You May Begin

Yugoslav reformers are better rated abroad than at home where tabloid psychology reigns, where the poor are taunted, where their dissatisfaction and anger are incited with questions like “How much money is coming into the country?” and “Why are things not better already” or “Why are no arrests being made”; where small differences are dramatized; where rifts are stressed and demands emphasized – in one word – where everyone is deluding everyone else in endless denial of the picture which indicates that we have dangerously deteriorated and that we mush go through a lot of suffering which we will only get out of if we are completely concentrated and we finally realize that there is no free lunch.

The on June 11 the executive committee of the International Monetary Fund approved a credit for FR Yugoslavia in the amount of 249 million dollars until March 31 of year 2002, as a symbolic gesture of support for the Yugoslav Government’s economic program.  This will enable the Yugoslav Government to immediately withdraw 62 million dollars, with the next installment of 50 million dollars being made available following the quarterly review of the Government’s economic program.  Everyone took note of these figures and speculated on whether the American member of the executive committee voted or not and how this is connected with the Hague, but a far fewer number of commentators observed that behind this decision is a long-range, positive verdict on recent developments in Yugoslavia.

Stanley Fisher, Deputy Executive Director of the IMF, who chaired the June 11 meeting, did not spare any words of praise for Yugoslav reformers: “The FRY Government has willingly and with impressive speed taken on the extremely difficult task of reconstructing its ravaged country.  Maintaining this motive will be key to getting broad political support for reforms and for ensuring its sustainability.”

NEW PHASE:  The reformers’ team now has “written approval” for the fact that it is sticking to the score and is not playing out of tune.

Ljubisa Sekulic, member of the Forum for International Relations and earlier our representative in international financial organizations, assesses that the support of the International Monetary Fund is of exceptional importance for out country, for it sends a strong signal to private investors…  In his opinion, the opening up of Yugoslavia toward the rest of the world since October 5 of last year unfolded in several phases – from humanitarian aid to the signing of commercial and financial agreements.

The directors of the IMF observed that Serbia already instituted main budget and tax reforms in order to increase the efficiency of its tax system and of open accountability; that it liberalized its foreign currency exchange rate and its trading system; that it liberalized many prices and generally increased prices in the private sector and initiated a series of price hikes for electrical utilities.  It is said that Yugoslav authorities stressed the importance of building an adequate social net as a means for strengthening support for its reform policies.  Montenegro is intending to continue privatization, the restructuring of banks and reforms of the tax system and of trade, while Serbian authorities began implementing a strategy of salvaging and restructuring of banks, and of improving the legal and regulatory framework for privatization, with expectations that significant progress will be made in both these areas.  It is noted that Yugoslav authorities have began implementing the program of restructuring and salvaging of banks in cooperation with the IMF and the World Bank, and that it is expected that work will continue.  In any case, they will check again in three months how things are shaping up.

SAME PRICE TAG AS WAGING A WAR OR BUILDING A METRO:  Economist Bosko Zivkovic says that the salvaging of the banking system is an incredibly costly affair – the price tag is comparable to the cost of waging a war or building an underground railway.

Bernard Shaw and Betold Brecht came up with similar statements – the robbing of a bank is petty compared to the founding of one.  Now they would probably say that both of the above are patty to the salvaging of a bank.  The problem is that the biggest debtors are practically “owners” of Yugoslav banks and are in charge of the destinies of those banks.  The Yugoslav domestic debt is as high as 847 billion dinars (equivalent to nearly 30 billion German marks)!?

Djordje Djukic, professor of banking at the Economics Faculty, who sometimes engages in duels with Zivkovic, thinks that it is impossible to recuperate our banks with domestic resources.  However, he thinks that it is not advisable that the state should recuperate all banks at the expense of taxpayers, but that a decentralized model should be created in which accountability for mistakes made thus far would be stressed.

The objectives of the economic program which are supported by the IMF include control of inflation and moderate recovery.  Fisher suggested that the program which is supported by the Fund will ensure solid macroeconomic policy synchronized with structural reforms.  He points out that restructuring of banks and the entrepreneurial sector remains, along with betterment of financial discipline in the economy and renewal of feasibility of the taxing system.  Every one of these words costs a billion.

Despite efforts, the FRY is facing an enormous financial precipice (around ten billion dollars for year 2001 alone) because of a necessity for import and financial obligations accruing from its foreign debt (10.7 billion dollars, of which 9.7 billion is an outstanding debt) – our current debt is up to 17.5 percent of the Gross Domestic Product (1.8 billion dollars) for year 2001, compared to 8.5 percent of the Gross Domestic Product (700 billion dollars) for year 2000.

This enormous financial precipice can only be bridged partly through economic aid programs, and partly through the writing off of debts.  The assessment of the IMF Executive Committee is that attempts by Yugoslav authorities to establish firm economic policy and to make progress in the direction of sustainable growth will not be possible without strong support from donators and creditors, where it is directly stated that the upcoming donators conference on June 29 “will give the international community an opportunity to demonstrate support” for programs and projects of aid in keeping with assumed needs of the FRY.

THE FROG AND THE PRINCE:  Judging by this report, it is expected that the Yugoslav Gross Domestic Product for year 2001 will increase by around five percent, mainly owing to increased agricultural production following last years’ drought.  The remainder of the economy will grow by two to three percent, with positive effects of the lifting of sanctions and moderate effects of restructuring of companies.

The Yugoslav public has difficulties understanding that these figures which indicate gradual but stable recovery do not suggest sudden change or any transformation of a frog into a prince.  Projections are made with regard to reduced inflation and moderate growth of the GDP, reduction of the public deficit, and gradual return of faith into the dinar in Serbia.  Montenegro is expected to reduce its subsidies, investments and other discretionary expenditures.  Reliance on the German mark in this republic will contribute to financial discipline.  The objective of this economic program is to reduce annual inflation of retail price hikes to around 20-30 percent in Serbia and to 6.6 percent in Montenegro.

TENDERS, AUCTIONS AND 600 AMENDMENTS:  Perhaps this week the Serbian Parliament will begin an important operation which paints the picture of reforms in our country.  After initial discussions on Vuk Obradovic, on salaries of members of parliament and appointment of judges, the parliamentary agenda will move onto a key package of laws (on privatization, on the excise fund and the agency for privatization).  The Serbian Radical Party announced a continuation of obstruction tactics, with the proposed package of laws heading for 600 proposed amendments.  This is only one part of a broad and luckily, as yet unconsolidated resistance to this package.  One syndicate, UGS “Nezavistnost” is halting all cooperation with the Serbian Government, the autonomists of Vojvodina and the management of the cement factory in Beocin are halting the attempted privatization of their enterprise, workers are being incited with statements to the effect that they are being forced to sell what they built, taxi drivers are organizing blockades, raspberry farmers are blocking the town of Uzice, a group of medical workers is on strike…

The proposed draft of the law on privatization will be taken up in parliament after it underwent public discussion for one month.  The text of the draft was put together by a group of experts and was presented to professionals, with directors of agencies for privatization in Hungary, the Czech Republic, Estonia and Poland having been consulted, as well as political parties, syndicates, and Minister Aleksandar Vlahovic met with managers throughout Serbia.

This law is intended to replace the model of outsiders’ privatization which was stipulated in the 1997 law, without any substantial effect.  The Minister for Privatization assesses that the free distribution of shares in around 500 companies did not succeed because there was no desire to invest where it was not known who is in charge of money coming in from new investors and where the majority owner was not known.  “Outsiders’ privatization” was fertile ground for closer ties between politics and the economy, and this is the knot which this new law wants to cut.

Resistance to this law also comes from smaller political parties and those that are part of the opposition because they see in it the end of their involvement in the economy, and it is assessed that this law also does not suit the group of private entrepreneurs who would like this situation to continue in which they are profiting from poor contracts with public enterprises in uncontrolled, parallel privatization.  Probably also active is the managers’ lobby which knows that “political connections” will mean less and less, and that the only valued qualities of a manager will be whether he generates a profit for the shareholders or not.  The list of those against this package of laws is increased by an entire segment of the population which is paid out of the budget – ideological and professional leftists, professional groups which get pay from the state budget and workers who continue to get salaries even though they never go to work, former self-management workers who are losing their status.

The draft of the new law stipulates the sale of all large enterprises to strategic partners who will invest and bring new markets, and this means with large companies with solid reputations, with tradition, history, technological know-how, and with their own programs of employee training.  Large public enterprises, that is to say 70 percent of the value of between 100 and 150 large enterprises should be privatized through public tenders which will be overseen by the Agency for Privatization.  The proposal for finding a strategic partner is submitted by the Agency to the Committee for Tenders.  This report is submitted to the Ministry of Industry and Privatization, and the Ministry in turn submits this report to the Government, with parliamentary committees being part of this proposal as controlling factors which can demand at any moment reports on each individual tender.  Fifteen percent of the capital will go to workers (it will be dealt out free of charge), with the remaining 15 percent going to other citizens.

Around 7000 small and midsize enterprises will be privatized through public auctions, first through “cash auctions”, and if these do not go through, the next step will be to pay off investment by drawing on old foreign currency savings, embezzled under Milosevic and backed by the Government.  In the first 18 months, 30 percent of shares can be dealt out, free of charge, and later, fewer shares will be dealt out.  With selling of enterprises through auctions, the procedure is similar – the initiative is taken either by the public enterprise itself or the Agency for Privatization which is there to ensure public access to the entire process.  The Agency for Privatization will be published in daily newspapers information on the financial prospects of an enterprise which is being privatized (relevant information on the financial state of an enterprise, its production, number of employees, etc.), as well as on its internet site, while large tenders will be placed in the Financial Times, the Economist, the Wall Street Journal…  Foreign embassies in Belgrade will be informed of enterprises that are up for sale, as well as our embassies in countries with market economies, along with our syndicates and chambers of commerce.  The money accrued from the sale of public enterprises will go toward the pension fund which was heavily defrauded under Milosevic (shares in public enterprises which are given to this fund will be sold within a period of six years), toward economic development, toward reinstating nationalized property, toward returning debts for which the Republic of Serbia is a guarantor, as well as for other purposes (this inspires suspicion among some economists, for instance S. Stamenkovic).

This operation should be more important than the donators conference and standby credits, because it should boost an economy which has been at a standstill for an entire decade.  As far as donators are concerned, the issue is being raised how DOS will overcome SNP’s refusal to support the law on delivering those accused of war crimes to the Hague, and how much this will effect financial support of Yugoslavia.  The rest depends on developments on the domestic front.  The basic question is still not how much we will get, but what we ourselves will do.

NETWORK OF INSTITUTIONS:  The fate of this operation, of course, depends on whether there will be a sufficient number of foreign investors who are interested in purchasing our public enterprises.  There are many skeptics, even though people in the Serbian Government claim with optimism that considerable interest exists, with the sale of 130 enterprises being mentioned.

Have the conditions for this been secured?

Yugoslav economists are saying that the top priority is to develop as soon as possible infrastructural financial institutions, a central registry, a stock fund and similar institutions for assessing the financial prospects of participants on the financial market.  It is necessary to secure an efficient system of financial reporting and to raise the level of accountability auditing houses.  The message sent by Yugoslav economists is that restructuring of the banking sector, development of the financial market, as well as privatization of enterprises and banks represents a precondition for improving the overall performance of the Yugoslav economy.  In the statement adopted at the conclusion of the Congress of Yugoslav Economists, the message sent is that the deadline, the model, method and rate of privatization should be set in such a way that costs and negative effects of privatization are reduced to the lowest possible levels.

CREDIBILITY:  In order for this operation of fundamental importance to succeed, it is crucial for politicians to be in agreement and to be decisive, for state apparatus and the justice system to be solid.  The opposition’s resistance to reform can prolong development, but the basic issue is whether a coalition with eighteen political parties will be unified in supporting this process.  There is no one who doubts that the state apparatus can be a point of risk, with a very vital issue being its control.  As far as the justice system is concerned, its rehabilitation and independence will require time and far more will than is apparent at present on our political scene.

The current session of the Serbian Parliament has on its agenda the issue of stripping 35 presidents of courts of their duties.  During the parliamentary debate, a good signal could be seen – there were no party differences on proposed new candidates to the 35 vacant positions.  More importantly and less flatteringly, the public was informed that Serbia practically does not have a constitutional court, given that the number of judges who preside over that court are less than the minimum required for a quorum.  Judges sitting on the constitutional court benches are nominated by the Serbian President (the Socialist Milan Milutinovic), although his nomination must be supported by a parliamentary majority.  In the case of a fundamental difference, a constitutional crisis results which leads to new elections.  It appears that this is not at issue, but rather the “petty detail” that the parliamentary majority has still not managed to find good candidates who will accept to be nominated to such vital positions!

Our political practice ascribes virtually no attention to the dignity of courts, not only because politicians like to make arrests over the newspapers, at will, to judge, to pass judgment even though they are not called to do so, not only because they are closely followed in this by petty journalists, not only because everyone wants to act and judge and jury and hangman, but also because there is certain seductiveness in revolutionary justice among our citizens, as well as because daily legal practice here still follows Tito’s dictum “don’t hold to the law at all cost.”

In recent days a unique debate broke out over the Postal Savings which arose over jurisdictions of monetary, executive and judicial authorities.

On June 8, the Judges’ Collegium  of Regional Courts in Belgrade criticized as an example of unacceptable behavior a statement made by Mladjan Dinkic, Governor of the Bank of Yugoslavia, in which he observed that the Commercial Court broke the law and after certain decisions have been passed by the Commercial Court, the president of that court can no longer remain in the same position.  The Judges’ Collegium  of Regional Courts in Belgrade responded to the Governor’s statement by noting that “he does not have legal authority on the basis of which he could assess the work of court presidents and initiate their firing,” and that “because of such a statement he is exerting unacceptable pressure on the courts and making evident the absence of legal culture in our society.”  Perhaps future conflicts of this type can be avoided.  Some economists (like Bosko Zivkovic, for instance) believe that the decision on liquidating banks should be left to monetary authorities.  It is better to change procedure, than to risk the questioning of credibility of vital state institutions.

This conflict is based on the resistance to the new authorities and a multitude of court cases which are under way against members of the former regime (Socialist Branislav Ivkovic informed the public that the number of such cases is up to 225).  Appeals to the fact that this work could be carried out with dignity and rationale is of little help.  The Judges’ Collegium  of Regional Courts in Belgrade made a statement on June 8 to the effect that “it is unacceptable to announce arrests over the media with unconsidered statements, to reveal details of court cases to which the public has no access, to assess evidence according to the selection made by interested parties, to pass judgment and to slander and insult judges.”  When the president of a Belgrade regional court was appointed, a statement of warning was made that the Judges’ Collegium  of Regional Courts in Belgrade will react every time that they feel that pressure is being exerted on the courts.  These days when reforms are finally due to begin, when large sums of money are changing hands and when large numbers of people are changing their status, when a chaotic system is being replaced with a new one, this appeal should under no circumstances be underestimated.  At the beginning of a challenge in which authorities are being separated from cash flows, it would be dangerous for this race to unfold without judges.  A transition is always a bit of testing with credibility.  Will we have credibility if we do not ascribe importance to the courts and the law?

It is an inexorable gift of our people to ruin large enterprises, which is why this tendency must be kept under check as much as possible.