Yugoslavia - Exports performance and policies

Report No. 2972-YU FILE COPY Yugoslavia: Export Performance and Policies October 16, 1980 Europe, Middle East and North Africa Region FOR OFFICIAL USE ONLY U Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bark authorization.  Currency Equivalents 1/ 1971 1 US Dollar 14.96 Dinars I Dinar 0.067 US Dollar 1972 1 US Dollar 17.00 Dinars 1 Dinar 0.059 US Dollar 1973 1 US Dollar 16.19 Dinars -l Dinar 0.062 US Dollar 1974 1 US Dollar 15.91 Dinars 1 Dinar 0.063 US Dollar 1975 1 US Dollar 17.39 Dinars 1 Dinar 0.058 US Dollar 1976 1 US Dollar 18.19 Dinars 1 Dinar 0.055 US Dollar 1977 1 US Dollar 18.30 Dinars I Dinar 0.055 US Dollar 1978 1 US Dollar 18.64 Dinars 1 Dinar 0.054 US Dollar 1979 1 US Dollar 19.00 Dinars 1 Dinar 0.053 US Dollar Glossary of Abbreviations BOAL Basic Organization of Associated Labor BLS US Bureau of Labor Statistics CIFER Community of Interest for Foreign Economic Relations CPE Centrally Planned Economies EEC European Economic Community EER Effective Exchange Rate IMF International Monetary Fund LDC Less Developed Country NBY National Bank of Yugoslavia NIC Newly Industrialized Country OAL Organization of Associated Labor OECD Organization for Economic Cooperation and Development QR Quantitative Restriction SITC Standard Industrial Trade Classification YBIEC Yugoslav Bank for International Economic Cooperation YDAC Yugoslav Domestic Activity Classification 1/ Period average exchange rates. The dinar has not been maintained within announced margins since July 12, 1973. Following a devaluation on June 6, 1980 the market rate was adjusted to 27.40 dinars to the US dollar (1 Dinar = 0.036 US Dollar) and was 27.34 dinars per dollar at the end of July 1980.  FOR OFFICIAL USE ONLY YUGOSLAVIA: EXPORT PERFORMANCE AND POLICIES This report is based on the findings of a mission which visited Yugoslavia in November 1979, consisting of Suman Bery (chief of mission), Cyrus Ardalan (incentives analysis), H. David Davis (tourism), Goran Segerlund (general economist and competitiveness analysis) and Antoine Schwartz (structural developments and market performance). The report was discussed in draft with agencies of the Yugoslav government and other official bodies in June 1980. Europe, Middle East and North Africa Region The World Bank Washington, D.C., USA This document has a restricted distribution and may be used by recpients ody in the performance of their official duties. Its contenst may not otherwise be disclsed without World Bank authorization.   YUGOSLAVIA: EXPORT PERFORMANCE AND POLICIES Table of Contents Page No. COUNTRY DATA MAP SUMMARY AND CONCLUSIONS ........................................ i-ix I. INTRODUCTION AND OVERVIEW ............................ 1 Institutional Developments 1952-65 .................. 1 The New System of Trade and Payments .... ............. 2 Major Trends, 1965-1979 ............................. 4 II. MERCHANDISE EXPORTS: GROWTH AND STRUCTURE .... ...... 11 Real Growth ......................................... 11 Market and Commodity Structure ...................... 12 Commodity Characteristics: A Disaggregated Analysis. 15 Diversification ..................................... 22 Specialization ...................................... 24 Conclusions .......................................... 24 III. MARKET PERFORMANCE .................................. 26 Export Performance in Developed Country Markets ..... 27 Aggregate Results .................. ................. 28 Comparative Performance by Commodity ........ ........ 31 Market Growth and Distribution ......... .. ........... 31 Competitive Effects and Relative Performance vis-a-vis the NICs .............. .. ................ 31 (a) Primary Products ............................... 31 (b) Manufactures ................................... 34 A Taxonomy of Performance ............ .. ............. 36 IV. EXTERNAL COMPETITIVENESS OF MANUFACTURED EXPORTS .... 38 Exchange Rate Policy ................................ 39 Nominal Exchange Rates .................... 40 Indicators of Competitiveness ....................... 41  Table of Contents Page No. V. COMMERCIAL POLICY AND TRADE BIAS .... ............... 46 Import Levies ........ .............................. 48 Quantitative Restrictions ..... ..................... 50 Export Incentive Policies ..... ..................... 54 (a) Duty Drawbacks and Fiscal Incentives .......... 55 (b) Credit Subsidies .............................. 56 (c) Retention Rights .............................. 57 Bilateral Trading Arrangements .................. ... 58 Relative Price Relationships .................... ... 59 VI. CONCLUSIONS AND PROSPECTS ......... ................. 63 ANNEXES ........................................................ 73 I. Yugoslavia's Exports by Commodity and Destination ....... 73 II. Market Share Analysis ................ .. ................. 77 III. The Measurement of Export Competitiveness .. ............. 80 STATISTICAL APPENDIX ....... ................................... 87 Text Tables 1. Imports and Exports, 1965-1979 5 2. Plan Targets, 1976-80, and Performance, 1976-79 9 3. Growth in Medium- and Long-Term Debt (Outstanding and Disbursed) 10 4. Comparative Merchandise Export Performance, 1960-78 11 5. Aggregate Regional and Commodity Distribution of Exports: 1963, 1970 and 1977 14 6. Distribution of Merchandise Exports by Country: 1963, 1970 and 1977 16 7. Commodity Structure of Yugoslavia's Exports by Major Region: 1963, 1970 and 1977 17 8. Comparative Dynamic Characteristics of Yugoslavia's Exports by Commodity 19 9. Measures of Export Diversification for Yugoslavia and Selected Countries 23 10. Export Specialization Indices for Yugoslavia, Developed and Developing Countries, 1970 and 1975 25 11. Yugoslavia and the Newly Industrialized Countries (NICs): Comparative Indicators 27 12. Constant Market Share Analysis of Yugoslav Exports: Aggregate Results 28  Text Tables (cont.) Page No. 13. Constant Market Share Analysis: Summary of Results for Major Commodity and Market Groupings 30 14. Yugoslavia's Relative Export Performance by Commodity: All Markets 32 15. Yugoslavia's Relative Export Performance by Commodity: European Economic Community 33 16. Yugoslavia's Relative Export Performance by Market; Primary Commodities and Manufactures 35 17. Grouping of Sectors by Market Performance 37 18. Dinar Rates Against the US Dollar in the 1970s 40 19. Indices of Nominal Exchange Rates for Manufactured Exports 41 20. Yugoslavia: Selected Indicators of External Competitiveness in Industry 42 21. Yugoslavia and Selected Export Competitors: Indices of Unit Labor Costs 45 22. Average Values of Import Charges, 1967-79 49 23. Average Tariffs by Customs Positions, 1975-79 50 24. Customs Duties and Import Taxes, by Customs Positions, 1977-79 51 25. Imports by Import Regime, 1967-79 51 26. Imports by Import Regime, 1975-79 53 27. Estimates of Fiscal Transfers for Export Stimulation, 1975-78 56 28. Ratios of Export Unit Values to Producer Prices, 1978 61 Statistical Appendix Tables A.1 Balance of Payments, 1965-79 88 A.2 Composition of Services Account, 1965-79 89 A.3 Current Account Balance of Payments Convertible Currency Area, 1970-79 90 A.4 Imports and Exports by Area, 1970-79 91 A.5 Composition of Exports by End-Use, 1970-79 92 A.6 Composition of Imports by End-Use, 1970-79 93 A.7 Exports According to SITC Classification, 1970-79 94 A.8 Imports According to SITC Classification, 1970-79 95 A.9 Export and Import Dollar Unit Value Indices According to SITC Classification, 1970-78 96 Figures 1. Yugoslavia: Imports and Exports, 1965-1978 6 2. Yugoslavia: Terms of Trade 8 3. Volume Indices of Yugoslavia and World Exports, 1953-79 13 4. Yugoslavia: Indices of Competitiveness 43   COUNTRY DATA - YUGOSLAVIA AREA POPULATION DENSITY 255,804 sq. km. 22.0 million (mid-1978) 86 persons per sq. km. Rate of Growth; 0.9% (from 1970 to 1978) 154 persons per sq. km. of agricultural land POPULATION CHARACTERISTICS (1978) HEALTH (1977) Crude Birth Rate (per 1,000) 18.0 Population per physician 762 Crude Death Rate (per 1,000) 8.0 Population per bospital bed 166 Infant Mortality (per 1,000 live births) 34.0 INCOME DISTRIBUTION (1973) DISTRIBUTION OF LAND OWNERSHIP (1971) Z share of household income, lowest quintile 6.5 % owned by top 10% of owners highest quintile 40.0 (social sector Kombinats) 15.1 % owned by smallest 10% of owners (private smallholders) 84.9 ACCESS TO PIPED WATER (1978) ACCESS TO ELECTRICITY Dwellings with piped water (%) 40.5 % of all dwellings (1978) 89.0 rural (1971) 80.0 NUTRITION (1977) EDUCATION Per capita Calorie Supply 3,445 Adult Literacy rate (Z) 85 (1975) (136% of requirement) Primary school enrollment (%) 100 (1977) Per capita protein supply (grams/day) 101 Secondary school enrollment (%) 79 (1977) GNP PER CAPITA IN 1978 1/: US$2380 GROSS DOMESTIC PRODUCT IN 1978 AVERAGE ANNUAL RATES OF GROWTH (1, constant prices) US $ Mln. % 1970-75 1975-78 1978 GDP at Market Prices 53,765 100.0 6.6 4.9 6.8 Total Consumption 38,597 71.8 6.8 4.9 13.4 Gross Domestic Investment 18,811 35.0 5.9 6.7 -3.3 Gross Domestic Savings 15,168 28.2 5.7 13.8 2.6 Exports of Goods and Nonfactor 5.7 -1.8 2.5 Services 8,655 16.1 6.3 0.7 9.5 Imports of Goods and Nonfactor Services 12,247 22.8 OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1978 GDP at Current Factor Cost (1978) Labor Force 4/ Value Added Per Active Resident Worker us$ MMn. % Mln. % USS (1478) _% Agriculture 2/ 5,702 11.7 2.67 33.1 2,136 35.4 Industry 3/ 21,945 45.1 2.69 33.4 8,158 135.2 Other 20,970 43.2 2.70 33.5 7,767 128.8 Total 48,617 100.0 8.06 100.0 6,032 100.0 GOVERNMENT FINANCE, consolidated, 1978 USt Mln. Consolidated Public Sector Receipts 20,617 Expenditures 20,885 Surplus -268 Ratio of Current Receipts to GDP at Market Prices (Z) 38.3 MONEY, CREDIT AND PRICES (in billions of dinars) 1974 1975 1976 1977 1978 Money Supply 5/ (end-year position) 103.4 137.8 214.3 257.2 329.2 Money Supply as Z of GDP at market prices 24.3 25.6 31.4 11.9 32.8 Bank Credit Total 6/ 359.6 451.7 569.1 699.3 884.6 Enterprises 276.9 350.9 443.1 539.2 682.7 Government and other Social Sector 54.6 67.2 78.3 08.4 111.6 Households 28.5 38.7 50.5 65.1 90.3 Price Indices (Annual Percentage Change) Industrial Producer Prices 29 22 6 10 8 Agricultural Producer Prices 14 13 14 12 11 Retail Prices 26 26 9 13 13 1/ The per capita GNP estimate is at market prices, calculated by the same conversion technique as the 1979 World Atlas. All other conversions to dollars in those tables are at the prevailing period average exchange rate (see inside cover). 2/ Includes irrigation and forestry. 3/ Manufacturing, mining, construction, electricity, gas and water. 4/ Total active resident labor force, excluding unemployed. 5/ Currency in circulation, demand deposits and float. 6/ Short- and long-term credits.  BALANCE OF PAYMENTS, MERCHANDISE TRADE AND DEBT Annual Data at Current Prices (US$ Millions) 1975 1976 1977 1978 1070 1/ SUMIARY OF BALANCE OF PAYMENTS EXTERNAL DEBT, Deceuber 31, 1978 4/ Exports (f.o.b.) 4,072 4,878 5,254 5,671 6,704 US$ Millions Imports (c.i.f.) -7,697 -7,367 -Q,634 -9,988 -14,019 Trade Balance 3,625 -2,489 -4,380 -4,317 -7,225 Debt Outstanding and Disbursed 11,014 Official (?,960) Non-Factor Service Receipts 2,354 2,430 2,600 2,984 3,016 Private (8,054) Non-Factor Service Payments 2/ -1,135 -1,386 -1,641 -2,259 -3,507 Non-Factor Services Net Balance 1,219 1,044 059 725 409 Debt Service Ratio 5/ (%) 21.5 Debt Service Ratio 6/ (%) 16.5 Factor Service Receipts 1,746 1,974 2,220 2,7