ECONOMY-YUGOSLAVIA: Bringing Down Milosevic Was the Easy Part

By Vesna Peric Zimonjic Reprint | | Print |

Vesna Peric Zimonjic

BELGRADE, Feb 7 2001 (IPS) - “Bringing (former Yugoslav strongman Slobodan) Milosevic down seemed to be the easiest task for us. The hardest part will be the economic recovery of the country,” Mladjan Dinkic, the new governor of Central Bank of Yugoslavia, (NBJ) said recently.

Dinkic made the remark at a recent roundtable here on ‘Revolution, Transition and Democracy’.

Like several events of the kind held in past three months, this one was dedicated to the possibilities of the recovery of Serbian economy that was devastated during a decade of Milosevic’s rule.

Milosevic was ousted from power on Oct 5, after hundreds of thousands of Serbs took to streets, protesting his refusal to admit the victory of the opposition in the September 1999 elections.

Indeed, one of the main reasons Milosevic lost the elections was the catastrophic economic situation after 10 years of his rule.

Serbia was one of the most prosperous countries in the region before Milosevic came to power, but it fell to the lowest economic level in the past 55 years in his decade in power.

“There is little hope that the economic recovery will come soon,” Dinkic said. “Until the first investments or foreign credits arrive, we’ll have to live on donations.”

So far, different international organisations, funds and institutions have promised a sum of around 500 million U.S. dollars of urgent aid to Serbia.

“The money is coming in drops, but regularly,” Nebojsa Savic of the Belgrade Institute for Economy Sciences (IEN) told IPS. “It is used to bridge the budgetary deficit, first of all social spending, and restart the domestic production of food and urgent medicines so that the population can survive.”

According to the criterion of one dollar per day for food, some 44 percent of Serbia’s 7,5 million people live below the poverty line, experts say.

One in seven families depends totally on social welfare, as there are only 1,5 million employed in Serbia. Those families receive up to 25 dollars a month from foreign donations. Pensions are partially paid from same funds too.

The employed receive an average salary of 90 dollars a month. Ten years ago, the average salaries were 10 times higher.

“Maybe it would not be a bad idea to proclaim the bankruptcy of our economy,” says Branko Dragas, economic adviser of the new Serbian Prime Minister Zoran Djindjic. “There can be hardly any talk of recovery if the industry is working with 15 to 20 percent of capacity. We have to start from point zero.”

Experts cite several reasons for the economic destruction of Serbia.

Instead of entering the phase of transition when the Berlin Wall and communism fell in 1989, Serbia saw an unusual and unexpected regressive process, they say.

Bloody wars of disintegration of the former Yugoslavia started in the early 90s, and Serbia was involved in them.

It was punished with several rounds of severe U.N. and European Union economic sanctions. These included total oil imports and a trade embargo. Only the domestic production of food and electricity remained active.

In 1999, in 11 weeks of air strikes led by the North Atlantic Treaty Organisation (NATO), industry and infrastructure were destroyed. The bombing was undertaken due to Milosevic’s repressive policy against the ethnic Albanian minority in Kosovo.

A decade of total isolation meant that Serbia practically saw no investment or development. Milosevic’s regime turned to the smuggling of petrol, cigarettes and a few strategic raw materials necessary for the parts of industry it controlled.

War efforts pumped out last financial reserves in the early 90s. The regime took to embezzlement too. Four billion U.S. dollars of private savings of people were siphoned out to regime- controlled accounts abroad.

The economy was excluded from the major international financial institutions for new investment. Since Oct. 5, the country has been re-admitted to all those institutions, but broader investment remains only at the level of promise.

One of the reasons for this is Serbia’s inability to cope with foreign debts made in the 80s. Together with unpaid interest, its foreign debt has reached 13 billion dollars.

“The only thing we can do now is to ask for re-programming of the debt,” Vice Prime Minister Miroljub Labus said recently. “Our capability to service the debt is almost non-existent now.”

According to economic experts, Serbia would need at least three billion dollars in aid and foreign investment in order to start its economy by the end of the year.

Together with that, they say, it should see the process of privatisation in the potentially strong sectors of economy and closing down of ‘white elephant’ projects — formerly state-owned companies that were idle for years.

“It will be a shock,” economic expert Ljubomir Madzar told IPS. “People will have to learn that chances missed in the past 10 years can not be made up in a few months only. This carries a risk of social unrest, but that is the only way to go.”

Still, it may be hard for dreams of economic revival to materialise. More and more, foreign aid is being linked to what seems to be the heaviest burden of Milosevic’s rule — Milosevic himself.

Several Western countries, including the United States, have put conditions for further inflows of aid. They demand that Milosevic be extradited to The Hague-based tribunal for war crimes in former Yugoslavia.

He was indicted by the U.N.-established tribunal for war crimes against ethnic Albanians in 1999. The Yugoslav Constitution prevents the extradition of its citizens.

“The ways of cooperating with the Tribunal will be found,” Serbian Prime Minister Zoran Djindjic said Sunday. “We’ll go step by step, gradually. Legislation will soon be in tune with the international law.”

“We have a deadline, March 31, to do something in that direction, or the aid will be blocked,” Djindjic told journalists upon his return from a visit to Washington.

It would be “unfair” for Serbs to be “hostages of Milosevic once again,” Djindjic said.