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yugoslavia

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  YUGOSLAVIA

REPUBLICAN REFERENCE

Area (sq.km)
88,400

Population
10,700,000

Capital
Belgrade

Currency
New Dinar

President
Slobadan Milosovic

Private sector
% of GDP

40%

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Background:
The Kingdom of Serbs, Croats, and Slovenes was formed in 1918; its name was changed to Yugoslavia in 1929. Occupation by Nazi Germany in 1941 was resisted by various partisan bands that fought themselves as well as the invaders. The group headed by Marshal TITO took full control upon German expulsion in 1945. Although communist in name, his new government successfully steered its own path between the Warsaw Pact nations and the West for the next four and a half decades. In the early 1990s, post-TITO Yugoslavia began to unravel along ethnic lines: Slovenia, Croatia, and The Former Yugoslav Republic of Macedonia all declared their independence in 1991; Bosnia and Herzegovina in 1992. The remaining republics of Serbia and Montenegro declared a new "Federal Republic of Yugoslavia" in 1992 and, under President Slobodan MILOSEVIC, Serbia led various military intervention efforts to unite Serbs in neighboring republics into a "Greater Serbia." All of these efforts were ultimately unsuccessful. In 1999, massive expulsions by Serbs of ethnic Albanians living in the autonomous republic of Kosovo provoked an international response, including the NATO bombing of Serbia and the stationing of NATO and Russian peacekeepers in Kosovo. Blatant attempts to manipulate presidential balloting in October of 2000 were followed by massive nationwide demonstrations and strikes that saw the election winner, Vojislav KOSTUNICA, replace MILOSEVIC.

Update No: 057

The situation in Serbia is improving by the day, albeit from a terribly low base level, due of course primarily to ten years of war. The prime culprit is in the Hague, Milosevic, and his cronies and accomplices are totally discredited; most have fled abroad. All that the Serbs want to do now is put the whole business behind them and rejoin the modern world. 
The EU and other representative European and international bodies are delighted to welcome the Serbs back into the fold. There is nothing quite to match the return of the prodigal son.
A key partner for Serbia is of course the IMF. The latest tranche, U$63million, of a stand-by credit facility of US$252million was extended in January, US$126 million of which has already been disbursed.
Inflation has fallen sharply in Yugoslavia, output has grown and important steps have been taken to restructure banks and privatise state enterprises, said IMF deputy chief Anne Krueger. "Macroeconomic policy implementation has been excellent for Yugoslavia as a whole, with the latest information indicating that fiscal, credit and wage policies remain firmly on track," she said.
The Fund said the current exchange rate is "broadly appropriate." It also praised Belgrade's "courageous decision to close four large insolvent banks" but urged stricter bank supervision. "The ultimate success of the reform effort requires that the authorities persevere with difficult decisions on bank and enterprise restructuring, underpinned by adequate measures to mitigate the social impact of restructuring," Krueger said. She called for continued donor and credit support to "mitigate the burden of transition" for the war-ravaged country and to allow the new government to "maintain broad support for their reform policies."
The Serb government under Premier Zoran Djindic is determined to undertake a really wide-ranging reform effort. Indeed it is already far advanced and attracting the favourable notice of foreign observers. Potential investors and financiers deem it to be among the most comprehensive and advanced of any developed by a former communist state.
A privatisation bill and the setting up of an agency to sell off state assets have been hailed as particularly welcome by potential investors and financial institutions. There has been substantial progress in reforming the judicial system, perhaps the most vital prerequisite of a functioning market economy.
The government is well aware of the vital role to be played by foreign investment. Draft laws on overseas investment are due to be enacted before the end of the year and will be closely examined by prospective investors.
At a European economic summit in Salzburg in July, Mr Djindic said that German, Austrian and Italian firms were prepared to invest around one billion marks once debt problems had been cleared up and investment insurance provided.
Firms already showing interest include the UK's Vodafone and Germany's Deutsche Telekom, which have their sights on the mobile telecoms firm, Mobtel. Laforge of France is interested in buying up a cement works. Michelin of France is forming a close partnership with tyre manufacturer, Tiger.
A vital area requiring improvement is financial and banking reform. Confidence in the financial sector was almost destroyed in the 1990s because of the failure of several large pyramid investment schemes. But this is now being restored.

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AVIATION

Montenegro to become majority share-holder of Podgorica, Tivat airports


The Montenegrin government will very soon become a majority shareholder in Podgorica and Tivat airports, while the Yugoslav Airlines - JAT - will be a minority shareholder in these airports, the Montenegrin Minister of Transport and Maritime Affairs Jusuf Kalamperovic told TV Crna Gora after talks with JAT leadership in Belgrade. This will create conditions for the reconstruction of these airports with foreign bank loans.
Kalamperovic said: "We have finally arrived at some palpable solution. Both sides have displayed readiness to let the airports be managed by the Aerodromi Crne Gore public company. The solution to the property issue should be resolved through co-ownership, with the Montenegrin side being the majority owner. A steering committee should be set up in which the majority of members would be from Montenegro. The company's director has already been appointed by the Montenegrin government. 
"What remains to be done is for them [JAT] to give their views in the next 10 days on their percentage of the ownership of Podgorica and Tivat airports. We have put forward our proposal. I hope that we are about to reach a solution and that in one month's time we shall have defined relations and that Montenegro will finally acquire the airports as described."

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BANKING

Serbian finance minister announces drafting of "national banking system"


Serbian Finance Minister, Bozidar Djelic, said on 31st December that the government's social programme will cover all 9,000 employees in the five banks which are undergoing a rehabilitation programme and that citizens need not be concerned about their money invested in these banks if they are closed down, Tanjug News Agency has reported .
"The decision to close down a bank is within the jurisdiction of the Yugoslav National Bank," Djelic pointed out at a press conference at the Serbian government following talks with representatives of bank trade unions.
The minister said it had been agreed that a new concept for the national banking system would be drawn up by 31st January 2002, and that negotiations on the fate of the banks undergoing rehabilitation were planned for the following day.
The new concept of the banking system envisages that these five banks will be transformed into a national bank for development that will not compete with commercial banks, an export-oriented bank for support to small and medium-sized companies, and a national savings-bank, he said.
"We must have a national banking system," he said, adding that foreign banks should be present in this market as well, but as a link between the home economy and foreign countries and with the purpose of stimulating domestic savings and restoring confidence in the home banking system.

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ENERGY

Kosovo electricity company increases production, reduces power restrictions


Reactivation of Block 2 of the Kosova B thermoelectric plant has significantly improved the electricity situation in Kosova [Kosovo], thus enabling the KEK [Kosovo Electricity Corporation] to return to the old pattern of restrictions of four hours on, two off, KEK officials said, KosovaLive web site has reported.
KEK press spokesman Fadil Lepaja told KosovaLive that the reactivation of the block had enabled them to scale down the restrictions of the previous weekend of three hours on, three hours off.

Over US$18m to be invested in Serbian coal mines in 2002

A total of US$18.4m will be invested in pit coal mines in Serbia next year, with almost half the sum going to mines in the Timok region, the Zajecar Chamber of Commerce has said in a statement for Tanjug News Agency.
As planned, US$5.4m will be invested in the continued work on excavation and building an export shaft in the Soko mine near Sokobanja - US$3.6m in mining work, US$300,000 in geological work, and US$1.5m in mining-construction work.
The Lubnica mine plans to invest US$2,876,000, mostly in new excavation - US$1.8m, mining work - US$576,000, and purchase of mining equipment - US$500,000.
The Vrska Cuka pit coal mine plans to invest US$100,000 to continue mining investment work.
The remaining US$10.4m will go to the Rembas mine in Resavica, the Stavalj mine near Sjenica, and other pit mines.
The new investments should help these nine pit mines soon to produce 1.5m tons of coal annually, twice the current output.

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FINANCIAL NEWS

Euro becomes official tender in Montenegro


As of 1st January 2002, the euro is the official currency in Montenegro. The German mark will be withdrawn from circulation by the end of March through conversion. The euro arrived in Montenegro about 10 days previously when 30m euros, which is about DM60m, were delivered from Germany, Radio B92 in Belgrade reported.
The exchange of German marks for euros began at the rate of 1 for 1.95. All the branches of the Central Bank of Montenegro will be carrying it out, as well as four commercial banks that have been licensed by the Central Bank of Montenegro.

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FOREIGN LOANS

EBRD provides finance to Yugoslav cities


Nis, the third largest city in the Federal Republic of Yugoslavia, will upgrade its capacity to treat water and wastewater with finance from the European Bank for Reconstruction and Development (EBRD), an EBRD press release reported recently.
The Bank will provide Nis, which has a population of 280,000, with a €6m loan to carry out the essential work in this hugely under-invested sector. This is the first loan to be extended from a planned amount of €50m focused on helping Yugoslav cities rehabilitate run-down public services.
The EBRD loan, which will have a sovereign guarantee, has received the support of international donors and other financial institutions. Germany's Kreditanstalt fuer Wiederaufbau is contributing additional finance to help with the installation of water metres in houses and to upgrade water supply mains. Technical assistance is being provided by the Danish Government to help draw up a service contract between the City and the local water company that sets operational targets and promotes the participation of the private sector.
Thomas Maier, Director for Municipal and Environmental Infrastructure at the EBRD, said that development of local infrastructure requires new investment and commercial management in order to rely less on the central government and encourage a better service to the public. The EBRD, he noted, would lend to those cities committed to providing reliable, long-term public services. He added that the Bank hoped to include Novi Sad very soon and then subsequent cities after that.
Last year the EBRD provided Belgrade with a €60m loan to help with urban transport, water treatment and improving the city's energy efficiency. Both the Nis and Belgrade projects similarly highlight the importance of strong local management of public services and the need for raising investment for maintenance and upgrades through appropriate billing rather than subsidies. For further information contact: Ben Atkins, Tel: +44 207 338 7236 or e-mail: atkinsb@ebrd.com.

EIB creates framework for lending activity, issues first FRY loan

The European Investment Bank (EIB), the European Union's financing institution, has signed a Framework Agreement with the federal government of Yugoslavia, thereby setting up a legal and institutional framework for its lending activity in the country, as well as its first €66m loan for urgent transport rehabilitation, New Europe reported recently.
The Deputy Prime Minister of the Federal Republic of Yugoslavia and the Vice President of the EIB signed the agreements in Belgrade.
The EIB loan will be extended to the Federal Republic of Yugoslavia, which will then pass on €50m to the Republic of Serbia and €16m to the Republic of Montenegro for works deemed necessary in their territory.
These include the refurbishing of the Belgrade airport, the Port of Bar, as well as various urgent road works, an EIB press release informed.
The EIB loan is provided under the current mandate for Central and Eastern Europe, which is in the process of being extended to the Federal Republic of Yugoslavia following the EU's Council Decision of November 2001.

Yugoslavia, World Bank sign agreement on six economic consolidation loans

Yugoslav Deputy Premier and Foreign Trade Minister, Miroljub Labus, and World Bank Belgrade Office chief, Rory O'Sullivan, signed documents on six consolidation loans in Belgrade on 17th December, regulating the repayment of all former loans of the World Bank approved to Yugoslav companies, Tanjug News Agency has reported.
Under the favourable conditions specified in these documents, the loans will be repaid over a period of 30 years with a three-year grace period, after which the instalments will gradually increase and reach the full amount only after nine years. Furthermore, the interest rate will be an annual 4.75 per cent, far lower than contracted for the original credits.
On behalf of the federal government, Labus thanked the World Bank for its assistance and support to Yugoslavia's economy. He expressed confidence that this agreement, which is very favourable for Yugoslavia, will significantly contribute to the revival of the home economy, the Federal Secretariat of Information said in a statement.

Italy donates 13m euros to Serbia for economic and social recovery

Miroljub Labus, federal deputy prime minister and minister of foreign economic relations, and Italian Foreign Undersecretary, Roberto Antonione, have signed a financial agreement at government level, on Italy's donation amounting to about 13m euros to Yugoslavia, Radio Belgrade reported.
The donation is part of the overall aid that Italy had promised to grant Yugoslavia at the Brussels Donor Conference in June last year.
The aim of the donation is to help Serbia's economic and social recovery by importing indispensable goods and corresponding services of Italian origin needed for the agricultural, educational, energy, environmental protection, and health care sectors.

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MINERALS & METALS

Montenegrin ironworks to sign lease agreement with Russian steel company


The Niksic ironworks management board has accepted a lease agreement proposal by a Russian company, Rusmon Steel Corporation, which will take effect from 1st March 2002. 
Anka Perovic-Radovic of Radio Montenegro has reported that talks between the Niksic ironworks and its Russian partner, which have lasted for a couple of months, will be finalised by signing an agreement for a five-year long lease with the possibility of extending it to 10 years on 21st December. The importance of this agreement to the Niksic ironworks is best disclosed in information provided by the company's manager, Miodrag Pejovic.
Pejovic said: "The overhaul of the ironworks is in our interest. It is necessary to invest substantial capital to start off with, which has been estimated at a minimum of DM7-8m, in order to secure production, on condition there is market for the products. Right from the start, we must take steps to maintain and overhaul the machines so they can meet production needs..."

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