Dreams From Scratch

The team of economists which Vreme weekly has named Group 17 was greeted with applause last week in the crowded amphitheater of the School of Philosophy in Belgrade. Mladjan Dinkic, one of the co-authors from the Group said to the present students, most of them from the School of Economics, that the Letter to the Public represented an awakening from the several-years-long hibernation.

Continuing our series of conversations about our economic reality initiated by Vreme weekly after the government had announced the promise that 1997 would be the year of reforms, the topic of this week’s conversation is the recently-published Program of Liberalization of the Export and Import of Goods Until 1999 by the Federal Trade Ministry. Dr. Jelica Minic, the member of Group 17 and Institute of Economic Sciences associate says about the above-mentioned federal program: "The announcement of the liberalization of foreign trade relations is praiseworthy. Of course, according to the presented information the liberalization is radical because the assessment is that 97% of the Yugoslav products will be freely exported and 95% of foreign goods freely imported in 1999. Nevertheless, it is inevitable to remark that the reform will be conducted under extremely unfavorable transitional conditions from the war industry to the peace time industry, within the conditions of isolation from the international community and enormous external and internal debts.

The federal program states that the local market should be open to imports of meat, meat products and agricultural products. Does that mean that most of the burden of reform will again be borne by agriculture?

One of the arguments in favor of liberalization is balancing the system of prices with the prices on the world market. Having in mind the quality of our system of prices, the extent of subsidized services and that, in fact, agriculture is mostly exposed to crisis, the question is will it be capable to support another stroke of this kind. One should bear in mind that currently in Europe agriculture is the most protected area compared to other sectors. It would be nice to hear the explanation for such a move.

What would be your argument, for instance?

Exports and imports will have a very serious impact on the price of the domestic consumers’ basket, but also on the position of the producers in agriculture who lack the right support and the appropriate balance of the input and output prices. We can expect the reaction of the domestic producers of agricultural products on the measures of the federal ministry, and it could make some of the measures highly questionable.

We are just beginning to adjust relations with neighboring countries and Europe seems hopelessly distant...

We are starting from scratch, although there is also a theory that we are the successors of the former Yugoslavia and that this fact will bring about our special treatment in normalizing the relations with the EU and other international organizations. Not a single step has been made toward regulating the relations with the international community and international and regional financial and economic organizations. The negotiations so far clearly demonstrate that our desires will not be met and that we shall have to respect the procedure that all former Yugoslav republics have already undergone. Thus, we will not have any privileged status. Moreover, our image in the world is extremely unfavorable so we can expect additional difficulties and by no means expect exemptions in the course of normalization of our relations with the world.

Which sectors of our economy in your opinion can be competitive on the EU market?

The first activities that penetrated barriers were again, of course, completed by the agricultural sector. The supply of wine from our country is expected since certain quotas assigned to the entire former territory of Yugoslavia have not been used up. Products such as early fruits (raspberries, strawberries), wheat and the like will be sought after. There is also a textile industry based on loan deals. It can also be expected that the production of some intermediary products will be activated, some areas of the chemical and pharmaceutical industry, the metal production complex, some areas of machine building industry and perhaps the production of agricultural machinery.

Trade liberalization is only one element of the entire liberalization package...

Along with the liberalization of trade, the package encompasses liberalization of assets flow, intellectual ownership and services, but no serious results can be achieved in that area if confidence in the domestic banking system does not return. That is the required precondition for the entire reform. Domestic investments are in fact the basis of any long term expansion. Foreign assets have certain moving functions as well as educational ones, but the most important is to revive domestic savings and investments.

Is the normalization of relations on the local and world market possible without the greatest possible transparency?

The transparency of the political and economic systems is necessary in order to present the real scope of the problem to foreign partners. The faked data on the gross national product and the national income per capita lead nowhere. They can only worsen our position in the negotiations on repaying the debts and make our position with the World Trade Organization more difficult. The manipulation of data can only harm domestic economic subjects, putting them in a situation which is not in keeping with the real capabilities of our economy. Transparency is crucial also for the current sale of big systems. Those transactions are always the subject of serious public control in the world. Here, they are just the means of preserving power, and not of protecting public interests.