There Can Be No State Without Economy

Losses larger than officially acknowledged, huge lack of liquidity. Taxation system and reforms - only empty talk. Assistance from the donor's conference, an illusion

by Slavko DRLJEVIC

Pobjeda, Podgorica, Montenegro, FR Yugoslavia, June 17, 2001

I am afraid that we are not aware how bad our situation is. However, foreigners know much better than we do. Based on their sources, Slovenians are predicting a bad economic future for Montenegro. They had a long time ago the data about the final budget of the Montenegrin economy for the last year, that we have just reported, says Slavko Drljevic, director of the Hipotekarna Bank.

When someone announces data acknowledging the loss of 319.5 millions of German Marks [$160 million], which is official, but unfortunately not final, then that is the end of the national economy. The losses are actually much larger than the officially admitted ones, because they are hidden in lender-debtor relations that haven't been presented. The internal debts between the companies, banks and the state and much larger than the external debt. That is why I fear that there is no cure for the current situation. We cannot expect that someone will reprogram the external debt. With such internal debt it would be impossible to know whose debt was reprogrammed. We also must be aware that all the admitted losses, plus the hidden ones, are reducing the value of the companies that are supposed to be privatized. Before any privatization we must know their actual value and the amount of their debts and their lenders. We have been talking about this for a while, but the authorities haven't done anything to provide accurate data about the debtor-lender relations.

The lack of liquidity is enormous, and its consequences will be shortages. The recent shortage of electricity is only the beginning. We had these blackouts because we did not pay our obligations. Another shortage that lurks in the future is that of medications, because we also have to pay for them in order to get them. That will be a serious warning.

Let us just consider the balance of the public [state-owned] sector. The spending was 3.5 times larger than planned and the budget could not function without donations from abroad. In addition to that, there are loans that should be interpreted as deficit. The state pension fund had 130 millions of German Marks in revenues and distributed 240 million. The rest was covered by donations again. The state health care fund has interminable problems with the state pension fund, which owes money to the health care fund because elderly state pensioners are biggest users of medical services.

If 80 percent of traffic in goods consists of compensation [barter], including the state, with which companies also engage in barter, how can we then talk about financial discipline? We can only state that we have returned to mediaeval times. We talk about the development of small and middle sized companies and the large ones are in a terrible state. More than 50 percent of overall official losses of the Montenegrin economy in the last year were created precisely by those companies. The Aluminum Company (KAP), the Electrical Utility Company, Yugopetrol, Jugooceania [ocean shipping company] and Obod. About 60 percent of losses are within the chain originating form KAP.

The tax system is a fiction and the one currently being prepared includes many dubious solutions and is not prepared transparently. I am one of those who support introduction of tax tills and taxation order but, judging by the reactions, that must be done differently, says Drljevic adding that it makes sense to ask - who are the biggest tax evaders? "That is the question..."

The financial sector and banking is organized according to new regulations and that has been done very slowly, says the director of the Hipotekarna Bank. We have become so infantile in our dealings with the foreigners that we allow them to create decisions that are not applicable in Montenegro. These decisions are unfortunately accepted also by the expert services of the Central bank of Montenegro. We are not as incompetent as foreigners believe. Moreover, we already had regulations in this field. It is another issue that no one controlled anything so that various deviations occurred.

If we believe that the current situation can go on and that everything will remain peaceful, I am convinced that we are wrong, warns Drljevic. Our responsibility is so big that we cannot pass it to anyone else, because now we cannot blame anyone for our own troubles. I wonder if anyone was held responsible, whether any manager or director was fired because his company was stumbling under losses, and he has been managing it for more than ten years. No! That is probably the best illustration of the current situation.

Despite such situation we keep talking about reform and are not doing anything, so that the whole story has become disgusting. We can even state that we have made some matters worse by taking over the competencies of the federal government. Relations and behavior of our authorities are now worse than before. That is the truth but people are afraid to say that because they fear reprisals. I can say that because I am not involved in export-import related business transactions.

I am afraid that we have ended up in the position in which our statehood project is destroying our state economy. We cannot be a state without a state economy. All states with weak economies are dependencies of other states. Those who fight and truly believe that the project of an independent Montenegro is viable, must do something. Especially because it is an illusion to count on the assistance coming from the donor's conference. We would gain from it only as an independent state. Within FR Yugoslavia we shall not see any donations.

Drljevic objects that the authorities have only now stumbled upon the idea of inviting experts to join the government. Experts should have been invited and listened to earlier, rather than now when it is necessary to share blame [for failures]. That won't work. We first must have an economic concept that will carry the political concept. Such an economic concept still does not exist. The economic policy we declare every year is useless, because it is only a copy of the several-decades-old policies. We must realize once and for all that there can be no political program without an economic one, emphasizes the director of the Hipotekarna Bank.

Social Peace

Social peace in Montenegro can last only during these several summer months, claims Slavko Drljevic. There will be a lot of trouble in the autumn. That should be known and the authorities must do everything to avoid consequences of the current situation. That is easier said than done. Unfortunately, the situation is such and those who are responsible for Montenegro and her fate must deal with it. That is much more important than whether some meeting has been held here or there. I am afraid that we still do not understand the essence. We cannot engage in politics if our essential problems haven't been solved, or at least if there is no program for their resolution, so that we can recruit progressive forces in Montenegro to work on that project.

Spending With Abandon

The money supply has been reduced by about 60 million German Marks. That indicates a rampant lack of liquidity, as this is the effective money supply. No one seems to wonder what should be done to preserve the current level of money supply. Especially because we cannot print German Marks. We must take a closer look at the import and foreign currency regimes and spending without a back up in the treasury - which persistently burdens Montenegro. It is high time to take another look at the foreign currency and import regulations. That is a way to protect money supply and local manufacturing. We cannot keep importing all and nothing and destroying the local economy in which we have invested. That is also a way to save, and savings are needed at all levels, because the budget deficit must become a thing of the past, emphasizes Drljevic.

Doubtful Value of Vouchers

We have distributed vouchers to the citizens, and we haven't done anything to get an objective picture of the situation in the companies that we are supposed to own in the near future, says Drljevic. It must also be stated what is the value of the companies that will soon, through voucher privatization, become the property of the citizens. Everything is done inadequately and I am afraid that the mass voucher privatization will end up being just another mass swindle. Citizens are told that vouchers are worth five thousand points. People trade with these papers, although that cannot be done. We can only imagine what will happen when all of this is collected and funds are formed. I am afraid that the funds, due to no fault of their own, will end up being seen as swindlers. What will happen when the citizens face real value of vouchers invested in certain companies?

Trade With Vouchers

Responding to our assertion that the issue of trade with vouchers, despite warnings about the risky nature of such transactions, is still important, Dragoljub Jankovic says the following:

"Our warnings have so far been received well by the citizens, because we have protected the citizens from unnecessary expenses and loss of money. We have clearly explained that the model has been well established both by regulations and computer-wise [sic] that it is highly protected so that it removes a possibility of unwanted speculations that may harm the interests of the citizens. "There is a certain possibility of making fictitious contracts based on buying of shares after the end of the auction in October. However, that is not advisable, since, as is known, the model of exchange takes a whole month in continuity, and will be followed by daily information about the value of invested voucher points for shares of certain companies, which will largely influence the success of the exchange of voucher points for shares of companies and will give expression to certain market principles of supply and demand.

"In any case it is good that citizens are highly interested in trade so that that is a good indication that the share market in Montenegro will develop successfully after the end of this program, which is important for the development of the capital market as a precondition for further development of the economy."

Translated on November 2, 2001