Yugoslavia - Economic development (Vol. 1 of 6) : Volume 1

DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use Report No. 194a-YU THE ECONOMIC DEVELOPMEUT OF YUGOSLAVIA (in six vo.lumes) VOLUME I SUMMARY AND CONCLUSIONS November 2X., 1973 Europe, Middle East and North Africa Region This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.  CURRENCY EQUIVALENTS Before January 23, 1971 A 1 US dollar = 12.5 dinars 1 Dinar = 8 US cents From January 23, 1971 to December 22, 1971* 1 US dollar = 15.0 dinars 1 Dinar = 6.67 US cents From December 22, 1971 to February 23, 1972 1 US dollar = 17.0 dinars 1 Dinar = 5.89 US cents From February 23, 1973 to July 12, 1973 Maintained a central rate of 1 US dollar = 17.0 dinars 1 Dinar = 5.89 US cents Since July 12, 1973 The Dinar has been floating. The rate of July 12, was 1 US dollar = 15.50 dinars 1 Dinar = 6.45 US cents * All conversions of 1971 data into dollars in this Report have been made at this exchange rate.  THE ECONOMIC DEVELOPMENT OF YUGOSLAVIA Table of Contents Page No. VOLUME I COUNTRY DATA MAP PREFACE SUMMARY AND CONCLUSIONS ...... .. * ..... . . . . .. . . . . ............ i - xxiv VOLUME II I. THE HISTORICAL AND INSTITUTIONAL SETTING ........... 1 A. Principal Developments to 1952 ................ 2 B. The Evolution of the Decentralized Self- Managed Systen: 1950-71 ..... ............... 9 C. The Present Institutional Framework .........." 26 II. ECONOMIC TRENDS AND DEVELOPMFNT ISSUES: 1953-72 ... 41 A. Long-Term Economic Trends ................41 B. Current Economic Situation and Short-Term Prospects .. *... . ... ........ . . . . . ....... .... . ... . 72 III. POPULATION, MIGRATION AND EMPLOYMENT ............... 77 A. Population ........................................ 77 B. Migration ...................................... 79 C. Employment Problems and Prospects ............. 85 IV. INCOME DISTRIBUTION AND SOCIAL WELFARE ............. 105 A. Incomes and Income Distribution ................ 105 B. Social Welfare System ....... ............ 117 (i) Health .b*b**................... 117 (ii) Pensions .............................. 120  Tha-e of Contents - Continued Page No. VOLUMF III V. INDUSTRY AND) MINING .................. ............... 121 APPENDIX TO V: Problems and Prospects of Selected Industries ....... 151 A. Steel .............. ......................... 151 B. Nonferrous Metals ........................ 154 C. Metal Manufacturing and Nonelectrical Machinery 156 D. Motor Vehicles .................... ..... 159 E. Electrical Equipment ............................ 162 F. Chemicals and Fertilizers ...................... 163 G. Forest Products Industries ..................... 165 H. Textiles and Clothing .......................... 168 I. Coal, Oil and Natural Gas .................. . ... 170 VI. AGRICULTURE ...................................... 173 VII. INFRASTRUCTURE .......... . . ....................... . ............. 189 A. Transport ....................... ............. ...... . 189 B. Electric Power ...... ........................... 204 C. Housing .......** ... *a&..* ..................... 210 D. Education ................................... 213 VIII. REGIONAL DEVELOPMENT PROBLEMS AND POLICIES .......... 216 VOLUME IV IX. RESOURCE MOBILIZATION AND ALLOCATION: 1947-71 ...... 242 A. Central Planning: 1947-51 ...................... 243 B. Decentralization: 1952-63 ................ ... 244 C. Decentralization: 1964-71 ....... .... 250 X. RESOURCE MOBILIZATION AND ALLOCATION: PROSPEM .... 276 XI. STABILIZATION: INSTITUTIONS, INSTRIMENTS AND POLICIES ....... ....:.... .:... . .. 292 A. The Fiscal System ....... .............. ...... . . 292 B. The Monetary System .... ... ..-.....-..... ...*-. 298 C. Instability and Inflation Since 1965 ........... 300 D. Stabilization Policy ........... ................ 303 E. Prospects for Stabilization Policy ............. 308  Table of Contents - Continued Page No. XII. THE BALANCE OF PAYMENTS AND FOREIGN TRADE ........... 312 A. Institutional Change and Foreign Exchange and Trade Policy: 1947-72 ................. 312 B. Commodity Trade .... . ................. .... 319 C. Development of Services ......... 343 XIII. CAPITAL FLOWS AND EXTERNAL DEBT ...................... 351 A. Capital Flows ...................... 351 B. External Debt ....... . ............. ........... . 355 XIV. DEVELOPMENT PROBLEMS AND PROSPECTS .... ........... too 364 SELECTED BIBLIOGRAPHY VOLUME V APPENDICES I. STATISTICAL NOTE II. PERSONAL MONEY INCOME FORMATION IN MANUFACTURING INDUSTRY III. A LONG-TERM PROJECTION MODEL FOR YUGOSLAVIA IV. NEW AGREEMENTS ON INCOMES POLICY V. THE SOCIAL COST OF EMPLOYMENT VOLUME VI STATISTICAL ANNEX  LIST OF CIURTS CONTAINED IN REPORT I. Political Structure of the Federation II. Self Management at Different Levels of a Large Enterprise, 1971 III. Distribution of Income Within an Enterprise, 1971 IV. Structural Changes in the GDP V. Total Consumption, Gross Domestic Investment and Resource Gap as Percentage of Gross Domestic Product VI. Industrial and Agriculture Producer Prices and Cost of Living Indexes, 1952-71 VII. Industrial Producer Prices by Type of Good VIII. Annual Changes in Production, Prices and Net Personal Income: Industry, 1954-71 IX. Trade, Services and Current Account Balance, 1950-72 X. Persons Registered for the First Time at the Employment Bureau, Total Registration and Non-Primary School Leavers XI. Growth of Capital Output, Capital Labor and Labor Productivity Ratios, 1952-70 XII. Income Concentration and Per Capita Incomes of Republics, 1968 XIII. Gross Material Product Per Capita by Regions XIV. Geographical Distribution of Trade XV. Foreign Exchange Earnings XVI. Foreign Exchange Earnings from Invisibles  LIST OF TABLES IN MAID TEXT OF REPORT Table No. Page No. I. THE HISTORICAL AND INSTITUTIONAL SETTING 1.1 Investment in Fixed Assets by Source of Finance 16 1.2 Investment in Fixed Assets Financed by the State by Levels of Government 17 1.3 Selected Indicators 23 l.)4 Membership of' Workers' Councils and Managing Boards, 1960 and 1970 34 II. ECONOMIC TRENDS AND DEVEIOPIvlT ISSUES 1953-72 2.1 Selected Indexes of Economic and Social Development 41 2.2 Sectoral Growth Rates of GDP in 1966 Dinars 42 2.3 Sectoral Shares in GDP 3 2.4 Resources and Use: Growth Rates in Percentages 45 2.5 Resources and Uses in Current Prices and in 1966 Prices 47 2.6 Gross Fixed Investment, 1952-69 50 2.7 Gross Fixed Investment in Industry, 1952-69 50 2.8 Capital Output and Capital Labor Ratios 52 2.9 Incremental Capital Output and Capital Labor Ratios 53 2.10 Population and Employment 54 2.11 Relative Magnitude of the Components - Total Output Growth: 1953-71 55 2.12 Net Yaterial Product per Worker 56 2.13 Industry: Growth of &nployment and Productivity 57 2.14 Prices and Deflators 61 2.15 Growth of Personal Incomes 62 2.16 Commodity Trade 67 2.17 Summary Balance of Paym-ents 69 2.18 The Private Sector in the Yugoslav Economy 71 2.19 Growth of the Private Sector 71 2.20 Selected Economic Variables, 1965-71 74 III. POPULATION, MIGRATION AND EMPL01MENT 3.1 Regional Comparisons in Social Sector Job Creation and Growth in Total Labor Force 1961-71 91 3.2 Enploynent Shares and Expansion of Employment in Industry and Services, 1953-71 92 3.3 Contribution of Factors to the Growth in Social Product in the Private and Social Sectors, 1953-70 95 3.4 Contributions of Productive Factors to the Growth in Value-Added in the Major Branches of the Social Sector, 1953-71 96 3.5 Investments, Employment Growth and Productivity in Manufacturing Industry, 1967-71 100  'aD- e 'ePage No. IV. 1NCOIE ,ISTRIBUTION AID SOCIAL WELFAIRE Evolution oI' Average Personal Incomes, 1952-71 106 4.2 Coefficients of Concentration of Household Income by Type of Household in Yugoslavia in 1963 and 1968 108 4.3 Growth Rates in Real Average incomes in Selected Percentiles 1963-68, by Types of .Households in all Yugoslavia 111 4.4 The Stiucture and Growth in Peasant Household Incomes, 1961-70 113 4. _15) The Structure of Average Personal Incomres in the Major Econoric Sectors, 1963 and 1971 115 4.6 Ratio of Earnings of Highly-Qualified to Earnings of Unskilled Labor by Sector of Activity, 1957-72 116 4.7 The Health Insurance System 118 4.8 The Pension System 120 V. IiDUSTRY AND DMTING 5.1 Evolution of Industrial Output and Employment 1952-71 121 5.2 Growth in Fixed Assets, Net Output and Employment in Manufacturing and Mining, 1960-71 123 5.3 Range of Growth Rates as a Ratio ! of Industrial Average 124 5.4 The Growth of Industrial Production by Branches 125 5.5 Investment, Output and laployment in Manufacturing, 1953-70 127 5.6 Capital-Output and Capital-Rnploynent Ratios in Yugoslav Industry 129 5.7 Trade in Manufactures 130 5.8 Industrial Enterprise by.Size, 1970 131 5.9 Nominal and Effective Tariff by Branches 134 5.10 Personal Incomes, by Industrial Group, (as a ratio to the Average for all Manufacturing Industries) Yugoslavia 1969 and 1970 and Sweden 1965 136 5.11 Ratio of Gross Profit to Total Assets, 1970 137 5.12 Distribution of the Industrial Product 139 5.13 Pattern of Fixed Assets Financing by Industry, 1970 142 5.14 Industrial Targets in the Draft Social Plan, 1971-75 146 Appendix to Chaper V 5.15 Present and Planned Capacities 154 5.16 Alumina and Aluminum Capacities at the End of Present Expansion Phase 155 5.17 Production and Employment in MIetal-Working Industries, 1970 157 5.18 Number of Producers of Some Common Types of Equipment 158 5.19 Production and Trade, in Motor Vehicles, 1964-71 160 5.20 Supply and Demand for Chemicals 163 5.21 Clothing Industry, Contract Work for Foreign Firms and Straight Dcports 170 5.22 Production and Trade for Major Mineral and Major Fuels 171  - iii. - Table No. Page No VI. AGRICULTURE 6.1 Output of Major Items in Socialist and Private Holdings 176 6.2 Gross Fixed Investment in Agriculture 177 6.3 Basic Data on Small Holdings 179 VII. INFRASTRUCTURE 7.1 Traffic by Transport Modes 191 7.2 Roads Classified by Surface 19g 7.3 Road Network in 1970 198 7.4 Financing of Highway Expenditures 19 7.5 Selected Data on Major Ports 203 7.6 Transport of Yugoslav International Trade -03 7.7 Selected Indicators of Development of Electric Power 205 Industry 7.8 Pattern of Electric Power Consumption 206 7.9 Generation of Electricity, 1960-71 202 7.10 Selected Indicators of Development in Housing 1 VIII. REGIONAL DEVELPMENT PR0BLE4S AND POLICIES 8.1 Selected Development Indicators 219 8.2 Index of' Per Capita Incomes 221 8.3 Index of Inequality of Per Capita GMP 222 8l.4 Indices of Net Material Product 223 8].5 Indices of Net Material Product Per Worker 224 8.6 Growth of Output Employment and Productivity, 1953-71 226 8.7 Components of Growth of Net Material Product, 1953-61 228 8.8 Investment and Output by Regions 229 8.9 Sectoral Allocation of Investment 230 8.10 ICORSs for Industry 231 8.11 ICOR by Industrial Branches 232 8.12 Capital Labor Ratios 233 8.13 Allocation of FAD Resources by Regions and Sectors, 1966-69 237 8.14 Regional Development 1970-85 241 IX. RESOURCE MOBILIZATION AND ALLOCATION - 1947-71 9.1 Assets of Social Investment Funds at End 1963 245 9.2 The Net Income System 247 9.3 Share of Enterprise Rei in Gross Value-Added 248 9.4 Structure of Total Savings, 1950-63 248 9.5 Banking System at End 1963 250 9.6 Trends in Aggregate Saving and Investment 251 9.7 Structure of Savings 253 9.8 Enterprise Saving Rate Out of "Residual Enterprise Income" 255  - iv - __________ Page No. IX. (cont'd.) 9.9 Share of Net Personal Receipts in Social Product 256 9.10 Ratio oi Savings to "Income" by Households and Private Producers 257, 9.11 Domestic So-u-rces of Finance for Fixed Investment 258 9.12 Numb.er of Business Barks at the Ehd of Year 259 9.13 Balance Sheet of Investment Operations of Business Banks at End of Year 260 9.14 Flow of' Investment Resources into Business Banks 262 9.15 Financial Investment by Domestic Non Financial Sectors 264 9.16 Financial Investments of Domestic Non Financial Sectors by Instrusents 266 9.17 Finarncial Savings of Domestic Sectors 267 9.18 Savings of Households and Private Producers 268 9.19 Interest Rates and Inflation 268 9.20 Enterprise Financing of Investment 272 X. RESOURCE MOBILIZATION AND ALLOCATION 10.1 Key Trends in Saving 3ehavior, 1967-71 279 10.2 Percent Composition of Revenues on Enterprise Value-Added, by Base 290 XI. STABILIZATION: INSTITUTIONS, INSTRUMENTS AND POLICIES 11.1 Public Sector Expenditures, 1967-70 295 11.2 Public Sector Revenues, 1967-70 297 I1L3 Monetary Pol-icy Tools 300 11.4 Symptons of Instability 301 11.5 Chain Indices of Prices: Data for December in Relation to December of Preceding Year 302 11.6 Structure of Public Expenditure 304 11.7 Aggregate Demand Variables 306 XII. THE BALANCE OF PAYMENTS AND FOREIGN TRADE 12.1 Retention Quota Rates 315 12.2 Average Customs Tariffs by Branch of Production, 1967-71 317 12.3 Distribution of IT%ports by Categories of Import Control System 318 12.4 Yugoslavia's Trade Balance and Balance of Goods and Services by Region, 1961-71 322 12.5 Structure of Exports and Imports, 1939-70 326 12.6 Structure of Exports and Imports by SITC Groups, 1939-70 327 12.7 Structure of Agricultural Exports 328 12.8 Structure of Industrial Exports by Branches 330 12.9 Number of Export Items of Manufactures 331 12.10 Structure of Exports by Degree of Manufacturing 332 12.11 Average Annual Growth Rates of Exports by Commodity Group, 1960-70 334  Table No. Page No XII. (cont'd.) 12.12 Average Growth Rates of Exports into OBCD Countries by Commodity Group, 1960-70 335 12.13 Growth of Total Imports and Imports from Yugoslavia in Main Foreign Markerts 337 12.14 Structure of Imports 338 12.15 Total Import Content (Direct and Indirect) by Iadustrial Branches and Annual Growth 340 12.16 Inport Content (Direct and Indirect) of Final Demand 341 12.17 Structure of Foreign Exchange Earnings, 1954-72 343 12.18 Foreign Exchange Earnings from Invisibles, 1954-70 344 12.19 Tourism Development 1960-71, Summary Indicators 348 XIII. CAPITAL L-MOWS AND EXTERNAL DEBT 13.1 Structure of Medi-um- and Long-Term Capital (Net), 1955-72 353 13.2 Structure of Foreign Debt 356 13.3 Average Terms of Foreign Loans, 1963-70 358 13.4 Structure of Amortization Payments on Outstanding Debt 359 13.5 Structure of Amortization Payments in 1970 360 13.6 Selected Debt Indicators 361 XIV. DEVELOPMENT PRDELEMS AND PROSPECTS 14.1 Export Growth Rates: Past Trends and Future Assumptions 370 14.2 Selected Results of Base Run 373 14.3 Balance of Payments, Current Account: Base Run Projections 374 14.4 Balance of Payments, Capital Accounts: Base Run 375 14.5 Debt Service Ratios Convertible and Non Convertible Areas: Base Run 375 14.6 Balance of Payments Sensitivity Results: Alternative Runs 376 14.7 Selected Results of Variant 377 APPENDIX III 1 Export Growth Rates, Past Trends and Future Assumptions 13 2 Assumptions and Terms for Suppliers' Credits 16 3 Results of Base Run 17 4 Sector Growth Rate 18 5 Non agricultural Emloyment 19 6 Imports by End-Use 20 7 Balance of Payment, Current Account 21 8 Balance of Payments, Capital Account 21 9 Net Transfer and Debt Service Ratios Convertible and Non Convertible Areas 22 10 Balance of Payments Sensitivity Results 23 11 Variant D 24  - vi - Table No. Page No. APPENDIX IV 1 Functional Distribution Nonrs in Croatia 3  Page 1 of 2 pages COUNTRY DATA - Yugoslavia AREA POPULATION DENSITY 255,8o4 sq.km 20.55 million (mid-1971) 80 persons per sa.km Rate of Growth: 0.9% (1965 to 1971) 203 persons persq.km of arable land POPULATION CHARACTERISTICS (1971) EETH (1970) Crude Birth Rate (per 1,000) 18.2 Population per physician 1,164 Crude Death Rate (per 1,000) 8.7 Population per hospital bed 174 Infant Mortality (per 1,000 live births) 48.9 INCOME DISTRIBUTION (1971) DISTRIBUTION OF LAND OWNERSHIP (1970) X of national income, lowest quintile 6.1 % owned by top 10% of owners highest quintile 39.2 X owned by smallest 107. of owners ACCESS TO PIPED WATER (2971) ACCESS TO ELECTRICITY (1961) % of population -urban) % 7 of population -urban 92.7 - rural) 34 8 rural 36.1 NUTRITION (1967-70) EDUCATION Calorie intake 3151 Adult literacy rate 7 82 (1971) Per capita protein intake 91.3 graams Primry school enrollment 2 94 (1968) a/ GNP PER CAPITA in 1971 US $730 GROSS NATIONAL PRODUCT IN 1971 ANNUAL RATE OF GROWTH (7., constant prices) US $ Mln. % 1960-65 1965-70 1971 1972 j GNP at Market Prices 14,875 100.0 6.o 5.h 9.7 5.6 Gross Domestic Investment 4,057 27.3 7.5 3.3 -4.5 4.0 Gross National Saving 3,733 25.1 9.1 2.6 -1.2 Current Ac,count Balance -324 2.2 Exports of Goods, NFS 2,844 19.1 12.0 8.4 9.5 20.7 Imports of Goods, NFS 3,743 25.2 8.6 11.6 12.2 2.2 OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 19971 b/ Value Added Labor Force7 V. A. Per Worker US $ Mln. M Nln. % us$ % Agriculture 2,193 16.3 3,928 47.4 558 34.4 Industry 6,186 46.o 1,932 23.3 3,202 197.5 Services 5,058 37.7 2,429 29.3 2,082 128.4 Unallocated . _ Total/Average 13, 10: 8,298 100.0 1,621 100.0 GOVERNMENT FINANCE C"ntrnl Goveritiienit ( Diin. ihn.) _ of (;DP 197). 9L7 i9o'._-7i Current Receipts 78,362 8'-5 8.2 Current Expenditure )m037 -' 7'7 3 Current Surplus 2,325 1.1 0.9 Capital Expenditures 2,315 1. 0.5. External Assistance (net) 35 -0. 01 -0.02 a/ The Per Capita GNP estimate is at 1971 market prices, calculated by the same conversion technique as,the 1972 World Atlas. All other conversions to dollars in this table are at the current exchange ratE prevailing during the period covered. Estimated per capita GNP in 1971 at the current exchange rate would be about $724. b/ Total resident labor force; unerployed are allocated to sector of their normal occupation. "Unallocated" consists mainly of unemployed workers seckinE their first job. c/ Preliminary. - zero not available * too small for expression  Page 2 of 2 pages COUNTRY DATA - Yu2oslavia MONEY, CREDIT and PRICES 1965 1969 1970 1971 1971 1972 (Million Dnrs. outstanding end period) Money and Quasi Money 344 6404 74.39 B 9.56, 79.54 99.46 Bank.s. Credit to Public Sector 7.74 6.95 8.38 9.395 7.69 9.71 Bank Credit to Private Sector 32.25 51.76 68.69 78.35 76.45 83.41 (Percentages or Index Numbers) Money and Quasi Money as 7 of GDP 41.1 39.6 39.5 38.0 General Price Index (1963 = 100) 141 207 227 262 277 314 Annual percentag;e changes in: General Price Index 29.4 7.3 9.7 15.4 14.5 16.0 Bank credit to Public Sector 96.4 5.8 20.6 12.1 3.4 26.3 Bank credit to Private Sector 11.1 20.4 18.9 14.1 20.4 9.1 BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 1969-71) 196 1970 1971 972 US Mln % (Millions US $) Exports of Goods, NFS 2,134 2,489 2,810 3,400 Agriculture Products 250 13.4 Irmports of Goods, NFS 2,405 3,220 3,720 3,914 Non ferrous metal ind. 249 13.3 Resource Gap (deficit -) 271 -731 _-910 Metal indus try 236 12.7 Ships 1242 7.6 Interest Payments (net) -90 -I10 -130 -150 All other commodities 988 53.0 Workers' Remittances 260 440 652 780 Total II3O _o o Other Factor Payments (net) . Net Transfers 45 61 64 70 EXTERNAL DEBT, DECEMBER 31. 1971,c/ Balance on Current Account -110 -340 -324 -I $ Direct Foreign Investment) Net MLT Borrowing ) 278 301 353 298 Public Debt, incl. guaranteed 2,670.6 Disbursements 517 636 857 926 Non Guaranteed Private Debt .8 Amortization _W22 -M:5 -.5904 -628 Total outstanding & Disbursed 4,487.4 Subtotal 278 301 353 %