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Update No: 061 - (23/05/02)

War crimes bedevil politics
The Serbs are cooperating with the international community in extraditing suspected war criminals under the threat of losing huge sums of finance and aid. The recent sum in question is US$120m, which was due to be handed over before the end of March. Yugoslavia missed the deadline and aid of around US$40m was frozen. 
President Vojislav Kostunica is opposed to the process in principle, but realises that in the real world the country has to comply: "it is something we have to live with." But he insists that without a clear national law regulating the cooperation, continually handing over suspects would result in the destabilisation of the country.
He has in mind that the war crimes purportedly, and almost certainly in most cases verily, committed by the suspects comprise the tip of an iceberg. A whole regime is really in the dock, with a secret police, informers, 'illicit' bankers and businessmen and other rogues, not just brutal ethnic cleansers in the army and air force. Kostunica was never part of that regime, his claim to integrity, as his modest life-style shows, a small flat in Belgrade and a battered car. But he knows well that a prolonged series of trials in the Hague spells trouble; anything could yet come out.
The pro-democracy forces in the Serb government are adamant that the issue has to be addressed and a complete catharsis take place. The government will continue to cooperate with the Hague, even if the odd suspect or two attempts suicide rather than be handed over, as did former Milosevic aide, Vlajko Stoljilikovich, on April 11th outside parliament by shooting himself in the head; he died a few days later.
On April 17th indeed, the Yugoslav government, that is the government of the Union of Serbia and Montenegro, published a list of 23 suspects wanted by the UN War crimes tribunal. The 23 included Karadzic, Bosnian Serb leader, and his military commander, Mladic.

Montenegro stays on board
In the Montenegrin republic, the other constituent member of the union, recent events have unfolded in a dramatic fashion. The premier of Montenegro, Filip Vijanovic, resigned after the separatist Liberal Party withdrew support for the government for shelving independence plans for the tiny republic of 660,000.
His resignation came after the Montenegrin president, Milo Djukanovic, abandoned a long-planned referendum on independence and signed a deal with Serbia to abolish the old Yugoslav Federation and create a new country, to be called as we have already had cause to mention, the Union of Serbia and Montenegro.
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.

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BANKING

Two Belgrade banks seek licences to operate in Kosovo

The Banking and Payments Authority of Kosova [Kosovo] (BPK) has received three requests from two banks and an insurance company from Serbia for permission to operate in Kosovo, the internet news agency, KosovaLive, has reported. 
"The two Belgrade-based banks, Ekos and Delta, have requested permission from BPK to establish branches in Kosovo," the UNMIK [UN Mission in Kosovo] Fourth Pillar reported on 24th April. 
The BPK governor, Ajri Begu, also confirmed the requests. He told KosovaLive that such requests for branches were common, and that the BPK would follow the correct procedures for any possible licensing. 
Begu said the procedure for opening new branches of a bank whose main headquarters are in a different country is different in only one aspect - the fact that BPK requests the approval of the country's central bank for a commercial bank to open a branch in another country. 
The request for banking licences from Serbia is the first of this type since the UN administration transferred the licence authority and banks' control to the BPK. 
According to the regulation in force, the Yugoslav National Bank must approve the request for a Serbian commercial bank to open a branch in Kosovo. 
Up to now, the Yugoslav National Bank has been claiming that it has authority in the banking market in Kosovo. 
BPK officials also reported another request by Serbia-based Takovo insurance company to operate in Kosovo. 
The BPK is currently looking into the three license requests.

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ENERGY

Serbian oil industry invites tenders for purchase of crude oil

The Serbian oil industry, NIS, on 18th April announced its annual invitation for tenders for purchasing crude oil,Tanjug News Agency has reported. 
The oil company will monthly purchase 200,000 tonnes of crude oil, or 2,400,000 tonnes over the next year, the statement said. 
Tenders will be received until 23rd April, and purchase will start in May 2002 and last until May 2003.

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FOREIGN LOANS

Netherlands writes off over half of Yugoslavia's debt

Yugoslav Deputy Prime Minister, Miroljub Labus, and National Bank of Yugoslavia Governor, Mladjan Dinkic, on 17th April signed an agreement with the Dutch Finance Ministry on the write-off of 51 per cent of the principal debt Yugoslavia owes to the Netherlands, Tanjug News Agency has reported. 
Under the agreement, there will be no interest rate on the remainder of the debt in the next three years, after which an arrangement on further payments will be made within the Paris Club of Creditors, through which the loan was approved, Dinkic told Yugoslav reporters at The Hague. 
Labus told reporters that the change of the Dutch government was the country's internal affair and that it would not affect the talks and further cooperation between the two countries...

EBRD makes €18m Yugoslav private-sector loan

The European Bank for Reconstruction and Development is providing €18m to Hemofarm, a leading pharmaceutical company in the Federal Republic of Yugoslavia, marking the Bank's first loan to a private local company in the country, an EBRD press release reported. The 6-year credit will support Hemofarm's expansion to meet increasing demand for its medicines both at home and from markets abroad. Development of the private sector in Yugoslavia has been severely constrained for more than a decade and companies like Hemofarm, which itself employs 2000 people, have no access to term finance locally.
Olivier Descamps, the EBRD's Business Group Director for Southern and Eastern Europe, said the challenge in 2002 would be to provide longer-term financing that could help larger industrial companies become more efficient and profitable through investment.
Hemofarm was established in 1960 and is currently the largest pharmaceutical company in Yugoslavia. It is undergoing an upgrading of its present facilities and improving efficiency to increase production. Demand has increased particularly from foreign clients in Bosnia Herzegovina, FYR Macedonia, Romania and Russia, its largest market. Mr Descamps said "the EBRD wants to assist Yugoslavia in recovering its export markets to create jobs and stimulate growth at home." 
"This loan from EBRD is of great significance for Hemofarm's further development maintaining product quality and expanding export," said Mr Miodrag Babic, President of Hemofarm Concern.
The EBRD last year invested €230m in Yugoslavia. Becoming a shareholder in the Micro Enterprise in April last year, the EBRD earlier this year became an equity holder in local Yugoslav bank, Eksimbank. In November, the EBRD provided a short-term working capital loan to Tigar, a local manufacturer of tyres. In addition, the EBRD channelled a large part of its investment, helping to upgrade transport, power and municipal infrastructure.
Mr Descamps said that the EBRD would continue to place infrastructure high on its list of priorities, but that the private sector would account for an increasing portion of the Bank's business. "We want to show investors that here are good quality, well managed companies in Yugoslavia," he said. That will involve selecting well managed, privately owned or recently privatised companies that have clear financial accounts and credible business plans. "Our aim is to develop good sound investment in Yugoslavia," Mr Descamps added. 
For any further information contact: Ben Atkins, Tel: +44 207 338 7236 or E-mail: atkins@ebrd.com

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