Yugoslav System Stymies Reforms

YUGOSLAVIA'S economy is in trouble. Economists project average inflation for the next 12 months at 11,000 percent, based on September's performance.

One Yugoslav worker in six is unemployed. Two in six could be, if reforms advocated by Prime Minister Ante Markovic but opposed by Communist Party hard-liners are implemented.

The country owes $20.5 billion abroad. Mr. Markovic is urgently seeking more loans. But foreign credit has for some time been closed to Yugoslavia. Instead, Yugoslav officials say they will pay down their foreign debt to $16 billion this year.

On Oct. 13 Markovic was in the United States trying to drum up aid and investment and unblock credit. He met with President Bush and top administration officials to ``see how our bilateral relationships can support our program of change,'' he said.

Markovic also wants $1 billion from commercial banks and governments to support Western-style reforms of Yugoslavia's banking system.

But no assistance was immediately promised by the White House or by officials he visited at the World Bank, or the International Monetary Fund (IMF).

``Regretfully, we will repay the IMF $575 million this year without receiving a penny in return ... so I don't really know who is helping whom out,'' Markovic said in Washington.

A US government economist notes, ``The Yugoslavs would have fewer problems securing fresh credit if they could hold discussions with the Fund that could lead to a signed agreement.''

That isn't expected soon. ``We are talking against each other, not with each other'' is how Dzevad Mujezinovic, Yugoslavia's incoming ambassador to Washington, characterizes the ongoing IMF-Yugoslav dialogue. The latest IMF mission has been in Belgrade since Oct. 23.

The Fund wants Belgrade to impose wage and price restrictions. But Yugoslavia tried an IMF program in May 1988, including devaluing the dinar, scheduling loan repayments, and controlling wages. The agreement had barely taken effect when labor riots brought it down.

Imposing reforms is uniquely difficult in Yugoslavia, a federation of six republics and two provinces whose sharp differences range from language to per capita income.

``If the federal laws are incompatible with a republic's interest, it doesn't take long before the federal prescriptions are totally ignored,'' the US government economist says.

``What is best for Slovenia is not necessarily good for Croatia,'' observes Laura Tyson, a former advisor to the government of Yugoslavia. The intended reforms, she says ``will have a differential impact on the Yugoslav economy that may lead to political paralysis.''

``Less-developed republics such as Bosnia, Macedonia, and Kosovo, will lose in a market economy,'' an economist from Bosnia's Institute for Economics warns.

On top of this, Markovic faces a 40-year-old system unique even in the communist world. Agricultural, industrial, and service firms are owned by no one but managed by everyone through workers councils and local Communist Party officials. These largely inefficient enterprises borrow money from banks that they also manage, resulting in almost unquestioned credit. The federal authorities register only marginal impact in this arrangement.

Markovic has already encountered resistance to economic reforms he has yet to implement. Officials in Belgrade aptly identify the federal government's role as ``indicative'' rather than binding with regard to the various republics and provinces.

Thus constitutional amendments that are designed to make enterprises and banks profitable will likely remain on the books rather than be put into practice, the Bosnian economist says.