April 30, 1999
THE SERBS
Economists Find Bombing Cuts Yugoslavia's Production in Half
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By STEVEN ERLANGER
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ELGRADE, Yugoslavia -- The Zastava factory in Kragujevac made
cars and trucks, as well as munitions. NATO strikes destroyed it
completely, putting more than 15,000 people out of work, along with
an additional 40,000 who worked at 120 subcontractors.
The Sloboda factory in Cacak made vacuum cleaners and ovens, as
well as ammunition. In five NATO raids, the factory has been
ruined, and 5,000 people are out of work.
In Krusevac, the 14 Oktobar factory made heavy construction
equipment and bulldozers, as well as reconditioning tank engines.
NATO bombs have left it a complete ruin, putting more than 7,000
people, a quarter of the town's workforce, out of their jobs.
The oil industry, a profitable part of the economy and a prime
candidate for early privatization, has been almost completely
devastated, with the two refineries in Yugoslavia and most of their
storage tanks destroyed.
The five-week air campaign, intended to change President
Slobodan Milosevic's policies toward the southern Serbian province
of Kosovo, is also destroying the country's civilian industrial
capacity and public works, including its highway, rail and
communications networks.
The air war has halved economic output and thrown more than
100,000 people out of work, Western-trained and independent
economists said.
Although it is difficult to estimate the cost of replacements
and repairs if the war stopped today, the economists said, the
damage has had greater effects on the gross domestic product than
the Nazi and then the Allied bombing of Yugoslavia, which was a
much more rural country during World War II.
The bombing has added to the problems of the past decade like
economic mismanagement, cronyism, the hyperinflation of 1992 and
1993, the Bosnian War trade embargo from 1992 to 1995, eight years
of virtually no foreign investment and almost constant war.
"Politics aside, this is an economic and humanitarian
catastrophe," Mladjan Dinkic, a professor of economics at Belgrade
University, said. "While the Serbs won't die of hunger --
agricultural production will continue, even without fertilizers --
our industrial base will be destroyed and the size of the economy
cut in half."
Dinkic coordinates Group 17, a group of economists, some from
the International Monetary Fund and the World Bank, who had
American financing to promote a market economy. They estimate that
gross domestic product per capita, $3,000 in 1989, before economic
sanctions were imposed in May 1992, dropped to $1,650 in 1997. But
because of the large black market, or so-called shadow economy,
that figure was probably closer to $2,000, Dinkic said.
It will drop below $1,000 if the Kosovo conflict stops now, he
said. And unemployment, officially 27 percent last year, is quite
likely to double, he added, with up to 500,000 people laid off or
out of work and 100,000 or so seeking to emigrate from a country of
10 million people.
Although he readily concedes that considerable guesswork goes
into all the figures -- damage estimates range from $40 billion to
$100 billion -- Dinkic said that no matter when the conflict ended,
the future will be difficult.
NATO says its air strikes are intended to force Milosevic to
change his policies in Kosovo and to "degrade and destroy" the
military ability to carry them out. But NATO is increasingly
ignoring the civilian-military distinction, going after "high
value targets" that are dear to Milosevic, his government, his
family and his friends, who control sectors like cigarette
production.
But the targets, like a major cigarette factory in Nis that NATO
recently destroyed, are not essentially military, but civilian or
psychological. The lines for cigarettes are now enormous in
Belgrade, and that may be NATO's point. And NATO officials will be
pleased with the new limits on gasoline rations, which on Tuesday
were cut from 10 gallons a month to five.
Although markets are still full of produce, people worry, too,
about the quality of the food and the produce being grown.
Fertilizer plants have been bombed, as have chemical plants that
are said to be spewing toxic fumes.
The Serbian environment minister, Branislav Lazic, said Thursday
that large quantities of chlorine and other noxious gases had been
released into the air because of the bombing of a refinery and
petrochemical plant at Pancevo, 10 miles northeast of here.
The environmental consequence of the bombing "knows no
borders," Lazic said, warning that the damage may be felt
elsewhere in the Balkans and Europe.
There is no question that ordinary people in this capital are
increasingly nervous about how long the conflict will continue and
what will remain of Yugoslavia when it ends. The deputy prime
minister who was discharged on Wednesday, Vuk Draskovic, spoke for
many people when he urged a settlement, saying: "People who lead
this country must say clearly where we stand. They must say what
will be left of Serbia in 20 days if the bombing continues."
But few here said Milosevic would feel significant pressure from
his executives to stop the war, because their positions depend on
his. In a statement, Group 17 criticized NATO for punishing the
entire nation, and not just Milosevic. The economists said
destroying the civilian economy "causes no material and even
political damage to Mr. Milosevic, but only to the citizens of
Yugoslavia."
After the conflict with NATO is over, Dinkic said, Yugoslavia
will depend on imported oil and gasoline and will be unable to
rebuild its industrial sector, let alone its bridges, without
significant aid from the very countries of the advanced West that
are now bombing it.
If the conflict ends with a clear NATO victory, international
aid and investment will be vital for any recovery. But foreign
investors will not be very likely to invest much money in a country
without functioning road and rail networks, a European diplomat who
specializes in economics said.
"The roads and bridges have to come first," the diplomat said.
But he noted that with factories like 14 Oktobar ruined, even the
capacity to produce the construction equipment required to rebuild
bridges, airports and roads is gone.
The director of the 14 Oktobar factory, the fortuitously named
Slobodan Milosevic, said last week in Krusevac that his foreign
partners had expressed interested in trying to help after the
conflict had ended. The machines had 45 percent imported
components, he said.
"If we get help from our old foreign partners, we might be able
to rebuild this factory," the director said. "Without foreign
help, it will be impossible."
And if the conflict ends inconclusively, with Milosevic still in
power and the West's denying any aid to Yugoslavia, the situation
will be bleak. Without aid, Yugoslavia will be isolated and poor,
dependent on Russia for energy, with greater unemployment and more
refugees, able to feed itself but not to remake its industrial
sector, Dinkic said.
Knowledgeable diplomats here said they expected Milosevic to
remain in power under such circumstances because a poor country
able to feed itself is less revolutionary than a hungry one, like
neighboring Romania under Nicolae Ceausescu.
And Milosevic will be able to blame the sorry state of the
economy on NATO "aggression," avoiding much of the responsibility
for his decade of economic mismanagement.
"I'm scared of a destroyed country with no political change,"
Dinkic said.
