think that this could form an important part of the Serbian national programme. National programmes tend to be closed and self- sufficient - that is the reason I concern myself with them. Now that it is pretty much clear that Serbia and Montenegro are forming a common state, it would be difficult to envisage any kind of a solution for Bosnia and Herzegovina where they would have no connection with the new Yugoslavia. That means that Serbs from Bosnia would insist on keeping the dinar. We'll see whether the others will accept this. If Bosnia is to stay within Yugoslavia in any kind of an association, then we are talking about a half of the former Yugoslavia, for which it would be natural to have a customs union; should the referendum in Krajina one day decide that it should be annexed to the association of the Serbian states, it would be natural for them to be in that union.

Such a union would suit Serbia, since it is a moderately developed Yugoslav republic; however, it would not suit it to form a free trade zone with the developed republics, since it will then be faced with the one-sided outpouring, but without any compensation for it.

I think that the forms lower than the customs union should not be considered at all, since they concern only sovereign states. In that case, I would ask myself why do we need that with Slovenia and Macedonia, and not with Hungary, Czechoslovakia, Poland or Greece...

* Is there a connection between the international position of Serbia and its internal policy, primarily economic, which you have recently described in Parliament as a series of violations of constitutional and legal regulations?

The situation has now become clear: Serbia adopted a Constitution two years ago which provides for a legal state, division of power, multi-party system and rule of democracy, a series of human rights and market economy providing for independence and business-doing. This is the way Serbia presented itself to the world, while the ruling party used that platform in the elections.

I have warned the president that credibility can be won only through consistent implementation of the Constitution, in other words that the one who has adopted such a Constitution now has to face a test to prove that he meant it seriously and that it was not merely a gimmick.

Actually, he has to prove that it was not just a politically useful concept, but that it concerns a concept which could be counted upon by our partners throughout the world. And foreigners will only be convinced that it is so through actions and not through mere talk.

* How do you explain the fact that the current policy can be at such odds with the Constitution?

I don't have all the answers. I have pointed to the same things at the time of Zelenovic was Prime Minister since the nationalization of economy was the starting point of his programme as well. To be honest, the interventions we have today were not in effect at the time: the entire situation was different too.

However, it is true that the present government policy calls into question the two main postulates of market economy: they are the independence of companies and the market frame which provides companies with a basis for rational decision-making. We have decided that companies need no special protection since everything is forcing them towards profit-maximization so it is up to the capability of each individual subject to expand or go bust. And what is being done now? The law actually says to a quarter of the Serbian economy, comprising some ten public companies, that they can do what they like and that their losses will be covered.

* And the Prime Minister is complaining that he would let go of the economy, but that the economy won't let go of him.

I do not concern myself here with the question of motivation, but I am principally pointing to the fact that if you say to one quarter of the economy that profit maximization can be its chief function, but that at the same time it will not matter if that does not materialize, that in effect means that a new coalition will be formed, for various reasons, which will, at best, be just covering these expenses. And there was no reason to proclaim these companies public, instead of enabling the formation of joint companies in that area. Actually, there is only the political explanation: someone wants to manage 25% of the Serbian economy. I personally think that is political blindness.

The other two-thirds of the Serbian economy are in no better position, not only because of the threats concerning the changes in the law on state capital which the government wants to use to turn all operational funds of companies into a republic development fund, which actually means turning the remaining 75% of the economy into state-owned. How can such companies maximize their profit, especially in the conditions of a fragmented market, lack of capital etc?

You can see that securities, instead of being issued according to market rules, are printed at the republic Ministry of Finance; then, since no one is buying them, laws are passed on the basis of which the securities are given to the railways to pay their dues, and those who get such worthless pieces of paper quickly turn them over to the banks, so ultimately the state has to make up for the losses of the banks.

All this has nothing to do with either the market, or the promises or the Constitution, in this as in other areas.

* How would you comment on the reply of the Prime Minister of Serbia that such criticism comes from cabinet economists?

I didn't concern myself too much with that reply.

* The question is whether the government is doing its job when it is bragging about going into factories and solving their problems.

It is perfectly clear that in the division of power the government should be the one to propose the laws to the Parliament relating to the market system, the economic independence and the legal security of companies. This particularly concerns regional development and social policy.

Interfering with the relations between the people and the companies should be the last thing the state should concern itself with.

* Do you agree that the position of Serbia, not only towards other republics but towards the world as well, will primarily depend on how much the current policy of the Serbian government differs from the constitutional solutions?

Precisely. That is why I spoke of the credibility in Parliament. If that is missing - nobody will believe in what we are saying here.