% of GDP
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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 January 2002
The Serbs are in a different world at last, with Milosovic under confinement in the Hague and his successor, President Kostunica, a valued interlocutor on
the world stage. As everybody knows, the key to pacification of the Balkans lies in Serbia and stabilising it and Montenegro, its partner (for now) in
The chances of doing that depend heavily on its deeply troubled economy. Ten years of war have left much of it devastated, with a desperate need to replace
or rehabilitate damaged infrastructure and to restore the environment of everyday life. Poverty and unemployment are rife.
It is in everybody's interest for the West to do what it can to help. On the geopolitical front it has set up the Balkan Stability Pact. The EU commissioner
for security affairs, Javier Solana, was in Belgrade in November to talk to Kostunica about co-ordinating a security cordon sanitaire for the region, of
heightened importance after recent events.
But the key is that Western institutions should be generous in extending aid and credit for reconstruction, the EBRD playing a key role here. One thing that
the current crisis has driven home is the close linkage between geopolitical stability and 'nation-building' or at least putting people on their feet
The World Bank will also play a central role. Experts from the West can now discuss the necessary measures to rehabilitate the economy and Western relations
with the country. Of course these include major liberalisation of prices throughout the economy and major privatisation of state assets.
One thing about being in such a bad way is that there is no way but up. Official statistics record an 18% jump in manufacturing output in the last year, a
statistical freak due to the low base starting-point. But there is at least hope of better things ahead for the Serbs.
A fortunate political development took place in Kosovo in November, no doubt in part due to the new spirit abroad since 9:11. The moderates under a pacifist
leader, the intellectual Ibrahim Rugova, won elections in the province. Rugova is expected to become president. The Serbs had better reconcile themselves to
its de facto independence. They may still have to do so vis-à-vis Montenegro, where a find of large reserves of oil off the coast on the Adriatic gives it
its own reason for going free.
US, EU set up fund for Serbia's power imports
A new mechanism for enabling Serbia's power industry (EPS) to cover domestic electric power needs by imports from neighbouring countries - the Serbia Aid
Fund for Energy (SAFE) - will be presented 4th December in Belgrade, the US embassy has said, Tanjug News Agency reported.
The United States and the European Union have allocated US$15m each to the fund in an endeavour to prevent expected serious power shortages in the
SAFE is a joint initiative of the US Agency for International Development (USAID) and the European Agency for Reconstruction (EAR), the embassy said, adding
that contributions by other international donors would also be welcome.
The Serbian government has made a commitment to provide enough electric power for the winter, but domestic consumption exceeds the EPS generation capacity
and imports are therefore necessary.
SAFE was created in response to a request for international aid made by Serbian Minister of Energy and Mining Goran Novakovic to pay for power imports to the
value of US$80m from August 2001 to May 2001, the embassy said.
Russian company signs to deliver 130,000 tonnes of oil per month
A Russian company, TNK, will be delivering oil to the Serbian Oil Industry [NIS] and Jugopetrol at a price per barrel 40 per cent lower than the world market
price, FoNet News Agency has reported.
A contract signed by the Serbian government, NIS, Jugopetrol and Reiffeisen Bank puts the TNK company under obligation to deliver 130,000 tonnes of oil per
month to Serbia.
"The implementation of the contract will begin in January  and we will be saving around US$5m," Serbian Minister of Energy Goran Novakovic said.
He added that it was agreed in a separate contract that experts, workers and equipment from the Federal Republic of Yugoslavia should be engaged in Siberia's
Novakovic said that the Serbian government would invest the surplus of around US$30 per tonne in roads and social programmes.
According to Novakovic, the oil prices in the domestic market will not fall, but the Serbian government is considering raising the price of electricity in
March or April 2002.
Part of Vojvodina electric plant rented to foreign company
Serbian Electric Power Industry [EPS] has rented a part of Novi Sad thermal power plant for use by an unnamed foreign company, RadioB92 in Belgrade, has
This company will produce electric energy in this part of the plant using mazut [unrefined oil] and sell it to Montenegro and other countries in the
Replying to the question as to why the EPS, which itself lacks electric energy, does not use these structures, the EPS information service said that this
was not profitable for them because unrefined oil was too expensive. The EPS demanded that retail tax for unrefined oil should be abolished, but Serbian
Finance Minister, Bozidar Djelic, declined this request, the company's information service explained to Radio B92.
FOREIGN LOANS & DEBT
The Paris Club Gives Reforms a Chance
Yugoslavia no longer has to find US$9.5bn in debt payments for 2002, but only US$3m in interest. "Only when 50 big international companies invest in
Yugoslavia will we be in the saddle," explains Miroljub Labus, AIM Belgrade, reported.
Cake and champagne were waiting for Yugoslavia's negotiating team on its return from Paris, following difficult negotiations with the Paris Club of
creditors. With open joy and smiles on the their tired faces, the negotiators brought a moment of optimism to the bleakness of Serbia's everyday
life. Synchronized statements by highest politicians followed, saying that the Paris visit had been the greatest thing achieved by the new government so
far. Thanks to this, nobody bothered to ask who deserved to get the credit - Yugoslav President Vojislav Kostunica, Serbian Premier Zoran Djindjic, or the
negotiating team led by Yugoslav Deputy Prime Minister Miroljub Labus. Labus himself briefly touched on that by saying that "everybody has their share of
merit, because we all did our part of the job to the best of our ability."
Thanks to this approach Yugoslavia has managed to secure the most favourable conditions for writing off the debt and rescheduling its remainder, among the
relatively well-developed countries it belongs to. Only a year after initiating reforms, it ensured the following conditions: a write-off of 66 per cent of
the debt (US$4.5bn), a six-year grace period in which it will pay only 40 per cent interest, and the paying off the principal over a period of 22 years at a
6 per cent annual interest. The Yugoslav delegation has every reason to be content with such results. The people who made the mess in the first place - the
per capita debt was US$1,200 - cannot destroy this with their stories that this is nothing much because "the countries that have written off our debts were
responsible for it in the first place, because they kept us under an embargo and we could neither produce nor pay our dues."
The reduction of the debt to US$900 per capita - or even US$700 per capita if negotiations with the London Club are successful - might not mean much for
ordinary people, but for those in charge of economic policy this means that next year they will not have to set aside US$9.5 billion, but only US$30 million
to cover interest. This means that one-fifth of what is earned from exports per month will be used to service the debt, instead of entire annual
revenues. The US$30 million is itself a big enough burden for Yugoslavia's ruined economy and its destitute people, because it will be collected through
taxes. But when one owes money to the international community, one has to pay off that debt. The creditors represented by the Paris Club, the governments
of 19 Western countries, have agreed that Yugoslavia should be given another chance to finish ongoing reforms and thereby create conditions for returning
the debt. They are ready, they say, to help unselfishly by approving money under the most favourable possible conditions through the World Bank and EU
financial institutions. Next year there will also be donations, amounting to a total of US$1bn, not including donations for the reconstruction of roads
and the overhaul of the power system.
European Bank grants four-million-euro loan to Serbian tyre factory
The European Bank for Reconstruction and Development (EBRD) has granted a €4m loan to the Tigar rubber product industry of Pirot, southern Serbia, which
will use it as working assets, Tanjug News Agency has reported.
This is the first batch of a €65m loan the EBRD plans to approve in order to stimulate economic activities in Yugoslavia.
The European Union has recently approved a €10m loan to the Pirot hydroelectric power plant. The plant will use the loan to complete a 5-km tunnel for the
transfer of excessive water from the Toplovodska Reka River to the Zavoj heating plant's accumulation.
After this, the Pirot hydroelectric power plant would be able to increase electricity production by 37 per cent.
Former Yugoslav railway heads meet in Zagreb to discuss modernisation
A meeting of the directors of all railways that once belonged to [former] Yugoslav Railways convened in Zagreb on 7th December, FoNet News Agency has
The main aim of the meeting was to agree on a joint approach to modernising railway infrastructures as well as to shortening waiting times at border
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