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Update No: 062 - (20/06/02)

The Serbs are cooperating with the international community in handing over suspected war criminals. This is an essential precondition of their receiving IMF and World Bank assistance and US aid and support, itself a precondition of reconstruction and recovery from a decade of warfare and devastation.

Montenegrin leader in scandal
Another scandal has blown up. The international community in the shape of NATO and EU officials persuaded President Milo Djukanovic to keep his small republic of Montenegro in federation with Serbia under the aegis of the Union of Serbia and Montenegro, dropping the nomenclature of 'the Federal Republic of Yugoslavia.' No sooner had he agreed to postpone a referendum on the issue of secession than he was charged by the Italian public prosecutor with allegations of smuggling and being in cahoots with the mafia, in particular the southern Mafiosi of Naples. He and his brother have long been thought to have had well-established connections with the Italian mafia, mainly to do with contraband cigarettes and the like, nothing too serious for the Balkans.
The charges are coming at an inconvenient time and are not likely to help Djukanovik in persuading his countrymen to remain linked to Serbia. Indeed, they are a gift to the secession-minded opposition, now augmented by ex-premier Filip Vijanovic, who recently resigned over the government's plans to shelve a referendum on independence, withdrawing his separatist Liberal Party from the coalition. 
Mr Djukanovic's decision, taken after immense international pressure had been exerted for him to comply, has left Montenegrin society deeply polarised. But the ruling elite does not want to fall foul of the West, on whom it depends for a great deal, including help to develop an oil deposit of perhaps one billion barrels in the Adriatic. Meanwhile it wants the international community to continue to turn a blind eye to what is going on in the way of smuggling.
In fact Djukanovic's policy is not so at variance with the popular mood. His socialist party won 9 out of 11 local elections in mid-May, indicating that the population understand full well the need to remain in with the West.

The West to the rescue
The main international financial institutions are keeping Serbia in their sights. The Serbian government under premier Djindic is keen to comply with international requirements, even if President Vojislvav Kostunica has his reservations about that. The EBRD is making private sector loans, such as 18m Euros to Hemofarm, a pharmaceuticals company.
There is a colossal task of reconstruction ahead, but the government has made a bold start. GDP growth, which was over 5% in 2000 and 2001, is due to be so in 2002, while foreign investment is picking up, some US$120m in 2001, but billed to be US$300m this year, with EU investors predominating.
The Serb government's plans to reform the economy are wide-ranging and have received accolades from the international community, with widespread privatisation to boost the private sector, now only 40% of GDP. Clearly there is great scope for improvement, and Serbia may yet benefit from the 'advantages of backwardness,' the leeway to generate rapid growth that being far behind creates, once a determined reform effort is in place. Things are at last looking up for Serbia.

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FINANCIAL NEWS

Serbia posts encouraging export figures in April 

Exports in Serbia recorded a rise of 27 per cent in April over the same month last year, and stood at US$173.4m. A major increase of 16.9 per cent was noted in central Serbia, whilst in Vojvodina exports soared by 54.4 per cent compared with April last year, the Serbian newspaper 'Glas javnosti' has reported. The figures are certainly encouraging and bear witness to positive changes in this rea, though exports in central Serbia slumped by 2.2 per cent in the first four months of this year, compared with the same period last year. This figure was better in Vojvodina at 29.6 per cent," Branko Hinic, adviser to the governor of the NBJ [National Bank of Yugoslavia], has said. 
Serbia's exports rose by 7.3 per cent in the first four months this ear, with goods worth US$575.8m. These figures are of an earlier date, however, and are liable to a margin of error of up to 5 per cent. 
The food industry, mostly agriculture, contributed largely to the export growth, as well as the production of electricity and the chemical industry, which increased 73.3 per cent, along with the manufacture of machines and appliances; other areas noted a lower export rate. Hinic said that this explained the different regional results, thus the good structure of the industry in Vojvodina, with the predominance of food and agricultural produce, oil products, and the petrochemical industry, has provided for better and speedier revival of export capacities. On the other hand, the predominant industrial branch in central Serbia is, in addition to agriculture, the metal industry, which has a longer production cycle between imports and exports, an intensive textile and leather industry with insolvent firms and poor results in the system of gross wages; the production of non-ferrous metals recorded the biggest slump. 
"It is precisely these export figures which disprove remarks that the policy of an overvalued dinar - as some businessmen and economists claim - has hindered exporters, since exports have been on the rise since the beginning of the year, and the results in April are particularly encouraging. The biggest problem facing domestic exporters lies in the structure of the economy, and this precisely accounts for the substantial export growth in Vojvodina. All this bears out that the achieved macroeconomic stability is conducive to solid firms with a product to sell on foreign markets, and unfavourable to inferior firms," NBJ Governor Mladjan Dinkic has told Glas.

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FOREIGN LOANS

Montenegro, World Bank negotiate US$15m loan 

Three days of negotiations with the World Bank on a loan to Montenegro for structural adjustment worth US$15m were successfully completed recently, TV Crna Gora, Podgorica has reported. 
Montenegrin Financial Minister, Miroslav Ivanisevic, told the news bulletin about the significance and terms of the loan: "The successful completion of negotiations with the World Bank is the best possible epilogue to months of work by the World Bank and the Montenegrin government teams concerning public finances, the pension system, the work force market, the energy sector - all the areas which are treated in the loan. Securing a loan for these purposes means that all the necessary conditions have been met for receiving this loan. The World Bank observed an improvement in all of these areas. Protocol on negotiations has been coordinated and signed and all the other relevant documents have been prepared. A plan of activities for the forthcoming period has been drawn up as well...

Serbia, World Bank sign agreement on structural adjustment loan 

Yugoslav Deputy Premier, Miroljub Labus, and the World Bank representative in Yugoslavia, Rory O'Sullivan, signed 4th June in Belgrade an agreement on an US$85m loan for structural adjustment of Serbia's economy, Tanjug News Agency has reported. 
The loan will be used for the development of small and medium- scale companies and for the rehabilitation of the banking system, Labus said. 
The money will available as soon as the federal parliament ratifies the agreement at a special session this month. It is to be repaid in 20 years with a 10 year grace period, Labus said. 
O'Sullivan said that the funds earmarked for the development of small and medium-scale companies will pave the way for the creation of new jobs, and added that impressive results have already been achieved in the reform of the banking system in Serbia. 

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MINERALS & METALS

Japanese metal giant opens subsidiary in Montenegro 

The Daido Metal Kotor ballbearing company, whose majority shareholder is the Japanese company of the same name [Daido Metal] was opened on 3rd June in the town's [Kotor] industrial zone, TV Crna Gora has reported. The company managers announced that a new production line will be imported from Japan and set up in November, while the mass production of ballbearings for cars for the European market is expected to start at the beginning of next year. The ceremony to open the company was attended by Montenegrin President Milo Djukanovic and Prime Minister Designate Filip Vujanovic
Dusan Davidovic reported for the TV that a new page in the Kotor metal industry's history was opened. The former Ballbearings Industry is replaced by Daido Metal Kotor - a company whose majority shareholder is a famous Japanese company which has subsidiaries in Taiwan, Thailand, Indonesia, Korea and the USA. This one in Kotor is their first subsidiary in Europe.
At a ceremony held in the company hall, which was attended by senior Montenegrin officials, Japanese ambassador in Belgrade, Joshiki Mine, and senior management of the Japanese mother company, Prof Dr Veselin Vukotic said on behalf of the Privatisation Council that the privatisation of the Kotor company was a practical example of how to implement the concept of privatisation in Montenegro. This example of privatisation, Vukotic said, demonstrated that we have to adapt to the world and not expect the world to adapt to us. He also said that we can keep our strategic partners in Montenegro if we respect all the obligations we are bound by under the agreements we sign, if we speed up the development of a new economic system in Montenegro and speed up integration into the region and the European
Union.
Speaking about the perspectives and expectations of the Daido Metal Kotor company, the president of the Japanese company, Sengo Hanji, announced that new equipment would arrive from Japan in this November and that mass production would start as soon as next year.
Montenegrin Prime Minister Designate Filip Vujanovic spoke about the importance of the business and links with the Japanese company: "We have gained, above all, a powerful strategic partner from the Far East, an area from which we believe more powerful companies will come to Montenegro, but we shall also invite new companies from neighbouring areas to invest in Montenegro. It is important that with this privatisation we have affirmed privatisation with additional capital - something we have planned to implement in the privatisation of our 19 companies."

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