NATIONAL INTELLIGENCE SURVEY 21; YUGOSLAVIA; THE ECONOMY

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• Collection: NIS
• Document Number (FOIA) /ESDN (CREST): CIA-RDP01-00707R000200100036-6
• Release Decision: RIF
• Original Classification: U
• Document Page Count: 38
• Document Creation Date: October 25, 2016
• Sequence Number: 36
• Content Type: REPORTS

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Page
2. Fuels and power
10
5. Retail trade
20
Relatively good endowment.
Improvement in quality, variety, and regu-
a. Coal
10
larity of supply in the retail trade network;
The single most important energy source,
catering industry stimulated by growth of
despite declining production of hard coal;
tourism.
growth in output of brown coal and
C. Planning, policy, and finance
20
lignite.
b. Petroleum and natural gas
11
1. Planning and policy
20
Increasing petroleum imports; despite
Significance of annual and medium -term
growth of production; expansion of the
plans; major goals; changes in priorities;
natural gas industry.
problems in controlling the economy.
c. Electric power
12
2. Government finance
21
Output; transmission; consumption.
Reduction in the financial role of the fed
3. Metals and minerals
13
eral government as a result of the con
Generally ample resources; major deficiency:
stitutional reform of 1971; revenue and
high grade iron ore.
expenditures.
a. Ferrous metals
13
3. Investment and banking
22
Rapid expansion of the industry; mini-
mi.m raw materials bare; regional pattern
Investment patterns; role of the banking sys-
of development of steel industry.
tem; governmental control of investment.
b. Nonferrous metals
13
D. International economic relations
23
Significant Production of a variety of
Role in the strategy for development.
metals, including copper, lead, zinc,
bauxite.
1. Foreign economic policy
24
c. Nonmetallic minerals and c ,nstruc-
14
Efforts to promote foreign trade, association
lion materials
with international organizations; problems.
Generally adequate production to satisfy
2. Foreign trade system
25
most domestic requirements.
Export and import regulations; foreign ex-
4. Manufacturing and construction
15
change controls and other methods of regu-
Rapid growth; problems; efforts to stream-
lating reports.
line the sector.
3. Balance of payments
26
a. Metalworking industries
16
Balance of payments problems as major con
Notable expansion in electrical and trans-
straints on economic development.
port equipment industries.
a. Commodity trade
26
b. Chemicals
18
Worsening trade deficits; patterns of ex-
Large investments since 1955; dependence
Ports and imports; major trading partners.
on imports; fragmentation of industry.
b. Invisibles
28
c. Light industry
18
Key sectors: textiles and wood processing.
Remittances from Yugoslays working
abroad; tourism; transportation; other
d. Agricultural processing
19
services and transfer payments.
A leading export sector, general neglect
c. Foreign assistance
wring industrialization drive.
e. Construction
19
Sources; purposes; Yugoslav credits to
less developed countries.
Expansion to meet demands of industriali-
zation and urbanization; slow rate of
4. Foreign investment
30
growth in labor productivity.
Efforts to attract foreign investment.
FIGURES
Page
Page
Fig. 1 Stratzg;:; supply position table)
2
Fig. 5 Corn harvesting photo)
8
Fig... Growth of GNP and industrial and
Fig. 6 Principal crops table)
9
agricultural production (chart)
3
Fig. 7 Livestock numbe -s and animal prod
Fig. 3 Distribution of GNP chart)
4
ucts table)
9
Fig. 4 Land utilization (map)
6
Fig. 8 Energy from primary sources (chart)
10
if
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iii
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Fig. 9
Energy products, minerals, metals,
and construction materials table)
11
Fig. 10
Iron Gate powerplant (photo)
12
Fig. 11
Industry map)
14
Fig. 12
Production of metals (photos)
15
Fig. 13
Production of selected manufac-
tured goods (table)
16
Fig. 14
Electrical equipment photo)
16
Fig. 15
Transport equipment photos)
17
Fig. 16
Housing construction photo)
19
iii
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Fig. 17
Sources and distribution of budget
revenues (table)
22
Fig. 18
Sources and distribution of invest-
ment (table)
23
Fig. 19
Foreign trade (chart)
26
Fig. 20
Composition of exports and im-
ports (table)
27
Fig. 21
Direction of foreign trade chart)
28
Fig. 22
Balance of payments table)
29
Fig. 23
Dubrovnik (photo)
30
iii
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south Bosnia and Hercegovina (Bosna: Her-
cegovina), Montenegro (Crna Gora), Macedonia
(Makedonija), and the province of Kosovo �has fallen
from 57o to 43% of that in the most advanced
republics� Croatia (Hrvatska) and Slovenia (Slove-
nija). More striking, per capita income iii the richest
republic, Slovenia, is now 5.5 times that of the least
developed area, Kosovo; in 1947, Slovenia's income
was only 3.3 times larger. Serbia (Serbija) and the
province of Vojvodina have remained at about the
Yugoslav average during the postwar period.
Besides attempting to balance regional levels of
development, the government periodically has
intervened to combat inflation and severe balance of
payments crises. These problems have reflected
distortions in output� inefficient industries, mainly ?a
the south, that require large imports and yield few
exports. Then too, decentralization in the I960's has
made the economy increasingly hard to control,
especially because the government has been unwilling
to settle for moderate rates of growth. The boom in
1970-71 generated annual rates of growth of 12% in
industrial output, 16% in the cost of living, and 48%
in hard currency imports. The trade deficit reached
record levels� US$1.2 billion in 1970 and $1.4 billion
in 1971.
Such crises have made for very uneven economic
growth, and Yugoslavia has not caught up with other
European countries. Average per capita gross national
product (GNP) in terms of U.S. purchasing power was
about $1,020 in 1971 (at 1970 prices), almost as high
FIGURE 1. Strategic supply position, 1970
(Thousands of metric tons except as noted)
as those of Greece and Romania, but well behind the
levels achieved by other Western and Eastern
European countries. Slovenia's per capita GNP,
however, is about $1,700; higher than Hungary's and
roughly on a par with Austria's.
Although it will continue to struggle with various
structural and regional problems, Yugoslavia has
considerable prospects for further development. For its
size, the country- has an exceptional variety of basic
resources especially lumber, copper, lead, zinc,
bauxite, low -grade coal, and a substantial hydroelec-
tric power potential. Major gaps in industrial supplies
are iron ore, hard coal, crude oil, cement, pig iron, and
rolled steel. Agricultural output generally meets all
requirements, save for vegetable oils, cotton, and often
wheat. Exports of fresh and processed food partially
offset large imports of industrial materials and
machinery from the West. Yugoslavia's strategic
supply position is given in Figure 1.
Most trade turnover �about 60% in 1971 �has
been with the industrial West. Communist countries
accounting for 29% of total turnover in 1971 �are the
main outlet for Yugoslav exports of industrial products
such as steel, chemicals, machinery and transport
equipment, and consumer manufactures. Trade with
the less developed countries, II% of the total in 1971,
has remained of minor importance, in spite of
Yugoslav efforts to extend credits and otherwise
expand trade.
APPARENT
PRODUCTION IMPORTS EXPORTS CONSUMPTION*
Electric power (mi :lion kilowatt- hours)
26,023
317
Hard coal
643
1,820
Brown coal and lignite
27,779
0
Metallurgical coke
1,309
201
Crude oil
2,854
4,466
Petroleum products
6,517
1,077
Iron ore
3,694
212
Rolled and drawn steel prodects
2,278
1,185
Refined copper
89
29
Refined lead
97
5
Refined and powdPred zinc
65
4
Cement
4,399
1,643
Wheat
3,790
14
COT'I
6,933
1
Cotton, ginned (metric tons)
11,966
69,646
*Production plus imports less exports, no allowance being made for changes in stock.
2
PRODUCTION
AS PERCENT
OF
CONSUMPTION
70
26,270
99
2
2,461
26
165
27,614
101
132
1,377
95
77
7,243
39
519
7,075
92
179
3,727
99
314
3,149
72
27
110
98
48
54
180
24
45
144
29
6,013
73
4
3,800
100
287
6,647
104
0
81,612
15
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1. Growth and structure
GNP has tripled since the early 1950's. Most of the
growth has taken place in the industrial sef;tor, where
output expanded by more than six times between 1952
and 1970 (Figure 2). Agricultural output during 1966-
70, which was 84,(' above the average for 1930 -55,
reflected frequent setbacks caused by weather
(listurbances. The slow overall growth of agriculture,
together with gem:ral recessions in 1961 and 1967, has
kept Yugoslavia's growth in the 1960's to about that of
most 1Vestem European countries.
Industrial output accounted for over 40% of
Yugoslav GNP in 1970, c�ornpawd with Irss than 25%
in the early 1950'x. The fastest growth has been in
heavy industry, especially chemicals, petroleum,
electric power, ferrous metals, metalworking, and
electrical equipment, which received about 60`/i of
industrial investment in the 1960's. Sizable
investments also have been made in light industry,
hut, except for paper and food processing, output of
most consumer goods has grown by far less than the
average for all industry during the postwar period.
Industrial employment has increased from 560,000 in
1952 to almost 1.5 million in 1970, and output per
worker more than doubled during the same period,
rising at an average annual rate of 4(,
Despite the rise in productivity and large injections
of imported Western technology, the range and
efficiency of industrial output remain low by
European standards. As in other less developed
countries, the expansion of the newer industries steel,
chemicals, machine building �was designed to reduce
import requirements. Instead, the growth of these
industries has, in many instances, increased the need
for imports of higher quality Western materials, as
well as capital equipment. Moreover, most of the
exports generated by these sectors have gone into the
soft currency area, primarily to the U.S.S.R. and
Eastern Europe. In addition to contributing to
balance of payments pressures, the pattern of
industrial growth has given 'rise to demands for import
protection and subsidies, hindering the progress of
economic decent:alization.
Industrialization has been accompanied by a rapid
development of transportation and domestic
wholesale and retail trade, all of which have steadily
increased their relative shares of GNP. "I'he lowest rates
of growth have been in the services sector, which
contributes about one -fifth to GNP. Governement
services have grown particularly slowly during the
1960's. Government employment- 99,800 in 1970
has rebounded from a low of 89,500 in 1967 but still is
20% below the high of 124,000 in 1961.
Agricultural production fell from 30% of GNP in the
e.arly 1950's to about 20% in 1970. The agricultural
labor force -4.7 million people accounted for 49%
of the total labor force in 1970 compared with 705 in
1950. This decline, however, has not been at the
expens of output; agriculture, including food
processing and the beverage and tobacco industries,
has provided a steady boost in the Yugoslav level of
living and still accounts for about one -fifth of total
exports.
The structure of GNP by end use (Figure 3) has
changed only slowly since the mid 1950'x. Govern-
ment spending has declined, reflecting the decentraliz-
ing reforms since the mid- i960's and reductions in the
share of defense expenditures. Gross fixed investment
rose during the boom in the early 1960'x, but declined
in the last half of the decade. Additions to inventories
averaged 794 of GNP in 1965 -69, ranging from a high
of 1251 in 1966 to only 3% in 1968 �the beginning of
the 1969 -71 boom. "Total investment, including
additions to inventories, amounted to 34% in the last
half of the 1960's, down from 37% in the first half of
the decade and equal to the share in 1955 -59. Net
3
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FIGURE 2. Growth of GNP, industrial production, and
agricultural production

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Personal
Consumption'
HSS-S! tHi4i4 NfiS -i9
5-yeer overa�ea
FIGURE 3. Distribution of GNP, by end use
foreign investment �the excess of imports over exports
of goods and services �has represented an average of
less than 2% of GNP since the mid 1950'x. Most
foreign assistance has supported investment, mainly
by financing imports of machinery and equipment.
Assistance to support personal consumption has
largely been confined to fairly small credits from the
U.S. Commodity Credit Corporation; the large U.S.
agricultural deliveries under P. L. 480 were terminated
in 1966.
Personal consumption has been the only component
of GNP to increase its share since the early 1960's.
Food consumption, in calories per capita, rose by
about 12% during 1955 to 1969, and the share coming
from animal origin -20% �has increased. Most
qualitative improvements in the diet have come from
increased consumption of sugar, oils, fats, and eggs,
rather than meat. The stock of housing has grown by
about 50% between 1950 and 1970, but shortages and
overcrowding in cities still persist. The largest gains
have carne from the increasing supply and assortment
of industrial consumer goods clothing and footwear,
beverages, tobacco products, packaged foods, home
appliances, radios, television sets, and automobiles;
the number of passenger cars registered in 1971 (over
700,000) was double the number in 1968.
2. Organization and policy
After Yugoslavia's ouster from the Cominform in
1948, the leadership began gradually to dismantle the
Soviet styled system and to decentralize economic
decisionmaking. During 1950 -55, workers' manage-
ment councils were set up in enterprises, agricultural
collectivization was abandoned, the economic
ministries and the state monopoly over foreign trade
were dissolved, obligatory state plans were replaced by
far less detailed "indicative planning," and state
financing of investments was reduced.
A series of major reforms (in 1561, 1965, 1967, and
1971) has transferred much of the direct federal role in
the economy to enterprises, banks, and local and
republic governments. Federal authorities still are
charged with insuring a unified and stable market,
providing for defense, and guaranteeing the transfer of
investment funds to the less developed regions.
Republic governments have taken over the federal
extrabudgetary accounts, including a number of major
investment projects. These governments also have
acquired a substantial role in formulating and
executing national economic policy.
The federal government �ir, spite of internal
criticism �has chosen to control the economy almost
exclusively through a combination of monetary- credit
policy and emergency price and import measures,
rather than by adding countercyelical fiscal policies to
its economic arsenal. Now, with greater decentraliza-
tion, the federal government has little choice but to
restrict its policy mix. Moreover, the effectiveness of
national policy in the future will depend heavily on
securing regional agreement or compromise �which is
not often easy to achieve, especially in time to respond
quickly to economic problems.
Private handicrafts and personal services �such as
shoe repair, beauty parlors, and guest rooms �are not
only tolerated but even promoted at times,
particularly because of the increased earnings from
tourism. Pressure on farmers in the private agricultural
sector to join producer cooperatives or otherwise
receive planting and harvesting assistance from the
socialized sector seems to have decreased. Both the
number of farms and acreage involved in cooperation
arrangements between private and socialized
agriculture have fallen since 1965.
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Fled .e/GNP
R CYrfellt IMrket rkla
Net Iorei�n
Inatxts
Gran Investment
In fine/ Capital
25 99 27
Nations! Defense
5
GOn n�tne
10 10
C
11
Personal
Consumption'
HSS-S! tHi4i4 NfiS -i9
5-yeer overa�ea
FIGURE 3. Distribution of GNP, by end use
foreign investment �the excess of imports over exports
of goods and services �has represented an average of
less than 2% of GNP since the mid 1950'x. Most
foreign assistance has supported investment, mainly
by financing imports of machinery and equipment.
Assistance to support personal consumption has
largely been confined to fairly small credits from the
U.S. Commodity Credit Corporation; the large U.S.
agricultural deliveries under P. L. 480 were terminated
in 1966.
Personal consumption has been the only component
of GNP to increase its share since the early 1960's.
Food consumption, in calories per capita, rose by
about 12% during 1955 to 1969, and the share coming
from animal origin -20% �has increased. Most
qualitative improvements in the diet have come from
increased consumption of sugar, oils, fats, and eggs,
rather than meat. The stock of housing has grown by
about 50% between 1950 and 1970, but shortages and
overcrowding in cities still persist. The largest gains
have carne from the increasing supply and assortment
of industrial consumer goods clothing and footwear,
beverages, tobacco products, packaged foods, home
appliances, radios, television sets, and automobiles;
the number of passenger cars registered in 1971 (over
700,000) was double the number in 1968.
2. Organization and policy
After Yugoslavia's ouster from the Cominform in
1948, the leadership began gradually to dismantle the
Soviet styled system and to decentralize economic
decisionmaking. During 1950 -55, workers' manage-
ment councils were set up in enterprises, agricultural
collectivization was abandoned, the economic
ministries and the state monopoly over foreign trade
were dissolved, obligatory state plans were replaced by
far less detailed "indicative planning," and state
financing of investments was reduced.
A series of major reforms (in 1561, 1965, 1967, and
1971) has transferred much of the direct federal role in
the economy to enterprises, banks, and local and
republic governments. Federal authorities still are
charged with insuring a unified and stable market,
providing for defense, and guaranteeing the transfer of
investment funds to the less developed regions.
Republic governments have taken over the federal
extrabudgetary accounts, including a number of major
investment projects. These governments also have
acquired a substantial role in formulating and
executing national economic policy.
The federal government �ir, spite of internal
criticism �has chosen to control the economy almost
exclusively through a combination of monetary- credit
policy and emergency price and import measures,
rather than by adding countercyelical fiscal policies to
its economic arsenal. Now, with greater decentraliza-
tion, the federal government has little choice but to
restrict its policy mix. Moreover, the effectiveness of
national policy in the future will depend heavily on
securing regional agreement or compromise �which is
not often easy to achieve, especially in time to respond
quickly to economic problems.
Private handicrafts and personal services �such as
shoe repair, beauty parlors, and guest rooms �are not
only tolerated but even promoted at times,
particularly because of the increased earnings from
tourism. Pressure on farmers in the private agricultural
sector to join producer cooperatives or otherwise
receive planting and harvesting assistance from the
socialized sector seems to have decreased. Both the
number of farms and acreage involved in cooperation
arrangements between private and socialized
agriculture have fallen since 1965.
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Enterprises in the socialized sector are managed by
workers councils elected by the employees. Where they
operate effectively, workers councils formulate overall
enterprise policy and approve major production,
investment, and wage decisions. Day -to -day
operations are controlled by a management board
(elected by the workers council and the local
government). In practice, the roles played by the
director, .corkers council, local government, and local
Communist party unit vary from firm to firm.
The most dramatic organizational change in recent
years has been the increase in the role of banks. In
1962 banks accounted for only 3 1 of investment
funds, and in 1970, 51 The expansion began in
1963 -6.1 when banks gained control over the
substantial "social investment funds" of republics and
the federal government. ?urthermore, local political
influence on the banks was r ^duced by allowing
enterprises to found banks and by limiting commune
government representation on bank management
boards. The banks provide a facsimile of a capital
market, although the immobility of funds due to
regional and local self- interest is still a problem.
A major reform is a market for foreign exchange,
scheduled to be in opeaation in 1973. The market is of
particular interest to the Croats, who have long
denounced the administrative reallocation of their
large export and tourist earnings. Under the old system
some 10% of foreign exchange earnings was retained
by enterprises; the remainder was surrendered to the
national bank which normally redistributed it in favor
of less developed regions. Now an average of 20% (and
for the tourist industry, 45%) of foreign exchange will
be retained, and most of the rest will be sold by banks
on the open market at rates subject to ceiling and floor
limits. Provisions still will be made to supplement the
meager export earnings of less developed areas.
National economic planning amounts largely to a
fo.ecast of economic trends and government
objectives �to give enterprises an idea of what to
expect in the market and to provide a formal outline of
major tasks to be carried out by the government and
the party. Although both annual and medium -term
(5 -year) plans are published, neither plan is binding
on enterprises and neither is necessarily consistent with
,rlans drawn up by enterprises or even republics.
Yugoslav planning, or forecasting, has often been at
variance with actual results. In fact, backtracking on
national objectives has often been necessary, because
the aebie -ement of planned high rates of growth
brought inflation and balance of payments problems.
During the inflationary boorn of 1970 -71, for example,
the government resorted to a freeze on all prices,
selective credit controls on imports, investment, and
consumer durables, and two devaluations of the dinar.
No effective controls, however, were put on wage
increases, such controls being strongly opposed by
trade unions. In short, the Yugoslav Government still
is searching for the right mixture of decentralization
and market controls that would provide structural
improvements for greater economic stabili� and
growth.
B. Sectors of the economy
1. Agriculture, fisheries, and forestry
Output in agriculture has grown considerably since
World War II, but weather conditions continue to
cause large year -to -year fluctuations in crop yields.
Most agricultural land (Figure 4) is still farmed in
highly fragmented parcels by private farmers using
little modern machinery. The government has tried to
stimulate output by allowing large price increases
agricultural producers' prices in 1970 were more than
three times higher than in 1960. Moreover, irrigation,
improvements in new seeds, increased use of fertilizers,
and greater mechanization, particularly in the large
scale socialized combines, have all helped to make
agriculture somewhat less vulnerable to fluctuations in
growing conditions. In good years, the sector it largely
self- sufficient, permitting significant expores of
livestock, meat, corn, wine, and tobacco. In years er
poor weather, large imports of such staples as wheat,
rice, and oils still are necessary, in addition to coffee,
sugar, fruit, wool, and cotton, which normalcy must be
imported.
Year -to -year fluctuations in output were noticeably
smaller it. the 1960's than in the 1950's (Figure 2). The
annual average variation in output in the 1960's was
less than 6% compared with 28% in the 1950'x.
Agricultural output in 1966 -70 was 16% higher than in
1961 -65 and 35% above 1956 -60 �among East
European countries only Bulgaria did as well.
During the decade of the 1960'x, the mix of
agricultural inputs has been altered somewhat. The
stock of farm machinery has increased rapidly,
particularly since 1965. On the other hand, the 1970
agricultural labor force (4.6 million) was 5% smaller
than in 1960. During the same period the tractor
inventories expanded front 31,700 to more than
67,000, while the number of combines increased from
3,100 units to 11,860. More significant than the pace
of mechanization has been the 140% increase: in
fertilizer use since 1961. Even Nvith this increase,
however, Yugoslavia ha; been outdistanced by other
5
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"W
oa
0
Forest
Valley pasture and upland grazing v
AGRICULTURE ra
Most productive arable land, mainly corn,
wheat, sugar beets, sunflowers, and tobacco
Other arable farming, mainly cereals, orchards,
vineyards, and livestock raising
Madder anean agricuhure, including citrus fruits,
fir alives, and some vineyards
Republic boundary
Autonomous area boundary
National caFdal
Republic capital
p Autonnmous area capital
501e26 3 73
FIGURE 4. Land utilization
East European countries in fertilizer consumption. In
1961, the Yugoslav use of chemical fertilizer (NPK) per
hectare (1 hectare =2.471 acres) was equal to or greater
than that of Romania, Bulgaria, and Hungary. By
1970, Yugoslavia, using 77 kilograms per hectare of
arable land, was still ahead of Romania (56 kg.) but
had fallen well behind Hungary (149 kg.), and
Bulgaria (140 kg.).
Most of the postwar gains in agricultural production
have come from the socialized sector which more than
doubled its output during the 1960's. Private
production has barely increased since the late 1950'x;
in fact, the peak output of 1 was only 2% above
the high for the 1950'x. Private holdings have declined
from over 90% of all arable land in the 1950's to 85%
in 1970. Moreover, output and productivity have
suffered from fragmentation of individual holdings,
low per hectare fertilizer application, and backward
farming techniques.
With minor exceptions, private farms are limited by
law to 10 hectares (about 25 acres); the average size is
lc i than 4 hectares as a result of land reforms and the
6
9 etla
Auk
repeated division of land among heirs. Rising
producers' prices, particularly since the economic
reform of 1965, have given peasants more incentive to
use fertilizers to increase output, but on a per hectare
basis the private sector still applies less than half that
of the socialist sector. Similarly, a lower density of
machinery is found in the private sector. According to
the 1960 census, there were only 5,080 tractors for the
9.2 million hectares in private holdings, compared
with 30,700 tractors for the I million hectares in the
socialized cultivation sector. The census of 1969,
however, showed a sharp increase to 39,000 private
tractors, reflecting increased availability of small, low
powered, garden -type tractors which arc suitable for
use on small farms. At the same time, the number of
tractors on socialized holdings dropped to 27,800 as
obs9lete machines were retired to make way for larger
machines.
The socialist sector comprises three main types of
holdings: agricultural combines and state farms,
agricultural cooperatives, and miscellaneous organiza-
tions, such as research institutes, specialized schools,
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and experimental facilities. The number of socialist
organizations reached a high of more than 9,000 in
1954 �the last year of forced collectivization. Since
then, many socialized organizations have been either
dissolved or consolidated into larger units so that by
1970 only 1,929 organizations remained. The most
important of these are the 270 state farms and
combines, which in 1970 held over 60% of the lard in
socialist holdings.
Organized like most industrial firms on the basis of
workers= self management, the state farms and
combines are large economic units; the 71 largest
enterprises owned nearly 45% of socialist acreage in
1970. The size of the state farms and combines,
coupled with their up -to -date technology, makes them
the heart of the food export industry. Many of the
firms are engaged in a broad range of economic
activity, some far removed from the production of
agricultural products. For instance, the Belgrade
Agricultural Combine is a giant holding company
now Yugoslavia's 11th largest enterprise �with
operations in allied fields such as food processing,
hotel and catering services, and even hotel
construction.
Agricultural cooperatives account for some 60� %0 of
the organizations in the socialist sector and own about
one -third of socialist agricultural lands. These
organizations are the main vehicle in transmitting
modern technology to private farmers. Private farmers
can participate in the cooperatives without forfeiting
ownership of their lands. Cooperatives provide
financial incentives, such as short -term ,edits for
seeds and fertilizer, and they contract to purchase
private output of food and industrial crops. Private
farmers, in turn, are expected to follow the
cooperatives' technical instructions on how to plow
the land, when to plant the crop, and how much
fertilizer to use. Members of cooperatives receive other
material advantages, i.e., social insurance benefits, for
which most private landowners are ineligible. Unlike
the ease in other socialist countries, the Soviet styled
collective farm is not an important part of the
agricultural scene. In fact, the Yugoslav equivalent
the peasant work cooperative �has all but disap-
peared.
Nearly 60% of the total land area can be used for
agriculturai purposes, and about half of this area is
cultivated. The most productive land is in the
Vojvodina �the fertile area along the Danube in
northern Serbia. Grain, mainly corn (Figure 5) and
wheat, covers two- thirds of the total cultivated area;
fodder crops such as alfalfa and clover make up about
I I of the area, and the remainder is divided between
vegetables (notably potatoes) and industrial crops
(mainly sugar beets, sunflowers, and tobacco). Almost
5% of the agricultural land is in vineyards and
orchards. The following tabulation shows a percentage
breakdown of land use and crop distribution in 1970:
PROPORTION of TOT.iL AREA
25.6 million hectares)
Agricultural land
57.4
Of which:
Cultivated land
29.3
Orchards and vineyards
2.8
Meadows and pastures
25.1
Forest land
33.8
Other noliagricultural use)
8.8
Total
100.0
CROP DISTRIBUTION IN CULTIVATED AREA
(7.5 million hectares)
Grain
65.8
Of which:
Wheat
24.7
Corn
31.6
Fodder
10.9
Vegetables
8.5
Industrial crops
5.5
Fallow
9.3
Total
100.0
Yugoslavia produced 11.6 million metric tons of
grain in 1970, compared with an average of 1 2.9
million tons during 1966 -70 and 8.1 million tons in
1939. Corn output in 1970 amounted to 6.9 million
tons; Yugoslavia's production is normally exceeded
only by that of the Soviet Union among European
producers, although in some years Romania has been
the second ranking cony producer. One of Yugoslavia's
long -term agricultural goals has been to develop self
sufficiency in wheat production. During 1961 -65,
wheat imports averaged 950,000 tons. The excellent
1966 and 1967 harvests -4.6 million and 4.8 million
tons, respectively permitted imports to decline from
L4 million tons in 1966 to only 79,000 tons in 1966.
The record 1969 harvest was so bountiful that imports
of wheat were insignificant in 1969 -70. The
production of wheat is still not "weather proof,"
however, as the small harvest of 3.8 million tons in
1970 proved. Production of potatoes has nearly
doubled since 1939, and larger increases above prewar
levels have been recorded for sugar beets, sunflower
seeds, and tobacco (Figure 6). Except for sunflowers,
tobacco, and legumes, for which the acreage has been
expanded considerably in the postwar period, the
increase in crop production has resulted primarily
from higher yields. Production of fruit, mainly grapes
11
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FIGURE 5. Yugoslavia is one of the
leading European producers of corn.
Although the extensive use of
modem machinery is not typical
of Yugoslav agriculture, mechani-
zation has increased, particularly
in the large socialist combines,
which dominate the production of
grain; labor- intensive cash crops
like vegetables and tobacco are
almost exclusively produced in the
private sector.
and plums, has sustained the large output and export
of wines and brandies. In good years, significant
amounts of fresh fruit are exported as well. Fruit is
highly vulnerable to weather disturbances, however,
arid, consequently, has a very uneven growth pattern.
Meadows and pastures, which cover about one
fourth of the total land area, support a livestock
iadustry that accounts for almost one -tenth of the
value of exports and has provided steadily increasing
amounts of meat for domestic consumption. In
response to growing domestic demand, hog and
poultry numbers have increased considerably since the
early 1950's. Poultry numbers increased by 28%
during 1966 -70, while the rise in ho}; numbers was
about 22% during the same period. Cattle numbers
have changed little, but the quality of Yugoslav beef
has improved enough to permit substantial export's of
fresh meat and meat products. Exports of live animals
and meats during 1966 -70 reached an annual level of
about US$160 million, most of which represented
exports to Western countries.
The number of sheep in 1970 was almost 20% below
that in 1962, a record 11. 1 million. The resulting
increase in wool imports induced the regime in 1970 to
institute guaranteed prices for domestic wool for the
first time. This action may slow further decline in
sheep numbers, but the measure has the disadvantage
of subsidizing a relatively costly and low quality
livestock operation. The number of horses, still an
important source of power, especially on private
farms, has declined by only 16% in the period 1939 to
1970. Milk production has leveled off since the early
1960's (Figure 7), but efforts are being made to
upgrade dairy herds through artific;ui insemination.
Milk output per cow, estimated at 1,136 liters yearly
in 1969, is still one of the lowest in Europe.
The Yugoslav diet compares favorably with those of
other European countries in terms of total calories
consumed per capita but is deficient in animal
protein, fresh fruits, and vegetables. The food mix is
similar to that in Bulgaria and Romania and other
countries of southern Europe. Starchy foods account
for approximately 58% of caloric intake; sugar, 8.4
fruits and vegetables, 7.1 meat, fish, and dairy
products, 14.4%; and fats and oils, 12.2 The main
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FIGURE 6. Production and yields of principal crops
(Production in thousands of metric tons; yields in quintals per hectare)
AVERAGE AVERAGE AVERAGE
1939 1956 -60 1961 -65 1966 -70 1970
Production:
Total gi 8,070 8,562 10,339 12,896 11,612
Of which:
Wheat 2,910 2,742 3,590 4,490 3,790
Rye 244 251 161) 149 127
Corn 4,070 4,710 5,616 7,348 6,933
Barley 424 477 557 526 402
Oats 348 350 343 332 309
Potatoes 1,540 2,830 2,708 3,007 2,964
Sugar beets 922 1,870 2,344 3,440 2,948
Sunflower seeds........... 27 89 206 299 264
Tobacco 16 41 43 49 49
Hem p 342 247 279 166 106
Plums 1,223 546 788 867 896
Yields:
Wheat 13.1 14.0 17.9 23.5 20.7
Rye 9.4 9.9 10.4 11.5 11.3
Corn 15.1 18.6 22.7 30.1 29.5
Barley 10.2 12.7 15.1 16.0 14.4
Oats 9.8 9.8 10.7 11.3 10.9
Potatoes 54.0 99.0 86.0 90.0 90.0
Sugar beets 200.0 241.0 279.0 3FS.0 346.0
Sunflower seeds........... 14.3 11.4 16.3 17.2 13.6
Tobacco 10.3 8.7 8.6 8.7 9.1
Flenlp 60.0 46.0 60.8 57.6 59.0
improvements in the diet since the mid- 1950's have
been a 15% drop in the consumption of cereals, a
doubling of sugar consumption, a1 d a 38% rise in the
intake of fats and oils. The share ol' animal products in
the caloric value of the diet -about 20% in 1969 -has
increased slightly since the 1950's.
FIGURE 7. Livestock numbers and output o
NUMBER OF LIVESTOCK
15 JANUARY 1939
Fishing is of minor importance in the economy.
About 46,000 metric tons of fish were landed in
1970 almost 25% above the average in 1961 -65 but
still one of the smallest catches in Europe. Fresh water
provides 40% of the catch, and the rest comes from
Adriatic fishing grounds. Croatia, which has nearly all
f animal products
AVERAGE AVERAGE AVERAGE
1950 -53 1960 -63 1966 -69 1970
AVERAGE AVERAGE AVERAGE
OUTPUT OF LIVESTOCK PRODUCTS 1939 1949 -52 1959 -62 1966 -69 1970
Thousands of metric tons'
`feat (including poultry)
Thousands
Cattle
4,332
4,957
5,560
5,562
5,029
fl ogs
3,564
4,184
5,550
5,400
5,544
Sheep
10,282
10,562
10,868
10,068
8,974
Poultry
22,450
19,372
29,366
37,280
44,954
Horses
1,274
1,105
1,218
1,125
1,076
AVERAGE AVERAGE AVERAGE
OUTPUT OF LIVESTOCK PRODUCTS 1939 1949 -52 1959 -62 1966 -69 1970
Thousands of metric tons'
`feat (including poultry)
420
315
547
700
760
Milk (from cows)
1,620
1,398
2,195
2,517
2,490
Eggs (fronlchickens)
1,370
888
1,485
2,196
2,868
':;'Jol (grease basis)
16
15
14
13
12
*Milk in millions of liters and eggs in millions
M
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fishing craft greater than 10 gross tons, accounts for
over 75% of all fish caught. Most of the catch is
processed for export; the Yugoslav fish consumption is
one of the world's lowest �only 2.3 kilograms per
capita in 1970.
Forests are one of the most valuable of Yugoslavia's
resources. Covering about one -third of the total land
area, forests are found nearly everywhere except in the
Vojvodina, along some portions of the Adriatic, and in
major river valleys. About half of forest resources are
deciduous trees mainly beech and oak �that rank
with Europe's best. Forestry itself accounts for only
about 1 of Yugoslavia's GNP, but this in turn
supports the 3% contribution of the woodprocessing
and paper indus'iries.
The annual timber cut fell from 31.5 million cubic
meters in 1949 to only 13 million in 1957. In 1966 -70
the cut was 17 million cubic meters a year, an output
which apparently is being offset by natural and
artificial reforestation. Most timber production has
gone into sawlogs and pulpwood. The output of
fuelwood has steadily declined since the mid- 1960's,
reflecting conservation measures, as well as the
increased availability of other sources of fuel.
2. Fuels and power
For its size, Yugoslavia is relatively well endowed
with fuel and power sources. The country has ample
reserves of lignite and a large hydroelectric power
potential. Crude oil and natural gas production is
growing steadily, but Yugoslavia still imports most of
the crude petroleum it uses. The production and net
supply of primary energy sources have doubled since
the mid- 1950's (Figure 8). Coal remains the single
most important energy source, but its share in energy
consumption is continually being reduced by the use
of hydroeleerric power, petroleum, and natural gas.
The share of coal in the net supply of energy dr(
from 60% in 1955 to less than 50% in 1970. Fuelwood
also declined in importance. At the same time, the
share of crude oil and natural gas rose from 9% to
35 and the share of hydroelectric power, from 12%
to 21 Data on primary fuel production, as well as on
minerals, metals, and construction materials, are
shown in Figure 9.
a. Coal
The most serious deficiency in the fuel base is a
shortage of hard coal. Known and probable reserves of
200 million metric tons are reported, but most deposits
occur in deep, thin seams or in areas where problems
of gas, water, or collapsible overburden prevent
10
Millrontk
Tore %steederd
f
MS 25
PRODUCTION
VET SUPPLY��.
S
Fuelwood
4
J9
21
28
Hydroelatric
Poiwr.
12
14
l
1
Natural Gas
e
3.
9
IS
Crude Oil
31
16
3
Hand Coal
e
Brown coal
so
44
and Lignite
44
32
HSS. N711
Me'.`
HSS
Ktooderd'Wd ha o calorific vain of 7000
kibcalaka per krlojram.
�tack ern( rnpwu at enera praoa*
deHred Item primary sources..
FIGURE 8. Production and net supply of energy from
primary sources
maximum exploitation. Postwar production of hard
coal consistently reached 1 million tons a year until
the last half of the 1960's, when several marginal
mines were closed. Production has plunged from
1,333,000 tons in 1966 to only 643,000 tons in 1970,
and large imports, averaging 1.8 million tons a year
during 1965 -70, have been necessary to meet domestic
requirements.
Low -grade brown coal and lignite deposits are the
most economic of Yugoslavia's fuel resources.
Concentrated in several large basins, these deposits
have known and probable reserves of 21.7 billion
metric tons several hundred times the 1970 output.
Lignite reserves -90% of known lower grade coal
deposits �are sufficiently concentrated so that highly
mechanized strip mining techniques can be used in
most of the major fields. Productivity has increased
rapidly, particularly in Montenegro. Although the
output of brown and lignite coal more than doubled
during 1955 -66, growth in production has slowed since
the 1967 recession.
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FIGURE 9. rroduction of major energy products, minernls, metals, and construction
materials
(Thousands of metric tons except as noted)
Electric power (million kilowatt- hours)
Hardcoal
Brown coal and lignite
Metallurgical coke
Crude oil
Petroleum products
Natural gas (million cubic meters)
Ironore
Crude steel
Rolled stee l
Copper ore
Lead -zinc ore
Refinedcopper
Refined lead
Refined zinc
Bauxite
Primary aluminum
Cement
Bricks (million units)
The principal users of coal are industry,
transportation, and private consumers. Industry
traditionally has consumed approximately 60% of
domestically produced coal and virtually all imported
coal. The largest consumers of low grade coal are
public and industrial powerplants (45% of lignite and
brown coal production in 1970) and the chemical, iron
and steel, and building materials industries, each of
which uses 4% to 6% of annual output. The
metallurgical industry relies on imported coke as well
as domestic coke produced by mixing domestic and
imported hard coal supplies. Railway transportation's
share in the consumption of coal decreased by almost
half in the decade 1961 -70 as electrification of
railways was completed on a number of routes and
some obsolescent coal burning engines were replaced
by diesel locomotives. The fuel requirements of
households are met principally by lignite.
1939 1950 1955 1960 1965 1970
1,173 2,408
1,410 1,154
5,622 11,665
0 0
1 110
239 469
3 14
667 731
235 428
151 278
984 1,116
775 1,187
12 15
11 57
5 12
719 206
2 2
894 1,220
830 769
b. Petroleum and natural gas
Significant production of crude petroleum did not
begin until after World War 11. In 1948, crude
production amounted to only 36,000 metric tons; in
1970, 2.9 million tons were produced. Intensive
exploration efforts brought proven and probable
reserves to an estimated 80 million tons in 1969.
Croatia accounts for almost three fourths of
Yugoslavia's crude oil production, with the Vojvodina
accounting for virtually all of the rest. The major
4,340
1,137
14,071
731
257
739
55
1,398
805
494
1,477
1,650
25
76
14
791
12
1,572
799
8,928 15,523 26,023
1,283 1,169 643
21,429 28,788 27,779
1,083 1,267 1,308
944 2,063 2,854
1,256 2,928 6,517
53 330 977
2,200 2,504 3,694
1,442 1,769 2,078
972 1,188 1,774
2,370 6,003 9,420
1,920 2,358 3,113
35 56 89
89 102 97
36 46 65
1,025 1,574 2,099
25 39 47
2,398 3,102 4,399
1,321 1,717 2,186
oilfields are located in central Croatia, but more recent
discoveries have been along the littoral of Slovenia
and Croatia.
Despite rapid development, oil production has
increasingly lagged behind domestic requirements.
Net imports (imports minus exports) of crude oil have
ripen from only about 25% of domestic production in
1965 to more than 150% of output in 1970. In 1970,
Iraq supplied 45% of imports, the U.S.S.R., 33 and
Iran, the remainder.
The increase in the use.of imported crude reflects
the rapid expansion of refinery capacity. The
increasing reliance on foreign petroleum sources and
the cost in hard currency, however, have alarmed the
government. To boost investment in domestic crude
oil production, prices of petroleum products were
raised substantially in March 1972. While refining
capacity for gasoline and diesel fuels is large enough to
permit some exports, significant amounts of fuel oil,
lubricating oil, and special greases still are imported.
Natural gas has undergone a concomitant
development since World War II. Production
stagnated somewhat in the late 1950'x, but between
1960 and 1970 output soared from 53 million cubic
meters to 977 million cubic meters. Production still is
smaller than in most European countries, but, with
proven and probable reserves estimated at over 30
billion cubic meters, the Yugoslav natural gas industry
has room for considerable expansion. In addition, the
country has significant oil shale reserves, but these are
uneconomic to develop at present.
11
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FIGURE 10. Erecting the first gener-
ator of the Iron Gate hydroelectric
powerplant. The dam is nomi.sally
a joint Romanian Yugoslav project,
although it has received sub-
stantial Soviet support in the form
of finance, equipment, and technical
know -how. Begun in 1964, the
project is expected to produce 5
billion kw.-hr. a year for each of
the two countries when final stages
are completed.
c. Electric power
Yugoslavia's steadily expanding electric power
sector plays a key role in the economy. During 1966 -70
the industry accounted for over 25% of total industrial
investment, and at the end of 1971, both generating
capacity -7.6 million kilowatts (kw.) �and output
29 billion kilowatt -hours (kw. -hr.) �were more than
three times the 1960 levels. Despite this expansion,
production does not meet the needs of all users; some
seasonal rationing is necessary. Output per capita
1,405 kw. -hr. in 1971 �still ranks among the smallest
in Europe.
Hydroelectric powerplants accounted for 3.97
million kw., or 52% of the total generating capacity in
1971. The most important hydroelectric plants are
located in the mountainous Adriatic coast -.d region,
along the Drava River in the northwest, and on the
Danit'oe River in the northeast. Annual hydroelectric
power potential was estimated at 66.5 billion kw. -hr.
in 1971, but output was only 15.2 billion kwAir. �just
over one -fifth of the potential. Production has
increased significantly now that the long awaited Iron
Gate (or Djerdap) dam has gone into operation
Figure 10).
12
Thermal powerplants produced 13.8 billion kw. -hr.
of electricity in 1971. Almost all o` this output came
from three republics� Serbia, Bosnia and Her-
cegovina, and Slovenia �the main sources of lignite
and brown coal, the primary fuel used in thermal
powerplants.
The electrical transmission network extends to all
economically significant areas and connects with the
grids of neighborhig countries. Domestic transmission
facilities are concentrated in the cast, centering on
Belgrade, and in the northwest, where they center on
Zagreb. International connections maintained with
Italy, Austria, Hungary, Bulgaria, Romania, and
Greece �are used mainly for seasonal exchanges of
electricity; the largest exchanges are made with
Romania, followed by Austria and Greece.
Industry consumes two thirds of all electric power
produced; of particular importance are nonferrous
metallurgy (14.4% of industrial consumption in 1971.),
chemicals and rubber (18.9�%0), iron and steel (19.2
and paper and wood industries (10.4 Agriculture,
commerce, public utilities, and transportation are
supplied adequately with power for their needs, but
only three fourths of all households have been
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equipped with electricity. Development plans for
1971 -75 call fo increasing the installed electric power
capacity to 10.5 million kw. and expanding annual
production to 51 billion kw. -hr. The increase in
generating capacity will be achiexed by expanding
both thermal and hydroelectric installations; extreme
reliance on hydroelectric power is undesirable because
of periodle droughts.
3. Metals and minerals
The supply of metals and minerals is one of the
economy's best assets. The main shortage is of high
grade iron ore, a deficiency which has led to
substantial imports of both ore and pig iron.
Nonferrous resources are ample, and, although there
are some imbalances between raw materials and
roilirg mill capacity, output covers most domestic
needs and provides sizable exports. Yugoslavia also has
adequate supplies of most nonmetallic minerals and
building materials.
a. Ferrous metals
In response to large investments, o,itput of the
ferrous metals industry has tripled since the mid
1950's. The industry, however, rests on a minimum
raw materials base. Proven reserves of iron ore amount
to 365 million metric tons but have an average iron
content of only 37 compared with about 45% in the
U.S.S.R. Output in 1970 -3.7 million tons �was
supplemented by imports of 212,000 tons of high
grade ore (over 42% iron), mainly from India. Imports
of pig iron also are required 172,000 tons were
brought in during 1970, compared with an output of
1.3 million tons. In that year Yugoslavia also imported
hard coal (1.8 million tons), metallurgical coke
(201,000 tons), iron and steel scrap (147 ,000 tons), and
some alloying materials, all to support an output of
about 2 million tons of crude steel and 1.8 million tons
of rolled products.
The hulk of investment since 1965 has gone into
new stud mills in Skopje, Macedonia, and Smederevo,
Serbia (near Belgrade), and for renovation of plants at
Zenica in Bosnia and Hercegovina and at Jesenice in
Slovenia (Figure 11). Progress, ho %vever, has been
slowed since the mid- 1960's because of difficulties in
O btaining financing and rising building costs.
Moreover, "Zito himself has criticized the pattern of
development of the steel industry and the role of
regional self- interest in the allocation of investment
funds. Each republic has lobbied successfully for a
steel mill. Most of the plants built� except for Zenica
and Skopje �have been small and inefficient by West
European standards. More recently, however, regional
aspirations have signaled a new danger. Some
republics are talking about building new facilities
which might well stretch capacity for.marry standard
products beyond Yugoslav needs. Such expansion
would require more imports of materials, and
undoubtedly would not yield much in the way of hard
currency exports. A classic example is the new steel
complex under construction near Spli: on the Adriatic,
a project which Tito in 1969 had branded as too costly
and unnecessary.
b. Nonferrous metals
In both resources and production of nonferrous
metals, Yugoslavia iE one of the leading countries
P'Lrope. Excluding the U.S.S.R., Yugoslavia leads
Europe in the production of copper, lead, and
antimon. ore and is second in the production of
bauxite and mercur,,'. Yugoslavia accounts for about
1% of the world's copper production, 3% to 5% of
antimony, bauxite, and lead, and about 6% of the
mercury o ^tput. Significant amounts of zinc, gold,
and silver are also mined. Production in 1971 of 89,000
metric tons of electrolytic copper, 97,000 tons of
refined lead, and 65,000 tons of refined zinc satisfy
domestic needs and provide a substantial surplus for
export, either directly or after further processing.
Electrolytic copper production has expanded by over
250% during the 1960's, and much of the increased
output has found its way into export markets. In 1970,
nearly 39% of Yugoslavia's copper was exported, most
of it to the United Kingdom, followed by France and
the United States. Exports of rolled copper and copper
products are important, but lead, zinc, and other
nonferrous metals are still exported primarily in
unwrought forms. The Bor and Majdanpek mines
(Figure 12), both located in Eastern Serbia, are the
center of Yugoslavia's copper industry. Expansion is
taking place at the Bor metals complex� already
Europe's largest �to increase annual capacity to
150,000 tc ^s. The most important lead and zinc
facilities are located near the Merica' mine in
northern Slovenia and at tlic Trepea mine in Serbia
(Figure 12). A new foundry at Titov Veles near Skopje
in Macedonia was to be completed in 1972, and is
expected to raise the industry's smelting capacity to
210,000 tons of lead and 160,000 tons of zinc.
Because Yugoslavia has large bauxite reserves
(about 6% of world reserves) and a large hydroelectric
potential, the aluminum industry is a prime target for
'For diacritics on place names see the list of names at the end of
the chapter.
13
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0
ca AN
Z
Sink
letkat
IRON
O ORE
oo
9 G
02110k� OIL
Sari fN
SertafYl !M
Sava
Tub
,IROr.ORE
Yntar
9
o d G +jT
F
e Mining, iron and steel, nonferrous metallurgy
Machinery and metal goods. transport equipment,
electrical equipment and appliances
Textiles and clothing, leather and footwear
Food and tobacoo processing, wood and paper
Chemicals, petroleum refining, cement
Circles and segments indicate relative importance
i i
Rny, qe Cno"eF
Tits" K"
Utica
CHROME
LEAD
7E AND
ZINC
IMa
They Vela
IRON
ORE Prilq
M Coal and Ignite
501627 3.73
FIGURE 11. Industry
expansion. Over 90% of the annual bauxite
production is exported, and imported aluminum
ingots are necessary to keep rolling mills operating at
capacity. Early plans to develop the industry were
upset in 1958, when the U.S.S.R. and East Germar-
suspended a credit of US$175 million for the
construction of an aluminum plant. In 1971, talks
between Energoinvest of Sarajevo and Kaiser
Aluminum on a proposed aluminum combine fell
through. Nevertheless, the industry finally is being
expanded. In February 1972, a credit agreement for
$130 million was signed by the Sovi -`s and
Energoinvest for the construction of a new faciiiry at
Zvornik in Bosnia and Hercegovina. Two plants, an
integrated aluminum combine at Titograd in
Montenegro and an alumina factory at Mosiar in
Bosnia and Hercegovina, began production during
14
1972 under licensing agreements with the French firm
Pechinet. In 1971 the Kidricevo plant in Slovenia
produced over 90� %0 of the 133,000 metric tons of
alumina produced in Yugoslavia. In 1972 annual
alumina capacity should exceed half a million tons,
and aluminum ingot capacity should reach 150,000
tons, compared with the 1971 ingot production of
48,000 tons.
c. Nonmetallic minerals and construction
materials
Yugoslavia has ample deposits of a variety of
nonmetallic minerals, including magnesite, limestone,
pyrite, gypsum, and asbrstos. Because of dericiencies
of phosphate rock and potash, however, the
production of chemical fertilizers is dependent upon
imported raw materials.
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Loading copper ore at the Maidanpek mine
FIGURE t.2. Yugoslavia's ample nonferrous resources include copper, lead, and zinc
Production of basic construction materials, such as
bricks, stone, glass, and lime, has been generally
,adequate to satisfy domestic req iirements. Cement
production, although it has risen from 1.6 million
metric tons in 1955 to 4.4 million tons in 1970, still
must be supplemented by substantial net imports,
amounting to 1.3 million tons in 1970.
4. Manufacturing and construction
The volume and variety of manufactured goods
have expanded rapidly under the Tito regime (Figure
13). Much of the expansion, particularly during the
1950's, h.,, taken place tinder a policy of easy credit
and heavy import protection enabling many
unprofitable and uneconomic firms to survive. The
autarkic tendencies of the republics have in many
cases led to the construction of plants of suboptimum
size, hindered cooperative efforts between enterprises
in marketing and research, and slowed the rate of
technological innovation. Moreover, the rapid growth
of manufacturing has greatly increased the demand
for imports. Large imports of capital equipment
(mainly from Western countries) have been required
to develop processing industries that, in some cases,
have outstripped domestic production of basic raw
materials and sentimanufactures. Manufacturing
industries draw heavily upon Western technology, not
only by importing advanced machinery and
equipment, but also through licensing arrangements
and an increasing number of joint ventures.
The government has been trying to streamline the
manufacturing sector. The price reform of 1965 raised
raw material prices relative to prices of manufactured
goods in an effort to eliminate excessive profits and
weed out clearly unprofitable firms. Beginning in
1967, the relaxation of import restrictions subjected
some manufacturing branches, such as chemicals,
metalworking, textiles, and the leather industry, to
more intense foreign competition. These measures, in
conjunction with the economic recession of 1967 and a
tight credit policy, forced a few uneconomic
enterprises out of business. Many more firms have
continued to operate with losses by piling up debts
with other enterprises. This situation has in a number
of cases disrupted investment plans of profitable
enterprises.
15
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The Trepca complex, a leading preJucer of
lead and zinc

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FIGURE 13. Production of selected manufactured goods
U N rrs
1939 1950 1955 1960 1965 1970
Tractors
Units.......................
0
53
1,100
7,309
7,430
12,047
Freight cars
..do.................
0
1,243
477
3,422
4,848
2,609
Passenger automobiles and trucks......
..do
0
826
3,210
15,025
45,452
123,610
Maritime cargo ships ind tankers......
Thousand gross register tons
no
0
31
161
299
402
(launched).
Electric wire and cable
Thousand metric tons.........
1
3
5
57
80
104
Sulfuric acid (100
....do......................
23
38
73
130
435
747
Soda ash (100
....do......................
22
32
39
89
93
113
Calcium carbide
....do......................
55
41
44
73
105
113
Mineral fertilizers (nutrient content)....
.do
9
14
34
50
226
480
Tires for motor vehicles and aircraft....
Thousands
8
54
87
391
955
2,763
Paper
Thousand metric tons.........
35
49
62
142
365
483
Plywood
Thousand cubic meters........
13
14
25
"1
111
103
Cotton fabrics
Million square meters.........
111
146
174
257
394
390
Wool fabrics
....do......................
12
25
26
4
55
57
Leather footwear
Thousand pairs..............
4,208
8,154
6,859
14,970
29,987
31,074
rm Data not available
a. Metalworking industries
Development of tote metalworking industries
producers of machinery, transport equipment,
household appliances, and other consumer goods �has
been one of the focal points of Yugoslavia's drive for
industrialization. Net product in the metalworking
industries increased fivefold during 1955 -70, while the
industries' share in net industrial product rose from
21 to 28
Among the most rapidly expanding industries in this
group is the production of electrical equipment and
appliances. Major prod.ict lines include turbines,
generators, transformers, electric motors, electric wire
and cable, as well as TV sets, radios, and refrigerators.
The Rode Koncar enterprise of Zagreb is one of the
more important domestic producers in this field
(Figure 14). The firm has supplied most of the
electrical equipment used in Yugoslav hydroelectric
and thermoelectric projects both at home ind abroad.
The industry also includes one of Europe's largest
cable producers, the Mosa Pijade cable enterprise of
Svetozarevo, Serbia. Electric wire and cable are the
leading exports of the electrical equipment industry
and alone accounted for 3% of total indus*rial exports
in 1970.
The production of transport equipment ships,
loci iotives, railroad cars, automobiles, trucks, buses,
met,,rcycles, and bicycles �also has expanded rapidly.
Most shipbuilding takes place at the three large
maritime shipyards on the Adriatic coast in Pula,
Ri;eka, and Split (Figure 15), and in two yards on the
Danube in Serbia. Although the yards sometimes have
difficulty securing orders, production has continued to
grow, and plans for the construction of vessels of up to
FIGURE 14. The production of
rotors for electric generators at
the Rade Koncar enterprise,
Zagreb
119
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FIGURE 15. The production of transport equipment is one of the most important
Yugoslav metalworking industries.
Paz_ 7 7 11-7 --177 T1
h3py and in Split. The Yugoslav merchant
fleet, a valuable earner of foreign exchange,
wnsists largely of domestically built ships.
15
17
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Most passenger automobiles are produced at the Crvena Zostava plan� in Serbia, under licensing of Fiat
of Italy

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265,000 gross register tons are underway. Ships are
built for export to both Communist and non
Communist countries; while the U.S.S.R. has been the
largest purchaser in the past, ships have been exported
to Norwaw, Sweden, India, and the People's Republic
of China.
Output of passenger automobiles (Figure 15) has
jumped from only 760 units in 1955 (the first year of
production) to 113.218 units in 1971. Expansion of the
Crvena Zastava plant at Kragujevac, Serbia, has been
underway for several years and is to continue until
1973 -75, by .which time the production goal is to be
450,0(X) to 500,000 annually. Series production of the
Zavasta -101 �the first all Yugoslav -made car �began
sometime late in 1972. Smaller numbers of cars and
buses are assernbl in Slovenia and in Bosnia and
Hercegovina from imported parts. Imports of
assembled passenger automobiles totaled about 43,000
units in 197!.
Yugoslavia also produces it wide variety of
machinery and equipment, including machine tools,
agricultural machinery, construction equipment,
pumps, boilers, compressors, heating and ventilating
equipment, and household appliances. Much
machinery, especially of larger or more sophisticated
design, must be imported. Imports of machinery and
equipment normally are over twice as large as exports;
in 1970 machinery and equipment accounted for 33%
of total Yugoslav imports, compared with 231 of total
exports.
Producers of machinery _.ad other metal products
were among the hardest hit by the price -cost squeeze
in 1965 and the relaxation of import restrictions in
1967. In 1968, output of all finished metal products
%was still slightly below the 1965 level. Since 1968,
production in metalworking has been affected by the
general boom in investment and industrial output.
There is still room, however, for substantial
improvement in the structure and quality of output in
this sector.
b. Chemicals
Since 1955 large sums have been invested in the
chemical industry. While these investments led to
rapid growth (chemical output rose more than 10
times during 1953 -70), the industry remains heavily
dependent upon imports for many of its synthetic
nniterials, especially polyvinyl and polymers. Growth
in the production of sulfuric acid and mineral
fertilizers has been particularly rapid (Figure 13).
Increasing the production of artificial fertilizers has
been important to agricultural self- sufficiency.
Yugoslavia was it heavy importer of fertilizers until the
18
late 1960'x; now some fertilizers are exported. Exports
of chemicals, chiefly pharmaceutical products,
plastics, basic compounds, and cellulose have
continued to increase slowly, but the industry still
requires large imports of basic chemical elements and
compounds, dyes, and plastics. In most years,
chemical imports have been over twice as large as
exports.
The fragmentation of the Yugoslav chemical
industry hinders its development �in 1969 there were
1.18 chemical firms, three fourths of which employed
fewer than 500 persons. Past investments have been
concentrated in inorganic chemicals and cellulose
with special emphasis on fertilizer production. Future
expansion is expected to take place in petrochemicals
under foreign licensing. One of the major producers,
OHIS of Skopje, is corstructing it plastics factory with
technical assistance from Pechinet of France.
c. Light industry
Comprising the textile, wood processing, paper,
leather, rubber, and nrinting industries, light industry
accounts for about one- fourth of total exports. The
textile industry ranks second only to metalworking in
value of net product (14io in 1970) and employment
(237,000). In 1969 the industry consisted of 338 firms,
of which 62 employed more than 1,000 persons each.
Production of all textile products more than doubled
during the 1960'x. Particularly rapid growth has taken
place in the manufacture of clothing and artificial
fabrics. The value of textile exports more than tripled
during the 1960'x, but t!te value of textile imports
consistently exceeded cxwrts. The industry must
import most of the cotton (mainly from the U.S.S.R.,
Egypt, and the United States) and much of the wool
and synthetic fiber necessary for textile production.
Another key industry is wood processing, which in
1970 ranked seventh in size of net product. Exports of
furniture, particularly to the United States and
Western Europe, earn substantial amounts of hard
currency. Sawn hardwood and softwood, as well as
veneers, ,,re shipped to both Western and Communist
countries. In addition to wood processing, forest
exploitation supports the growing paper industry,
whose output tripled in value during the 1960's.
The leather and rubber industries have expanded
about as fast as the other light industries. Output of
leather is large enough to permit sizable exports of
shoes and various leather products. Production of
rubber products, on the other hand, depends heavily
on imported raw and synthetic rubber, and, even
though output of rubber tires and articles has been
growing, it large portion of domestic requirements is
met by imports.
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d. Agricultural processing
Agricultural processing ranks fourth among
Yugoslav industries in value of net product and in
employment. The industry supplies most of the food,
beverages, and tobacco that pass through domestic
commercial channels and is one of the leading export
sectors. Although the share of food and tobacco
products in total exports has declined to about 205c,
fresh and processed meats, canned fish, fruits and
vegetables, alcoholic beverages, and tobacco are still
important earners of hard currency.
In 1971 there were 192 enterprises in the
agricultural processing industry. About three- fourths
of them ernpio,cd fewer than 500 workers. The typical
processing plant has outmoded equipment, reflecting
the neglect of this industry during the industrialization
drive. Some progress has been made over the last
several years, however, b% increasing the average size
of plants and employing more advanced processing,
canning, and bottling machinery imported from
Western Europe and the United States.
Production of processed foods expanded roughly at
the same rate as total industrial production since the
raid- 1950's; tobacco production grey at a far slower
pace. The output of various processed agricultural
products between 1960 and 1970 increased as follows,
in tons except as noted:
1960 1970
Flour (thousand tons) 1,597 2,172
Sugar (thousand tons) 264 354
Canned meat 33,000 56,741
Bacon and sausage 21,800 72,512
Canned fish 16,500 22,149
Canned vegetables 20,200 78,575
Fruit preparations 36,800 47,005
Alcoholic beverages (thousand hectoliters) 22,500 42,113
Tobacco products 20,343 32,179
e. Construction
The construction industry has undergone consider-
able expansion in the postwar period to meet the
demands of industrialization and the gro%%ing need for
household construction that has accompanied rapid
urbanization Figure 16). Construction activity slowed
during 1965 -67, rebounded in 1968, and remained at a
high level during the boom years of 1969 -70. The
construction sector employs about 332,000 persons,
generates about one -tenth of GNP, but receives only
about 2.6rf of gross investment in fixed capital. The
nse of outdated construction methods by most
enterprises has resulted in a slow rate of growth in
labor productivity. Of the 730 enterprises engaged in
construction activity (including design, assembly, and
FIGURE 16. Housing construction in Belgrade. Despite
considerable expansion in the construction industry, most
enterprises lack modern equipment and use out-
dated methods.
related firms), only about 85 are fairly large, with
more than 1,000 employees. These larger firms execute
most major projects at home and abroad
powerpla. factories, ports and roads, hydrologic
work, and geological exploration. In 1970, Yugoslav
construction enterprises were engaged in projects in 36
countries, mostly developing nations. The total value
of construction completed abroad in 1969 -70 was
US$180 million, carried out mainly in Libya. 7,arnbia,
Pakistan, Czechoslovakia, and East and Nest
Germany. The leading international construction
^rterprises are Energoproject of Belgrade, anti
F.nergoinvest of Sarajevo.
In 1965 -70 construction of residential housing
accounted for about 37i of the value of completed
construction, representing only a small increase from
the share in the early 1960's. The construction of
hospitals, government offices, and schools usually
makes up aot,ut tic,( to 8`.1 of the total, whiie
9
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construction of transportation facilities consumes
about 12.5 i of total outlays. Efforts in recent years to
reduce the backlog of urban housing needs have met
with moderate success. Since 1967 about 5000)0 units
have beer completed. Average dwelling space per
inhabitant increased from 8.7 to 11.9 square meters
during this period, but Yugoslavia still ranks below
most of Western Europe and some Eastern European
countries in this respect. Moreover, the standards of
quality of most structures, including newer ones, are
we ll below those in Western Europe.
5. Retail trade
The quality, variety, and regri:vrity of supply in the
retail 'ride network have been consistently superior to
chose of other Communist countries. The consumer
has profited from a steady rise in the volume of goods
handled by the nehvork parallei to the general
increase in urbanization and in the level of living.
Queues for food, clothing, and other essentials are now
infrequent, and supplies of luxuries are growing
rapidly, although still beyond the reach of much of the
working class. Substantial improvi�ment needs to be
made in bringing the trade network closer to
consumers in Wa al and backyard areas and in
incre asing the use of marketing techniques in order to
gear production more closely to consumer demand.
Domestic trade enterprises, like other firms outside
agriculture and handicrafts, are socialized and operate
under workers' management. In addition to trade
organizations, the government permits wholesale or
retail sales of goods by private producers in agriculture
and handicrafts. !n 1970, 1,254 retail and 985
wholesale firms specialized in domestic trade. The
number of trade firms has been reduced, mainly
through mergers, by almost 1,800 during the 1960's.
(hr the other hand, employment has risen from
1990H) in 1960 to 311,000 in 1970, and the number of
shops operated by trade organizations rose from
41,(H)0 to 62,M0 during the same period.
The volume of retail sales more than doubled
between 1960 and 1970. The largest gains have been
in s..les of gasoline, which increased by more than six
tim. -s during the period, and of electric appliances,
which rose by five times. Sales of metal, wood
products, and construction materials roughly triple
(I ..ring the decade. The smallest increases have been
for coal and fuelwood, artificial fertilizers, soaps, and
fabrics; sales of these products either have barely
increase or have fallen since 1960. Essentials such as
food and clothing still account for about (iOSr of retail
sales. In 1970, food and tobacco made up37 of retail
20
turnover; textiles, leather and footwear, 21 5 1i; and
household fuel, 1 Si. Consumer durables, however,
have made a significant impact on the market in
recent years �at least in the largest urhan areas.
During MWO 70, sales of passenger automobiles have
leaped from less than 8,000 units to 80,00); television
sets, from 14,000 to 272,000; and refrigerators, from
350H) to 258,000.
In addition to the domestic trade network,
Yugoslavia has a large and fast growing catering
industry. In 1970, the industry employed 136,000
people and operated over 9W hotels and motels, as
mane boarding houses and other living quarters, 1,400
restaurants, over 10,000 inns and taverns, and over
7,000 coffeehouses and snackbars. Spurred by the
tourist boom since the mid- 1960's, catering and
tourism together received over 7% of all Yugoslav
investment in 1970, more than total investment in
agriculture: and nearly equal to spending on electric
powerplants �the largest single area cif industrial
investment. Even so, the catering network has been
hard pressed to keep pace with the growth of tourism,
especially along the popular Dalmatian coast.
C. Planning, policy, and finance
1. Planning and policy
Formal government objectives are embodied in
annual and medium -term plans, which contain
noncompulsory forecasts for output, employment,
incomes, investment, consumption, and foreign trade.
The pans also designate priorities among economic
sectors and geographic areas. In theory, plan
objectives are to be pursued by indirect instruments of
economic policy such as general credit and tax
policies. In practice, the government has had to
impose selective controls on prices, investments, and
imports because of chronic inflationary pressures,
distortions in the structure of prices and output, and
destabilizing features of the economic systern itself.
Medium -term (generally 5 -year) plans have been
poor indicators of economic trends in Yugoslavia, even
when the government has gone all out to achieve
them. Indeed, two of Yugoslavia's four 5 -year plans
(1947 -51 and 1961 -65) were scrapped when it was
clear that they would not he achieved, and only the
second 5 -year plan (1957 -61) fulfilled. The plan
for 1966 -70 called for average annual increases of
7.Wr' to 8.55 for national income, gin to 105b for
industry 5' for agriculture, and ISSb to 15`i for
exports as against IOif to 12(" for imports By 1967,
%with the economy deep in recession, it was clear that
these goals were no longer feasible. Actual results
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during 1966 -70 were average annual increases of 6%
for both national income and industry, 3% for
agriculture, only 5% for exports, and 14% for imports.
Throughout the postwar period, plans and policy
pronouncements have reflected three main objec-
tives �rapid growth, decentralization to spur
efficiency and exports, and the elimination of regional
economic disparities. These objectives have become
increasingly incompatible. On one hand, narrowing
the regional income gap requires a strong federal role
in resource allocation, while greater efficiency through
market forces requires just the opposite. Moreover,
rapid growth, which tends to favor the less developed
areas, has been accompanied by inflation and balance
of payments problems, forcing the government to
tighten controls on market forces.
A change in priority has taken place since the
reforms of 1965 -67, which sought improvements in the
structure of prices and output and increases in exports
through greater decentralization. As a result of the
recession of 1967, the outbreak of inflation in 1969 -70,
and the revival of regional political and economic
tensions throughout the late 1960's, the leadership has
shifted its sights. The key goal of economic policy in
1971 -75 is achieving stability, which will involve
extensive price and credit controls and even some sort
of wage policy. At the same time, the plan projects a
growth rate for less developed areas of 25% above that
for the country as a whole, or about 9.4% per year
compared with about 7% for the more developed
areas. Unlike the 1966 -70 plan, virtually nothing is
said about increasing efficiency.
Policymakers have always had trouble controlling
Yugoslavia's decentralized economy. The constitu-
tional reform in 1971, moreover, may add indecision
to the current problem of getting the desired impact
from economic controls. The new Constitution is laced
with the provision that the federal government secure,
or attempt to secure, republic agreement on major
policy questions. Moreover, the republics have
acquired, considerable power and latitude in the
implementation of national policy.
Sonic insight into the kinds of problems that might
be faced by the leadership in the 1970's may have
been provided by the dismal record of policymaking
during the inflation of 1970 -71. A price freeze enacted
in the fall of 1970 was never enforced, attempts to
control wages were watered down under trade union
pressure to a meaningless 12 limit on the growth of
those wages that were ahove the Yugoslav average.
Republics charged with carrying out control �even
allowed exceptions to that liberal wage limit. The
government also prompted considerable speculation
by exposing in October 1970 an internal debate over
whether or not to devalue tfn, dinar. Imports soared,
and, although the go lernment then had little choice
but to devalue, it was not done until January 1971.
Some of the indecision was caused by the impending
constitutional reform and government reorganization.
But the fact that the economy ran out of control for
nearly 2 years while the government tried to enact an
effective stabilization program spells trouble for
decentralized economic decisionmaking� especially
after Tito's departure.
2. Government finance
The constitutional reform of 1971 marked a major
reduction in the financial role of the federal
government. All federal spending now is to come out
of the federal budget. Extrabudgetary accounts �such
as federally sponsored investment projects �have been
transferred to republics. The federal government's
financial responsibility has been restricted to
providing for the national defense, covering its own
administrative expenses, providing various economic
subsidies, and assisting war veterans. Belgrade will
continue to act as a clearing house for the Fund for
Underdeveloped Areas, which is financed by
obligatory contributions from the more advanced
regions� Slovenia, Croatia, and Serbia. Direct federal
investment, however, has been completely eliminated.
The structure of government revenues and
expenditures has changed considerably from that
shown for 1965 and 1970 in Figure 17. Gone are
federal revenues from taxes on personal income and
retail turnover, which now are collected by the
republics and provinces. Revenues for the 1972 federal
budget are from two sources almost 50% of
budgetary expenditure will be supplied by the federal
govem.ent from its remaining sources of revenue,
primarily customs duties, and the rest will come from
levies upon republics and provinces. For the most part,
regional contributions correspond to per capita levels
of development; Croatia, Slovenia, and Serbia proper
accounted for about 70% of such contributions in
1972.
Defense remains the largest category of federal
expenditure. At least for 1972, large amounts also were
to be spent on export rebates and other so- called
interventions in the economy and on supplementary
grants to the less developed areas (in addition to the
regular Fund for Underdeveloped Areas).
21
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FIGURE 17. Sources and distribution of budget revenues by government level
(Millions of dinars at current prices)
*Primarily receipts of administrative organs, transfers fro.n previous years, and, for the federal
government in 1970, taxes for remuneration for services.
"Beginning in 1967, education ceased to be budget- financed and was switched to autonomous
financing by educational associations at the commune level.
Pianned federal revenues and expenditures in 1972
were as follows (in millions of dinars):
Revenue;
24,252
Tariffs and consular fees
REPUBLIC AND
DISTRICT AND
742
FEDERAL
PROVINCE
Expenditures
COMMUNE
Administration
3,293
1965
1970
1965
1970
1965
1970
Revenues
8,101
14,169
4,144
5,805
6,480
7,502
Turnover taxes
3,873
6,501
623
2,051
1,324
2,170
Personal income taxes
1,097
1,654
2,478
1,450
3,203
2,246
Import tariffs
1,968
3,498
0
0
0
0
Taxes on crafts and other activities......
0
0
2
26
293
439
Stamp duties
44
690
30
247
319
561
Transfers from other government units...
0
0
682
1,819
490
649
Other revenues*
1,119
1,821
329
212
851
1,437
Distribution of receipts
8,386
12,926
4,098
5,572
6,268
7,162
National defense
4,293
7,600
1
7
0
69
Administration
457
845
864
1,673
1,378
2,771
Education, health, culture, social serv-
ices**
469
544
711
1,695
3,191
2,209
Investment
63
80
212
549
772
1,168
Subsides, other interventions in the
economy
1,458
697
232
342
118
213
Transfer to other levels of government...
742
2,629
1,120
1,114
3
0
Reserve funds
124
157
105
74
204
156
Other expenditures
780
374
853
118
602
576
*Primarily receipts of administrative organs, transfers fro.n previous years, and, for the federal
government in 1970, taxes for remuneration for services.
"Beginning in 1967, education ceased to be budget- financed and was switched to autonomous
financing by educational associations at the commune level.
Pianned federal revenues and expenditures in 1972
were as follows (in millions of dinars):
Revenue;
24,252
Tariffs and consular fees
11,258
Revenues of federal agencies
742
Republic and Province contributions
12,252
Expenditures
24,252
Administration
3,293
Defense
11,731
Interventions in the economy
.1,223
Re;;ional grants
4,846
Other
159
Undoubtedly, spending at the republic and
province level should increase noticeably starting in
1972. The full impact of the transfer of federal funds,
however, will not be felt for a few years. The
extrabudgetary accounts inherited by the republics
were badly in arrears, and the money that the federal
government owed on several investment projects will
have to be made up by the republics. In order not to
strap less developed republics, the federal government
has agreed to fulfill its obligation to Montenegro and
Macedonia, which includes extrabudgetary projects
such as the Belgrade -Bar railroad.
The largest extrabudgetary activity is the social
security system, still supervised by the federal
government although it is under the day -to -day
control of self managed social insurance associations
operating at the various levels of government. The
system offers a wide range of benefits to most of the
nonagricultural population, plus health insurance for
farmers. During the 1960's social security expenditures
increased 600%, as coverage of the population was
extended and benefits were enlarged; these
expenditures totaled 19.5 billion dinars in 1970.
Approximately 37% of the expenditure in 1970 was for
health care, and 28% was for old -af;e and survivors'
benefits.
3. Investment and banking
The main shifts during the 1960's in the sectoral
pattern of investment were a decline in the share of
agriculture and large increases in the shares of trade,
housing, and municipal services (Figure 18). Industrial
investment and spending for government and other
social services declined after 1965.
Regional shares of investment have changed little
during the 1960'x, even after 1965 when the Fund for
Underdeveloped Areas was instituted to formalize
assistance to the backward regions. The most
developed areas Slovenia and Croatia -have slightly
22
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FIGURE 18. Sources and distribution of investment.*
(Percent; otal investment� 100)
1960 1965 1970
Source of Financing:
Government
62
26
16
Banks
1
37
51
Enterprise a
31
29
27
Other organizations
6
8
6
Distribution by Sector:
Industry
35
36
32
Agriculture and forestry
13
9
7
Construction
2
2
3
Transport and communications........
18
12
14
Trade and handicrafts
6
6
16
Housing and municipal services.......
15
24
20
Social, cultural, and governmental
activities
11
11
8
Distribution by Republic:
Slovenia
13
14
15
Croatia
23
23
25
Serbia
41
37
36
Bosnia and Hercegovina
12
13
12
Macedonia
6
10
8
Montenegro
4
3
3
*Components may not add to 100' because
of rounding.
increased their share of investment, and Serbia has lost
ground. The less developed areas have held their own;
Macedonia experienced a sharp upsurge in investment
in the mid- t960's, reflecting ecuntrywide and foreign
assistance in rebuilding Skopje, which �.vas leveled by
an earthquake in 1963. Investment in Kosovo
Serbia's, and Yugoslavia's, most backward area
rangcd from 3% to 5% of total investment throughout
the 1960'x.
The federal and republic governments have not
financed directly a large share of Yugoslav investment
since 1963 when their large social investment funds
were transferred to the banking system. As shown in
Figure 18, investment by all government levels has
dropped from 62% of total investment in 1960 to 16%
in 1970; meanwhile, hank investments have climbed
from 1% to 51%. The share provided directly by
enterprises has slipped from 31 to 27
The expansion of banking resources was followed by
a wholesale reform in 1965 which established the role
and structure of the banking system. The Law on the
National Bank of Yu;oslavia designated that bank as
the "hank of issue" and gave it the authority to
control both the stock of money and foreign payments.
The Law on Banks and Credit Operations set out the
function of three categories of banks: 1) investment
banks, primarily responsible for financing investments
in fixed assets, but also permitted to extend short -term
credits; 2) commercial banks, which concentrate on
the extension of short -term credits, and which may
invest in housing and communal services, as well; and
3) mixed banks, which extend both short- and long-
term credits. The reform also placed banks on a profit
loss basis and forced them to meet minimum
capitalization requirements before they could go into
business. Finally, the reform was intended to break the
domination of banks by regional and local political
interests. Government bodies could still participate in
establishing new banks but were limited to 10% of the
total votes in a bank's board of directors.
Since 1965 the banking system has been condensed,
but with a greater number of bank branches. An
increasing number of bank mergers should improve
the mobility of investment funds within and between
regions. Tito, in particular, has pushed for these
mergers in the hope that a broader spectrum of profit
opportunities might help to weaken parochial motives
for investment. However, local governments, working
through the banking system, still play a major role in
the allocation of investment �out of proportion to
their voting strength in bank directorates. Local
political and business: interests normally have gone
hand in hand; enterprises and communal bodies,
which usually are the founders of the banks. %aturally
want to be the main beneficiaries of bank resources.
The federal government still has exercised
considerable control over investment through the
general credit policies and reserve requirements of the
National Bank. For example, a tight money policy
during 1965 -67, reflected in a mere 7% increase in the
money supply, led to a 13% drop in the real volume of
investment between 1964 and 1967. Moreover, the
government has imposed selective credit policies,
usually to discourage investment by unprofitable
enterprises and to promote investment in promising
export- earning sectors such as tourism. National Bank
policy is apt to be weakened by the 1971 reform.
"National" banks are to be set up in all republics, to
help formulate and carry out national monetary
policy. The directors of these banks are to make up the
board of directors of the National Bank.
D. International economic relations
The Yugoslav strategy for economic development
depends heavily on foreign trade, particularly with the
West, to acquire material inputs and advanced
technology. To increase trade, the government
actively participates in many international organiza-
tions. In addition, Belgrade puts a high priority on
tourism and encourages workers abroad to remit
earnings to boost foreign exchange inflows. These
23
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earnings have been large, but total receipts together
with commodity exports have not satisfied Yugo
slavia's appetite for imports. During 1969 -71, for
example, the balance of payments deficit mounted
rapidly and, as in 1964 -65, Yugoslavia had to fall back
on emergency Western assistance. In a long -range
move to relieve some of the balance of payments
constraints on development, the government in 1967
authorized direct foreign investment in partnership
with Yugoslav enterprises. So far, foreign response has
been less than the Yugoslays had hoped.
I. Foreign economic policy
As a "nonaligned" country willing to accept aid
and trade concessions from almost any quarter,
Yugoslavia belongs to nearly all international
economic organizations and has sought special
relationships with customs unions in order to protect
and promote its trade. Yugoslavia is a charter member
of the International Monetary Fund (IMF) and the
International Bank for Reconstruction and Develop-
ment (113111)). Active roles also are played in other
agencies of the United Nations such as the Economic
Commission for Europe (ECE) and the Food and
Agricultural Organization (FAO). Since 1955 the
country has been a limited participant in the
Organization for Economic Cooperat_on and
Development (OECD) and its predecessor, the
Organization for European Cooperation. Although
full membership in the General Agreement on Tariffs
and Trade (GATT) was not obtained until 1966,
selected participation began in 1959. Yugoslav trade
representatives have negotiated with both the
European Economic Community (EEC) and the
European Free Trade Association (EFTA) to obtain a
special status for their exports. In 1970 these
negotiations produced a 3 -year nonpreferential,
nondiscriminatory trade agreement with the Common
Market, the first commercial treaty between the EEC
and a Communist country.
Since 196.1, Yugoslavia has been an associate
member of the Council for Economic Mutual
Assistance (CEMA). This arrangement satisfies
Belgrade's desire to seek opportunities for expanded
trade and economic cooperation with other
Communist countries without compromising its
neutrality and independence. Yugoslavia participates
in the work of CEMA commissions dealing with
foreign trade, currency, and finance, iron and steel,
nonferrous metals, metalworking, chemicals, and
scientific and technical cooperation. Attendance at
other meetings, including the high -level executive
?-1
meetings, has been on a selective basis. Yugoslavia has
only an advisory role in CEMA and, like the full
members, is not bound by the council's decisions
unless they are ratified by its own government.
As its widespread involvements suggest, Yugo-
slavia's foreign trade policy is geared not only to
growth but also toward achieving a suitable balance
between the clearing trade with the Communist
countries and the hard currency trade with the West.
Particularly since the reform of 1965, Yugoslavia's
trade policy has been focused on increasing the
competitiveness of manufactures in Western markets,
while maintaining the fairly slow- growing sales of
food and raw materials. Trade decisions have been
decentralized, most export subsidies removed,
cooperation deals have been pushed, and the dinar has
been devalued several times, all a part of the effort to
promote ex ^:rts. Yugoslavia, however, still faces a
marginal Western market for its manufactures; the
government consequently has had to rely more on
import controls than on export successes to keep the
deficit with the West within iolerable limits.
The opposite problem �a tendency toward export
surpluses �has been a major factor in Yugoslavia's
trade with the Communist countries. Yugoslav
producers of manufactured goods have found it easy
to sell to the CEMA countries, but have resisted
buying many of the goods machinery and other
finished products �that these countries have wanted
to peddle in Yugoslavia. Moreover, rigid clearing
agreements and goods lists have made it hard for the
Yugoslays to turn to these countries on short notice for
imports of raw materials and semifinished goods in
periods when inflationary growth has led to payments
problems with the West.
To make this trade more compatible with
Yugoslavia's decentralized economy �and more useful
in times of instability Belgrade has lobbied to
convert the trade to a hard currency basis and to
increase the role of enterprise -to- enterprise trade. Thus
far, the Yugoslays have secured only agreements to
settle some outstanding clearing balances in hard
currency and the establishment of joint banks (with
Hungary, Bulgaria, Romania, and Czechoslovakia) to
facilitate cooperative deals and handle debt
settlements.
Yugoslavia has eliminated its clearing agreements
with nearly all the less developed countries. Belgrade
had long hoped that the 'Third World, along with the
East, would provide markets for machinery and the
other goods that could not be sold in the West. The
country, however, has found itself in sharp
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competition with the West; like Yugoslavia,
developing countries prefer to buy better quality
Western goods, and Yugoslav banks and exporters
have been hard pressed to meet or beat the volume
and terms of Western credit facilities. In line with the
general policy to expand trade, Belgrade wants full
dinar convertibility in international markets. Efforts
have been frustrated, however, by unexpectedly large
trade deficits and the lack of gold and foreign
exchange reserves to insure that Yugoslav banks could
pay hard currency for dinars on demand. Moreover,
inflation and frequent devaluations have eroded world
confidence in the potential stability of the dinar.
2. Foreign trade system
The present foreign trade system was set up by the
reform of 1965 -67. Although liberalization of trade
was a key element of the reform, the system still relies
heavily on quotas, licenses, and regulation of foreign
exchange earnings to limit imports. These controls are
designed to balance trade flows to clearing and hard
currency areas. Additional restrictions, such as import
deposit requirements and import surcharges have been
imposed during balance of payments crises.
Foreign trade regulations cover three categories of
exports: free exports, licensed exports, and exports to
clearing areas. Most exports are free; only those in
short supply (which are more expensive to import than
produce) require a license. Although budgeted export
subsidies have been removed, exporters are now
supported by tax rebates on imports needed for
production. More directly, exports are stimulated by
access to two credit agencies �the Agricultural Fund
for short -term credits and the Export Credit and
Insurance Fund for medium and long -term credits.
Exports to clearing areas usually are covered under
bilateral agreements. In addition to the overall trade
protocols, agreements are signed between Yugoslav
republics and the clearing partner and between
enterprises in both countries. Since clearing trade
requires detailed coordination, agreements must be
negotiated or approved by the Federal Secretariat for
Foreign Trade. The secretariat also must consider the
impact of the agreement on clearing balances.
Yugoslav enterprises are free to determine their own
import requirements and resist buying many of the
products contained in the agreements. For this reason
surpluses accumulated during most of the 1960's,
reaching US$120 million in 1968. Since then, clearing
surpluses have been eliminated through planned
deficits; imports from CEMA countries in particular
were encouraged when it was necessary to limit
imports from the West in 1970 -71.
Imports fall into four categories:
1) Free imports, which can be purchased by freely
converting dinars into hard currency at the banks.
2) The global foreign exchange quota assigned
by the government �which allocates among enterprises
the right to purchase a fixed amount of foreign ex-
change to import nonrestrictive goods from the con-
vertible currency areas.
3) Foreign exchange and commodity quotas, which
establish quanti and value ceilings for specific
products from both convertible and clearing countries.
4) Import permits, which control the import (through
the global foreign exchange quota) of such items as
narcotics, explosives, arms, automobiles, and tractors.
An additional category� conditionally free
imports �was discontinued on 1 Jan 1971. It
contained a list of goods which could be freely
acquired from the West after specific quantities had
been imported from clearing areas.
Although extensively revised in 1971 -72, foreign
exchange regulations still serve the dual function of
promoting exports and limiting imports. Exporters are
allowed to retain a percentage of their foreign
exchange earnings �a "retention quota" �which can
be spent on imports, sold to designated banks, or even
transferred to other enterprises to support joint
production. Most exporters retain 20% of their foreign
exchange earnings, but tourist organizations are
allowed 45 and enterprises that engage in capital
construction projects abroad keep 100
Enterprises have the right to purchase some foreign
exchange from banks. Currency for importing capital
equipment may :)e.purchased for dinars in the amount
of 10% of the amortization fund for plant and
equipment. Additional currency may be purchased
from the assigned foreign exchange quota.
The toreign exchange system is to be significantly
liberalized in 1973, when a foreign exchange
market is scheduled to go into operation. In the
market, enterprises and individuals, including foreign
firms doing business with Yugoslav parties, may buy
and sell dinars against convertible currencies. The
market will be run through the banking system and
supervised by the National Bank, which will intervene
to keep the dinar within range of parity.
Complementing foreign exchange regulations are
laws governing the use of credit. Enterprises may
freely contract debts up to a!: .mount which can be
repaid from the retention quota or amortization funds.
Alternatively, enterprises may borrow through the
banking system, using foreign exchange allocations to
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secure the funds; the banks in turn, borrow from
abroad. In addition, the government imposes a limit
on the total annual volume of credit transactions.
Besides shifting commodities to d4ferent listings
and changing quota allotments, the government can
regulate trade through the application of customs,
tariffs, or through extraordinary measures. In line with
the policy to liberalize trade, customs tariffs have been
reduced, but they still are a major source of federal
revenue. Belgrade also has imposed import surcharges
to reduce cash purchases and has required import
deposits to limit credit transactions abroad. Finally,
the government has had to resort to devc4uatian to try
to offset the impact of chronic inflation on export
prices and to reduce the demand for imports.
The strictest control is exercised over consumer
goods, which ranged from 15% to 21 of total imports
in 1967 -70; the commodities least controlled are
machinery and equipment used for reproduction, 22%
to 25% of total imports. Liberalization has been
primarily directed at a third group, raw materials and
semi manufactured goods, which accounts for the bulk
of imports -57% to 63% in 1967 -70. The following
tabulation shows the percentages of the total annual
value of imports of raw materials and sernimanufac-
tures, rounded by category:
1967 1968 1969 1970
Free
26
27
30
36
Conditionally free
36
25
22
17
Global foreign exchange quota
38
30
33
.32
Commodity and foreign exchange
quota
1
15
12
12
Permit
Insig
3
3
2
3. Balance of payments
The trade deficits which have accumulated during
1967 -71 indicate that the foreign trade system has
functioned poorly (Figure 19). The smallest trade
deficit during the 1960's was recorded in 1965, when
trade still was heavily regulated. Since then, economic
decentralization and trade liberalization have reduced
governmental control, resulting in autarkic behavior
by both republics and enterprises. The system is
particularly vulnerable during periods of rapid growth
when import demand is high and enterprises,
particularly in less developed republics, tend to buv
from the Vvest but sell to the easier markets in the
East. Trade liberalization has made Yugoslavia more
sensitive to world business conditions but also more
dependent on imports; the balance of payments and
the willingness of trade partners to extend long -terra
assistance have become the main constraints to
economic development.
26
FIGURE 19. Foreign trade
a. Commodity trade
Foreign trade has grown rapidly, averaging a 10.2%
rate of growth during 1966 -71 (it) 1965 constant
prices), compared with an average annual rate of 7.5%
during 1961 -65. On the other hand, exports as a share
of imports have fallen since the reform of 1965 �from
85% in that year, to only 56% in 1971. The worsening
trade balance resulted in 1971 in a record deficit of
US$1.4 billion, of which $1.3 billion was in hard
currency trade. The rate of growth of exports had
slowed down considerably since the mid 1960'x; the
annual average increase of exports was 12.9% during
1956 -65 and only 5.4% during 1966 -71 (in 1965
constant prices), falling below the growth of GNP for
the first time in the postwar period. Imports, which
have always grown rapidly, averaged a 9.4% annual
rate of growth during 1956 -65 and jumped to 13.5%
during 1966 -71.
A major reason for the slowdown in exports has been
the lag in sales of agricultural products, beverages and
tobacco, and industrial raw materials, which together
make up over one fourth of total exports (Figure 20).
Common Market barriers, a dip in Western growth
rates in 1971, and bad weather in Yugoslavia in 1967-
68 and 1970 -71 were Al factors in the slow growth of
these exports. But even aside from trade restrictions,
the Western markets for agricultural goods, and for
many types of raw materials as well, are slow- growing
and highly competitive; future expansion of Jugoslav
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FIGURE 20. Composition of exports and imports
(Percent; listed according to Standard Internationcl Trade Classifications
sales will depend mostly on sluggish factors like
population growth rather than on opening new
markets.
Sales of sernimanufactures, chemicals, machinery,
and finished consumer goods all increased as a share of
exports during the 1960's. The largest increases were in
machinery exports -from 15% of total exports in 1960
to 24% in 1971 -and of sales of industrial consumer
goods -from only 7% of exports in 1960 to 14% in
1971.
While the structure of exports has changed fairly
steadily as the economy matured, the pattern of
imports has been much more erratic, reflecting on and
off selective controls, periodic shortages of agricultural
products, and sharp fluctuations in the rate of
investment and industrial growth. During the 1960's,
for example, imports of foodstuffs ranged from 7% to
19% of total imports and machinery from 27% to 37
The most consistent trends have been it rise in imports
of chemicals and sernimanufactures from 27% to 30%
of the total in the early 1960's to 37% to 38% in 1970-
71, and a decline in the share of raw materials and
fuels from 20% in the mid- 1960's to 15% in 1970 -71.
Purchases of consumer manufactures -still small
grew from .3% of imports in 1960 to 5% in 1970 -71.
The share of raw materials and semi manufactures
from the convertible currency area rose from 38% of
total imports in 1967 to 47% in 1970, while the share
in bilateral accounts dropped from 19% to 16
Imports of machinery and equipment followed a
similar pattern, rising from 14% to 18% in the
convertible area and falling from 8% to 3% in the
clearing areas. Imports of consumer goods from all
areas declined as a share, falling from 13% to 10% in
convertible trade and from 8% to 6% in bilateral
trade.
After shifting,away from the Communist countries
during the last half of the 1960's, Yugoslavia's trade
with these countries increased sharply in 1971,
reflecting efforts to ease the large hard currency
deficit. This trade, which had slid from 35% of total
turnover in 1965 to 25% in 1970, was back up to 29%
in 1971 (Figure 21). The Communist countries,
particularly the U.S.S.R., have provided Yugoslavia's
best markets for machinery, transport equipment,
consumer goods, and other finished manufactures,
most of which find few outlets in the West. A more
than proportionate share of these exports come from
Yugoslavia's less developed republics. In return, the
Communist countries have been Yugoslavia's most
27
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1950
1955
1960
1965
1970
1971
Exports:
Food and live animals
21.11�
23.5
28.9
21.2
15.9
14.2
Beveragese.nd tobacco
7.7
,7.7
4.7
4.5
3.5
3.4
Inedible crude materials, except fuels....
44.1
29.3
15.7
10.1
9.4
8.2
Mineral fuels, lubricants, and related
materials
1.2
1.0
0.9
1.0
1.2
1.1
Animal and vegetable oils and fats...
Insig
Insig
0.2
Insig
0.1
0.2
Chemicals
2.7
5.5
4.0
5.5
5.8
7.1
Semimanufactured goods
22.2
27.5
23.7
22.7
29.3
27.2
Machinery and transport equipment.....
Insig
1.8
15.0
23.5
22.7
24.5
Consumer and other finished goods......
0.3
2.8
6.8
11.5
12.7
14.0
Miscellaneous commodities and trans-
actions
Insig
0.9
0.1
Insig
0.1
0.1
Imports:
Food and live animals
4.9
27.1,
9.2
14.7
7.0
8.9
Beverages and tobacco
0.1
0.3
Insig
Insig
0.2
0.2
Inedible crude materials, except fuels....
28.9
17.6
14.3
16.8
10.9
9.6
Mineral fuels, lubricants, and related
materials
9.3
8.3
5.4
5.6
4.8
5.9
Animal and vegetable oils and fats......
0.9
1.2
1.4
1.0
0.7
1.5
Chemicals
5.0
6.7
8.6
9.2
9.3
9.1
Semimanufactured goods
22.7
11.5
20.8
21.7
28.8
28.2
Machinery and transport equipment.....
26.6
25.3
36.9
27.6
33.3
31.3
Consumer and other finished goods......
1.6
1.6
3.3
3.4
5.0
5.2
Miscellaneous commodities and trans
actions
Insig
0.1
0.1
Insig
Insig
0.1
sales will depend mostly on sluggish factors like
population growth rather than on opening new
markets.
Sales of sernimanufactures, chemicals, machinery,
and finished consumer goods all increased as a share of
exports during the 1960's. The largest increases were in
machinery exports -from 15% of total exports in 1960
to 24% in 1971 -and of sales of industrial consumer
goods -from only 7% of exports in 1960 to 14% in
1971.
While the structure of exports has changed fairly
steadily as the economy matured, the pattern of
imports has been much more erratic, reflecting on and
off selective controls, periodic shortages of agricultural
products, and sharp fluctuations in the rate of
investment and industrial growth. During the 1960's,
for example, imports of foodstuffs ranged from 7% to
19% of total imports and machinery from 27% to 37
The most consistent trends have been it rise in imports
of chemicals and sernimanufactures from 27% to 30%
of the total in the early 1960's to 37% to 38% in 1970-
71, and a decline in the share of raw materials and
fuels from 20% in the mid- 1960's to 15% in 1970 -71.
Purchases of consumer manufactures -still small
grew from .3% of imports in 1960 to 5% in 1970 -71.
The share of raw materials and semi manufactures
from the convertible currency area rose from 38% of
total imports in 1967 to 47% in 1970, while the share
in bilateral accounts dropped from 19% to 16
Imports of machinery and equipment followed a
similar pattern, rising from 14% to 18% in the
convertible area and falling from 8% to 3% in the
clearing areas. Imports of consumer goods from all
areas declined as a share, falling from 13% to 10% in
convertible trade and from 8% to 6% in bilateral
trade.
After shifting,away from the Communist countries
during the last half of the 1960's, Yugoslavia's trade
with these countries increased sharply in 1971,
reflecting efforts to ease the large hard currency
deficit. This trade, which had slid from 35% of total
turnover in 1965 to 25% in 1970, was back up to 29%
in 1971 (Figure 21). The Communist countries,
particularly the U.S.S.R., have provided Yugoslavia's
best markets for machinery, transport equipment,
consumer goods, and other finished manufactures,
most of which find few outlets in the West. A more
than proportionate share of these exports come from
Yugoslavia's less developed republics. In return, the
Communist countries have been Yugoslavia's most
27
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important source for fuels and other industrial
inputs especially iron and steel and raw cotton �and
certain types of machinery including metalworking
and agricultural equipment, and military hardware.
In February 1972, the U.S.S.R. provided a major
impetus to Yugoslavia's trade with the Communist
countries �a US$130 million credit for the develop-
ment of an aluminum combine in Bosnia and
Hercegovina. The protocol calls for the Yugoslays to
ship all alumina produ,ed by the combine and
500,000 tons of bauxite for 10 years �part of which
will be in repayment of the loan. At the same time, the
projected turnover in the Soviet Yugoslav trade
agreement for 1971 -75 was increased by $540 million
to $3.6 billion -50% more than deliveries in 1966 -70.
In November 1972 the Soviet: extended a substantial
credit line �at least $500 million �for developing
mineral resources in Yugoslavia's backward regions.
Another deal �$100 million barter arrangement
between car manufacturers in the two countries �was
signed early it: 1972.
28
Yugoslavia's trade with the West �in the 1950's
basically an exchange of Yugoslav food, live animals,
and nonferrous metals in return for machinery and
emergency food supplies �was broadened consider-
ably in the 1960's. A flourishing two -way trade in
semimanufactures� chemicals, and iron and steel, ii.
addition to nonferrous metals �has been developed.
In addition, Yugoslavia is now sending some finished
products furniture, clothing, and footwear.
Yugoslavia's main Western partners are West
Germany, Italy, and the United States, countries
which have also supplied the bulk of the US$5.7
billion in assistance received by Yugoslavia since
World War II. Trade with the United States, running
at about $300 million a year, involves Yugoslav sales
of canned meat, tobacco, furniture, copper and brass
products, and cable and wire, in return for U.S.
vegetable oils, textile materials, coal and coke, a
variety of chemicals, and often wheat. The low share
of Yugoslav deliveries of unprocessed food and raw
materials sets the trade apart from that with closer
partners in Western Europe.
Little progress has been made in increasing trade
with developing countries. Although total trade
increased 54% during 1966 -70, the share of trade
dropped from 16.4% to 13.2 and in most years there
was a trade deficit. The largest category of Yugoslav
exports is machinery and equipment, with the greatest
gains recorded in sales of the agricultural, mining, and
construction equipment. Yugoslavia imports raw
materials, including oil, tin, rubber, and textile
materials, and food coffee, cocoa, and fruit.
b. Invisibles
Yugoslav earnings from tourism, transportation,
workers' remittances, and other services and transfer
payments have helped to offset the large trade deficits,
or at times have encouraged larger imports. The
largest invisible item in recent years has been
remittances from the nearly 1 million Yugoslav,
working abroad, mainly in West Germany. These
earnings leaped from US$89 million in 1967 to about
$630 million in 1971 (Figure 22).
Formerly the most dynamic growth was in earnings
from tourism (Figure 23); net earnings boomed from
only US$4 million to $6 million annually in 1955 -60 to
about $175 million in 1971. Since 1969, however, net
tourist receipts have fallen below expectations,
actually declining in 1970. Gross earnings were limited
by peak- season capacity constraints, and were offset to
some extent by increases in the number of Yugoslays
going abroad� Yugoslav tourists spent about $113
million in 1970. Earnings in 1972 �.vere hurt by a
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FIGURE 21. Direction of foreign trade

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FIGURE 22. Balance of payments*
(Millions of U.S. dollars)
smallpox epidemic during March April, even though
there were only a few cases reported in the major
tourist area of Croatia. Tourism has considerable
potential for expansion in the 1970's, providing that
construction of new facilities along the seacoast can he
accelerated to meet demand and prices are held to
their current relatively low level. Yugoslavia is
benefiting from the U.N. Adriatic project involving
the building of beach and ski resorts in Montenegro,
which will make tourism the leading industry in that
less developed republic.
Net earnings from transportation, mainly from the
merchant fleet and from transit traffic, have grown
along with the general expansion of trade and travel
from US$140 million in 1967 to $244 million in 1971.
in effect, these earnings are lower because part of
Yugoslav expenditures on transport appear in import
data rather than in the services account. Other net
services and transfer payments accounted for another
$180 million in earnings in 1971, while the interest
payments on Yugoslavia's growing foreign debt have
become a large negative item in the services account
$115 million in 1971.
Only in 1965, under a strong regime of import
controls, did invisible earnings cover the trade deficit;
in fact, a surplus of US$62 million on current account
was achieved that year. With the exception of that
interruption, Yugoslavia's balance of payments deficit
has continued to mo� -1t, reaching a cumulative total
of nearly $5 8 billion for the period 1949 -71.
Nearly all of Yugoslavia's balance of payments
deficit has been in hard currency �in fact, in 1970, the
hard currencv deficit on current account was US$374
million, compared with a total deficit of $341 million.
In 1971, when Yugoslavia ran a large imbalance with
the CEMA countries, $242 million, or 75% of the
overall deficit, was in hard currency.
c. Foreign assistance
Balance of payments deficits forced Yugoslavia to
obtain over US$5.7 billion in foreign assistance in
1949 -71. About $3 billion of the total has come from
the United States and about $9,30 million from
Western European countries. The IBRD has supplied
about $585 million in long -term loans and the IMF
29
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1967
1968
1969
1970
1971
�rclimincrg
Goods, services, and transfers:
Trade bal ance
-455
-532
-660
-1,194
-1,439
Exports f. o .b.)
1,253
1,265
1,475
1,680
1,814
Imports( c. i. f.)
-1,708
-1,797
-2,135
-2,874
-3,253
Net services and transfer payments............
373
426
552
854
1,115
Freight and transportation
140
144
163
201
244
Foreign travel
98
136
168
146
175
Investment income
-67
-77
-88
-110
-115
Workers' remittances
89
122
206
440
630
Transfer payments
32
38
45
61
111
Other services
81
63
58
116
70
Balance on the current account
-82
-166
-108
-340
-324
Nonmonetary capital:
L�)ng -term eapital
151
165
253
269
295
Loans received
334
390
517
636
640
Loans paid
-200
-219
-239
-335
-420
Agricultural commodity credit
17
-6
-25
-32
75
Short -term capital
-4
-102
-67
-28
-127
Export credit
-39
-46
-92
-50
-72
Other, including errors and ommissions.......
35
-Lo
25
22
-55
Allocation of SDR's monetary capital............
25
22
SDR' s
-6
4
Gold and convertible foreign exchange.........
-52
-158
109
14
IMF account
33
-18
-38
-60
71
Bilateral bal ances
-94
48
58
71
45
Bank credit
-4
65
60
-40
Not pertinent.
*Based on latest available IMF data. Figures may
not add to totals because of rounding.
smallpox epidemic during March April, even though
there were only a few cases reported in the major
tourist area of Croatia. Tourism has considerable
potential for expansion in the 1970's, providing that
construction of new facilities along the seacoast can he
accelerated to meet demand and prices are held to
their current relatively low level. Yugoslavia is
benefiting from the U.N. Adriatic project involving
the building of beach and ski resorts in Montenegro,
which will make tourism the leading industry in that
less developed republic.
Net earnings from transportation, mainly from the
merchant fleet and from transit traffic, have grown
along with the general expansion of trade and travel
from US$140 million in 1967 to $244 million in 1971.
in effect, these earnings are lower because part of
Yugoslav expenditures on transport appear in import
data rather than in the services account. Other net
services and transfer payments accounted for another
$180 million in earnings in 1971, while the interest
payments on Yugoslavia's growing foreign debt have
become a large negative item in the services account
$115 million in 1971.
Only in 1965, under a strong regime of import
controls, did invisible earnings cover the trade deficit;
in fact, a surplus of US$62 million on current account
was achieved that year. With the exception of that
interruption, Yugoslavia's balance of payments deficit
has continued to mo� -1t, reaching a cumulative total
of nearly $5 8 billion for the period 1949 -71.
Nearly all of Yugoslavia's balance of payments
deficit has been in hard currency �in fact, in 1970, the
hard currencv deficit on current account was US$374
million, compared with a total deficit of $341 million.
In 1971, when Yugoslavia ran a large imbalance with
the CEMA countries, $242 million, or 75% of the
overall deficit, was in hard currency.
c. Foreign assistance
Balance of payments deficits forced Yugoslavia to
obtain over US$5.7 billion in foreign assistance in
1949 -71. About $3 billion of the total has come from
the United States and about $9,30 million from
Western European countries. The IBRD has supplied
about $585 million in long -term loans and the IMF
29
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FIGURE 23. Dubrovnik, a leading
tourist center on *he Adriatic coast.
Tourism, already a significant source
of foreign excrange, has con-
siderable potential for expansion.
has provided over $400 million. Finally, about $800
million has been supplied by the U.S.S.R. and other
Communist countries.
U.S. credits since 1966 have been largely for
development, including some US$53.2 million from or
guaranteed by the Export Import bank (excluding
1971). Yugoslavia previously had been a major
recipient of surplus agricultural commodities,
particularly wheat, under medium- and long -term
credits authorized by Title IV of P.L. 480. Yugoslav
participation in this program was terminated in 1966
by the provisions of the Findley Amendment.
Yugoslavia has continued to buy some wheat, cotton,
and other commodities under less favorable credit
terms of the Commodity Credit Corporation. Other
main Western creditors are West Germany, Italy, the
United Kingdom, aril France, and small credits have
also been granted by Canada and Japan.
Twice since the reform of 1965, the Yugoslays have
come to the West for debt rescheduling and new
emergency assistance. Some US$58.5 million was
rescheduled by the United States, and .hrough April
1972 about $375 million had been received from other
Western countries and institutions to tide Yugoslavia
through the balance of payments crisis of 1970 -71.
The Communist countries have provided only
moderate credits in comparison with Western
assistance. In 1956, the U.S.S.R., Fast Germany,
Czechoslovakia, and Poland cultivated rapproche-
ment with Yugoslavia by extending credits totaling
US$464 million; however, only $Iff) million of these
30
credits were drawn before relations again cooled and
the credit line was suspended. Since relations were
rekindled in 1962, Soviet credits �about $360
million �have gone mainly into reconstruction of
Skopje, following the earthquake of 1963, and into the
Iron Gate project. Czechoslovakia has provided $110
million and East Germany $66 million, both for the
development of metallurgy. Smaller credits, $30
million apiece, were provided by Poland and
Romania.
Yugoslavia itself has pursued a policy of offering less
developed countries some credits reportedly over
US$600 million since 1950 to 27 countries in Africa,
Asia, and Latin America. Many of the recipients,
however, have been slow in drawing on these loans.
4. Foreign investment
In 1967 Yugoslavia became the first Communist
country to permit foreign investment on a joint basis
with domestic enterprises. The Yugoslays were
motivated by the prospect of achieving a faster rate of
development and eventually casing the strain on their
balance of payments. In addition to capital inflow,
gains would evolve from the introduction of new
technology, from access to better managerial skills,
and from the creation and expansion of export
markets. Prospective foreign investors were offered
cheap labor and raw materials.
Initially, the foreign partners were limited by law to
a maximum share of 49% in the venture, were required
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to reinvest 20% of profits, and were taxed at a rate of
33% of their income (or progressively less if more than
the required minimum profits were reinvested). Other
obligations of the foreign partner were set out in
Individual contracts, some of which included training
of personnel, marketing, and supplying production
inputs. Although management rights also differed
between contracts, ultimate control rested with the
domestic partners.
The Yugoslays, expecting a vast inflow of capital,
were shocked by the limited response to their
investment law. During the first 3 years, 1968 -70, 32
agreements were concluded but only for a total of
US$71 million in foreign investment. Several factors
were responsible: The law was complicated and full of
special provisions; Yugoslav officials were fearful of
the impa -t of joint investrrents on their system of
workers' self- management; and foreign businessmen
only vaguely understood that system and its provisions
fo� workers councils and "right of use," rather than
ownership, of capital. Equally important, potential
foreign investors were deterred by the highly unstable
Yugoslav economy and the constant changes that had
been made in government economic controls since
1 965.
Beginning in late 1970, Belgrade took a number of
steps to make foreign investment more attractive.
Aided by the International Finance Corporation, a
banking consortium was erelted �the International
Corporation for Investment in Yugoslavia (ICIY). The
ICIY was organized to provide investment informa-
tion, to smooth legal pathways, and to attract
investment by providing "seed money." Then, in
February 1971, foreign investment regulations were
liberalized. The 20% reinvestment requirement was
removed, the ability to repatriate capital was
guaranteed, and the foreign investor was insulated
against possible adverse legislative changes that might
be made after his investment. Finally, under special
circumstances the foreign investor could obtain shares
in the enterprise equal to or even larger thar. those
held by the domestic partner.
These efforts, however, could not overcome the
impact of the economic crisis in 1971; 13 new
contracts were signed during the year but ti e;
involved only US$12.4 million in foreign investmeca
In 1972, with the economy stabilizing, the outlook was
brighter. Moreover, provisions of OPIC (Overseas
Private. Investment Corporation) guarantees and other
services to U.S. i... .2stors may lead to a major increase
in U.S. investment in Yugoslavia.
Ell
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Places and features referred to in this Chapter
COORDINATES
W. 'E.
Bar 42 05 19 06
Belgrade 44 50 20 30
Bor 44 06 22 06
Buzet 45 24 13 59
Celje 46 14 15 16
Dalmatia (region) 43 00 17 00
Danube River (sirm) 45 20 29 40
Drava River (strm) 45 33 18 55
Dubrovnik 42 39 18 07
Iron Gate (gorge) 44 41 22 31
Jesenice 46 27 14 04
Kidri6evo 46 24 15 47
M elica 31 14 52
Majdanpek 25 21 56
M ostar 43 21 17 49
Pane' evo 44 52 20 39
Pul a 52 13 50
Raa 05 14 06
Rijeka 45 21 14 24
Sarajevo 43 50 18 25
Sisak 45 29 16 22
Skopje 42 00 21 29
Smederevo 41 39 20 56
Split 43 31 16 26
Svetozarevo 43 59 21 15
Titograd 42 26 19 16
Titov veles 41 42 21 48
Trepta 42 49 19 49
Zagreb 45 48 16 00
Zastava 45 35 15 14
Zenica 44 13 17 55
Zvornik 44 23 19 07
32
FOR OFFICIAL USE ONLY
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