SWP705Financial Discipline and Structural Adjustment

in Yugoslavia

Rehabilitation and Bankruptcy of Loss-Making Enterprises

Peter T. Knight

WORLD BANK STAFF WORKING PAPERSNumber 705

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WORLD BANK STAFF WORKING PAPERS , (D57Number 705

947'

Financial Discipline and Structural Adjustmentin Yugoslavia

Rehabilitation and Bankruptcy of Loss-Making Enterprises

Peter T. Knight

I1RNATIONAL MONETARY rUNDJOINT LIBRARY

DLC 1 1 194

INTErINATICNZAL BANh !'OR]RECO,STrUCTiC'. i_)D v.Z. 1OPNENT

The World BankWashington, D.C., U.S.A.

Copyright (© 1984The International Bank for Reconstructionand Development/THE WORLD BANK1818 H Street, N.W.Washington, D.C. 20433, U.S.A.

All rights reservedManufactured in the United States of AmencaFirst printing November 1984

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The World Bank does not accept responsibility for the views expressed herein, whichare those of the authors and should not be attributed to the World Bank or to itsaffiliated organizations. The findings, interpretations, and conclusions are the resultsof research supported by the Bank; they do not necessarily represent official policy ofthe Bank. The designations employed, the presentation of material, and any maps usedin this document are solely for the convenience of the reader and do not imply theexpression of any opinion whatsoever on the part of the World Bank or its affiliatesconcerning the legal status of any country, territory, city, area, or of its authorities, orconceming the delimitation of its boundaries, or national affiliation.

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A senior economist in the Country Policy Department of the World Bank when thispaper was written, Peter T. Knight is now with Country Programs Department Il ofthe Bank's Latin America and the Caribbean Regional Office.

Librziry of Congiress Cataloging in PublHlicalion Dz9a

Knight, Peter T.Financial discipline and structural adjustment in

Yugoslavia.

(World Bank staff working papers ; no. 705)1. Business enterprises--Yugoslavia--Finance.

2. Credit--Yugoslavia. 3. Business losses--Yugoslavia.4. Bankruptcy--Yugoslavia. I. Title. !I. Series.HG4234.6.K55 1984 332.74'409497 84-22072ISBN 0-8213-0443-7

ABSTRACT

Successful completion of Yugoslavia's structural adjustmentprogramn requires stricter financial discipline to increase the economicpressure on public enterprises to adjust. This paper focuses on twoaspects of the general question of financial discipline: rehabilitationand bankruptcy of loss-making enterprises and interenterprise credit. Ineach case the nature of the problem, the present legal framework, recentexperience, and expected future developments are reviewed.

In 1981 loss-making firms were 7.8% of all Yugoslav social sectorfirms in "economic" activities, employed 4.9% of all social sector workersin these activities, and their losses came to roughly 1.5% of grossmaterial product. The bankruptcy and liquidation solution for loss-makers,while well-defined in legislation, has rarely been invoked. In principle,procedures for rehabilitation are adequate, but in practice they are seldomfully executed. They also appear to provide insufficient pressure toinduce real adjustment by firms. Rehabilitation often involves extensivegrants in aid and loans at highly negative real interest rates. The resultis often more a bailout than a workout.

New legal measures have recently been enacted which should helpinvolve Yugoslav enterprises to achieve the objectives of the country'sstructural adjustment program. But it will be necessary to mobilize thepolitical will to enforce the new legislation and that previously in thebooks. The interlocking system of banks, enterprises and local governmentshas produced a very soft budget constraint on the loss-making Yugoslavfirm. To break out of this self-serving system of rehabilitation

proceedings, it is necessary that they be conducted by an independentagency. The Social Accounting Service (SDK) is the obvious candidate to

perform this function. Banks could also increase the technical assistancecomponent of their loans and the stringency of conditionality forrehabilitation programs.

Use of enterprise-level data and multivariate analysis could help

determine more precisely the characteristics of loss-makers than has beenpossible in this paper using subsectoral level data. Phasing out of pricecontrols and negative real interest rates are also important parts of aprogram to increase financial discipline and promote structural adjustment.

Condense

Si l'on veut que le programme d'aJustement structurel de laYougoslavie aboutisse, il faut renforcer la discipline financiore afin quales pressions economiques qui s'exercent sur les entreprises publiquesaugmentent, les obligeant a s'adapter. Ce document traite de deux aspectsde la discipline financi6re g le redressement et la liquidation des entre-prises fonctionnant a perte et le credit interentreprises. On a 6tudi6dans les deux cas la nature du probleme, le cadre juridique exKistant9 lasituation recente et 1P6volution probable0

En l98l1 les entreprises fonctionnant a perte representaient798 % des organisations elementaires de travail associ6 exergant des acti-vites "6conomiques", elles employaient 4,9 % des travailleurs de ces orga-nisations et leurs pertes se chiffraient a environ 1,5 % du produitmateriel brut. La faillite et la liquidation des entreprises fonctionnanta perte, si elles sont bien d6finies dans la legislation, ont rarementlieu. En th6orie, les procedures de redressement sont satisfaisantesmais9 dans la pratique, il est rare qu'elles soient appliquees jusqu'aubout. I1 semble egalement que les pressions ne sont pas suffisantes pourinciter les entreprises a veritablement s'adapter a leurs strsuctures0 Leredressement s'accompagne fr6quemm.ent de dons tres importants et de pretsaccord6s a des taux d'int6r8t reels tres n6gatifs0 Le resultat n'estsouvent qu'un mieux temporaireO

De nouveaux textes ont ete recemment promulgu6s , qu° devraientinciter les entreprises yougoslaves a atteindre lee objectif£ du programmenational d'ajustement structurel. Hais il fauera amener les pouvoirspublics a faire appliquer la nouvelle l6giGiation ainsi que cemIe qui estdeja en vigueur. Etant donne linterdependance des banques, desentreprises et des collectivites locales, les entreprises yougoslavesfonctionnant a perte n9ont guere ete soumises a des pressionsbudgetaires= Pour sortir de ce circuit ferm6, il faut que lee op6rationsde redressement soient confi6es a un organisere ind6pendant. Le Service dela comptabilite sociale (SDK) est le candid2t tout d6sign6 pour cettefonction. Les banques pourraient 6galement accroltre la composanteassistance technique de leurs prets et suoordonner leur aide er faveur desprograxmes de redressement i des conditions plus strictes.

Des donnees sur chaque entreprise et une analyse a. variablesmultiples pourraient aider a determiner plus precisement lescaracteristiques des entreprises fonctionnant a perte quon a pz. le fairedans ce document avec les donnees sous-sectorielles dont on disposait.L'6limination progressive du controle des prix et des taux dtinteret reelsn6gatifs sont egalement des elements importants de tout prograir-e visant a

accroltre la discipline financiere et a encourager l'ajustement structurel.

EXTRACTO

Para que Yugoslavia pueda llevar a buen fin su programa de ajusteestructural se requiere una disciplina financiera mAs estricta, a fin deintensificar la presi6n econ6mica para que las empresas puiblicas efectuenun ajuste. Este estudio se concentra en dos aspectos de la cuesti6ngeneral de la disciplina financiera: rehabilitaci6n y quiebra de lasempresas que dejan perdidas y cr6dito entre empresa. En cada caso seanalizan la indole del problema, el marco juridico actual, la experienciareciente y la evoluci6n que se preve.

En 1981 las firmas que dejaban perdidas constituian el 7,8% del totalde firmas del sector social yugoslavo dedicadas a actividades"econ6micas", empleaban al 4,9% del total de trabajadores del sectorsocial empleados en esas actividades y sus p6rdidas ascendianaproximadamente al 1,5% del producto material bruto. Rara vez se harecurrido a la soluci6n de la quiebra y liquidaci6n de las empresas quedejan perdidas, aunque 6sta esta claramente definida en las leyes. Enprincipio, los procedimientos de rehabilitaci6n son adecuados pero en lapractica pocas veces se ejecutan en forma cabal. Aparentemente, lapresi6n que ejercen es insuficiente para inducir a las firmas a efectuarun ajuste real. La rehabilitaci6n frecuentemente comporta grandesdonaciones o subvenciones y prestamos a tipos de interes reales muynegativos. Frecuentemente el resultado es una operaci6n de salvamento mAsbien que un esfuerzo por resolver el problema.

Recientemente se han promulgado disposiciones legales que tienen porobjeto ayudar a que las empresas yugoslavas participen en los esfuerzospor lograr los objetivos del programa de ajuste estructural del pais.Pero sera necesario movilizar la voluntad politica para exigir elcumplimiento tanto de las leyes nuevas como de las que ya existian. Elsistema de tener bancos, empresas y gobiernos locales con miembros comunesha traido como consecuencia una limitaci6n presupuestaria muy debil paralas firmas yugoslavas que dejan perdidas. Para terminar con este sistemade rehabilitaci6n que sirve los intereses propios a costa de los demAs esnecesario que el procedimiento sea llevado a cabo por un organismoindependiente. El Servicio de Contabilidad Social es un candidato obviopara desempeniar esta funci6n. Los bancos tambi6n podrian incrementar elcomponente asistencia tecnica de sus pr6stamos e imponer unacondicionalidad mas estricta para los programas de rehabilitaci6n.

El uso de datos a nivel de las empresas y del analisis de multiplesvariables ayudaria a determinar las caracteristicas de las empresas quedejan perdidas de manera mas precisa que lo que se ha podido en esteestudio usando datos de nivel subsectorial. La eliminaci6n gradual de loscontroles de precios y los tipos de inter6s reales negativos tambi6nconstituye una parte importante de todo programa que tenga por objetoaumentar la disciplina financiera y promover el ajuste estructural.

ACKNOWLEDGMENTS

This paper was prepared in support of the World Bank's structuraladjustment loan to Yugoslavia. The author wishes to thank Suman Bery,Vinay Bhargava, Francis Colaco, Gregor Dolenc, Marko Voljc and participantsin a World Bank seminar for helpful comments on an earlier draft.Chandrashekar Pant prepared Annexes 2 and 3 and supplied helpful informationon Developments since April 1983, as did Wayne Lewis.

TABLE OF CONTENTS

Page No.

Introduction ......... ................................... 1

Rehabilitation and Bankruptcy of Loss-Making Enterprises. 6

The Problem .................................. 6The Legal Framework as of April 1983 .... ..... 9Recent Experience ............................ 11Developments through June 1983 .... ........... 26

Interenterprise Credit .................................. 31

The Problem .................................. 31The Legal Framework as of April 1983 .... ..... 32Recent Experience ............................ 35Developments through June 1983 .... ........... 37

Conclusions and Recommendations ......................... 39

Postscript ......... ..................................... 44

ANNEX 1: Legal Framework Governing Rehabilitation and

Bankruptcy of Loss-Making Enterprises ....... 46

ANNEX 2: Comparison of June 1983 Amendments to theLaw on Rehabilitation and Liquidation ofOrganizations of Associated Labor withDraft Amendments ............................ 60

ANNEX 3: Comparison of June 1983 Amendments to the

Law on Securing Payment Between Users ofSocial Resources with Draft Amendments ...... 65

Statistical Appendix .................................... 70

LIST OF TEXT TABLES

Table No. Title Page No0

1 Loss-Making BOALs to all BOALs in Yugoslavia, 1981 000000 5

2 Losses in the Social Sector, Their Coverage,

and Investment in Loss Making BOALs, 1979-1981000000 13

3 Distribution of Losses Shown on Annual FinancialReports and GMP by Territory, 1979-1981 ............ 15

4 Financing of Uncovered Losses Showm on Annual

Financial Reports, Social Sector, As ofDecember 31 of Subsequent Year, 1979019810.......... 17

5 Total Losses and Investments, 1981, and

Rehabilitation Credits Outstanding andDisbursed as of 30 September 1982, Selected

Industrial Subsectors ............................... 19

6 Rehabilitation Programs and Bankruptcy

Procedures Initiated in the Social Sectoras of 31 December, 1980-1982 ....................... 23

7 Status of Claims against Purchasers for Goods

and Services Sold, Social Sector 31December 1979-1981 and 30 September 1981, 1982000000 36

LIST OF STATISTICAL APPENDIX TABLES

Table No0 Title Page No0

A lo1 Coverage of Losses at Time Annual Financial

Reports Were Prepared, 19790000000000000000000000 71

A 12 Coverage of Losses at Time Annual FinancialReports Were Prepared, 19800000000000000000000000 72

A 103 Coverage of Losses at Time Annual Financial

Reports Were Prepared, 1981.00000000000000000000 73

- iii -

LIST OF STATISTICAL APPENDIX TABLES (Continued)

Table No Title Page No.

A 2.1 Rehabilitation Due to Uncovered Loss As Shownin Financial Report for 1979(a) Data on the Amount of Uncovered Loss and

Coverage Thereof as of 31 December 1980 74(b) Number of BOALs under Rehabilitation and

Numaber of Workers in Such BOALs as of31 December 1980 .76

A 2.2 Renabilitation Due to Uncovered Loss As Shown

in Financial Report for 1980(a) Data on the Amount of Uncovered Loss and

Coverage Thereof as of 31 December 1981 77(b) Number of BOALs under Rehabilitation and

Number of Workers in Such BOALs as of31 December 1981 .78

(c) Manner of Payment of Advance Payments ofPersonal Income .79

A 2.3 Rehabilitation Due to Uncovered Loss As Shown

in Financial Report for 1981(a) Data on the Amount of Uncovered Loss and

Coverage Thereof as of 31 December 1982 80(b) Number of BOALs under Rehabilitation and

Number of Workers in Such BOALs as of31 December 1982 .81

A 3.1 Investment in BOALs Showing Losses in AnnualFinancial Reports, 1979-1981 .82

A 4.1 Rehabilitation Credits Outstanding and

Disbursed as of 30 September 1982 by Typeof Activity .83

A 4.2 Rehabilitation Credits Outstanding and

Disbursed as of 30 September 1982 byRepublic and Autonomous Province .84

A 5.1 Consolidated Annual Balance Sheet for JointReserve Funds of All Yugoslav SociopoliticalCommunities, 1980 and 1981 .85

- iv

LIST OF STATISTICAL APPENDIX TABLES (Continued)

Table No Title Lage No0

A 6.1 Status of Claims Against Purchasers for Goods

and Services Sold as of 31 December 1979000000000 86

A 6.2 Status of Claims Against Purchasers for Goods

and Services Sold as of 31 December 19800 0<ooooo 87

A 6.3 Status of Claims Against Purchasers for Goods

and Services Sold as of 31 December 1981000000000 88

GLOSSARY-OF ACRONYMS

AFR Annual Financial Report

BOAL Basic Organization of AssociatedLabor

COAL Contractual Organization of Associated Labor

GMP Gross Material Product

SDK Social Accounting Service

SMA Self-Management Agreement

SPC Socio-Political Community

WO Work Organization

AVERAGE -EXCHANGE RATES(Yugoslav Dinars per US Dollar)

1977 18.298

1978 18.644

1979 18.996

1980 24o639

1981 34o966

1982 50.276

1983 92.839

INTRODUCTION

Adjusting the structure of an economy to operate efficiently

with higher real energy prices and to obtain greater benefits from

international trade requires both modification of economic behavior at the

enterprise level and new investments. Enterprises must adapt to prices

reflecting new relative scarcities. New technologies, products, markets,

and sources of supply must be sought. While much adjustment can be

achieved without physical investment, often new plants, machinery and

equipment are needed to achieve the full potential benefits of the

adjustment process. On the other hand, inefficient investment, not guided

by appropriate factor and product prices, may hinder rather than further

the adjustment process.

In a market economy, enterprises which fail to adjust to a

changed economic environment are likely to experience losses and

eventually bankruptcy. The prospect of bankruptcy is the ultimate "stick"

which complements the carrot of greater profits which await successful

adjusters. But bankruptcy and attendant liquidation of going concerns have

high economic, social, and political costs. Hence, in most countries

provision is made for "workout" or rehabilitation solutions. Bankruptcy

and liquidation remain as last resorts when rehabilitation fails.

Yugoslavia is no exception. Yugoslav enterpriscs uhich have

incurred losses have had recourse to a wide variety of sources fcr covering

the losses. Among them are not only their own reserves, but also rese::ves

of other basic organizations of associated labor (BOALs) with which they

are linked by self-management agreements (SMAs), "solidarity contributions"

from other enterprises to which they are not linked by SMAs but which are

important suppliers and customers, pooled reserves at the commune and

republican provincial level, bank loans and reschedulings, 9 riteoffs of

debts, and postponement or canceling of tax and contribution obligations to

sociopolitical communities (SPCs -- the Yugoslav term for federal,

republican/provincial and commune governments) and communities providing

social services all without any direct contribution from the budgets of

SPCso1/

In addition, Yugoslav enterprises (and not just loss-makers)

have been able to obtain credit by paying for goods and services wiith

promissory notes and other forms of deferred payment which they have not

always executed when due. Beginning in 1977 the rise in registered

interenterprise claims has been well above the rate of infletion.

1/ Unless otherwise indicated, the word enterprises refers to BOALs, workorganizations not composed of BOALs, basic cooperative essociations,basic organizations of cooperative associations, artisar and other

cooperatives, and contractual organizations of associated labor. For abrief description of the evolution of the Yugoslav system of workerself-management and its specialized terminology, see the section onYugoslavia in the author's "Economic Reforms in Socialist Countries.The Experiences of China, Hungary, Romania, and Yugoslavia," World BankStaff Working Paper No. 579 (Washington, DoCoo The World Bank, 1983).For more details, see the references on Yugoslavia in the bibliographyof that paper.

- 3 -

There has been widespread discussion in the press of the scale of

enterprise losses and the laxity of financial discipline that they

represent. A consensus appears to be forming among Yugoslav economists and

policy-makers that succesful completion of the country's structural

adjustment program requires stricter financial discipline to increase the

economic pressure on enterprises to adjust. To use the term coined by the

Hungarian economist Janos Kornai, the "soft budget constraint" facing

Yugoslav enterprises needs to be "hardened".l/

Table 1 provides statistics on tae extent of uncovered losses

incurred in 1981. Loss-making BOALs in "economic" activities (sectors 1-11

in the Yugoslav classification) were 7.8X of all BOALs, employed 4.97 of all

social sector workers, and the losses came to roughly 1.5% of social sector

gross material product (GMP) for these activities. These numbers appear to

be significant from macroeconomic viewpoint, though not overwhelming. But

the uncovered losses in Table I may only be the tip of an iceberg. Losses

already covered at the time annual financial reports were submitted were

some 26% greater than uncovered losses (see statistical Appendix Table

A1.3). Interest rates charged on loans to BOALs have been well below the

rate of inflation, resulting in hidden subsidies. And given the

increasingly difficult economic situation faced by the country since 1982,

with decreased demand and acute shortages of foreign exchange, the problem

has probably become more serious, though the statistics on losses for these

1/ Janos Kornai "Hard' and 'Soft' Budget Constraints", Acta Economica25:3-4 (1980) pp 231-246.

4

years were not available to the author at the time the main text of this

paper was written (October 1983). In any case, the meaning of a loss in

Yugoslavia is quite different from that in Western countries, as is

explained in the next section of the paper. This means that comparisons

with data for other countries are risky.

It is likely, however, that without more effective financial

controls and a greater possibility of bankruptcy than has prevailed in the

past, the allocation gains of a greater reliance on the price system, which

is now planned, will be lost. The issue of enterprise losses is also

intimately related to issues of nominal incomes policy, price control,

interenterprise credit (and hence monetary policy) and national savings.

This paper focuses on ttwo aspects of the general question of

financial discipline in Yugoslavia- rehabilitation and bankruptcy of

loss-making enterprises and interenterprise credit0 In each case the nature

of the problem, the present legal framework, recent experience, and expected

future developments are review,ed0 Conclusions and policy recommendations

are contained in the final section of the paper0 A short postcript provides

some information on developments through June, 1984.

Table 1: LOSS-MAKING BOALS TO ALL BOALS IN YUGOSLAVIA, 1981

(Economic Activities Only)

Proportion of Loss-Makers

Loss Making BOALs a/ Total BOALs to Total/or Social SectorThousand Amount Thousand GMP (in Din B) GMP for

Number Workers (in Din B) Number Workers for the Number Number of the

of BOALs Involved of Losses of BOALs Involved Sector b/ of BOALS Workers c/ Sector c/

(1) (2) (3) (4) (5) (6) (1) as % (2) as % (3) as %

of (4) of (5) of (6)

Industry and Mining 465 124 20.8 6,053 2,242 856.8 7.7 5.5 2.4

Agriculture andFishing 132 14 1.4 1,252 200 91.0 10.5 6.8 1.6

Forestry 4 1 - 380 63 25.9 1.1 1.0 0.1

Water Economy 4 - - 90 18 6.9 4.4 1.7 0.3

Construction 89 27 1.9 1,611 622 20.7 5.5 4.4 1.0

Transportation andCoimiunication 105 44 2.3 1,457 408 152.5 7.2 10.7 1.5

Trade 70 8 0.6 555 596 395.4 12.6 1.3 0.2

Catering and Tourism 101 11 0.6 455 210 54.9 22.2 5.2 1.0

Handicrafts 41 4 - 584 172 47.2 7.0 2.3 0.3

Housing 39 4 0.7 497 112 n.a. 7.8 3.8 n.a.

Financial and OtherServices 16 1 0.1 733 204 n.a. 2.2 0.4 n.a.

TOTAL 1,066 237 28.6 13,667 4,848 1,830.2 7.8 4.9 1.6

a/ BOALs showing uncovered losses on their Annual Financial Reports for 1981 as of December 31, 1982.

b/ Social sector only.

c/ Calculated from untouched original data.

Sources: Statistical Appendix Table A 2.3 for Loss-Making Boals and Statistical Yearbook of Yugoslavia, 1982, Tables103.2, 105.1, and 107.5 for total BOALs.

Rehabilitation and Bankruptcyf Loae-Making Enter_rises

The Problem

When a bankrupt firm is liquidated assets are generally sold at

distress prices, i.e. at prices far below their reproduction value.l/ The

proceeds to the creditors fall short of the principal value of their claims

and debt is extinguished. The services required in the form of lawyers,

asset-selling expenses and the like constitute a considerable consumption

of real resources which corresponds to both a private and a social cost.

The financial costs associated with the termination of labor and other

contracts are a private cost to claimants, if not a social one. Also,

assets are often sold at distress prices on liquidation, and creditors and

holders of the last shreds of equity in troubled firms receive less than

"fair value" for their claims. For these reasons, these private parties

prefer "workout" or rehabilitation solutions to bankruptcy.

There are additional costs to society inherent in bankruptcy, and

for these reasons bankruptcy law and social practice (including that of

Yugoslavia) try to promote rehabilitation and avoid liquidation when

possible0 An enterprise is more than the sum of its real and financial

assets - it is a going concern0 Its value as such is its goodwill or

intangible assets0 In economic terms, the firm is an organization that

embodies human capital and a technology that of the management of labor

1/ I am indebted to Frank Veneroso for the ideas and much of the languageof this and the following paragraph.

and capital. In their haste to get their fair share of a troubled company's

eroding assets, creditors in Western countries often opt for liquidation,

even if it involves disruption of enterprise management structures and

production, breaking up a functioning organization that would be costly to

reproduce.

In Yugoslavia, the banKruptcy and liquidation solution for

loss-makers has rarely been invoked and the procedures for rehabilitation,

while in principle adequate, in practice are seldom fully executed. They

also appear to provide insuffienct pressure to induce real structural

adjustment by firms. The Yugoslav rehabilitation often smells more of a

bailout than a workout. The problem, therefore, is how to secure more

effective adjustment by increasing the credibility of the bankruptcy threat

while putting more "teeth" into rehabilitation procedures.

Before proceeding to a summary description of the existing

legislation governing rehabilitation and bankruptcy of loss-making

enterprises, a short digression is necessary to clarify the special meaning

of the losses in the Yugoslav systems of worker's self-management. In this

system the basic accounting and legal unit is the BOAL. While "kombinats"

and intermediate "work organizations" are composed of multiple BOALS linked

by SMAs, all assets, equity and liabilities remain under the control of

BOALs. It is the practice for a kombinat to prepare and submit to the

Social Accounting Service (SDK) consoldiated accounts for the BOALs which

comprise it. Such a consolidation, however, cannot be viewed as an organic

unity, as is often appropriate in considering the accounts of a holding

company and its subsidiaries in Western countries.

In the Yugoslav system, labor rather than capital is the residual

claimant of the surplus left after paying for purchased inputs and services

(including borrowed capital) and taxes. Labor income is not considered a

cost. In principle, capital is own^ed by society, but in practice its

rental value accrues to groups of workers (including managers' who enjoy

its usufruct, except in the case where such workers lend it for interest to

another BOAL, either directly or through the banking system. In this case

the interest income accrues to the group of workers lending the capital and

only any return above the interest goes to the workers actually "employing°

it0

Article 154 of the Associated Labor Act of 1976 states that a

basic organization shall be considered to have incurred a bus_ness loss if,

according to its annual balance sheet, it has not received sufficient

income to cover amounts spent on personal incomes provisionally accounted

and paid out, or to pay statutorily-guaranteed personal incomes for the

accounting business period for which personal incomes have not been

provisionally accounted or paid, or for which statutorily guar-nteed

personal incomes have not been paid.

Thus it is possible for a firm whose workers vote themselves

excessively generous advances on personal incomes (e.g. incomes well above

the average for the activity involved) to incur a loss lacking the normal

economic significance of a loss in most Wiestern countries0 The

(understandable) reluctance of workers' councils to fire or lay-off

colleagues tends to produce losses when demand falls if personel incomes

- 9 -

are not reduced. On the other hand, a loss might be a "programmed" one

caused by economic polices, such as price controls on the firm's output,

which have no efficiency implications for the firm. A loss of this kind

would not call for economic adjustment by the firm in question, but rather

changes in price policy on the provision of some form of subsidy.

The Legal Framework as of April 1983

The basic legal framework for enterprise rehabilitation and

bankruptcy in Yugoslavia is the law on Rehabilitation and Liquidation of

Organizations of Associated Labor of July 1980. This law became effective

on December 31, 1980 and has since been amended three times. The following

is a brief summary description of its major provisions and covers the law

as amended through April 1983. A more detailed description is contained in

the Annex to this paper. The amendments of June 1983 are set forth in

Annex 2.

Three types of rehabilitation procedures of progressively greater

severity are provided for. The first two are technically known as

"pre-rehabilitation" procedures. More formal rehabilitation procedures,

for which statistics are regularly reported by the SDK, apply to

enterprises showing losses on their annual financial reports (AFRs), due by

the end of February of the following year. An enterprise showing a loss on

its AFR must initiate a set of procedures following a timetable specified

in the law. These include informing associated BOALs and various official

organizations, including the relevant SPCs and the SDK, of its situation

10

and the procedures adopted, establishing the causes of and responsibility

for the loss, and the means to be taken for eliminating the lose. It also

includes adopting a rehabilitation program wihich specifies, inter alia, the

method and deadlines for obtaining funds to cover losses not already

covered from non-reimbursable sources (its own reserve funds, reserve funds

or net income of associated BOALs linked by a SMA on the pooling or labor

and resources, or other sources), and (if the loss was found to be due to

obsolete technology, inadequate productive capacity, a shortage of working

capital, or uneconomic business operations) measures and financial means to

solve the problem.

Requests for funds to cover the loss together with a copy of the

rehabilitation program must be sent to BOALs with which the loss-making

BOAL is linked by a SMA, BOALs with which it has generated more than half

its total revenue declared in the AFR in w^hich the uncovered loos is shown,

the joint reserve fund for the territory of the SPC in which it has pooled

its reserve funds, the compentent body of the SPC, and the compentent

branch of the SDKo In the rehabilitation proceedings funds must be

obtained at least up to the level of the uncovered loss and of three major

types: non-reimbursable resources, writeoffs of creditors' claims, and

rehabilitation credits. If the loss-making BCAL does not cover the loss

and fails to find parties willing to do so (called rehabilitation

administrators) within the time limits established (that is by roughly

August 8 of the year following that in which the loss was incur-..d) it must

submit to the general association with wihich it is ascociated, without

delay, a proposal for initiating rehabilitation with a view to finding the

- 11 -

rehabilitation administrator. When rehabilitation administrators have been

found, a SMA on mutual relations under rehabilitation must be established

setting forth the rights and duties of all parties concerned, including the

basis and criteria for determine personal incomes for the duration of the

rehabilitating program as well as the method of coordinating positions and

joint decision-making in cases where the workers of the BOAL under

rehabilitation do not act in conformity with the obligations they assumed

in the SMA on rehabilitation. This SMA may envisage that the

administrators participate in the BOAL's decision-making on the execution

of the rehabilitation program.

If no rehabilitation administrators are forthcoming by

approximately September 7 of the year following that in which the loss was

incurred, consultations on a reduction in claims by creditors must be

initiated. If an agreement cannot be reached within another 30 days,

bankruptcy proceedings must be initiated. These may lead either to an

enforced settlement (reduction in claims) or liquidation of the debtor BOAL.

Recent Experience

The statistical material concerning rehabilitation which was made

available to the World Bank mission does not include pre-rehabilitation

programs. Nevertheless, interviews with enterprises and banks indicate

that considerable effort and resources are expended by both enterprises and

their creditors to avoid an enterprise showing a loss on the AFR and

thereby entering formal rehabilitation proceedings. Reportedly funds for

12

projects under construction are sometimes diverted to finance working

capital for existing activities. This is one of many factors Leading to

cost overruns and delays in investment projects. Indirect financing to

avoid an enterprise showing a loss may be provided when its bank finances

the enterprise's suppliers and/or customers.

An example of a partially successful pre-rehabilitaton program is

provided by the national airlines JATO At the end of June 1982 losses

totaled some Din 780 million, but they were reduced to Din 450 million by

December 31 through a combination of a freeze on new hiring, revision of

flight schedules to increase load factors, an expense control program, and

by holding increases in personal incomes below the rate of inflation.

Seasonal factors may also have helped improve performance0 As part of the

pre-rehabilitation program, JAT launched a study on reorganization of the

enterprise which was expected to result in consolidating its Sia2 BOALs into

one or two, with considerable cost savings through elimination of

management functions and better control over costs, including advances on

personal income0

For all Yugoslavia, total losses as shown in annual financial

reports at the time of presentation to SDK came to 1.6%, 1.3% and 104% of

GMP respectively in 1979, 1980, and 1981 (see Table 2). In 1981 losses

reported were a total of Din 31 billion, of which Din 6.6 billion (21%)

were covered from non-reimbursable funds, as specified by the 1980

- 13 -

Table 2: LOSSES IN THE SOCIAL SECTOR, THEIR COVERAGE,

AND INVESTMENT IN LOSS MAKING BOALS, 1979-1981

(Billion Dinars unless otherwise indicated)

1979 1980 1981

Total losses shown on AFRs 18.7 20.0 31.0(as % of Gross Material Product) (1.6) (1.3) (1.4)

Losses covered at time AFR was prepared 2.0 3.3 6.6

Uncovered losses at time AFR was prepared 16.6 16.7 24.3

Number of BOALs 1,383 1,303 1,277

Thousand Workers 279.9 277.2 261.6(as % of workers in social sector) (5.1) (4.9 (4.5)

Lossess still uncovered as of December 31

of subsequent year 1.0 4.1 6.1

Number of BOALs 94 198 204

Thousand workers 20.3 53.1 44.7

Investment in BOALs showing losses on AFRs 27.7 37.8 34.6(as % of Gross Investment in the Social Sector) (7.4) (8.3) (n.a.)

SOURCES: Statistical Appendix Tables A 1.1, A 1.2, A 1.3, A 2.1, A 2.2, A 2.3,A 3.1, and Statistical Yearbook of Yugoslavia, 1981 and 1982, Tables 105.3,

107.7, 107.8 and 110.0

- 14 -

rehabilitation and liquidation law, at the time the reports were presented

to the SDKol/ To the remaining 24.3 billion must be added Din 401

billion in losses from earlier years still uncovered at the end of 1980 to

get a total of Din 2804 billion of uncovered losses at the time the 1981

AFRs were prepared.2/

Table 3 showis the distribution of losses between republics and

autonomous provinces in relation to territorial GMP for the years 1979-81.

In general the less developed regions tend to have a larger share of losses

than production. The average ratio of the percentage of total losses shotin

on AFRs at the time of preparation to the percentage share of GMP for these

three years is given in the following table.

Average Ratio of % of Total Losses onTerritory AFRs to % of GMP, 1979-81

Less Developd Reg s

Bosnia-H{erzegovina 1.27Montenegro 2.45Macedonia 1.79Kosovo 3.67

1/ The sources from which losses were covered at the time of preparation ofAFRs and the respective amounts by industrial subsector for the years1979-81 are given in the Statistical Appendix, Tables A lol A A 13.

2/ This number is Din 09 billion belou the Din. 29.3 billion of uncoveredlosses shown in the Table A 2.3 of the Statistical Appendiz 0 A probableexplanation of this discrepancy (and similar ones for other years) iSthat the AFRs are reviewed and sometimes revised by the SDKo Thenumbers in Tables A 201 - A 203 are based on the revised A5Rs as ofDecember 31 of the subsequent year 0

Table 3: DISTRIBUTION OF LOSSES SHOWN ON ANNUAL FINANCIAL REPORTS AND GMP BY TERRITORY, 1979-1981 a/

1979 1980 1981Losses G4P % Loss/% GMP Losses GMP X Loss/% GMP Losses GMP X Loss/% GMP

(X of total) (X of total) (ratio) (X of total) (X of total) ( X ) (X of total) (X of total) ( )

Bosnia-Herzegovina 14.3 12.5 1.14 18.1 12.5 1.45 15.4 12.5 1.23

Montenegro 8.2 1.7 4.82 3.3 2.1 1.57 2.0 2.1 .95

Coratia 27.6 26.3 1.05 18.7 26.5 .71 21.9 26.5 .83

Macedonia 9.0 5.6 1.61 11.6 5.5 2.11 9.2 5.6 1.64

Slovenia 7.3 16.4 .45 9.4 16.1 .58 14.6 15.5 .94

Serbia 33.7 37.4 .90 38.9 37.3 1.04 36.9 37.8 .98

Serbia Proper 15.8 24.1 .66 15.0 24.0 .63 12.6 24.0 .53

Kosovo 7.8 2.2 3.55 8.0 2.2 3.64 9.2 2.4 3.83

Vojvodina 10.2 11.1 .92 15.9 11.1 1.43 15.1 11.5 1.31

Yugoslovia 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Note;

a/ Economic sectors (0-11) only

SOURCES: Statistical Appendix Tables A 1.1, A 1.2, A 1.3 and Statistical Yearbook of Yugoslavia, 1982, Table 205.4

16 -

More Developed Regions

Croatia .86Slovenia o66Serbia proper .61Vojvodina lo22

The only more developed region with a ratio exceeding unity is Vojvodina0

The undisputed leader in loss-making in relation to GNP is Kosovo.

Uncovered losses for 1981 were shown by 1277 BOALs with 261,634

workers, or 4o5% of the workers in the social sector (including

'unon-economic" activities) that year. The number of BOALs and uorkers in

loss-making BOALs in 1981 were 7.7% and 6.8% below the levels in 1979 (see

Table 2)o

Table 4 summarizes the way uncovered losses for the years 1979=81

were financed in the year following that in which the loss was incurred.

Coverage from reimbursable sources fell from 14.4% of the total in 1979 to

12.5% in 1981. Other BOALs provided an increasing percentage of coverage,

reaching 5.8% of total uncovered losses show-fn on the AFRs for 1981 Another

important trend is the decline in non-reimbursable funding from SPCs and

"other users of social resources" (reportedly mostly communities of

interest). These are healthy trends since they are likely to Tesult in

increased pressure on loss-making BOALs to improve their performance by

workers in other BOALs. SPCs and communities of interect are more distant

and impersonal, and their contribution does not normally take the form of

budgetary allocations, but rather the pardoning or deferral of ax aend

contribution obligations.

Table 4: FINANCING OF UNCOVERED LOSSES SHOWN ON ANNUAL FINANCIAL REPORTS, SOCIAL SECTOR,AS OF DECEMBER 31 OF SUBSEQUENT YEAR, 1979-1981

(Percentages of Total)

1979 1980 1981

Total Uncovered Loss 100.0 100.0 100.0of which

Covered with Nonreimbursable Funds 14.4 13.1 12.5of which

From BOALs linked by SMAs 2.2 3.2 5.8From Common Reserve Funds 1.1 1.6 2.9From Banks 0.2From SPCs and other Users of Social Resources 9.7 6.9 2.8Claims Written off 1.3 1.3 1.0

Covered with Rehabilitation credits 80.9 67.3 66.6of which

From BOALs linked by SMAs and other BOALs 9.0 10.8 9.1From Common Reserve Funds 39.5 34.0 39.1From Banks 21.4 18.3 14.6From SPCs and Other Users of Social resources 11.1 4.2 3.8

Still Uncovered as of December 31 of Subsequent Year 4.7 19.6 20.9

SOURCES: Statistical Appendix Tables A 2.1, A 2.2 and A 2.3

° 18 C

The share of losses financed by rehabilitation credits fell from

809% in 1979 to 6606% in l981. This is almost all accounted for by

decreases in the share of credits supplied by banks and by SPCs and other

users of social resources. Again this can be interpreted as a favorable

phenomenon. A caveat is posed by another trend, however, the increase in

the share of uncovered losses shown on AFRs which remained uncovered at the

end of the year following that in which they were incurred. It rose from

4.7% for losses incurred in 1970 to 20C9% for losses incurred in 1981. As

will be discussed below, an amendment to the rehabilitation and bankruptcy

law passed in June 1983 authorizes the SDK to initiate bankruptcy

proceedings for any enterprise still showing an uncovered loss as of

December 31 of the year following its incurral.

Table 5 shows total losses recorded in AFRs for 1981 at the time

they were prepered, investments during l19l in BOALs showing losses, and

the total amount of rehabilitation credits outstanding and disbursed for

twelve four-digit industrial subsectors which had losses exceeding Din 800

million (US$23 million) in 1981 as showni in Table A 103 of the Statistical

Appendixo These 12 industrial subsectors were responsible for 68% of all

losses shown on the 1981 AFRso The average loss in these subsectors was

4.4% of subsectoral GNP, compared with 1o6% for all economic activities

(sectors 0l=il). Subsectors whose losses were more than 6% of subsectoral

GMP were iron and steel (6.7%), non-ferrouo metals (2MM%), manufacture of

chemicals (15.6%), food processing (6.2%) and railways (702%)o Note that

electric energy (106%) was at the average for all economic activities in

1981.

Table 5: TOTAL LOSSES AND INVESTMENTS, 1981, AND REHABILITATION CREDITS OUTSTANDING AND DISBURSED AS OF 30 SEPTEMBER 1982,SELECTED INDUSTRIAL SUBSECTORS a/

(Million Dinars and Precentage of Gross Material Product)

1981 In- RehabilitationLoss vestment Credits Out-

Activity at Time Col 1/ in Loss- standing andCode 1981 AFR GMP Col 2 Making Col 7 Disbursed as of Col 6Number Industrial Subsector Prepared 1981 (%) BOALs Col 2 30 Sept 1982 Col 2

1 2 3 4 5 6 7

0101 Electric Energy 900 55,369 1.6 2,733 4.9 1,102 2.0

0102 Extraction of Coal 850 22,365 3.8 935 4.2 1,464 6.5

0107 Iron and Steel 1,739 25,957 6.7 811 3.1 1,795 6.9

0109 Non-Ferrous Metals 1,529 7,233 21.1 157 2.2 2,265 31.3

0113 Metal Fabrication 1,254 92,522 1.4 1,163 1.3 3,094 3.3

0115 Transport Equipment 1,265 43,968 2.9 564 1.3 2,840 6.5

0117 Electrical Machinery 1,777 57,616 3.1 1,022 1.8 2,560 4.4

0118 Manufacture of Chemicals 3,633 23,255 15.6 1,249 5.4 5,139 22.1

0121 Building Materials 1,091 26,359 4.1 1,855 7.0 4,085 15.5

0124 Paper 895 20,858 4.3 353 1.7 2,292 11.0

0130 Food Processing 3,903 63,302 6.2 3,800 6.0 8,274 13.1

0601 Railways 1,681 23,238 7.2 3,125 13.4 3,959 17.0

Subtotal 2j0,1 462,042 4.4 17,767 3.8 38,869 8.4

01-11 Total, All Economic Activities, Social Sector 30,065 1,924,863 1.6 32,871 1.7 67,738 3.5

Note a/ 4 Digit subsectors with 1981 losses over Din. 800 million.

SOURCES: Statistical Appendix Tables A 2.1, A 2.2, A 2.3, A 3.1, A 4.1, and Statistical Yearbook of Yugoslavia, 1982, Table 107.8

20

investment in fixed assets in lose-making BOALs averaged 308% of

subsectoral GMP in all industrial subsectors with losses above Din 800

million compared with 107% for all economic sectors. Subsectors with

investment in loss-makers over 5% of subsectoral GMP were manufacture of

chemicals (5.4%), building materials (7.09%), paper (7.O%), food processing

(600%) and railways (1304%).

Whether investment in loss-making BOALs represents modernization

and expansion of productive capacity that will reduce future losses, or

good money following bad cannot be determined from these data0 Investment

in 1981 at the sub-sectoral level is, however, positively and significantly

correlated with losses in that year as well as with investment in 1980ol/

While such a positive statistical association does not prove that

investment is caused by losses or by previous investment, it does suggest

that loss-makers do not tend to cut back on investment.

1/ For 41 observations at the four digit level for inductry and mining andthe two digit level for other activitiesg

181 - 564o0 + 00698 LS81 - 382.0 DUM R2 - o42 DW 1074(2.33) (SolS) (1.o43)

181 1571 + 0.859 180 + 0.040 LS81 - 182.8 DUM R2 375 DU 1q78(0.93) (7.05) (0o31) (1.02)

Where

181 - Investment in 1981 in Din N

180 3 Investment in 1980 in Din N

LS8O - Losses on 1981 AFRe at time prepared in Din M

DUN - Dummy for 4 digit sub-sector

- 21 -

The provisions of the Law on Rehabilitation and Liquidation appear

to induce loss-making BOALs to carry out additional investment, and the

rehabilitation procedures prescribed by this law suggest that such

investment may not be rigorously appraised for its economic viability. The

workers' council of the loss-making BOAL determines the causes of losses,

which may be inefficient management and/or workers, obsolete technology or

other bottlenecks in productive capacity, and/or the government's price

intervention policies. The self-criticism does not appear to work well, and

the first cause is rarely established. The second cause is frequently

accepted, and the predictable response is to invest further. In the case of

the third cause, the BOAL often chooses to diversify by investment. Since

the decision-makers' (members of the workers' council) jobs are at stake,

the option of closing the facility and cutting losses is almost never

seriously considered.

Rehabilitation credits outstanding and disbursed as of 30 September

1982 totaled 8.4% of 1981 subsectoral GMP in the 12 selected subsectors

compared with 3.5% for all economic activities. Subsectors where such

credits exceeded 10% of subsectoral GMP include non-ferrous metals (31.3%),

manufacture of chemicals (22.1%), building materials (11.0%) and railways

(17.0%). In industry and mining, 72% of uncovered losses reported in the

AFRs for 1981 were covered by rehabilitation credits as of the end of 1982

(see Statistical Appendix Table A 2.3).

Using four rather arbitrary criteria -- (1) subsectoral losses

greater than Din 800 million for 1981, 1981 (2) losses greater than 6% of

1981 subsectoral GMP, (3) 1981 investment in loss-makers greater than 5% of

- 22 -

subsectoral GMP for 1981, and (4) rehabilitation credits outstanding and

disbursed as of 30 September 1982 greater than 10% of 1981 subsectoral GHP

-- the leading loss-making absorbers of resources are given in the

following table.

Meet All Four Criteria Meet Three Criteria

Manufacture of chemicals Non-ferrous metals

Railways Food processingBuilding materials

Table 6 shows that the great majority of enterprises with

uncovered losses on their AFRs (84% for 1981) completed rehabilitation

programs in the following year. Since the Rehabilitation and Liquidation

Law of 1980 became effective the number of BOALs initiating procedures for

fixing responsibility for losses has risen sharply, reaching 38.9% in 1982

for the BOALs showing uncovered losses in 1981. Apparently this was still

not a popular activity, despite the legal obligation of workers in all

BOALs reporting uncovered losses on their AFRs to institute such procedures

within 30 days of adopting the AFRo Even less common was the initiation of

procedures to remove managers. This took place during the subsequent year

in 14% of the BOALs showing uncovered losses in their 1980 AFRs, but only

2% of the BOALs showing uncovered losses in their 1981 AFRs.

Initiation of bankruptcy procedures was a truly rare event,

affecting only 14 BOALs (1% of all BOALs showing uncovered losses in their

1981 AFRs) with 1,306 workers in 1982, the continuation of a decline from

29 BOALs and 7,279 workers in 1980 under the old bankruptcy law0

- 23 -

Table 6: REHABILITATION PROGRAMS AND BANKRUPTCY PROCEDURES INITIATED IN THE SOCIAL SECTORAS OF 31 DECEMBER, 1980-1982

1980 a/ 1981 1982

Number of BOALs with

Uncovered Loss on AFR for Previous Year 1,383 1,303 1,277

Rehabilitation in Process 62 178 190

Rehabilitation Completed 1,286 1,105 1,073

Bankruptcy Procedure Initiated 29 20 14

Procedure for Fixing Responsibility Initiated 203 447 497

Procedure for Removal of Managers Initiated na 184 27

Workers in BOALs with

Uncovered Loss on AFR for Previous Year 279,858 277,195 261,634

Rehabilitation in Process 15,678 51,119 43,440

Rehabilitation Completed 259,573 224,132 216,888

Bankruptcy Procedure Initiated 7,279 1,994 1,306

Note

a/ Number of BOALs and Workers in BOALs showing losses in AFR not equal to sums for rehabilitations in process,rehabilitations completed, and bankruptcy procedures initiated in original source, Table A 2.1.(b)

SOURCES: Statistical Appendix Tables A 2.1, A 2.2, and A 2.3

- 24 -

Banks do not generally provide financial support for a

rehabilitation program if the enterprise in question has not made a

significant contribution from its own resources. The extent to which banks

take an active part in the elaboration, execution and monitoring of

rehabilitation programs varies considerably. In some cases tney make their

own analysis of the causes of losses and insist on strong conditionality,

including reductions in personal incomes, in return for rescheduling debts,

granting rehabilitation credits, or financing new investments as part of a

rehabilitation program. They may insist on use of external consultants by

the loss-making enterprise to help in the diagnosis of econom.!c ills and

the prescription of appropriate remedies. They may participate in frequent

meetings of the rehabilitation administrators to monitor the execution of

the rehabilitation program.

But banks may also be subject to considerable pressure from the

enterprise in difficulties, particularly if it is large and a founding

member of the bank in question0 Bank officials admit that there are cases

when this pressure is strong enough that the bank feels it has little

choice in responding to a rehabilitation program proposed by such a

loss-maker, and consequently takes a fairly passive role in meeting its

demands with few questions asked0 Frequently pressure to accommodate also

comes from SPCs on whose territory the loss-maker is based0 Banks

generally administer common reserve furds at the level of SPCs, and are

expected to provide a recommendation as to their use to the governing

boards of these funds which approve the granting of rehabilitation credits0

- 25 -

The consolidated balance sheet for the common reserve funds of

all Yugoslav sociopolitical communities for 1980 and 1981 may be found in

the Statistical Appendix, Table A 5.1. As of 31 December 1981, total

assets were Din 59.4 billion, equivalent to 2.7% of Yugoslavia's GMP in

that year. Of this total, 79% consisted in credits for the coverage of

losses. The largest source of funds was pooled reserves of BOALs, which

accounted for 58% of total liabilities of the consolidated common reserve

funds. An additional 28% of the liabilities were made up of credits

received.

Interest rates on rehabilitation credits from banks were

reportedly in the 5-7% range in 1982, but in 1983 are on the order of

14%-18%. The interest rate on rehabilitation credits from common reserve

funds is reportedly only 4% for periods up to 10 years, the period being

based on the economic possibilities of the loss-making enterprise.

Investment credits for modernization or expansion under

rehabilitation programs generally carry more favorable conditions than

normal investment credits and BOALs under rehabilitation may receive up to

100% bank financing for such investments, i.e. they are exempt from the

normal requirements for financing a percentage of the investment from

retained earnings. Highly negative real rates of interest and 100% bank

financing may constitute powerful incentives to incur losses.

It is difficult to determine to what extent loss-making

enterprises have actually reduced personal incomes as part of

rehabilitation programs, though in principle the SDK could determine this

26 -

from the data which it possesses. Table A 202(c) in the Statis';ical

Appendix provides some data on the way personal incomes in BOALs showing

uncovered losses on their 1980 AFRs determined personal incomes, but not on

their absolute levels. This information is summarized in the following

table, which gives the percentage of the total of 1303 loss-making BOALs

using different methods.

Manner of Determining Advances on Percent ofPersonal Incomes T.otal

As per SMA on Association 58As per SMA on Rehabilitation 2Minimum guaranteed personal incomes 5Average of 9 months in 1980 13Above the average of 9 months in 1980 15Unpaid 7

Note that only a total of 7% of the BOALs were paying out the

guaranteed (minimum) personal incomes or amounts specified in an SMA on

rehabilitation0 The mission heard reports that there is no significant

difference in personal incomes paid by loss-making enterprises as opposed

to those operating profitably, but was not able to verify this0 it was

observed, however, that reducing personal incomes may result in the loss of

an enterprise's better workers, and that maintaining incomes at the nominal

level of the previous year may be too drastic a measure to enforce when

inflation is running at 20 to 30% a year0

Developments through June 1983

The Anti-Inflation Program prepared by the Stabilization

Commission in 1982 argued that business losses of enterprises have in

practice been socialized to an excessively high degree with the result that

- 27 -

their workers are not sufficiently interested in, and are in fact

noticeably indifferent to, business losses.l/ This document calls for

applying stricter measures which would accelerate the process of

rationalizing work in loss-making enterprises so as to cover and eliminate

the losses and further encourage them to avoid operating at a loss in the

future. Among the measures called for applying to enterprises showing

losses on their AFRs are:

(a) mandatory reduction in personal incomes by a given

percentage;

(b) exemption from income taxes and other contributions payable

out of income and from obligations to contribute to the

funds for accelerated development of less developed regions;

(c) reduction in depreciation charges on the condition that

they be offset by increases in later years;

(d) provisions that rehabilitation programs should envisage

eliminating surplus labor by introducing additional shifts,

increasing capital utilization or expanding the production

program, and if these measures are not possible by reducing

the number of workers employed;

(e) mandatory elections for a new workers' council and

management body at the end of each year during which an

enterprise operates as a loss;

1/ The Stabilization Commission is a semi-official body composed ofwell-known economists and policy-makers.

28

(f) greater emphasis on solidarity and mutual responsibility of

other BOALs in the same work organization or composite

organization or self-managed community of interest in accord

with the SMA on association;

(g) mandatory sharing by banks in the risks of credits extended

to loss-making enterprises through cancelling interest on

regular credits to such enterprises and rescheduling

investment credits;

(h) reducing or eliminating fiscal and other contributory

obligations of loss-making enterprises to SPCs and

self-managing communities of interest;

(i) special compensation for "programmed losses' of enterprises

which must operate at a loss because of price controls

imposed on them;

(j) elimination of common reserve funds at the regional level and

their transformation into institutions through which payments

will be provided for decreased personal incomes of workers;

and

(k) faster liquidation of enterprises in the event that

rehabilitation programs fail, with due attention being paid

to reemployment of their workers, but only where economically

justified -- unemployed workers would get social benefits.l/

1/ Anti Inflation Program, as published in Borba in 1982, exact date notavailable.

- 29 -

As of April 1983, it was already possible for loss-makers to

reschedule depreciation payments as proposed by the Stabilization

Commission. At that time, a number of amendments to the 1980

Rehabilitation and Liquidation Law were under discussion. Briefly, these

were meant to further strengthen the role of banks and other organizations

that participate in financing the rehabilitation program in the design and

monitoring of rehabilitation procedures and to provide for the possibility

of replacing and recalling managers of loss-making enterprises. The power

of rehabilitation administrators was to be strengthened to enable them to

influence the production and planning decisions of the loss-making

enterprise. Loss-making BOALs were to be required to identify the causes

of losses and to assign responsibility to individual workers, managers, or

management bodies. The competent agency of the SPC and the SDK were to be

informed by the BOAL of these actions. Were the BOAL to fail to determine

the causes of its losses, the draft amendments provided for the

intervention of bodies of the SPC as provided for in Article 622 of the

Associated Labor Act.l/ The SDK which has the power to block payments

1/ Art. 622 of the Associated Labor Act allows the SPC to take thefollowing measures of social protection against an organization ofassociated labor (OAL):(a) Change the business-managing organ;(b) Relieve of duty individual workers vested with special authority

and responsibilities;(c) Dissolve the workers' council;(d) Dissolve the executive organ;(e) Temporarily restrict the exercise of specified self-management

rights of workers;(f) Appoint a temporary organ in the OAL;(g) Order other statutorily-prescribed temporary measures.Measures under (e) and (f) may not last longer than specified by law,and in no case for more than one year.

- 30 -

of personal incomes in excess of the levels established in the

rehabilitation program, was to be authorized to institute bankruptcy

proceedings in court if the BOAL failed to cover its losses within a

specified period.

The final amendments to the Rehabilitation and Liquidation Law were

passed by the Federal Assembly in June 1983. These amendments do not differ

significantly from the draft amendments.l/ Essentially the final amendments

suggest a further strengthening of the role of the SDK (unlike 'in the draft

amendments, the SDK can now initiate bankruptcy proceedings in court for

BOALs in railway, postal, telephone, telegraph, electric power and coal

industries) and provides for the imposition of penalties on BOALs and

lending banks for not fulfilling obligations listed in the Law.

An additional measure under consideration in April 1983 would

decrease the probability of enterprises operating at a loss was a draft law

on the provision of working capital to BOALs. This law would prohibit

investment in fixed assets by BOALs with insufficient working capital.

Likewise, such BOALs would not be permitted to receive investment credits

from banks unless at the same time the bank or other social sector

organization provides credit for the difference between the available

working capital from long-term sources prescribed by statute and for tne

working capital needed for the new investment.

1/ A comparison of the final and draft amendments is contained in Annex 2of the present papero

- 31 -

As of December 31 of each year all BOALs would have to calculate

their need for working capital, and so inform the SDK and the bank

providing investment credits. On the basis of this calculation the SDK

would be required to inform the bank in which said BOAL has its deposit

accounts and the assembly of the commune in which the BOAL is located of

the fact that the BOAL had not secured long-term sources of working capital

in the required amounts. The draft law provided that tne Federal Executive

Council shall prescribe the manner of calculating the working capital

requirements to be met from the organization's own resources and other

long-term sources of funding, as well as the deadlines for submitting tnis

calculation. Fines would be imposed on enterprises, including banks, who

violate the principal provisions of the law.l/

Interenterprise Credit

The Problem

The control of domestic credit and enterprise incomes depends

crucially on the disciplined behavior of the enterprise sector. The stock

of outstanding credit registered with the SDK that has accumulated outside

the banking system has reached very high levels and reportedly there has

been a significant increase in the value of claims which are not paid on

1/ The Law on Securing Working Capital was adopted in the Federal Executive

Council on May 14, 1984. This law is similar to draft law discussednere.

- 32 -

time, Detailed data on the status of claims against purchaserc for goods

and services sold as of 31 December 19799 1980 and 1981 by inductrial

subsector and territory is provided in TaDles A 60 1-A 6.3 in tLbe

Statistical Appendix. A preliminary analysis of tnis data is g.ven below

after a review of the legal framework governing interenterprise Payments.

The rise in registered interenterprise claims was three times the rate of

inflation in 1981 and continued to increase faster than inflation in 1982

and 1983. These claims represent a significant source of credi4. allowing

enterprises to pursue more expansive wage and investment policies and/or to

operate more profitably than would have been the case in its absence. This

source of credit constitutes an addiLicnal softening of the budget

constraint facing Yugoslav firrms at a time when attempts are being made to

increase financial discipline.

The Legal Framwork as of April 1983

The legal framework governing interenterprise credit is the Law on

Securing Payments Among Users of Social Resources of December 1975 as

amended in April 1976 and April 19780l/

This law specifies that payment between users of social resources

may be secured in four waysg

1/ The Law was amended again in June 19830 See Annex 3.

- 33 -

(a) a check for immediate payment;

(b) an endorsed promissory note for payment within a period which

may not exceed 90 days from the date good are delivered or

services rendered;

(c) an irrevocable letter of credit if payment is effected on the

basis of documentation established in the contract concluded

between the debtor and the creditor; and

(d) a guarantee if payment is effected within a period which may

not exceed 30 days from the date goods are delivered or

services rendered, except in cases 1-3 above.

Guarantees are issued by enterprises, including banks, in their own name and

on their own account, except that banks may issues a guarantee for

investments in their own name, but upon authorization of one or more users

of social resources who then become liable if the guarantor cannot execute

the guarantee. Banks may also obtain "superguarantees" from other banks to

back up their own guarantees.

A guarantee or letter of credit must be provided to the seller on

or before the date goods are delivered or services rendered (this is called

the date of initiation of debtor-creditor relations in the law), and a check

or promissory note within 10 days of that date.

Letters of credit establish a separate account in the SDK which may

be drawn by the creditor upon presentation of documentation specified in the

letter. They are the safest form of payment from the creditor's point of

34

view, since the SDK transfers existing funds from the issuing enterprise0 s

giro account to a special account created for the purpose specified in the

letter. SDK will not open such an account if the funds are not available,

Letters of Credit therefore involve no net increase in the means of payment

and cannot be the object of collection on the basis of other obligations of

the debtor. Such special accounts can also be set up to secure payment by

check, but they are not obligatory. Promissory notes may be for up to 90

days and must be countersigned (in effect guaranteed) by ancther enterprise,

which can be a bank. As will be seen below, this involves tne creation of

new means of payment and therefore has implications for monetary policy.

Promissory notes, which are drawn on the debtor's SDK office, may

be endorsed by the creditor and used as a means of payment, or they may be

discounted at a bank or other social sector organization (user of social

resources) as provided by that organizatiorn's statutes0 The SDK pays the

holder of the promissory note on the maturity date, drawing on the issuer's

giro account. If the issuer's funds are insufficient to cover statutory

minimum personal income payments, then the SDK will issue an order to take

the required funds from the account of the countersigner, cherging the

account of the original issuer and registering it as an outstanding

obligation. If the countersigner's funds are insufficient, the SDK submits

the promissory note to a court, informing the creditor, who may then take

legal recourse.

- 35 -

The issue of a promissory note, then, creates a form of money

which, while backed by real goods and services, may circulate among

enterprises and be discounted and rediscounted (that is transformed into a

more broadly useable form of money, namely deposits in accounts at branches

of the SDK).

SDK statistics on the status of claims against purchasers for goods

and services sold show a category "claims for which payment date was

agreed." This category represents goods delivered and services rendered for

which no payment instrument has yet been transferred from the debtor to tne

creditor and no guarantee or letter of credit issued -- a status which in

April 1983 was legal for up to 10 days after the initiation of

debtor-creditor relations but illegal thereafter.

Recent Experience

Table 7 shows the aggregate value of outstanding claims at tne end

of the years 1979-83. A number of interesting facts emerge from a perusal

of this table. First is the predominance of promissory notes, which,

however, make up declining proportion of total interenterprise claims

outstanding over this five year period falling from 52.7X of the total

end-1979 to 43.3% at end-1983. Second is the rise in the percentage of

total claims accounted for by "claims for which payment date was agreed" in

1982 and 1983. The third is a clear increase in the percentage of claims

for which letters of credit and guarantees were received.

Table 7: STATUS OF CLAIMS AGAINST PURCHASERS FOR GOODS AND SERVICES SOLD, ALL ECONOM1IC ACTIVITIES

31 DECEMBER 1979-1983(Billion Dinars, Percentages of Total and Percentage of GMfP)

Date 31 December 31 December 31 December 31 December 31 DecemberType of Claim 1979 1980 1981 1982 1983

Claims for which Letters of Credit

and Guarantees were Received 114.1 166.9 246.4 344.8 611.5

(% of total) (30.4) (31.7) (33.9) (33.8) (37.2)

Claims for w'hich Payment Date

was Agreed 61,6 86.0 112.8 173.8 314.9

(S of total) (1604) (16.3) (15.5) (17.1) (19.2)

Uncashed Checks 19 1,5 3.1 3.1 5.4

(% of total) (0.5) (0.3) (0.4) (0.3) (0.3)

Prcnissory N1otes 197.6 272.0 364.3 497.4 710,7

(N of total) (5207) (51.7) (50.1) (48.8) (43.3)

Total Claims 375,1 526.5 726,6 1,019,2 1,642,5

(Z of GMP) (33.3) (35.0) (32.9) (35.1) a/ (40.7) a!

Notez

a/ Estimate based on preliminary estimate of CG,P

SOURCEz Statistical Appendix Tables A 6.1-A 6.3, Statistical Yearbook of Yugoslavia, 1983, Table 107.5°, SZZT, Saopstenje,

28 December 1A82, P. 4, and Yugoslav authorities,

- 37 -

Developments through June 1983

As part of the stabilization program, the Yugoslav authorities seek

to tighten controls over interenterprise credit. The principal vehicle for

accomplishing this was a set of amendments to the 1975 Law on Securing

Payments Among Users of Social Resources which were passed in June 1984.

These amendments were being discussed in draft in April 1983. Among the

important changes introduced in the draft amendments were;

(a) a requirement that seller of goods and services must provide an

invoice or bill to the seller within eight (rather than ten)

days of the time the goods are delivered or services rendered,

likewise the purchaser must provide the seller a receipt within

the same eight day period;

(b) The purchaser would be allowed 15 days rather than 10 before he

would have to provide a check or promissory note to the seller

if he had not already provided a guarantee or letter of credit;

and he would not be allowed to provide a promissory note before

taking delivery;

(c) if the debtor does not deliver an instrument of payment within

the legal deadline, the creditor would have to report to the

SDK within 10 days of the deadline (i.e. a maximum of 25 days

after the goods are delivered or services rendered);

38

(d) a debtor enterprise w-jhich did not effect payments on time would

be prohibited from paying personal incomes above the statutory

minimum for the republic or province in which it is based until

its payments position was regularized;

(e) after settlement of obligations on the basis of which he has

received a promissory notes a creditor would be allowed to

endorse it in favor of another enterprise as payment for goods

or services, repayment of a credit, downpayment required by a

contract, to discharge an obligation for pooling resources, as

a payment of interest, but not to grant credit to another

enterprise or to settle an obligation to a labor collective, or

he could discount the promissory note with a bank;

(f) the original issuer of a promissory note who acquires the note

prior to its due date could not endorse it to pay his own

obligations;

(g) discounting and rediscounting of promissory notes could be

performed only by banks, including internal banks of a work

organization;

(h) fines would be levied for illegal use of payments instruments

-- including payment by check or promissory note before

delivery of goods or performance of services or more than 15

- 39 -

days later, if the debtor BOAL pays personal incomes above the

statutory minimum before regularizing its payments situation,

illegally discounts a promissory note, if a creditor does not

report the failure of a debtor to pay on time, etc.

The amendments to the Payments Law passed in June 1983 had minor

changes from the draft amendments. The differences are spelled out in Annex

3. It was expected that they would reduce the volume of "claims for which

payment date was agreed" to Din 50 billion by the end of 1984, but that has

not occurred -- the total was DY 314.9 at end-December 1983 and nad risen

again to DY 412.6 at end-Marcn 1984.

Amendments to the SDK law were also passed during 1983 which placed

that institution in a better position in terms of organizational structure

and authority to carry out the monitoring of inter-enterprise credit.

Conclusions and Recommendations

The amendments to the Law on Rehabilitation and Liquidation of

Organizations of Associated Labor, the Law on Securing Payments among Users

of Social Resources, one the SDK law as well as the Law on Provision of

Working Assets of BOALs go a long way toward hardening the rather soft

budget constraint which has faced Yugoslav enterprises. The legislation

stepped up the economic pressure on these enterprises to increase their

efficiency and more broadly to achieve the objectives of the structural

adjustment program. It will be necessary, however, to mobilize the

40

political will to enforce the new legislation. Clearly this is a major

challenge, given the laxity with which even the existing laws have been

enforced and the frequent intervention of SPCs, both in investment decisions

and the bailing-out of loss-makers. The interlocking system of banks,

enterprises, and SPCs has ensured that bankruptcy proceedings have been

instituted only exceptionally. To break out of this self-serving system of

rehabilitation proceedings, it is necessary that they be conducted by

independent bodies.

The SDK is the obvious candidate to perform this function. An

amendment to the Rehabilitation and Liquidation Law could provide the

necessary legal framework by requiring that the SDK or extsrnal consultants

licensed by the SDK participate actively in determine the caused of losses,

fixing responsibility for them, and developing rehabilitation programs,

including appraisal of any proposed investments for modernizing or expanding

productive capacity, which would have some minimum (positive in real terms)

economic rate of return to qualify for bank financing0 The SDK would have

to provide a written appraisal of rehabilitation programs which would have

to be attached before they could be sent to potential rehabiiitation

administrators.

If the SDK were to perform these functions it would have to be

strengthened, and this might require technical assistance, new hiring and/or

staff training0 There are a number of consultant groups, such as the

Institute for Industrial Economics in Belgrade, which have some exnerience

- 41 -

in this field and are interested in expanding their assistance to

enterprises in economic difficulty. Banks might also develop specialized

units for this purpose.

Banks could also increase the technical assistance component of

their loans and the stringency of conditionality for rehabilitation

programs. Even the founding member enterprises may look more critically at

new loans by their banks if there are less resources available from common

reserve funds and SPCs to help cover the losses. But the current ownership

structure for banks does tend to make them less selective in their lending

to member enterprises than would be the case for more independent banks.

The SDK has over 600 offices and an elaborate computer network, and

taus has the potential to collect, analyze, and act upon detailed BOAL-level

data and to aggregate this data as required for supervision at all levels of

tne federal system. It is not clear that this ability is fully utilized, or

that the capacity yet exists at the federal level to directly access and

aggregate data from the BOAL level on up simply by calling it up from a

central computer console. Yet in principle this could be done. As a

starter it would be helpful to collect and analyze quarterly data of ttne

kind contained in Tables A 2.1-A 2.3 of the Statistical Appendix,

disaggregated by four digit industrial subsectors for each republic and

autonomous province as well as for Yugoslavia. In order to monitor whether

personal incomes are actually being reduced in loss-making enterprises, data

on average monthly advances on personal incomes in enterprises showing

losses on their latest AFRs could be compared with that for all enterprises,

- 42

again by four digit industrial subsector and for each republic znd

autonomous province as well as for Yugoslavia. Use of BOAL level data and

multivariate analysis could help determine more precisely the

characteristics of loss-makers. Among the independent variables which might

'gexplain" loss-making are size of assets, number of workers, capital/labor

ratios, incremental capital-output ratios (ICORs), location (developed or

less-developed regions) 9 and the presence of price controls on output0 It

would also be useful to see whether loss-making BOALs make great..er use of

promissory notes than do financially healthy enterprises.

There is a critical relationship between progress in eliminating

price distortions and enforcing greater financial discipline by phasing out

or greatly reducing the common reserve funds and other sources of covering

losses which are far removed from the enterprises. So long as controls hold

prices below economic levels, it will be necessary to provide some form of

subsidy to the programmed loss-makers. Eliminating price controls or at

least greatly reducing the number of products subject to them, as was

planned as of June 19839 is in most cases a necessary condition for ending

programmed losses. Another important tway to increase financial discipline

and promote efficient structural adjustment is to phase out interest rate

subsidies, including those for rehabilitation credits0 Enterprises should

face realistic prices for capital0

Finally, the whole question of interenterprise credit needs more

study0 Before any further measures are recommended in this arez it wjill be

necessary to look at quarterly or monthly data and better underotand the

- 43 -

seasonal patterns and the mechanisms involved in the different modes of

payment. It will also be useful to see the impact of the new legislation

which should be on the books during the second half of 1983, and to

understand to what extent, if any, claims not registered with the SDK have

accumulated.

- 44 -

POSTCRIPT

The amendments to the Law on Rehabilitation and L.qu :.cc of

OALs, to the Law on Securing Payments Between Users of Social Resources,

and to the SDK Law passed during 1983 strengthened the legal and

institutional framework for tightening financing discipline in Yuzgoslav

firms. In April 1984 two new federal laws were passed which provide

additional instruments for enforcing financing discipline.

The first new law limits payments out of Joint Reserve Funds

(there are over 500 such funds in Yugoslavia) so that cumulative quarterly

payments in 1983 can only exceed the level (during the same periods) in

1983 by 50% of the increase in the retail price index (lagged one

quarter). The second limits personal income payments by loss-making and

illiquid BOALs whether they were in profit- or loss-making work

organizations. The percentage increase in personal income payments by

loss-making enterprises is now limited to 50% of the growth in total

personal incomes per employee in the social sector of the relevant republic

or province, beginning March 1, 1984. A limited number of exceptions to

this provision are provided for, including electricity generation, coal

production, ferrous metals, fertilizer, and some foodstuffs production0 In

illiquid enterprises the same provisions becam¢ e£fective July 1D 1984D

with the same exceptions. The SDK is to monitor the provisions of the

law0 When an enterprise wishes to make payments of personal incomes it has

to sign a declaration that it does not have unpaid obligationso The SDK is

to check all personal income payments against a list of enterprices with

- 45 -

payments arrears. A creditor enterprise must report twice a month to its

regional SDK the names of enterprises with unpaid obligations to it. The

SDK then must send copies of the report to the regional SDKs where these

debtor enterprises are situated, thus establishing the list of illiquid

enterprises.

Even stricter limitations on personal income payments by illiquid

enterprises were contained in the amendments of the Law on Securing

Payments Between Users of Social Resources passed in June 1983, but as of

April 1984 these provisions were expected to come into force only on

January 1, 1985. They would limit personal income payments by illiquid

enterprises to the nominal level paid in the previous year.

ANNEX 1

LEGAL FRAMEWORK GOVERNING

REHABILITATION AND BANKRUPTCY

OF LOSS-MAKING ENTERPRISES AS OF APRIL 1983

- 47 -

ANNEX 1Page 1 of 13

Rehabilitation and Bankruptcy of Loss-Making Enterprises

Legal Framework as of April 1983

The Law on Rehabilitation and Liquidation of Organizations of

Associated Labor of July 1980 provides the basic legal framework for

enterprise rehabilitation and bankruptcy. This law became effective on

December 31, 1980 and had been amended twice as of April 1983. The

following description of its provisions covers the law as amended through

April 1983. Annex 2 compares the Amendments enacted in June 1983 with

those available in draft in April 1983.

Rehabilitation. Three types of rehabilitation procedures of

progressively greater severity are provided for in this law, according to

the seriousness of an enterprise's financial situation. The proceedings

involved are explained in the following paragraphs.l/

1/ For more detail a translation of this law and its amendments is

available in the Yugoslavia division.

48

ANiEX 1Page 2 of 13

Technically the first two types of rehabilitation are called

"pre-rehabilitation" procedures. They cover (a) enterprises which9, while

not having shown a loss on a periodic (usually for a quarter other than for

January-March) financial report, are considered to have `busTness

difficulties" as defined by Art. 152 of the Associated Laboc Act 2/ and (b)

enterprises with losses on periodic financial reports but not yet having

shown a loss on an annual financial report.

In case (a) workers in the enterprise are required to adopt a

program of measures for removing the causes of business difficulties within

45 days of the time limit for submitting the quarterly financial report

(normally one month after the end of the quarter); inform of its

difficulties other BOALs with which it is linked by SMAsD the responsible

body of the SPC on whose territory it is based and self-managing communities

of interest toward which it has obligations to be met out of: its income; and

submit to them its program of measures0 The enterprise may request economic

and other assistance from all these sources, which are required to rev..ew

the program of measures and consider what assistance they w..ll render0 If

workers in a BOAL do not draw up a pre-rehabilitation program, or fail to

implement it, the management body of the BOAL or composite o.rganization of

associated labor within which it operates and the responsible body of the

2/ Art0 152 of the Associated Labor Act defines such enterprises as these

not able to secure resources for personal incomes as determined by SMAs,or to secure investment resources as provided for by a SNA, or to ensurethe continuity of production.

- 49 -

ANNEX 1Page 3 of 13

SPC have the right and the duty to propose to the workers in the BOAL in

difficulty to adopt or implement such a program. If they do not do so

within 30 days of receiving such a proposal, the competent body of the SPC

must propose to the assembly of the SPC that it prescribe measures to

protect the social property entrusted to the BOAL.

In case (b) the workers of the BOAL must establish not only a

program of measures to remove the causes of the loss, but also determine the

causes of the loss and the responsibility, if any, of workers, management

bodies, and executive bodies for the loss incurred -- all within 45 days of

the date on which the periodic financial report must be submitted. The BOAL

must submit its program to remove the causes of the loss to the Social

Accounting Service (SDK) as well as to the same organizations as in case

(a). Otherwise the provisions are approximately the same as for case (a).

More formal rehabilitation procedures, for which statistics are

regularly reported by the SDK, apply to enterprises showing losses on their

annual financial reports, which are due by the end of February of the

following year.

Workers in a BOAL which declares a loss in its annual financial

report (AFR) are obliged, when adopting the report, to take a decision on

initiating rehabilitation proceedings which must specify:

- 50

ANNEX,a 1Page 4 of 13

(a) the procedure and deadlines for establishing the causes of the

loss incurred;

(b) the deadlines for determining the responsibility, if any, of

individual workers, management bodies, and the eaecutive body

for the loss;

(c) the procedure and deadlines for adopting a rehabilitation

program; and

(d) other measures relevant to the rehabilitation procedure.

Within eight days of the adoption of the decision the BOAL must inform all

the organizations, including the SDK, required in the case of

pre-rehabilitation procedures, and also the court of registration0 If the

workers of the BOAL do not take the decisions required, the executive body

of the BOAL must notify the management bodies of the BOAL and other work

organizations within which it operates or with which it is associated, as

well as the appropriate agency of the SPC on whose territory it is based, of

the loss incurred and its size.

No later than July 1 of the year following that in which the loss

was incurred the BOAL must adopt a rehabilitation program which containsa

(a) the amount of the total loss and the amount of the loss not

covered by the reserve funds of the BOAL, the reserve funds or

net income of associated BOALs linked by a SMA cn the pooling

- 51 -

ANNEX 1Page 5 of 13

of labor and resources, or other non-reimbursable sources --

all deposited to its giro account before the deadline for

handing in the AFR;

(b) the established causes of the loss, and the measures to be

taken for their removal;

(c) the method and deadlines for ensuring funds to cover the loss

and the terms under which those funds shall be obtained; and

(d) the duration of the rehabilitation program.

If the loss is due to obsolete technology, inadequate productive capacity,

shortage of working capital, or uneconomic business operations, the program

must also contain:

(a) a plan for the modernization, reconstruction and expansion of

facilities, the method of obtaining funds for that purpose and

the terms under which these funds will be obtained;

(b) the amount of working capital required, the method of obtaining

it and the terms under which it will be obtained; and

(c) measures to ensure rational economic business operations.

52

ANNEX 1Page 6 of 13

If the BOAL establishes a loss in the AFR which does not exceed the

planned amount of the loss in the adopted rehabilitation program providing

for a rehabilitation process of more than one year's duration, it is not

obliged to draw up a new rehabilitation program.

The BOAL must forward a copy of the rehabilitation program together

with a request for covering the loss not later than July 9 of the year

following that in which the loss was incurred to the followingz

(a) the BOALs with which it has signed a SMA on association to form

a work organization or composite organization;

(b) the BOALs with which it has signed a SMA on association of

labor and resources providing for joint liability and

risk-sharing as well as the covering of losses;

(c) the BOALs within the framework of the same work organization or

other BOALs with which it has generated more than half of its

total revenue declared in the AFR in which the uncovered loss

is shown;

(d) the joint reserve fund for territory of the SPC in which it has

pooled its reserve funds;

(e) the competent body of the SPC; and

(f) the competent branch of the SDKo

- 53 -

ANNEX 1Page 7 of 13

The BOALs with which the BOAL incurring a loss have concluded a SMA

on the association of labor and resources providing for joint liability

risk-sharing and covering of losses or with which it has pooled its reserve

funds for covering losses shall, within a period of 30 days following

receipt of the rehabilitation program (that is by approximately August 8 of

the year following that in which the loss was incurred), take a decision on

covering the loss and cover the loss. In the rehaoilitation proceedings

funds shall be obtained at least up to the level of the uncovered loss.

If the BOAL does not adopt and submit a copy of the rehabilitation

program, the competent body of the SPC, together with the workers' council

or other management bodies of the BOAL, must propose a rehabilitation

program to the workers. If the workers in the BOAL do not adopt a

rehabilitation program, the assembly of the SPC may intervene to protect tne

social property entrusted to the BOAL. The competent body of tne SPC must

monitor the execution of the rehabilitation program.

In the rehabilitation proceedings funds must be obtained at least

up to the level of the uncovered loss and of three major types:

(a) non-reimbursable resources;

(b) writeoffs of creditors' claims with the proviso that the loss

in the AFR for the next year cannot be covered by writing off

rehabilitation credits granted to cover the losses in AFRs for

previous years;

- 54

A N NX 1Page jof 13

(c) rehabilitation credits (which may be granted by joint reserve

funds, banks and other users of social resources) for wihich the

repayment terms may not be shorter than the duration of the

rehabilitation programo

All actions taken in the course of rehabilitation proceedings must

be recorded in a special register kept by the competent SDK office. All

organizations providing funds to finance the rehabilitation program become

rehabilitation administrators. The rights and duties of rehabilitation

administrators and of the BOAL under rehabilitation must be specified in a

SMA on mutual relations under rehabilitation. If the loss-making BOAL does

not cover the loss and fails to find a rehabilitation adminiscrator within

the time limits established that is by approximately August 8 of the year

following that in which the loss was incurred, it must submit to the general

association with which it is associated, without delay, a proposal for

initiating rehabilitating with a view to finding the rehabilitation

administrator and shall inform the competent SDJK office of the same.

Immediately on receipt of this proposal, the general associati;on shall

invite all interested BOALs to initiate the rehabilitation asd shall inform

the Chamber of Economy of Yugoslaiva that the proposal to initiate the

rehabilitation has been accepted0 Tne potential rehabilitation

administrators must decide whether to take charge of the rehabilitation

within 30 days of receiving the proposal, and if the decision is positive,

- 55 -

ANNEX 1Page 9 of 13

must conclude a SMA rehabilitation within 40 days of the date on which a

proposal for administering rehabilitation is submitted by the loss-making

BOAL to the general association with which it is associated, that is by

approximately September 17 of the year following that in which the loss was

incurred. This SMA may envisage that the administrators participate in the

BOAL's decision making on the execution of the rehabilitation program.

The payment of advances on personal incomes in loss-making

enterprises from the deadline for filing the AFR until the adoption of a

decision to institute bankruptcy proceedings is currently governed by

republican and provincial laws.l/ The rehabilitation administrators and the

workers in the BOAL under rehabilitation must lay down, in the SMA on mutual

relations under rehabilitation, the basis and criteria for determining the

level of personal incomes for the duration of the rehabilitation program as

well as the method of coordinating positions and joint decision-making in

cases where the workers of the BOAL under rehabilitation do not act in

conformity with the obligations they assumed by that SMA.

1/ This provision was the result of an amendment to the 1980 law. Themission did not obtain copies of the relevant republican and provinciallaws, but these reportedly mandate reducing personal income advances tothe guaranteed minimum (usually 70% of the republican or provincialaverage for the previous year).

56

ANi#EX 1Page 10 of 13

Within 30 days of the adoption of the AFR in unich an uncovered

loss is declared, the workers of the BOAL must initiate the prccedure for

establishing the responsibility for the loss of individual workters,

management bodies and the executive body. If the workers of the BOAL

establish the responsibility of any of these parties, steps must be taken to

appoint them to other posts and assignments, to recall them, replace them or

take other appropriate action0 The BOAL must inform the competent bodies of

the SPC and the SDK of the established causes of the loss incurred, the

responsibility of individual workers, management bodies or the executive

body and the actions taken to replace, recall or otherwise pun..sh them.

If no rehabilitation administrators are forthcoming within 30 days

after the general association receives a proposal to administer

rehabilitation (that is by approximately September 7 of tne year following

that in which the loss was incurred), consultations on a reduction of claims

must be initiated0 The proposal for starting such consultations must

contain-

(a) the amount of the loss to be covered through a Si4.A on reduction

of claims as well as the percentage offered credi.tors as

payment for their claims including proposed deadlines and

methods of payment of these claims;

(b) the amount of the uncovered loss upon the completion of the

rehabilitation proceedings;

- 57 -

ANNEX 1Page 11 of 13

(c) a list of all creditors with the amount of outstanding claims;

(d) a list of all debtors indicating the size of the debt;

(e) an indication of the amount to which the claims should be

reduced; and

(f) the total value of capital assets of the BOAL.

This proposal must be submitted to all creditors and tne competent body of

tne SPC of the territory on which the BOAL is based, inviting them to a

meeting on the reduction of claims by SMA.

The SMA on claims reduction may envisage the right of creditors

signing that agreement to participate in decision-making on the debtor's

legal affairs and may establish the level of workers' personal incomes in

the debtor BOAL for a period up to the execution of obligations assumed

under that SMA. A SMA on claims reduction is considered to have been

concluded if the creditors agree to reduce their claims to the level

required for covering the loss. Copies of the signed agreement must be

forwarded to the competent bodies of the SPC and to the SDK. If an

agreement is not reached within 30 days of initiating the consultations

(that is approximately by October 7 of the year following that in which the

loss was incurred), the BOAL must notify the competent body of the SPC and

the SDK. If the competent body of the SPC does not take steps under Art.

160 of the Associated Labor Law (governing BOALs encountering exceptional

-58 -

ANNEX 1Page 12 of 13

economic difficulties) to cover the losses, for example by exempting the

BOAL from taxes and contributions or reducing the sems, it shall initiate

bankruptcy proceedings.

Bankruptcy. Bankruptcy proceedings are executed by the competent

court on the territory where the debtor BOAL is based. Bodies involved in

such proceedings are a bankruptcy council (composed of three judges), the

bankruptcy judge, the administrator of enforced settlement or the bankruptcy

administrator, and a creditors' committee which can be formed at the request

of creditors whose claims exceed 50% of the total claims of all creditors0

Two outcomes of bankruptcy proceedings are possible0 The first is

an enforced settlement, which is an agreement between a debtor and at least

one half of the total number of creditors whose claims amount to more than

half of the total claims, if such a settlement is approved by the bankruptcy

council0 This normally involves a reduction in claims, is legally

enforceable, and does not result in the total liquidation of the BOALO The

second is bankruptcy proper, which resultc in termination of the employment

of the debtor BOAL's workers on the day the final bankruptcy proceedings are

initiated, unless otherwise determined by the bankruptcy council, in wfhich

case their incomes are determined by the bankruptcy council at the proposal

of the bankruptcy administrator0

- 59 -

ANNEX 1Page 13 of 13

Bankruptcy also results in the total liquidation of the BOAL,

the distribution of its assets to the various creditors, and its

elimination from the register of enterprises. If any assets are left over

after the regular liquidation proceedings, they are to be turned over to

the basic organizations associated within the same work organization as the

debtor, proportionately to the rights and obligations fixed under the SMA

on association.

ANNEX 2

COMPARISON OF JUNE 1983

AMENDMENTS TO THE LAW ON REHABILITATION AND LIQUIDATION

OF ORGANS OF ASSOCIATED LABOR

WITH DRAFT AKENDMENTS

- 61 -

ANNEX 2Page 1 of 4

Law on the Rehabilitation and Liquidation of OALs (1980)

Comparison of Final Amendments and Draft Amendments

Final Amendments (1983) Draft Amendments (1983)

Art. 18 Requires that the loss making BOAL

inform not just BOALs within its WO or COAL --

with which it has a SMA but other BOALs aswell.

Art. 19 In addition to the possible exemptions Lists the possibilities offrom obligations of loss making enterprises exempting loss making BOALslisted in the draft amendments, obligations from obligations from taxesarising from the pooling of resources based on and other contributions.SMAs on the plans of Communities of Interest inmaterial production in social activities are alsoincluded.

Art. 32 Essentially as in draft amendment. It Less precise.separates the competent organ of the republicand the lending banks as two institutions tobe informed of the initiation of rehabilitation.

Art. 35 In addition to those listed in the Law,

the lending bank is also to be forwarded a copy --

of the rehabilitation program by the BOAL.

Art. 37 As in the earlier amendment if the BOAL Same except for lastcannot pay interest on credit and repay invest- additions; i.e. possibilityment credits, it can request the lending bank of deferment and waiver ofto write off or defer the payment of interest mandatory association ofor such credit; it could also request deferment resources to the funds ofof the repayment of investment credit. In the bank.addition, it can also request deferment orwaiver of the mandatory association of resourcesfor allocation to the funds of the Bank.

Unlike the earlier amendment, the lending bank No time specified.has to respond to this request and inform theBOAL within 60 days of the receipt of the request.

The conditions and manner by which write off Same as new law except forand deferment of the above obligations are absence of additionalobtained will be set forth in a SMA. obligation on allocation of

funds to tne bank.

- 62

ANNEX 2Page 2 cf 4

Final Amendments Draft Amendments

Art. 38 Possible exemptions to Art. 31-37 aremade more precise. Thus a loss makingenterprise may not request rehabilitationadministors for funds to cover losses if(i) the extent of such losses is no greater thanthe amount allocated by the BOAL in the precedingyear to the business fund for the improvement ofthe material base of labor and provided such lossesare covered from income in the following year0(ii) if the extent of such loss does not exceed 50%of the amortization in the year in which the losswas incurred and provided losses will be coveredfrom the income in the following year0

In case the BOAL is not able to cover itslosses as described above, it must take allnecessary measures to cover its entire loss incase (i) and at least 1/3 of the loss in case (ii).

Art0 50 The scope of the SMA between the loss Same as final amendment0making BOAL and the rehabilitation administratorsis widened to not only include the basis and cri--teria for determining the level of personal incomesfor the duration of the rehabilitation but also toparticipate in the preparation of productionprograms; plans to employ surplus labor byintroducing additional work shifts, improvingcapacity utilization and by transferring suchsurplus labor to other BOALs in the WC or COAL0

The SMA would also allow for setting up a Same0committee of creditors-rehabilitationadministrators who would express opinionsand make proposals to the management of tneloss making BOALO

The loss making BOAL's management This requirement didwill take these views into account and inform not exist0the Creditors Committee of their position0

Art0 52 A para of the Law which stipulatedthat steps would be taken to reassigns recallor replace those workers or managers heldresponsible by the workers for the loss, hasbeen deleted.

- 63 -

ANNEX 2Page 3 of 4

Final Amendments Draft Amendments

Art. 53 This amendment basically incorporates Same

the para deleted from Art. 52. The workersmust establish the cause of loss and individualor collective responsibility and takedisciplinary measures. It should also informthe SDK and the responsible agency of the SPCs.

Art. 53a This is an addition. It provides for Same. But in addition tothe WO of which the loss making BOAL is part informing the Assemblyto instruct the BOAL to take measures specified it would recommend thatin Art. 53 and if not done it will imnediately temporary measures ofinform the Assembly of the SPC. social protection

specified in Art. 622 ofLaw on Associated Laborbe applied to the BOAL.

Art. 64 This amendment strengthens the role of In tne draft, the SDK

the SDK. If the BOAL does not cover its loss was authorized to fileor if it fails to conclude a SMA on reduction a suit in court forof the amount of its claims by a specific period, instituting bankruptcythe SDK will inform the SPC of its recommendation proceedings and onlyto initiate bankruptcy proceedings. Tne SPC is inform the SPC of this.

bound to respond to this and after examination An exception was made forto inform the SDK of its decision within 60 BOALS on railways, postal,days. If either the SPC fails to inform the SDK telephone, telegraphs,or if it informs that it would not initiate electric power and coal

proceedings, the SDK is authorized to file an management where the SDKapplication for initiating bankruptcy proceedings was to inform the SPCs

with the appropriate court. for the purpose ofensuring that necessarysteps were taken; but itcould not file a suit incourt.

Art. 216 Specifies fine on the BOAL for notinitiating proceedings for the dismissal ofthe Director, President and members of themanagement, or for recall of delegates, or ifit fails to take disciplinary measures againstindividual workers responsible for loss.

Art. 217 Imposes fines on the BOAL if it fails

to inform SPC, SDK of the causes of the lossesand the responsibility of workers/managersas well as of disciplinary proceedingsinitiated.

- 64

agRe 4 6

Final Amendments Draft Amenem-nto

Art. 217a A fine is imposed on the lending bankand its boss, if its does not reviews within 60days, the request for triting off interest,investment credit etc. from the BOALo SeeArt. 37.

- 65 -

ANNEX 3

COMPARISON OF JUNE 1983

AMENDMENTS TO THE LAW ON SECURING PAYMENTS

BETWEEN USERS OF SOCIAL RESOURCES

WITH DRAFT AMENDMENTS

- 66

AkNEX 3Pnge I of 3

Law on Securing Payment Between Users of Social Resources

Comparison of Draft and Final Amendments

Draft Amendments Final Amendments

Art. 2 The draft law required the debtor (in This requirement is noaddition to the creditor already specified in longer necessary in theLaw) to prepare a document acknowledging receipt final amendments.of the goods within 8 days of the date ofdelivery.

Art. 7 The draft amendment introduced a new The final amendmentarticle 7a which ensured that a debtor who had defined the minimum morenot met all his obligations towards his clearly. It required thatcreditors could not pay his workers more then workers be paid not morethe guaranteed minimum income till these than the average personal"obligations had been met. income per worker in the

preceding year and no morethan the average personalincome in the relevantsubsector of the Republic,as obtained from SDK date0The amendment alsorequires that each debtorenterprise submit awritten statement both SDKat the time incomes aredisbursed to the effectthat the enterprise has nooutstanding obligations0

Art0 17 (i) the draft amendments listed the In addition to the banksNational Bank of Yugoslavia, the national banks listed in the draftof republics and provinces and the associated, amendments, workingbasic and internal banks as organizations that organizations andcould discount and rediscount bills of exchangeo composite organizations(ii) the draft amendment did not allow users which have specialof public funds as specified above to endorse financial service depts0the bill of exchange to settle their omn could also discount andobligations or for the granting of credit0 rediscount bills of

exchange0(ii) the final amendmentallows these organizationsto endorse the promissorynote for settling theiroun accounts and forgranting credits0

- 67 -

ANNEX 3Page 2 of 3

Draft Amendments Final Amendments

Art. 48 --- (i) the Law specifies tnepenalty for economicoffenses for the debtor,guarantor or endorser.The amendment increasesthe penalty from amaximum of 20,000 dinarsto 50,000 dinars for anofficial of a bank or ofa user of public funds.

(ii) the Law required that

in addition to the fine,the official's executingauthority be curtailed for

a period of 1-3 years.The final amendment doesnot insist on thisrequirement.

Art. 49 A new article 49a was added imposing The article 49a remained

fines for minor economic offenses that were but as the debtor was nolisted in the article. One was that a debtor longer required to preparewas to be fined if he did not submit a a certificate of receiptcertificate of receipt of goods from creditor of goods, no fines were towithin 8 days of receipt of such goods. be imposed (see Art. 2

above). However, inaddition to economicoffenses listed in theDraft, a number of otherswere also specified.These included failure topresent a check orpromissory note forpayment within a specifiedperiod; failure to submitto SDK proof of

68

F?age 3 of 3

Draft Amendments Final Amendmento

Art. 49 (cont'd).availability ofuncommitted funds forgranting credits; andfailure to recordinstrument for securingpayment which had beenreceived and issued.

Art. 52 --- (i) the Law imposed a fincup to 20D000 diners on ttcpereon in charge of theSDK for economic offeancothat were listed. Thiopenalty tyS i.ncreased to5OC0OO dinars in the finnla-endmento

(ii) In addition, if uceba person had beenconvicted ttwo or moretimes in one year, theLaw required that he beprohibited frem effectingspecific transactionsfor 1-3 years0 Thiorequirement uae no lon,-rnecessary under the findlamendmentO

Art0 66a -- A new article specifyingimplementation ofproviciono of Art0 5 no ofJanuary 1, l984.

69 _

STATISTICAL APPENDIX

The data in the statistical appendix were supplied

by the Federal Secretariat of Finance and the

Social Accounting Service (SDK). There are minor

inconsistencies and missing rows in some of the

tables.

-71

Table A 1.1

COVERLAGE OF LOSSES AT TIME ANNXUAL FIMMICIAL REPORTS WERE PREPARED, 1979

(million Dilnars)

Coverage of Losses FranOther

Comee,o lion- TotalActivity Total Reserve Reserve Gaol- Ovitbor- Coveed UvcoveredCode Activity of Loss at Foods of Foods of Fooled ness sable Losses LossesNiabe TerrItory End of Year ROots Other BOALs RIsk Foods Foods Sources (2 thra 6) (I- 7)

I 2 3 4 5 0 7 - N

0101 Electric Energy 1,192 47 0 8 10 71 1,1210102 Eotractlon of Coal 442 19 - -- 3 - 52001103 CoalI Processiog 105 - - - - 105 1050104 Eotractlvo of Crude

Pet rolewo aed Gas - -- - - - -

0105 Crade PetroleiaRefioIng - - - -- -- -

0106 Iron Ore $10100 74 - - - - 42 42 320107 tray ov Steel 419 31 - - - 2 33 4400100 Nonfe,rrouss Ore Mining 601 30 7 - - 5 50 5510109 Romfofru Metals 1,355 - 5 3 03 1,3020110 ProcessIlng of

Rooferrus Metals 97 - - -- - - 97

0111 No,ootailic MineralOre Eotractl on 176 3 - - - 1 4 272

0112 Manufacture ofNorovtallic Minerals v.a. n.a. n.a. n.a. ..a. v.a. n.a. 0.0.

0~113 Metal~ Fabricativo.904 74 54 -52s iao 2740114 Machinery. nonelectrical 207 39 0 . 45 2420110 Transport Equipeovt 405 36 211 3 - 22 82 3640115 Shiphu ld Ing 772 19 1 - 2 1 103 0990117 Electrical Rachiery 471 32 19 - - 113 104 307

019 Mavfacture of Chevicals 1,2 12 3 - - 1 0 100011 Processiog of Chevicals 151 6 3 - - 15 24 1270120 Eotrattlon of Stone and

Saed 34 4 -- - 4 30

0121 Ruildiog Materials 090 16 7 81 41 8490122 asanills and Mood Board 205 4 17 . 4 35 2500123 Furniture and Fiotores n. na. v.. ... va. .a. v.a. n.0. v.a.0124 Faper 456 4 -- - 2 6 4500125 Yarns and Fabrics 390 II -- I 379

0126 Finished TeotileFroducts 393 10 28 4 1 97 336

0127 Leather and For 57 3 - - - 4 7 s00120 Footevar aod Other

Leather Products 159 20 - . 1 21 130012 Robber 35 2 2 . - - 4 312130 Fond Processing 2,479 90 26 - i 17 152 2,327

0131 Bevarages 093 26 3 - 46 6 01 22120132 Anleal Feed 26 - - - - 260133 Tobacco 92 0 1 6 15 770134 Prnting ad FoOlishly9g9 3 . - - - 3 6

0139 MiscellneouManufactures I - - . - - - I

01 Total Idutyand Minn 14,331 717 224 19 102 530 1,591 12,740

o2 Ag riculturetavyd FIshng 705 01 20 - 0 21 110 0703 Forestry 17 2 - - - - Is04 Water Ecovojy - - - - -

05 Construction 2b6 03 10 34 2 101 lOb06 Transp.rtatilo" and

Conmnincatlons 902 33 7 - . 50 90 8920601 (ofwhc Raila'ays) 600 0 - -- 37 86 51407 Trade'c 333 401 7 isl 2 70 26300 Cateriog and Touris 950 39 27 - 19 14 98 85709 Hondicraft I105 27 9 2 3 40 125IA ouIg 113 9 5 - 3 17 9611 'Floa:ncial and Other

Servie 106 25 - 15 - 1 41 6512 Educatioo.' Science, Culture

and InfornIatlon 144 22 - 2 33 57 8713 Healith and Social

Welfare 412 so 5 - 1 30 124 298

Total,' All Ac tivities(I thro 13), Yugoslavia 18,037 1,114 325 19 95 449 2,001 15,036

TotalI IOtnelicActivites (I thra 11) 19,000 1,012 319 19 92 378 1,920 16,260All nugoslavia,of which

Bosnia-Herzegooina 2,507 98 53 - 24 35 210 2,377Montenegro 1.476 37 12 - 19 3 71 1405Croatia 4,93 433 01 - - 494 4,49Macedonia 1,2 40 9 - 1 29 81 1.542Slveia1312 87 105 3 7 24 226 1,009Serbia 6,009 315 79 10 4 207 739 6,361Serbia Proper 2,853 217 34 30 189 479 2,379Kosovo 1,402 9 5 2 I 45 62 1,340Vojvodina .0844 99 40 14 2 53 190 1,645

SOURCE: Federal Secrtetriat of Finance

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73

Table A 1.3ODSERAGE OF LOSSES AT TIME ANMUAL FIMDUCIAL REPORTS kERE PREPARES, 1981

(Million Dint,%)

Coverage of Losses FPOther

Coq n Non- TotalActivity Total Reserve Reserve Bosi Relabur- Covered UncoveredCode Activity of Loss at Funds of Finds of Pooled ness sable Losses LossesNOber Teritory End of Year SEALs Other BOULs Rlisk Funds Funds Sources (2 thru 6) (1 - 7)

1 2 3 4 5 6 7 8

0101 Eletric Energy 900 23 - - - 217 250 6500102 Eotraction of Coal 850 45 65 - - 126 236 6140103 Coal Processing Il - 11 - -0104 Extraction of Crude

Petroale nd Gas - - -

0106 Crude Petrolet.Refining 255 110 - - - 60 170 a5

0106 Iron ore Mining 72 31 - - - - - 410107 Iron and Stool 1,739 96 302 - - 245 643 1.0960108 Monferrous Ore Mining 253 4 45 - 1 16 66 1870109 Monferroas Metals 1.529 - - - - 5 - 1,524

0110 Processing ofMonferrous Metals - - - - -

0111 Nonmetalilc ineralOre Extraction 204 8 - - 2 1 11 193

0112 Manufacture ofMor.etalllc Minerals n.a. no. n.a. n.a. n.e. .a. n.a. A ..

0113 Metal Fabrication 1,254 63 43 - - 83 189 1,0670114 Machinery, nonelectrical 96 23 3 8 4 33 71 250110 Transport Eqalpwent 1.265 7 31 - - 38 76 1.1890116 Shlpbuilding - - - - - - -0111 Electrical Ilchinery 1,777 69 16 - 16 109 309 1,567011 nufacture of Chemicals 3,633 19 47 - 17 793 876 2.7570119 Processing of Chenicals 133 36 - - 5 3 44 890120 Extraction of Stone and

Sand 125 12 - - - 1 13 112

0121 Building Materials 1,091 47 17 _ 10 88 162 9290122 Sa1lls nd aood Board 542 45 47 - - 40 133 4090123 Furniture and Fu.tures n.a. n.a. n.a. n... e.. n.. n. n.a,0124 Paer 895 - 13 - - 6 19 8760125 larns and Fabrics 71 - - - - 12 17 54

0125 Finished TetileProducts 159 7 - - - 3 10 149

0127 Leather and Fr 12 5 - - - - 5 70128 Footwar and Other

Leather Produts 12 4 - - - - 4 80129 Rubber 165 4 5 - - 6 15 1490130 Food Processing 3,903 25 39 a - 220 292 3,611

0131 Beverages 165 4 19 - - 2 25 1400132 Animal Feed 12 2 - - - 2 4 80133 Tobacco - - - - - -0134 Printing nd Publishing 161 2 - _ _ 2 4 1570139 Miscellaneous

"Mnufactures 2 1 1 - - - 2 -

ol Total Industry and Mining 21,386 772 776 T8 SO 2,448 4.064 17,32102 Agrlcultur d Fishing 1,466 68 73 - 3 a8 232 1.23403 Forestry 12 1 - - - 2 3 9

04 Water EconoMy 11 - - - - I 1 1006 Constructlon 1,696 205 98 - 32 33 368 1,52806 TrmisportatIon and

Comnelcations 2.603 174 37 57 24 351 643 1,9600601 (of Which RaIlWAYS) 1,681 2 2 57 6 238 3D7 1,374

07 Trade 677 85 22 1 12 70 191 48600 CaterIng and Toerla 688 54 63 - 6 72 195 49309 hndicrafts 297 31 40 1 19 63 178 11910 Housing, 940 43 43 - 6 173 265 67511 Flnancial and Othar

Services 87 9 6 3 1 7 26 6112 Education, Sciatce, Culture

Nd Information 250 29 5 - 12 106 152 9813 Health and Social

Welfare 645 147 43 2 12 117 321 324

Total, All ActivitIca(I thlu 13). YugoslavIa 30,961 1,620 1,204 64 179 3,556 6.643 24,318

Total Econ"icActIv1ties (I thru 11) 30,065 1.443 1,157 81 154 3,334 6,169 23,890All YugWslavia,oF Su1ch

S6n1-lbragnovina 4,615 364 412 - 35 680 1,691 2,924fMeteaMo 662 38 20 - 7 153 218 384Croatia 6,578 439 179 57 9 331 1,015 5,563Mecadamia 2,776 57 26 - I 36 120 2,656Slavoena 4,400 216 233 8 10 323 789 3,611Serbia 11,094 329 286 IS 92 1,610 2,332 6,743

Sarbia Prpe 3,791 233 166 11 70 725 1,200 2,565Kosoov 2,765 31 33 1 14 60 139 2,624Vojoodlia 4,538 65 87 3 8 824 987 3,551

insa Federal Swetwrlat of Flnaoce

- 74 -

Table A.2.1 (a)

REHABILITATION DUE TO UNCOvERED LOSS AS SHOT JN FINANCIAL REPORT FOR 1979(a) Data on the A=ount of Uncovered Loss and Coverage Thereof as of 31 Decez:ber 19B0

(Million Dinars unless othermise specified)

Uncovered Loss on1979 Annual Financial Report Losses Covered with i onreirbt-isable Funds

Frao Frc:BOALs Coc=,G, Fran Amounts

Nwusber iuLber Amount of Total linked From Reserv3 Freci Other t!ritten

Activity or Territory of BOALs of tlorkers Uncovered Loss (5 thru 9) by SKA Banks Fund SPCs Sources Off

1 2 3 4 5 6 7 8 9 10

BOALs in Economiic Activities(01 through 11) 1.158 257,649 15,982 1,976 343 25 150 158 1,30D 200

Industry and Mining 579 161,822 12,375 1,029 196 21 66 148 598 191

Agriculture and Fishing 135 12,748 687 65 30 4 8 - 24 7

Forestry 7 632 21 2 - - 2 - -

hater Econavy 5 555 5 - - - - - - -

Construction 45 7,994 185 30 14 - 5 1 9 -

Transportation andComzzunication 96 43,137 1,170 357 14 - 52 2 289 -

Trade 71 8,720 303 80 27 - 2 - 51 -

Catering and Tourism 123 13,873 924 344 33 - 4 1 305 -

Handicrafts 50 4,988 149 31 12 - 13 4 3

Housing 29 1.770 92 22 - - 1 - 21Financial and

Other Services 18 1,410 69 17 17 - - - -

BOALs in Non-Economic Activities 205 21,688 355 157 10 3 34 1 109 -

(12 and 13)

Agricultural Cooperatives 20 521 36 13 - - - - 13 11

Yugoslavia 1,383 279,858 16,373 2,146 353 27 184 159 1,422 210(01 through 13)

Bosnia-Herzegovina 204 36,512 1,778 111 42 4 26 3 36 -

ontenegro 143 25,067 1,945 946 9 - 6 3 929 -

Croatia 310 54,651 4,299 349 152 2 48 60 86 11Macedonia 160 28,763 1,654 336 1 7 35 88 205 191

Slovenia 64 10,867 1,122 108 72 - 2 - 33 -

Serbia 502 123,998 5,576 295 76 14 66 6 132 8

Serbia Proper 239 73,961 2,491 169 40 - 63 6 60 8

Kosovo 156 26,772 1,448 85 5 14 - - 65 -Vojvodina 107 23,265 1,637 42 30 - 4 - 8

75

Table A.2.1 (a) continued

Manner of Losses StillLosses Covered with Rehabilitation Credits Providing Funds Uncovered at end of 1980

From MoneyFrom From Other Order

Total!/ Common BOALs Users of Against Promis- Number Number Amount(12 thru From Reserve From and Social Giro sary of of Still

Activity or Territory 16) Banks Funds SPCs wOs Resources Account Note BOALs Workers Uncovered

11 12 13 14 15 16 17 18 19 20 21

BOALs in Economic Activities!' 13,052 3,482 6,416 132 1,462 1,560 11,487 1,565 82 19,944 954(01 through 11)

Industry and Mining 10,597 3,005 5,253 104 1,150 1,085 9,456 1,141 38 12,727 749Agriculture and Fishing 581 192 186 - 101 101 546 35 3 642 41Forestry 19 6 11 - 2 - 19 - 1 18 -

Water Economy 5 2 3 - - - 5 -Construction 107 38 50 - 13 7 103 4 10 2,142 48Transportation and

Communication 751 10 550 12 30 54 707 44 7 2,437 63Trade 192 45 111 - 21 15 173 19 7 1,323 31Catering and Tourism 573 61 194 12 34 272 262 311 7 511 7Handicrafts 112 7 44 - 53 8 109 3 4 40 6Housing 69 4 11 2 42 11 62 7 1 31 1Financial and

Other Services 45 17 4 1 17 7 45 - 4 73 7

8OALs in Non-Economic Activities 190 13 45 9 12 111 163 27 7 161 9(12 and 13)

Agricultural Cooperatives 10 5 3 - 1 - 10 - 5 180 14

Yugoslavia 13,251 3,501 6,464 141 1,475 1,672 11,659 1,592 94 20,285 976(01 through 13)

Bosnia-Herzegovina 1,324 320 430 - 390 184 1,289 35 24 8,537 342Montenegro 920 157 303 25 45 389 349 571 21 5,154 78Croatia 3,858 829 2,520 1 411 96 3,444 414 16 885 93Macedonia 1,223 528 416 43 182 53 1,163 60 9 1,223 95Slovenia 996 15 633 9 174 166 818 178 4 138 18Serbia 4,930 1,650 2,162 62 271 785 4,596 334 20 4,348 350

Serbia Proper 2,269 368 1,241 10 149 501 2,033 235 10 1,172 54Kosovo 1,352 1,049 165 9 10 119 1,310 42 3 191 12Vojvodina 1,310 233 756 44 112 165 1,253 57 7 2,985 285

Note a/ Some totals do not equal sum of components in original source.

- 76 -

Table A.2.1 (b)

(b) Noter of BOALs under Rehabilitation end zRu:r of Vorhers in Such OCALsas of 31 2cc;abar 19S0

Proce1dings forUncovered Loss D1)teriningoa 1979 Annual Rehabilitation Rehcbilitation Rehabilitation Gan%ruptcy Prccci1ings Responsibility

Activity of Territory Financial Report In Process Cc: Started Cc,lctcd InitiatedDOALs t1orkers BOALs Horkers BOALs t!orkers BOAta s orbers BOALs L'orkers BOALs b'orkers BOALs tlor4ers

1 2 3 4 5 6 7 8 9 10 11 12 13 14

BOALs in Econcsic Activities 1,158 257,649 57 15,499 1,02 230,440 13 7,265 22 4,338 1 - 170 36,432(01 through 11)

Industry cnd Mining 579 161,822 30 9,632 538 147,555 3 1,540 8 3,09S - - 85 25,767Agriculture and Fishing 135 12,748 3 642 131 11,954 1 152 - - - 22 1,231Forestry 7 632 1 18 6 614 - - - -Uater Econaziy 5 555 - - 5 SSS - - - - - - 1 Construction 45 7,994 6 1,582 35 5,852 - - 3 481 - - 12 1,640Transportation and

Ccazunication 95 43,137 5 2,323 84 35,242 5 5,458 2 114 - - 10 3,670Treda 71 8,720 3 752 60 7,282 4 115 4 571 - _ 13 1,091Catering and Tourise 123 13,873 5 484 116 13,362 - - 2 27 - - 10 1,5r4Handicrafts 50 4,988 3 35 45 4,948 - - 1 5 1 - 7 6COHousing 29 1,770 1 31 28 1,739 - - - - 5 496Financial and

Other Services 18 1,410 - - 14 1,337 - - 2 45 - - 5 294

BOAs in t!on-Econcnic Activiti-as 205 21,688 2 7 195 21,523 1 4 5 154 1 - 29 5,9(12 cad 13)

Agricultural Copaeratives 20 521 3 172 13 331 .1 10 2 8 1 - 4 C5

Vuqoslavia 1,333 279,858 62 15,678 1,271 252,294 15 7,279 29 4,50 3 - 203 42,517(01 throush 13)

Bosnia-K2rzegovina 204 36.512 21 8,380 178 27,975 - - 3 157 2 - 71 15,63mNontenegro 143 25,067 21 5,154 122 19,913 - - - - - - 6 452

Croatio 310 54,651 7 558 291 53,506 3 1c0 9 327 - - 26 5,0G;Pccedonia 160 28,763 4 454 150 27,530 1 10 3 741 - - 45 8,527Slovenia 64 10,867 - - 59 10,729 - - 4 138 1 - 20 4,931Serbia 502 123,998 9 1,132 471 112,561 11 7,009 10 3,137 - - 35 7,820

Serbia Proper 239 73,961 4 544 218 65,7CD 11 7,009 5 549 - - 22 5,163rosovo 156 26,772 3 191 153 26,581 - - - - - - 6 1,632Vojvodina 107 23,265 2 397 1CD 20,2O - - 5 2,589 - - 7 1,025

Notes

a/ Regular rehab1litation proccdure

b/ Rehabilitation accordiag to produre for enforced sett1ca;nnt

S0U9CE. Social Accountieg Scrvice (SEX)

- 77 -

Table A 2,? (a)

REHABILITATION DUE TO UNCOVERED LOSS AS SHOWN IN FINANCIAL REPORT FOR 1980(a) Data on the Amount of Uncovered Loss and Coverage Thereof

as of 31 December 1981 /

(Million Dinars)

Losses Covered with Nonreimbursable Funds Losses Covered through Rehabilitation CreditsTotal From From LossesUncovered BOALs BOALs From StillLoss on linked linked SPCs and Uncovered1980 by a From From SPCs by a From Other at endAnnual Total SlA and Coemon and Users Claims Total SPA and Cowin Users of 1981Financial (3 thru Other Reserve of Social Written (8 thru Other Reserve Frao of Social (I -

Activity or Territory Reportb/ 6) 80ALs Funds Resources Off 11) 8OALs Funds Banks Resources (2 + 7))

1 2 3 4 5 6 7 8 9 10 11 12

BOALs in Economic Activities(01 through 11) 20,47 2,568 626 323 1,347 272 13.981 2,246 7.189 3.796 851 3.930

Industry and Mining 14,814 1,338 322 276 478 262 10,495 1.684 5.277 2,759 775 2,980Agriculture and Fishing 1,123 46 17 1 28 978 128 341 454 56 98Forestry 1S 5 - 4 - - 10 - 2 5 3 -

water Economy 24 2 2 - - - 20 3 11 6 - 2Construction 720 143 140 3 - - 338 52 156 125 5 239Transportation and

Coiunication 2,131 743 100 24 619 - 1,075 121 700 243 11 313Trade 433 61 8 - 53 - 245 61 136 48 - 127Catering and Tourism 578 192 30 6 154 1 356 70 176 109 - 31Handicrafts 351 3 2 1 - - 319 119 173 27 - 29Housing 139 17 - 3 14 - 114 6 105 3 - 8

Financial andOther Services 150 17 5 3 - 9 31 3 12 16 - 102

BOALs in Non-Economic Activities(12 and 13) 440 171 45 15 106 5 103 12 14 38 39 166

Education, Science, Cultureand Information 127 75 10 15 48 2 10 1 4 - 5 42

Health and Social Welfare 313 96 34 - 58 3 93 10 10 38 35 125

Yugoslavia 20,919 2739 670 338 1.453 277 14.084 2.257 7.103 3,34 89 4.096(01 through 13)

Bosnia-Herzegovina 3,384 140 54 5 4 76 2,470 617 1,244 500 110 774Nontenegro 1,067 238 22 - 216 - 406 45 198 169 3 424Croatia 4.766 419 57 229 118 16 2.929 480 2.095 332 22 1.417Macedonia 2,266 239 12 4 223 - 1.823 76 803 917 28 204Slovenia 1,946 378 280 12 83 3 685 314 339 28 5 882Serbia Proper 2,411 671 169 56 441 4 1,505 375 861 167 101 235Kosovo 1,970 280 65 24 25 166 1,608 44 328 1,166 69 82Vojvodina 3,109 374 11 8 343 11 2,659 306 1,235 666 551 77

a/ Totals may not equal sum of components due to rounding.

b/ Information covers aounts of uncovered losses from current and earlier years. However, some deviations from the actual levels of uncovered lossesoccured during the processing of data given in annual financial reports (AFR) for 1981 for the following reasons:

- AFR data analysis covers all users of social resources whose accounting records are kept according to the accounting plan for OALs (BOALs, WOs,Working Cosunities, BOALs at foundation etc.), whereas SDK Information covers only AFR data of BOALs and WOs of econmic and non-economicactivities;

- AFR data analysis covers OALs wthose AFR were copleted on time, while the Information covers also those OALs whose AFRs were discovered to containuncovered losses through control procedures;

- even if the coverage were the same, differences could occur because of increased or decreased uncovered losses discovered through control procedures.

-78 -

Table A.2.2 (b)

(b) nu:zber of BOALs under Rehabilitation and Uubr of tiorkers in Such BOALsas of 31 Dxcczber 1981

ProceC-urc In1t1.ct,d

For ForUncovered Loss Banhruptcy Loss Still Fining nc:Dvalon 1980 Annual Rehabilitation Rehcbilitation Procedure Urcov_rcd &t Respon- of

Activity or Territory Financial Report in Process Cczplctcd Initiated Ernd of 1981 sibility ilanctcrs

BOALs tlorkers BOALs tlorkers BOALs torkers BOALs tUorkers BO;Ls Uo"acrs BOALs 6OALs1 2 3 4 5 6 7 8 9 10 11 12

BOALs in Econamic Activities(01 through 11) 1,138 258,001 154 47,552 964 208,505 20 1,944 174 49.496 303 135

Industry and rlining 504 135,230 53 20,584 444 1t3,135 7 1,511 s0 22,0Z5 159 46

Agriculture and Fishing 130 11,640 13 1,354 117 10,285 - - 13 1,334 37 1SForestry 4 603 - - 4 603 - - - - 2

Uater Econany 5 759 1 68 4 691 - - 1 68 1Construction 61 18,500 17 9,053 40 9,293 4 154 21 9,207 19 a STransportation and

Caoyzunication 136 57,872 38 12,858 98 45,014 - 33 12,858 55 1STrade 75 10,422 10 1,685 62 8,597 3 140 13 1,825 31 11Catering and Tourism 122 13,642 11 925 110 12,701 1 16 12 9S41 50 21Handicrafts 57 6,543 7 835 47 5,636 3 72 10 907 17 7Housing 26 1,761 2 77 23 1,678 1 6 3 83 9 5Fincacial and

Other Services 18 1,029 2 113 15 871 1 45 3 158 5 5

MOkLs in rlon-Econi=1c Activities(12 and 13) 165 19,194 24 3567 141 15.627 - - 24 3,587 64 49

Education. Science, Culturecnd Infomation 68 4,633 6 398 62 4,235 - - 6 398 31 15

Health and Social welfare 97 14,561 18 3,169 79 11,392 - - 18 3,169 33 34

Yuqoslavia 1,303 277,195 178 51,119 1,105 224,132 20 1,944 198 534053 447 184(01 through 13)

Bosnia-Herzegovina 259 49,930 63 20,683 195 29,207 1 40 64 20,723 76 47MNontenegro 110 19,616 33 7,358 77 12,258 - - 33 7,358 28 4Croatia 249 48,286 19 2,881 222 44,638 8 767 27 3,648 97 34

O1ccedonia 144 31,396 29 5,923 115 25,473 - - 29 5,923 41 31Slovenia 76 15,863 10 5,135 63 10,098 3 630 13 5,765 40 3

Serbia Proper 213 62,261 10 3,356 202 58,752 1 153 11 3,509 119 33Kosovo 148 29,506 11 5,559 136 23,941 1 6 12 5,565 18 15

Vojvodina 104 20,337 3 224 95 19,765 6 348 9 572 28 14

SCURCE: Social Accounting Service

- 79 -

Table A.2.2 (c)

(c) Manner of Payment of Advance Payments of Personal Incomes

Manner of Advance Payments of Personal IncomesUncovered Loss Amounts Amounts Minimum 9 month Above the 9on 1980 as per SMA as per SMA on guaranteed average month average Unpaid Personal

Activity of Territory Financial Report on Association Rehabilitation Personal Income for 1980 for 1980 Incomes

BOALs Workers BOALs Workers BOALs Workers BOALs Workers BOALs Workers BOALs Workers BOALs Workers1 2 3 4 5 6 7 8 9 10 11 12 13 14

BOALs in Economic Activities(01 through 11) 1,138 258,001 637 150,917 23 6,003 57 8,188 166 34,902 173 42,335 82 15,656

Industry and Mining 504 135,230 267 68,387 8 3,365 28 5,749 74 20,445 88 27,432 39 9,852Agriculture and Fishing 130 11,640 58 4,751 1 65 7 629 30 4,001 20 1,438 14 756Forestry 4 603 2 191 1 182 - - - - 1 230 - -Water Economy 5 759 3 681 - - - - 1 10 1 68 - -

Construction 61 18,500 40 12,379 2 121 4 735 7 1,944 3 986 5 2,335Transportation and

Communication 136 57,872 89 43,173 2 1,288 2 123 12 4,603 26 7,998 5 687Trade 75 10,422 39 5,918 2 568 5 383 17 1,931 9 1,511 3 111Catering and Tourism 122 13,642 81 9,025 5 334 4 349 11 1,202 15 1,449 6 1,283Handicrafts 57 6,543 32 4,363 2 80 1 5 9 596 7 1,116 6 383Housing 26 1,761 16 1,434 - - 2 18 3 95 3 107 2 107Financial and

Other Services 18 1,029 10 615 - - 4 197 2 75 - - 2 142

BOALs In Non-Economic Activities(12 and 13) 165 19,194 123 14,565 6 411 7 135 6 671 17 2,597 6 815

Education, Science, Cultureand Information 68 4,633 49 3,693 3 80 5 72 4 162 5 563 4 63

Health and Social Welfare 97 14,561 74 10,872 3 331 2 63 2 509 12 2,034 4 752

Yugoslavia(01 through 13) 1,303 277,195 760 165,482 29 6,414 64 8,323 172 35,573 190 44,932 88 16,471

Bosnia-Herzegovina 259 49,930 153 24,851 7 2,043 3 539 37 8,321 45 13,213 14 963Montenegro 110 19,616 29 3,923 8 1,945 - - 24 4,829 46 8,857 3 62Croatia 249 48,285 201 41,566 2 44 11 1,432 3 276 25 4,182 7 786Macedonia 144 31,396 92 22,822 4 1,360 1S 905 22 5,269 8 959 3 81Slovenia 76 15,863 51 8,735 1 31 1 3 - - 22 7,088 1 6Serbia Proper 213 62,261 129 43,949 4 625 9 745 38 4,993 9 3,976 24 7,973Kosovo 148 29,506 79 15,785 1 182 1 62 21 3,262 20 4,862 26 5,353Vojvodina 104 20,337 26 3,851 2 184 24 4,637 27 8,623 15 1,795 10 1,247

80

Table A 2.3 la)

REIABILITATIO:1 DUE To UNCOVEREO LOSS AS 9:CJ IG FlZA2:CIAL REPORT Fm 1981(a) Data on the A-ount of Uncovered Loss End Coveraep thereof

as of 31 DOccebar 1982 a/

(Mi4ltion Diners)

Losses Covered with aonreiczursable Funds Losses Covered throueai .leciwb1ltat1ie CrcditsTotal From Frca LossesUncovered BOALs BAljs Free StillLoss on linked linked SPCs aEnl Uncovered1981 by a Fri) Fraz SPCs by a Frr- COthr at cad

Annual Total Sfl and Comsn end Users Clains Total SZa end Caman Uscrs ca 1932Financial (3 thru Other Reserve of Social Uritten (8 thru other Reservo Frca of Sccial (1 -

Activity or Territory Reportb/ 6) BOALs Funds Resources Off 11) Banks Fur.s Ccnks Cesourcs (2 ° 7))

1 2 3 4 5 6 7 8 5 10 11 12

OLs in Econcnic Activities 28,631 3A291

1,536 i05 653 287 19 294 2,640 i1,3 5 741SS I l1l 5604C3

(01 througC 11)

Industry and Mining 20,834 1,950 813 556 448 133 15,832 1,982 9,111 3,18 729 3,51Agriculture and Fishing 1,426 204 142 30 7 25 9S1 181 422 332 17 271Forostry 14 3 3 - - - 11 6 5 - - -

Uatcr EcorncW Z1 - - - - - I6 3 4 8 - 5Construction 1.943 85 35 37 5 B 817 143 383 209 25 1,C32Transportation and

Cezmnlcotion 2,262 699 373 104 126 96 8s5 45 (40 14a 252 670Trcde 613 112 74 26 12 - 421 64 258 55 43 79Catering end TourisQ 573 105 46 44 9 5 415 63 257 G7 6 53Ncndicrafts 124 15 13 - - 1 84 10 31 12 1 24Housing 713 as 26 7 56 - 618 107 351 123 27 0Finncrial cnd

Othr Services 108 30 11 - - 19 74 15 58 - - 4

COALs in r:ao-Ecomcic Activities(12 End 13) 671 371 151 53 160 7 214 32 Co 77 24 E5

Education, Scicece, Cultureacd Inforzetion 143 106 31 51 24 - 25 4 21 - - 12

oealth End SSCial ealfaro 528 265 120 2 136 7 189 28 60 77 24 74

v4pyzslaova 29 302 3,663 1,687 858 823 294V 19, 8 673 1 437 4,273 1.123 513(O Warough l3) - _ _ __ _ _

Dosnia-Hereegovlno 3,714 812 362 138 307 5 2,683 633 1,238 203 524 222r:ntencgro 758 57 41 6 10 - 246 60 125 43 16 455Croatia 7,294 1,130 369 505 124 132 3,428 463 2,CeC 312 25 2,733iacredenia 3,144 571 380 16 171 3 1,973 254 725 733 251 5sa

Slovenia 4,200 177 147 6 24 - 4,011 278 3,424 241 69 12Serbia 10,192 916 389 167 187 153 7,169 959 3,322 2,659 280 2,107

Serbia Proper 3,310 358 184 84 87 3 2,538 314 1,353 740 119 414Co0avO 3,622 381 72 97 62 149 1,643 262 165 1,170 C5 1,583VojvedinR 3,259 177 133 5 38 2,989 383 1,791 742 65 93

o/ Totals Cay not eCUOl s:a of cce:onents due to rounding.

b/ Infereetlin covors crounts of uncovered losseS fra: current end oerlier yeors. Ho=evor, seze deviations fre teo actual levels of ancovered lossesecured durirg eth processing of data given in annual financial reports (AFR) for 1981 for tke following reasonsa

- A dcta analysis covers all users of social resources whose accounting rccords are kept according to tw caccGontng plan fer OAs (COALs, l3s,l korftie Cczanities, GOALs at foundation ete.), whereas SO Inforciation covers only AFR dote of BOts end tUOs of cconw:i1c Cca ndcecccta:cactivitics;

- APR ata analysis cowers OALs eose AFR wreo cc:pleted on tire, t7ilo th ;nfor. atios covers also those OALs t:cose AP.1 care dlscowera to contcinuncoverod lossos thresgh control procedures;

- even if the covcrca tare the sca, differences could occur bccausc of increosed or decroesed uncovered losscs discovcred throfl: control pr;tcdures.

Table A.2.3 (b)

(b) Number of BOALs under Rehabilitation and Number of Workers in Such BOALsas of 31 December 1982

Procedure InitiatedFor For

Uncovered Loss Bankruptcy Loss Still Fixing Removalon 1981 Annual Rehabilitation Rehabilitation Procedure Uncovered at Respon- of

Activity or Territory Financial Report in Process Completed Initiated End of 1982 sibility Managers

BOALs Workers BOALs Workers BOALs Workers BOALs Workers BOALs Workers BOALs BOALs1 2 3 4 S 6 7 8 9 10 11 12

BOALs in Economic Activities(01 through 11) 1,06 237,235 165 40,813 888 195,176 13 1,246 178 42,059 389 26

Industry and Mining 465 123,636 65 18,637 396 140,242 4 757 69 19,394 184 8Agriculture and Fishing 132 13,640 37 3,835 95 9,805 - - 37 3,835 34 1Forestry 4 631 - - 4 631 -Water Economy 4 305 2 79 2 226 - - 2 79 1 1Construction 89 27,473 16 9,459 69 17,678 4 336 20 9,795 27 7Transportation and

Communication 105 43,588 17 6,048 88 37,540 - - 17 6.048 38 2Trade 70 7,848 5 572 62 7,183 3 93 8 665 30 1Catering and Tourism 101 10,945 12 1,157 88 9,758 1 30 13 1,187 34 1Handicrafts 41 4,033 7 772 34 3,261 - - 7 772 16 1Housing 39 4,274 3 240 36 4,034 - - 3 240 19 1Financial and

Other Services 16 862 1 14 14 818 1 30 2 44 6 3

BOALs in Non-Economic Activities(12 and 13) 211 2439 25 2,627 185 21,712 1 60 26 2.687 108 I

Education, Science, Cultureand Information 105 6,383 14 673 91 5,710 - - 14 673 47 1

Health and Social Welfare 106 18,016 11 1,954 94 16,002 1 60 12 2,014 61 0

Yuqoslavia 1,277 261,634 190 43,440 1,073 216,888 14 1,306 204 44,746 497 27(01 through 13)

Bosni a-Herzegovina 212 36,516 19 3,895 193 32,621 - - 19 3,895 127 1Hontenegro 74 12,669 24 6,098 SO 6,571 - - 24 6,098 10 -Croatia 252 46,994 10 937 230 44,798 12 1,259 22 2,196 93 9Macedonia 153 31,350 36 7,608 117 23,742 - - 36 7,608 61 3Slovenia 85 18,345 - - 84 18,315 1 30 1 30 46 - 3Serbia 501 115,760 101 24,902 399 90,841 1 17 102 24,919 160 11

Serbia Proper 216 60,916 33 7,408 183 53,508 - - 33 7,408 80 9Kosovo 215 42,201 63 17,108 152 25,093 - - 63 17,108 44 1Vojvodina 70 12,643 5 386 64 12,240 1 17 6 403 36 1

SOURCE: Social Accounting Service

- 82 -

Table A 3.1

IIJVESTMI0T IN BOALS MZCIlS LOSSES IN: AU-.'.JL FIUANCIAL REP00TS,1979-1981

(million Diners)

ActivityCode

utzber Activity 1979 1980 1981

01-11 Econoiic Activities 26,009 36A156 32,871

01 Industry of tWch 19,169 24,104 18,944

0101 Electric Energy 3.284 2,510 2,7330102 E*trcction.of Coal 659 725 9350103 COGl Processing l1O 1 -0104 Extraction of Crude Petrolcm

and Gus - -

0105 Crude Petroleu:: Refining - 1,501 1,539

0105 Iron ore Pining 22 3 370107 Iron end Steel 258 1,192 8110108 Ponferrous Ore [1ining 411 81 1830109 i:onferrous Vetels 722 70 1570110 Processing of lionferrous ;:eals 7 - -

0111 0oic2toellic linerel OraExtrection 280 443 212

0112 Panufcctura of norottllicMinerals 122 408 1S5

0113 Nl,tol Febrication 1,971 1,059 1,1630114 1cchinsry, nonelectricel 329 85 710115 Transport Equip=2nt 18D 1,671 5640116 Shipbuilding 183 - -0117 Electrical Itchinery 228 986 1,0220118 Ncnufccture of Ch6:1cols 2,463 2,283 1,2490119 Processing of Chniicels 63 212 1970120 Etreaction of Stone cad Scnd 46 261 322

0121 Building M1ateri1als S90 1,248 1,0550122 Sat:1lls and 0ood Board 314 1,174 2000123 Furniture end Fixtures 327 1,031 5910124 Poper 1,033 1,732 3530125 Varns end Febrics 372 500 67

0126 Finished Te*tile Products 213 75 480127 Leather and Fur 32 6 10128 Footesar end Other Leathzr

Products 24 64 40129 Rubber 219 745 5640130 Food Processing 3,761 3,975 3,000

0131 Bevereges 500 36 SO0132 Ani1al Fced 18 11 180133 Tobecco 32 . _0134 Printing end Publishing 1 16 200139 Miscellaneous Panufecturas - - -

02 Agriculture and Fishing 1,265 1,758 2,08103 Forestry 38 16 1604 tloter EconeHy 4 1 1305 Construction 241 519 56406 Trensportation end

C.czunications 3,035 4,977 4,7340601 (of thich Railasys) (2,571) (1,957) (3,125)

07 Trede 521 904 1,33408 Catering end Tourisa 1,232 2,323 3,04809 Handicrafts 239 165 13510 Housing 181 1,218 1,75111 Finnncil end Other Services 33 271 251

12613 Uon-Econca1ic Activities 1,704 1D640 1,478

12 Education, Science, Cultureand Inforeation 293 262 257

13 HeIlth and Social Lislftro 1,408 1,378 1,221

01-13 All Activities 27,713 37,796 34,349

SOURCE: Federal Secreteriat of Finence

- 83 -

Table A 4.1

REHABILITATION CREDITS OUTSTANDING AND DISBURSED AS OF 30 SEPTEMBER 1982

(Million Dinars)

ActivityCodeNumber Activity Value

01-11 Economic Activities 67,738

01 Industry of which 50,503

0101 Electric Energy 1,2020102 Extraction of Coal 1,4640103 Coal Processing 4210104 Extraction of Crude Petroleum and Gas0105 Crude Petroleum Refining 205

0106 Iron ore Mining 550107 Iron and Steel 1,7950108 Nonferrous Ore Mining 1,4820109 Nonferrous Metals 2,2650110 Processing of Nonferrous Metals 355

0111 Nonmetallic Mineral Ore Extraction 3750112 Manufacture of Nonmetallic Minerals 1,4900113 Metal Fabrication 3,0940114 Machinery, nonelectrical 1,0410115 Transport Equipment 2,8400116 Shipbuilding 3630117 Electrical Machinery 2,5600118 Manufacture of Chemicals 5,1390119 Processing of Chemicals 7900120 Extraction of Stone and Sand 257

0121 Building Materials 4,0850122 Sawmills and Wood Board 8570123 Furniture and Fixtures 2,1950124 Paper 2,2920125 Yarns and Fabrics 1,659

0126 Finished Textile Products 2,0090127 Leather and Fur 2340128 Footwear and Other Leather Products 3880129 Rubber 2420130 Food Processing 8,274

0131 Beverages 7260132 Animal Feed 460133 Tobacco 720134 Printing and Publishing 2280139 Miscellaneous Manufactures 3

02 Agriculture and Fishing 3,77003 Forestry 6304 Water Economy 3705 Construction 1,67506 Transportation and Conmunications 5,976

0601 (of which Railways) (3,959)07 Trade 1,89008 Catering and Tourism 2,01609 Handicrafts 58410 Housing 99011 Financial and Other Services 234

12&13 Non-Economic Activities 760

12 Education, Science, Culture and Information 27913 Health and Social Welfare 481

01-13 Total, All Activities 68,017

SOURCE. Federal Secretariat of Finance

Table A 4.2

REaXLXTATXUO CREDITS GUTSTSAXM SD CHSOMIJSED Qi OF h 0 0? BY REPUBLEC lID Aula,,¢MS pRGVHCX9

6NMMOR Map?s)

Econm-13C Qon-Ecoaac,1c allActlvilties Activitles AstGvlties

T@ppitory (GIl ° 11) (12 & 13) 6i ° m3)

Yugoslavia 67,738 7W 68 498of twhich

Bosnia-Herzegovina 99673 163 90836Montenegpo 4,S31 172 4,703Croat1a 139755 69 13,084Macedonia 60,37 49 50X6SQV,bla 6923 3I 6,,326

of uhtchSerbi Ppope? I9ml 176 1}0g7

Kosovo 7D0§3 57 79110

Vojvod1na S,483 43 99526

SOURCEo Federal Secretariat of Finunce

- 85 -

Table A 5.1

CONSOLIDATED ANNUAL BALANCE SHEET FOR JOINT RESERVE FUNDS OF ALL YUGOSLAV SOCIOPOLITICAL COMMUNITIES, 1980, 1981

(As of December 31, Million Dinars)

Assets 1980 1981 Liabilities 1980 1981

Cash 1,541 3,022 Long Term Business Funds 41,902 53,690of which

Short Tenm Investments 2.665 4,834of which Fixed assets funds 121 148

Short term credits for Pooled funds of BOALS 25,861 34,509working capital 833 2,103

Long term deposits 284 340Other short term credits 857 1,185

Long term obligations arisingOther short term credits for from securities issued 1,042 744

coverage of losses 906 1,473Obligations arising from long

Pooled Funds 69 73 term credits received 13,051 16,350

Other long term obligations 1,543 1,599Long Term Investments 40,463 49,599

of whichShort Term sources of Business

Long term credits for Funds 552 681working capital 2,431 3,312

Current Obligations Arising fromLong term credits for Business Relations 3.789 4.988

covering losses 36,093 44,162

Long term credits forfixed assets 1,340 1,478

Long term investments insecurities 30 29

Pooled funds 569 618

Other Business Funds 1.458 1,769

Other Assets,/ 116 135

TOTAL ASSETS 46,243 59,359 TOTAL LIABILITIES 46,243 59,359

Note'/ Balancing Item -- difference between total assets and total liabilities in original data.

SOURCE; Federal Secretariat of Finance

86-

Table A 6.1

STATUS OF CLAIIlS AGAIOST PURCHASERS PFM GOODS AND SERVICES S0OLD

AS 0F 31 DECEIOEA 1979

(Mlillion Diners)

Cleins forIVhich Letters Clairs for

Activity of Crcdit and l4hich payment TotelCode Activity or Guaernte-s Date was Untceshed Preoiissos-y Claib-snreeker Territory V~ere Re-ceived Agreed Checks Notes (1 thru 4)

1 2 3 4 5

01 Industry 42,798 25,111 718 96,454 185,081of cihich

0101 Electric Energy 3,772 5,362 4 13,603 22,8210102 Extraction of Coal 569 147 1 1,309 2,0260103 Cool Processing 133 342 - 583 1,0580104 Extraction of Crude Petrolese and Gas 604 19 - 707 1,4200105 Crude Petroletee Refining 1,045 840 95 8,340 8,340

0106 Iron ore Mining 23 85 140 2590107 Iron end Steel 1,742 1,109 2 6,114 8,0090108 Nonferrous Ore Pining 221 63 - 1I5m 1,8740109 Nonferrous netals 706 219 2 2,543 3,4700110 Processing of nonferrous iletals 721 437 7 1,570 2,735

0111 Woneetollic Ilineral Ore Extraction 148 86 1 314 5490112 Ilonufacture of Ilor=2tollic 4inerels n.e. n.e. n.e. n.e1. n.e.0113 Pct01 Fabricution 4,471 2,168 9 8,40 15,0560114 lIochinery. nonelectrical 2,709 1,320 14 4,317 8,3600115 Trensport Equip=snt 2,518 2,034 6 4,504 9,582

0116 Shipbuilding 1,108 258 5 517 1,9700117 Electrical Maechinery 3,558 1,047 26 9,655 12,0860118 lanunfacture of Chemicals 1,453 1,015 185 4,033 6,7330119 Processing of Chenicals 2,152 1,193 7 3,530 6,8820120 Extraction of Stone end Send 188 176 6 SCO 008

0121 Building Maoterials 702 810 6 1,507 2,7250122 Sat:illls use Hood Board 685 202 3 1,300 2,2580123 Furniture end PiAtures0124 Paper So1 372 6 1,500 2,8590125 ferns end Fabrics 822 730 3 3,770 5,325

0126 Finished Textile Products 1,424 1,445 8 4,473 7,3520127 Leether entd Fur 1 S8 179 16 00. 1,1970128 Footcear end Other Leeither Products 1,330 020 39 1,003 3,8720129 Rubber 842 404 100 1,031 2,4370130 Food Processing 4,442 1,537 37 9,40 15,505

0131 Beveregos 680 535 11 1,070 2,8060132 Animel Feod 215 79 2 023 1,2220133 Tobacco 78 91 10 1,240 1,4330134 Printing end Publishing 588 393 8 60 1,0530139 Mliscellaneous Manufcctures 303 168 1 2241 000

02 Agriculture and Fishing 2,091 930 53 8,530 12,51803 Forestry 422 147 4 1,0a2 1,62504 cioter Econepy 317 151 . 174 0405 Construction 20,86 8,208 91 9.31e 35,57000o Transportation and Coz=unications 5,304 4.20R 146 7,455 17,174

0001 (of which Relexoys) (400) (847) (31) (2,501) (3,859)07 Traed 32,538 18,330 524 01,127 112,51908 Cottoring end Touriso 1,024 1,105 30 1,034 4,10309 Handicrafts 1,797 048 134 3,104 5,0810 Housing 1,550 1,076 7 1,03 4,43311 Finencial aned Other Services 4,485 4,107 179 6,042 15,503

01-11 All Econonic Activitics 11,11f2

61,562 1,889 107,5"0 375,149

12 Educeition, Science, Cultureend Inforoetion 1,075 1,404 19 1,241 4,3099

13 Hoexlth eind Social Valfero 2,541 3,571 33 2,101 0,246

12413 No-E4conenIc Activitixs 4,216 *:,035 52 3,349 12,645

01-13 All Activltios 110,L328 63,507 1,941 _2~2 307 794

01-11 Yugoslavia, All Econemic Activitios 114.112 61,562n 18-89 19, C 375,140of eRhich

Bosnia-Hierzogovino 14,235 7,055 102 30,000 52,132lIontenegro 1,784 1,002 37 4,e07 7,410Crootiei 27,637 15,80 476 46,237 06,2441lcccdonia 6,685 4,052 73 13,343 24,326Slovenie 24,114 11, 404 200 24,003 00,743

Serbio Propor 20,350 10,807 679 52,207 08,203Kosov0 2,040 1,039 11 5,370 9,318Vojvodina 0,004 3,3100 191 20,100 32,773

- 87 -

Table A 6.2

STATUS OF CLAIMS AGAINST PURCHASERS FOR GOODS AND SERVICES SOLOAS OF 31 DECEMBER 1980

(Million Dlnars)

Claims forWhich Letters Claims for

Activity of Credit and Which Payment TotalCode Activity or Guarantees Date was Uncashed Promissory ClaimsNunber Territory Were Received Agreed Checks Notes (1 thru 4)

1 2 3 4 5

01 Industry 66,180 33,840 571 134,640 235,231of which

0101 Electric Energy 6,479 5,396 6 12,140 24,0210102 Extraction of Coal 827 167 19 2,508 3,5210103 Coal Processing 462 132 - 1,163 1,7570104 Extraction of Crude Petroleum and Gas 1,237 75 80 1,849 3,2410105 Crude Petroleum Refining 1.290 1,824 174 12,257 15,545

0106 Iron ore Mining 57 57 - 120 2340107 Iron and Steel 2,672 1,913 6 7,827 12,4180108 Nonferrous Ore Mining 360 103 - 2,773 3,2360109 Nonferrous Metals 1,584 454 - 2,619 4,6570110 Processing of Nonferrous Metals 1,194 489 1 1,721 3,405

0111 Nonmetallic Mineral Ore Extraction 168 123 1 407 6990112 Manufacture of Nonmetallic Minerals n.a. n.a. n.a. n.a. n.a.0113 Metal Fabrication 6,212 3,034 17 13,914 23,1770114 Machinery, nonelectrical 3,639 1,845 18 5,077 10,5790118 Transport Equipment 3.932 1,842 32 6,135 11,941

0116 Shipbuilding 940 601 9 746 2,2960117 Electrical Machinery 4,758 2,614 21 8,729 16,1220118 Manufacture of Chemicals 2,975 1,474 5 4,836 9,2900119 Processing of Chemicals 3,245 2,134 24 4,797 10,2000120 Extraction of Stone and Sand 175 159 1 657 992

0121 Building Materials 1,076 513 10 2,094 3,6930122 Sawmills and Wood Board 747 265 3 2,268 3,2830123 Furniture and Fixtures n.a. n.a. n.a. n.a. n.a.0124 Paper 1,159 333 6 3,190 4,6880125 Yarns and Fabrics 1,648 1,350 3 5,322 8,323

0126 Finished Textile Products 2,657 1,752 7 7,017 11,4330127 Leather and Fur 280 171 10 1,063 1,5240128 Footwear and Other Leather Products 2,803 1,073 2 2,589 6,4670129 Rubber 1,758 517 8 1,265 3,5480130 Food Processing 6,233 2,094 33 16,060 24,420

0131 Beverages 992 510 25 2,013 3,5400132 Animal Feed 538 99 8 1,262 1,9070133 Tobacco 198 172 1 1,254 1,6250134 Printing and Publishing 712 456 10 985 2,1630139 Miscellaneous Manufactures 382 278 1 625 1,286

02 Agriculture and Fishing 5,524 1,413 30 10,963 17,93103 Forestry 516 191 7 1,482 2,19604 Water Economy 373 175 - 274 82205 Construction 26,980 6,423 99 17,879 51,39106 Transportation and Communications 9,378 5,584 101 13,534 28,597

0601 (of which Railways) (613) (886) ( - ) (4,574) (6,073)07 Trade 46,940 26,175 523 77,146 150,78408 Catering and Tourism 1,615 1,563 31 1,718 4,92709 Handicrefts 2,397 1,337 39 4,341 8,11410 Housing 2,334 1,389 5 2,353 6,08111 Financial and Other Services 6,619 5,955 136 7,692 20,402

01-11 All Economic Activoties 166,864 86,045 1,543 272,024 526,476

12 Education, Science, Cultureand Information 2,160 1,850 11 1,905 5,926

13 Health and Social Welfare 2,846 4,220 17 3,933 11,016

12613 Non-Economic Activities 5.006 6.070 28 5838 16,942

01-13 All Activities 171.870 92.115 1.571 277,862 543,418

01-11 Yugoslavia, All Economic Activities 166,864 86,045 1.543 272,024 526,476of which

Bosnia-Herzegovina 21,445 9,493 87 40,865 71,890Montenegro 2,616 1,838 11 7,025 11,490Croatia 40,001 21,615 343 61,754 123,713Macedonia 8,545 5,811 80 18,501 32,937Slovenia 35,146 16,317 260 34,230 85,953Serbia Proper 41,363 23,538 427 68,303 133,628Kosovo 2,559 2,180 17 7,612 12,368Vojvodina 15,189 5,256 318 33,734 54,497

Tch1e A 8.3

STATUS 07 CLA1IIS AUAIIST PUJICHASEOS Fa1n 800S A3. SERlVICES SOLDAS OF 31 0CECEr9 1981

(Millilon Diners)

Civics forSthick Letters Cleins for

Activity of Credit cnd Lichic Pey.Jnt TotalCods Activity or Guarantees Dete ccv Uncasked Prc:Jissory Cleiicsoch-er Territory Leere Received Agreed Checks Notes (1 thru 4)

1 2 3 4 5

01 Industry 1CO,094 44,639 1,4-04 173,660 319,797of cihich

0101 Electric Energy g,503 3,958 15 9,405 22,8880102 Eutrcction of Coal 1,249 240 - 3,176 4,66550103 Coal Processing 449 271 - 1,248 1,6660104 Extrcction of Crude Petroleen arnd Gee 1,809 552 1 4,736 7,1800105 Crude Petroleme Ref inin 3,291 665 41 6,223 12,220

0105 Iron ore tliving 106 94 - 207 4090107 Iron and Steel 5,508 1,952 3 11,615 19,0780108 tonferrous Ore Mining 343 188 - 2,973 3,5040109 llonferrous Iletels 1,937 361 - 4,492 6,7000110 Processing of tonferreus POstuls 1,973 464 6 1,065 4,400

0111 Moscetullic Ilineral Ore Extraction 230 153 1 582 9550112 Mlanufacture of hoine-tullic Ilinerele n.a. n.e. n.a. n.a. s.c.0113 Pletal Fabricetion 10,020 4,131 62 13,850 20,1630114 lleckinery, nonelectrical 6,761 2,182 42 8,689 15,6740115 Transport Equip=znt 8,08 3,824 21 0,912 16,645

0118 Shipbuilding 1,655 1,402 2 032 3,66410117 Elcctrical Ileckinery 7,850 3,188 90 11,024 22.1090118 Ilenufecture of Ckemicals 3,412 1,595 4 8,269 11,3010119 Processing of Chkciicals 5,114 3,167 63 6,074 14.4180120 Extrection of Sto= end Send 276 248 - 811 1,335

0121 Building Ilaiterials 1,364 789 2 3,086 5,2400122 Sczzills end Mood Board 091 361 84 3,121 4,5570123 Furniture ari Fixtures n.e. n.e. n.e. s.c. n.e.0124 Ppepr 1,784 777 - O,0= 6.,9410125 Yems end Fabrics 2,304 2.363 105 7,141 12,003

0126 Finished Textile Products 3,793 2,805 5 9,677 16,3710127 Leether end Fur 400 319 49 1,588 2,Q440128 Footce-ar cod Otthor Leether Plroducts 4,191 826 18 3,812 8,8450129 Rubber 2,103 456 6 1,911 4.4760130 Food Processing 8,955 3,033 566 13,946 26,550

0131 Bevereges 2,8813 859 35 2,83 8,4130132 Anical Fee-d 640 143 40 1,039 2,7V20133 Tobecco 339 94 4 1,141 1,5780134 Printing and Publishing S81 597 8 1,532 3,1400139 1liscelleeoss Ilenufectures 298 215 1 621 1,135

02 Agriculture! end Fishing 8,222 2,220 146 19,497 30,03503 Forestry 763 283 34 2,83 3,90-~04 atetr Econoziy 878 305 - 401 1,2805 Construction 32,881 8,881 107 25,535 67,404~05 Transportation and Cac-unicetione 11,938 7,719 14 1S,133 34,9On

081 (of chick Rlailcays) (1,587) (2,184) (26) (5,60) (9,311)07 Trede 73,342 36,135 805 103,633 217,103508 Cetering and Tourisme 2,583 2,015 85 2,029 6,67209 Handicrafts 3,812 1,885 36 5,874 11,10710 Housing 3,520 1,610 20 3,461 0,81111 Finncmiel aend Other Services 8,703 7,014 147 9,535 25,40

01-11 All Econv3ic Activities 246,421 112,817 3,101 334,292 728,631

12 Education, Science, Culturecotd Isforcation 3,153 2,387 157 3,015 0,742

13 Hevlth cad Sociel teelfare 1,323 727 0 163 2,221

12413 Von-Econecic Activities 4,476 3,1-14 185 10,20663i

01-13 All Activities 250,8997 115,931 M23j 367,503 737,594

01-11 Yugoslavia, All Ecoenoic Activities 246,421 112.017 3,101 M5,292 726,631of c:hick

Boenie-hejreegovino 28,013 13,023 108 85,4-03 97,039Ilonotnegro 4,239 1,970 162 9,073 15,473Crootie 51,83 27,209 88 00,54 18D,533llcccdonie 11,673 9,332 n-7 24,707 45,169Sdovcoie 55,217 21,473 388 42,145 119,223Serbie Proper 82,032 29,470 787 Go,54'0 101,6855Kosovo 2,292 2,83 102 13,247 15,001Vojvodina 20,290 7,334 237 42,547 70,437

World Bank An Analysis of Developing NEW_Publications Country AdjustmentFPublicatfons Experiences in the 1970s: Low- Compounding and Discountingof Related Income Asia Tables for Project Analysis

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Adjustment Experience and Aspects of Development Bank J. Pnce GittingerGrowth Prospects of the Semi- Management Project planners and analysts will findIndustrial Countries William Diamond and V. S. this book a convenient and time-sav-Frederick Jaspersen Rghavan ing reference for the preparation andStaff Working Paper No. 477. 1981 132 Deals exclusively with the manage- analyss fbldevfelopercent through 50pages (including 3 appendixes) ment of development banks. The book percent show the compounding factorStock No. WP 0477. $5 is divided into eight sections, each for I and for I per annum, the smikng

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Alternative Mechanisms for setbacks. French: Tables d'interets composis et d'ac-Financing Social Security World Bank Staff Working Paper No 562 tualsotion. Economica, 4th printing,Parthasarathi Shome and Lyn 1983. 74 pages 1979Squire ISBN 0-8213-0169-1. Stock No WP 0562. ISBN 2-7178-0205-3, Stock No. IB 0542,Reviews, clarfies, and evaluates theo- $3 $6.retical literature about the effect of so-Spnh Tladeitrsoputoydcial secunty on capital accumulation Capital Market Imperfections Spancsh Tablas de vnteres comnpuesto y deand labor supply. Analyzes empincal and Economic Development descuento para evaluaaon de proyectos.studies using U.S. data, the impact of Vinayak V. Bhatt and Alan R. Roe Editorial Tecnos, 1973; 4th printing, 1980.pay-as-you-go financed and fully Staff Working Paper No. 338. 1979. 87 ISBN 84-309-0716-5, Stock No. IB 0526.funded social security schemes, and ixages (including footnotes). $6.characteristics of optmal social secu- Stock No. WP 0338 $3.rity systems. This study provides astartmg pomt frrev eveexstyong theores for The Changing Nature of Export A Conceptual Approach to thefinancing social security in developing Finance and Its Implications Analysis of External Debt ofcountnes. for Developing Countries the Developing CountriesStaff Working Paper No. 625. 1983. 62 Albert C. Cizauskas Robert Z. Aliberpages. Staff Working Paper No 409. 1980. 43 Staff Working Paper No 421. 1980. 25ISBN 0-8213-0292-2.Stock No WP 0625. pages (including 3 annexes). pages (including appendix, references).$3. Stock No. WP 0409. $3. Stock No. WP 0421. $3.

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David L. Gordon ISBN 0-8213-0102-0. Stock No. WP 0529.

An informative guide to the function EcOlDomIc bemlAzaf tn Tm d $3.and design of development finance Staibilization -UD Aes Lo HM@2zest .companaes as they are set up in devel- Ayent&a, Chile, M& l Ca o: r1hwyoping countries. Case histories high- Umu~aiy: AV~ti t1h D FV.;:rPL.light the differences among these com- andftay S.m mz: a n fl -rpanies-their institutional structure, Swee vi Wijnh eeremanagement style, financial perfor- Balance of PayzaLc& Sweder van Wijnbergenmance, and other features. Looks at Edited by Nicolas Ardito Barletta, Examunes the claim that hig-her timethe problems of resource mobilization Mario . Blejer, and Luis Landau deposit rates raise output and lowerand strategies to overcome them. Twenty-eight leading international inflation in the short run, and mcreaseStaff Working Paper No 578 1983 84 econonists and regional specialists re- growth through their favorable impactpages. view the salient charactenstics of the on savings rates. It concludes that thisISBN 0-8213-0226-4. Stock No. WP 0578 monetary approach to the balance of theory dep_nds heavily on the as-$3. payments, examine the variations in sumption that portfolio shits ito time

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Qavizix', Saudi ~~~ UAE examination of economic policies and tion, capital, capita accumulation andgalhy, Saiudi Arzbia, lUAIE their effects in a region that looms medium term growth are discussed,Rudolf Hablitzel large in current deliberations about in- and empiaical relevance is demon-Staff Working Paper No. 483 1981. 53 ternational indebtedness and finance. strated through simulation runs with apages (including statistical tables). June 1984 About 240 pages. macroeconomic model of South Korea.

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Nicholas C. Hope - Couiik'esStaff Working Paper No. 488 1981. 70 Ricardo Martin and Marcelo Vijay Joshipages (including 2 annexes, references). Selowsky Staff Working Paper No. 485. 1982. 57

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NEW The Policy Experience of Private Bank Lending toTwelve Less Developed Developing Countries

Municipal Accounting for Countries, 19731978 Richard O'BrienDeveloping Countries Bela Balassa Staff Working Paper No. 482. 1981. 60David C. Jones Staff Working Paper No 449 1981 36 pages (including appendix, bibliography).This manual is based on Bntish prac- pages (including appendix). Stock No. WP 0482 $3.tices and terminology of municipal ac- Stock No. WP 0449. $3.countmg, modified to suit the needs of Pnvate Capitl Flows toother countnes, especally those lack- The Political Structure of the Developing Countries anding a core of appropnately trained ac- New Protectionism Their Determinations:countants. Provides the basic pnnci- Douglas R. Nelson Historical Perspective, Recentpies of municipal accounting for those with httle or no bookkeeping expen- Staff Working Paper No 471 1981. 57 Experience, and Futureence and proceeds through successive pages (including references) Prospectslevels of difficulty to some of the most Stock No. WP 0471. $3 Alex Flemingadvanced concepts currentlv in use, Staff Working Paper No 484. 1981. 41mnduding the pooling of loans. An im- pagesportant feature is the multitude ofpractical applicatons and examples of NEW Stock No WP 0484. $3forms and records. Private Direct ForeignA Joint publication of the Chartered Price Distortions and Growth Investment in DevelopingInstitute of Public Finance and Ac- in Developing Countries Countriescountancy and the World Bank Ramgopal Agarwala K. Billerbeck and Y. YasugiJune 1984 About 900 pages SLxteen informative tables trace the Staff Working Paper No. 348. 1979, 101ISBN 0-8213-0350-3. Stock No BK 0350 distortion in prices of foreign exchange pages (including 2 annexes)$30. and other factors affecting the growth Stock No. WP 0348. S5

of developing countries. Based on sta-The Nature of Credit Markets tistics from thity-one developingin Developing Countries: A countres. NEWFramework for Policy Analysis Staff Working Paper No. 575. 1983 78Arvmnd Virrnanl pages. Savings Mobilization throughStaff Working Paper No 524. 1982. 204 ISBN 0-8213-0242-6 Stock No WP 0575 Social Security: The Case ofpages $3 Chile, 1916-1977ISBN 0-8213-0019-9 Stock No WP 0524 Chrstine WallichS5 Pricing Policy for Development Chstine thel

Management ~~~~~Describes the savmgs mobiltlraon po-The Newly Industrializing Meanagement tental in Chile and in five Asian pro-Developing Countries after the Gerald M. Mejer grams. Some sort of social securityOil Crisis Presupposing no formal training in program functions in almost all devel-economics, it explains the essential oping countnes. Programs are oftenBela Balassa elements of a price system, the func- costly, whether measured in relationStaff Working Paper No. 437 1980. 57 tions of pnces, the vanous policies to GNP, government expenditure,pages (including appendix) that a government rmght pursue in government revenue, or the wage billStock No WP 0437. $3 cases of market faLlure, and the pnnci- This paper compares the successful

pies of publhc pricing of goods and systems.Notes on the Analysis of services provided by government en- Staff Working Paper No 553 1983 109Capital Flows to Developing terprises. It also provides the would-be pages.Nations and the "Recycling" practitioner with an appreciation of the ISBN 0-8213-0123-3. Stock No. WP 0553.Problem underlying logical structure of cost- ISBN081-1335SokN.W.53benefit project appraisal. To give sub-Ralph C. Bryant stance to the applied and policy ti- Short-Run Macro-EconomicStaff Working Paper No. 476. 1981. 67 mensions, many of the readings arepages dirawn from the experience of develop- Adjustment Policies in SouthStock No. WP 0476 $3 ment practitioners and relate to such Korea: A Quantitative Analysisimportant sectors as agnculture, mn- Sweder van WijnbergenNotes on the Mechanics of dustry, power, urban services, foreign Staff Working Paper No. 510. 1981. 182Growth and Debt trade, and employment. The pnnciples pages (including 3 appendixes)Benjamin B. King outlined are therefore relevant to a ISBN 0-8223-00008. Stock No WI 0510.host of development problems, ISBN081-00-.Sok.oW 50A practical model to explore the way T J $5in which capital inflow from abroad af The Johns Hopkins Uning rsity Press. 1983.fects economic growth. d72 pages (including bibxiography and inThe Johns Hopkins University Press, 1968. LC 82-7716. ISBN 0-8018-2803-1, Stock69 pages (Including 4 annexes). No IH 2803, $35 hardcover; ISBN 0-LC 68-8701. ISBN 0-8018-0338-1, Stock 8018-2804-X, Stock No. IH 2804, $12.95 Prices subject to change without noticeNo. JH 0338. $5 paperback. paperback. and may vary by country.

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nature of intergovernmental fiscal rela- T p mr stions in India. "The primary source for Word DebTabbsVol. 1: Revenue Sharing in India medium- and long-term Ev OmdDrCw lChristine WallichVol. 11: India-Studies in State Fi- external debt of manynances developing countries." --

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Structural Aspects of Turkish World Debt Tables, 1983-84 EditionInfation: 1950-1979 The World BanLk's invaluable reference Also available for the first time ..M. Ataman Aksov guide to the external debt of develop-Staff Working Paper No. 540. 1982. 118 ing countries. Essential planning tool Summary Reportpages. - for economists, bankers, country risk Debt and the DevelopingISBN 0-8213-0098-9. Stock No. WP 0540. analysts, financial consultants and all Wol:CretT ndIS. those interested in the global system

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Thailand: An Analysis of countries augmented by information, bles from the 1983-84 edition.Structural and Non-Structural where available, on major economic 1984. 64 pages.Adjustments aggregates plus indicators used to ana-Ame Drud, Wafik Grais, and lyze debt and creditworthiness. Shows Stock No. BK 0319, $6.50.Dusan Vujovic statistical tables by country, including Companion computerized dataStaff Working Paper No. 513. 1982. 93 standing, commitments, disburse- basepages (including appendix). ments, service payments, and net bor- Includes all debt information given inISBN 0-8213-0023-7. Stock No. WP 0513. rowings. Reports on private the unabridged volume, and, where$3. nonguaranteed debt of 19 countries. available, offers continuous historical

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HG 3881.5. W57 'Y67 NO.705c.3

KNIGHT, PETER T.

FINANCIAL DISCIPLINE AND

The World Bank

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ISSN 0253-2115/ISBN 0-8213-0443-7