TYPE=BACKGROUND REPORT
BYLINE=Barry Wood
DATELINE=Washington
INTERNET=YES
CONTENT=
VOICED AT:
INTRO: Yugoslavia's new president, Vojislav Kostunica, is pledging to move quickly to overcome his country's ostracism from the world community and reintegrate Yugoslavia into the European economy. V-O-A's Barry Wood reports that the new government faces enormous economic challenges in the weeks and months ahead.
TEXT:The Liberal economists, known as the Group of 17 who are advising Mr. Kostunica, say renewed membership in the International Monetary Fund is a top priority. Yugoslavia was expelled from the I-M-F and World Bank in 1992 because of its role in the wars that accompanied the breakup of the old Yugoslav federation. Without I-M-F membership Yugoslavia will remain largely cut off from most Western financial assistance. Mr. Kostunica's economists say Serbia and Montenegro urgently need one billion dollars to restore vital infrastructure and reactivate an economy shattered by a decade of misrule, corruption and last year's NATO bombing.
Branko Milanovic, a Group of 17 member and World Bank economist, says it is possible for Yugoslavia to rejoin the I-M-F as early as December 14th. That date is important, he says, because that is when the I-M-F board of directors holds its regular six month review of the Yugoslav membership suspension.
Charles Robertson, an East European specialist at ING Barings Bank in London, says it is essential that the new Yugoslav government act quickly to stabilize the currency.
//ROBERTSON ACT//
On the black market the dinar has been quoted at between 20 and 40 to the German mark. Forty a week or so ago, it is now closer to 20, but there is certainly no stability on the currency. And that makes everything else very vulnerable, i.e. (that is) prices, inflation, let alone any kind of long-term investment decisions.
//END ACT//
Mr. Robertson suggests that stability might be achieved if Serbia follows the lead of Montenegro and adopts the German mark as the official currency.
Other experts say there is little prospect of Yugoslavia quickly receiving more than token aid or foreign investment. A new government is not yet in place, political events are still unfolding, and now parliamentary elections are scheduled for December. Meanwhile there is no functioning government or budget. No-one knows whether Yugoslavia still has any foreign exchange reserves or gold. Yugoslav assets abroad are still frozen. Most industries are bankrupt, people have no purchasing power, and there is hardly any trade with the outside world.
The first tangible improvement is likely to come from both the availability of gasoline and home heating oil. The European Union is also promising to send a technical aid mission to Belgrade. And perhaps most importantly, the E-U says it is ready to move very quickly to rebuild the vital Danube river bridges destroyed in the NATO bombing campaign, clearing the debris that has halted inland shipping for more than a year. The Danube River Commision has 19 million dollars available for obstacle removal and bridge reconstruction. It will meet next week in Budapest to name a project director with work likely to begin almost immediately.
Milan Panic, the Serbian-American business executive who is in Belgrade hoping to regain title to the pharmaceutical factory seized by the Milosevic regime last year, says he is ready to invest 50 million dollars in Yugoslavia. At a press conference in Belgrade (Tuesday) Mr. Panic said the new government must move quickly to create a legal system that protects property rights and introduce a series of free-market reforms. Then, he says, the government should start selling state-owned companies. He says attracting foreign direct investment is the key to Yugoslavia's economic recovery.
Charles Robertson, the ING Barings East Europe specialist, agrees. He says stability and recovery in Yugoslavia is critical to stability in the entire Balkans region.
//ROBERTSON ACT//
If all the money that is being promised to the region via the Stability Pact set up after the Kosovo war, if all of this money was actually being spent in the region, on infrastructure, new roads, repairing the bridges over the Danube, improving transportation, cutting the costs of trade as a result, this could be tremendously beneficial to the entire region. And Yugoslavia is right in the middle of all the networks, transport, water, road. It would help the region immensely.
//END ACT//
The Stability Pact, funded mostly by the European Union, promises to provide more than 20 billion dollars of aid to the Balkan region over the next several years. (signed)
NEB/BDW/FC
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