Calm Before The Storm

Something strange is happening on the monetary black market. That is, nothing is happening, the price of hard currency is stagnating, even though two weeks have already passed since the National Bank of Yugoslavia doubled its planned issue of money for the last three months of this year. Earlier on, in similar circumstances, the Serbian government, through its banks and their dealers, immediately went out onto the streets and caused a rapid rise in the price of foreign currency.

Of course, a new explosion is possible even before this magazine reaches its readers. The dinar is under attack from all sides, so that the lonely monetary policy of the central bank, even if it is respected to the letter, cannot give the usual results. Experts expect the inflation for October to be 85 percent, and for hyperinflation to continue to rise. Pressure for an increase in salaries is growing because they are well behind the rise in prices, and manufacturers of basic foodstuffs are more open in their rejection of Bozovic's policy of controlled pricing, with the strong and convincing argument that this is the surest way to destroy the manufacturing of goods that have high demand.

MP Milomir Babic, the one who recently called on the wives of Radoman Bozovic and Slobodan Milosevic to take up milking cows since their husbands assert that it is possible to live well off agriculture, explained on Wednesday that he hadn't wanted to offend anyone because he himself milks cows before he sets off each morning to the Serbian Parliament. Joking aside, Babic is warning politicians not to look on the villages as a pantry from which things are only taken, and "at the same time abuse farmers for political ends".

More and more workers are being left without work and there are less and less who are certain of receiving their next salary or unemployment benefits. The Serbian government has pushed social security policy into commerce, so that company directors, often through no fault of their own, find themselves between two fires. Both burn bright: one side wants work and bread, and the other wants to hold on to its power, explaining to the people that everyone except the democratically chosen leaders of SPS are to blame for their misfortune.

Bozovic didn't accept the invitation of managers in Serbia and Montenegro to attend their annual general meeting on Wednesday. This wasn't, however, the reason for Slobodan Andjic, director of "Jugoexport" and president of the Association, to notice that there is no development outside the international community, that "in times like this one has to survive, however not in a reservation, but in a civilized society with a modern economy". And the Montenegrin Prime Minister, Milo Djukanovic, said that "priority must be given to the realization of conditions for the lifting of sanctions, because any kind of getting used to them or belief that we can live with them, is an illusion".

All in all, businessmen are in a panic because of the ruling policy of "albanization" of the Serbian and Montenegrin economy. More exactly, the once "albanization". At the moment citizens of Albania have reached a national income of USD 900, whereas expert estimates for the new Yugoslavia range from USD 500 to 900 for the next year, with the understanding that in unchanged circumstances, this would be the starting sum, one which would certainly decrease in the course of the year. On the other hand, there is greater stirring amongst the workers, things are moving towards a general strike, though it is not clear who is influencing the many trade unions. Non payment, and from there distrust, is taking on massive dimensions in the economy. In the group of biggest debtors is the Yugoslav Army: less than a month ago its debt to Serbian companies was around 20 billion dollars. The state doesn't protect creditors, manpower and capital are fleeing the country, the fall in production continues, wheat has only been planted in under half of the planned area....

The signals from all sides are clear: the nominal value of the dinar is way above the real value. Nonetheless, the street rates of exchange are stagnating. The fact that there has been no change even after the increase of the primary issue of the central bank, is explained to VREME readers by Dragoljub Vukosavljevic, President of Union Bank, who says that there is increased control on the use of credits on the primary issue. It is a novelty, and a good one, says Vukosavljevic, that business banks now have to supply quality documentation to the National Bank, and only then can they be given credit from the primary issue. It is harder and harder to do business, says Vukosavljevic, it is harder to establish the credit and total business capabilities of potential partners, so that the introduction of disciplines into the world of finance is more necessary than ever before. This banking expert thinks that the Council of Governors of the NBY did well in deciding to double the primary issue for the last quarter of this year. Vukosavljevic sees the real reasons and justifications for this move in the drama the Yugoslav economy is going through since the embargo on doing business with the outside world. He even thinks that there is too little comprehension of the problem, because the breaks in the economy are far bigger than commonly thought. He gives the example of the difficulties Union Bank has had in trying to convince the central bank that it can't retain the unchanged conditions for credit given to agriculture from the primary issue before the devaluation of the dinar. In this situation, companies will be brought to a halt, even those who succeeded in entering the most fastidious of foreign markets.

In truth, the Serbian government uses similar arguments when it requests the federal economic authorities for a more generous monetary policy. The only question is whether there is "quality documentation", with at least as much quality as is necessary for business banks to draw their clients. It is hard to believe that Bozovic's government could succeed in this, even if documentation were not to be sought for its work.

To put aside the fact that certain economists, members of the Economic Council of the Serbian government, raced to disparage what their colleagues did for the federal government, it is interesting to note that Bozovic discovered that behind this program was an attempt to introduce an economic policy similar to that of Ante Markovic's government in 1990. Apart from this mortal sin, Bozovic provided a series of other comments on Panic's program, but in a very interesting way. It was in the way a crude man would want to show his characteristic and human qualities as tolerant, respectable, even intellectual. First Bozovic said of the federal program that it was "logical, fundamental, sufficiently general for it to be tailored in some elements", but that it suffered from one basic problem - the authors' lack of understanding of what the situation will be like after the lifting of sanctions. Then, one part was judged to be a "completely unrealistic, bookish, cabinet supposition based on nothing", followed by "pure nonsense", and, to end with: "I am afraid I have to tell you that this program has only one aim, and that is political marketing".

There is no doubt, says Branko Dragas, director of Credibel Bank, to VREME, that the realization of conditions for the lifting of sanctions is the primary precondition for a turnaround, and rapid and wide scale privatization is one of the steps towards this turnaround and, at the end of the line, towards a rich and stable society. It is essential for the buying and selling of companies to be organized and public, not "under the counter", and for the state to take over social security. "I don't expect anything more from the state," says Dragas, "but for it to create ordinary conditions for market competition and for it to disqualify anyone who plays dirty: unfortunately, it looks as though there is still a lot of hesitation as to whether socialism or capitalism. I am for capitalism. I have agreed to work without pay on the managing board of a Rakovica factory, and in one month I have found around ten manufacturing programs. But the director still hasn't the authority to move workers from one position to another, or one shift to another. Under these conditions, there can be no salvation."

For those who are using the Rakovica and other workers, pressuring the central bank to endlessly print worthless money, and particularly for those who are being manipulated, it is important that they know the following assertion made by Dragas: for such new programs there is no need for money from the issue, but there is no-one ready to invest his capital in the present situation. The hands of managers of socially owned corporations are tied. They are having a hard time; there is no hope without the existence of various methods of privatization and there is no justification for postponement. Something must begin, because there can be no survival otherwise.

It is obvious that none of this is possible without a convertible dinar and an open economy. And it looks as though a healthy dinar is not possible while the present regime rules in Serbia.