THE ECONOMIC AND SOCIAL SITUATION AFTER 1989

REDUCTION OF THE ECONOMIC ACTIVITIES

    While the Central and Eastern Europe started an application of reforms in all fields, in the territory of former Yugoslavia, as a result of the historic-national social-economic factors, and expressed tendencies for domination and centralism, it came to a war escalation. It was a conflict between hegemonistic forces for economic and political domination and new forces which admired the independence and establishment of democratic societies. This war resulted in the destruction of former Yugoslavia. In this historic constellation, the population of Kosova was among the nations who sought rescue on a democratic development, interested to be included in the transition process and social reforms. However, in 1990, the government of Serbia, through the military-police force made a classic occupation of Kosova, contrary to the constitutional status of Kosova in former Yugoslavia. Thus, the constitutional subjectivity of Kosova in former Yugoslavia, as one of its eight equal units of the federation, was abrogated, and by the same time, the institutional structure of a wide territorial and political autonomy was suspended. A structure of political, and economic, social and psychological domination over the majority population of Kosova was created instead, through the force apparatus and application of a typical colonial policy.

This can be illustrated by the following facts:

1. The basic bearer of administration over the economy and material goods became the minority population of Kosova, which in 1991 had a participation less than 10%, so that this administration is effected through the apparatus of force.

2. Establishment of the state of emergency for suspension of the legal state bodies (the Parliament, Government and other legal institutions).

3. Application of the administrative force measures in all public-state enterprises, such as information, science, health care, and humanitarian field.

4. About 70 % of the Albanian employees were dismissed by force from their jobs, from the public-state sector of the economy and other legal and culture institutions in the function of ethnic cleansing.

5. Integration by force of the companies of Kosova with respective companies in Serbia, in order to put them in subordinate relations.

6. Transformation of the social (public) property according to the Serbian concepts regarding privatization, where the public and state institutions such as Chamber of Economy, Fund for development of Serbia, Agency for the capital evaluation, and different ministries through fictive transactions turned the Serbian state into an "owner" of the most significant part of the main companies of Kosova.

7. Interruption of public and other investments, despite the fact that Serbia and "Yugoslav" government collected different kinds of taxes.

8. Destruction of financial institutions and banks and opening of affiliate of serbian banks representative offices in Kosova, without any investment activity, the main operation of which is to collect foreign currency.

9. Transformation of the Kosova market in an absorption market for Serbian products, with much higher prices than those in the world market lacking competition.

By these and additional measures applied later, which were installed at the economic system of the command type: The economic sovereignty of Kosova was destroyed, despite the fact that in legal and constitutional basis of former Yugoslavia, Kosova had the same position as Serbia and other subjects of the federation.

This situation has been reflected in the following:

1. Drastic reduction in the national production

2. Reduction in production and industrial activities

3. Stopping of investments

4. Mismanagement in all public enterprises, particularly in large economic systems

5. Losing of foreign markets, in particular in exports

6. The blockade of institutions of the financial system.

1). The decline of the national product and economic activity, took place immediately after 1989. The impact of destructive political factors was crucial in the decline of the economic activity. While in Central and Eastern Europe, decline of GDP was as a consequence of the transition and reform process, in Kosova it was a consequence of the installed administration in economy driven by political objectives.

During the period of 1989-1995, the national product of the economy declined for 47,5 %. It is a characteristic here that a decline in the economic activity was evident almost in all economic activities. The most significant decline was marked in industry for 71,6 %, hydro-economy 77,5%, construction 80,2%,communication 72,9%, public services 71,2 % and handicraft 64,3 %. This was reflected also in the structure of the economic and development activities. So, while in 1989, the participation of industry in national product of the economy was 47,4 %, in 1994 declines at 21,1 %, construction from 7,0 to 2,6 %, communication from 7,5 % to 3,9 %. This proves that the installed administration destroyed the most production and infrastructure structures of the economy, which had been constructed by significant funds invested from the international financial institutions and other forces. Some higher vitality has been shown by agriculture, due to the fact that its potentials (land, equipment, and production structure), were mainly, even in the past, privately owned. An increase of trade participation in creating of the national product of Kosova is also indicative.

In 1989, trade participation in GNP was 14,2 %, while in 1994 it increased to 22,9 %. This is a consequence of the destruction of the production capacities.

The decline was quite significant and with a lot of development and social consequences even in a long term economic development of Kosova. Taking into consideration the fact that Kosova in the past had experienced a considerable industrial development, such a significant decline of the economic activities in this sector has seriously spoiled much more the equilibrium between the economic, social and regional development of Kosova. In this period, there is a drastic reduction of production in all vital complexes of the economy. It should be stated here that only the electric-economy did continue the production activity, but in the circumstances of a forced integration with the public electric economy corporation of Serbia.

Reduction of the national product per capita in Kosova in this period was drastic. While in 1989, the estimated national product per capita was 700 US$, in 1995 it is 340 US$ only.

This ranked Kosova in the group of Balkan countries with the lowest national product. Such a national product level had considerably narrowed the possibility to keep an economic, social and demographic equilibrium in Kosova. These processes of a deep economic and political crisis have been accompanied with population movement (out of Kosova migrations are estimated to be about 500 000 inhabitants, or about 20% of the population).

Suspending the main sources of the industrial growth, Serbia during the period after 1989 has transformed the market of Kosova in a common market and in a function of its colonial policy towards Kosova, imposing to the population its products, under the conditions of a total economic, fiscal and customs blockade of Kosova. The destruction of the industrial capacities, especially of those in food production, enabled Serbia to restructure the market of Kosova, according to its colonial needs, selling its products with higher prices than in the foreign market, on the other side making impossible to do any imports. It is estimated that total Serbian food product sales in Kosova reaches the amount about 400 mil DM.

2) All the industrial branches faced significant reduction of production in the period between 1989-1995 compared to 1988: electro-energy had a reduction with 57,2 %, the non-ferrous mineral production 86,5 %, non-ferrous metal production 86,5 %, processing of the non-ferrous metals 97,2 %, production of non-metals 98,0 %, production of machines and electric appliances 67,6 %. Almost all branches and complexes are facing a blockade of development processes as well as the technological progress. In 1994 capacity using level (rate), has declined at 35,5 %, while in 1994 it is 19,0 % of the potential capacities. These processes had significantly influenced the economic position of Kosova as indicated below:

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3) Investment activity during this period had experienced a drastic decline. The reasons for such a decline should be searched in the destruction of the financing development sources and other institutional funds, an interruption of using of the World Bank funds and financial credits from other international financial institutions.

During the period 1990-1994, the overall investments in state and public sector of the economy of Kosova decreased by 69,2%. The economic development concept of Kosova would have grave consequences for future prospective.

4) The economic activity, in particular was attacked in large corporations. In the focus of the destructive economic policy was the "Trepca" corporation, Electric-economy, Feronikel etc. The sale of Kosova telecommunication system to the foreign partners, represents an open and a very rude form of transfer of property because the population of Kosova has no access to these funds.

Also the large corporation system "Trepca", had an economic activity under imposed business conditions. Under the decision of the Government of Serbia, the "Trepca" corporation, in 1992 did a transformation to the stock company, this way a new ownership structure was established with a participation as follows: 65,6 % belonged to the "Serbia Development Fund", 27,5 % the "public (social) capital of Trepca, 2,5 % "to Yugobanka, 2,5 % to "Progres", Belgrade, 1,9 % the electro-economy of Serbia and 0,6 % to other subjects. By this way, under an administrative restructuring, it came to a change of property to "Trepca". After such transformation, the number of dismissed workers reached 11.597 Albanian employees.

All new production programs and geological research were blocked. There were failures in all exporting activities, which were contracted in long term periods with foreign partners. So, the exports effected in 1989 at the amount of 111,7 mill. US$, in 1990 it was 38,1 mill. US$ only, while in 1994 in fact total exports were blocked.

Such a high decline of the production level in metallurgy is a result of a very bad administration. Characteristically, the production of electrolyte zinc, silver and cadmium was stopped in 1994. The production of zinc plated lead and electrolyte zinc drops at 4,2% and 3,4% of the production level of 1988.The decline of the production level in comparison with real installed capacities is much more problematic. In the production of former Yugoslavia, Trepca had a high participation: lead-zinc metal production was 32,0 %, pyrite concentrate 18,5 %, refined lead 76,1 %, lead alloy 52,6 %, and refined silver 67,2 %.

The energy plants of Kosova had a rather high participation in the energetic of the former Yugoslavia: electric-energy (7.3 %) , coal production ( 15.0 % ) and lignite ( 18.0 %).During the period of 1990-1996 the production of electric energy was 25,8 mil. Kwh, out of which 17,7 mill. kWh was Kosova consumption, while 8,1 mil kWh were distributed out of Kosova. In this period direct consumption of the electric energy is decreased for 54,4 %, because the large systems had a significant reduction in their operation volume. The Institute for scientific research "INKOS", within electro-economy of Kosova, have been destroyed in complete. Although investments for the factory of production of energetic equipment and mining industry have been completed, before 1989, it was never put under operation.

According to some analyses and evaluations made, the value of lost production in the energetic complex reaches the amount of 1,7 bill. US$, while the value of destroyed facilities is approximately 755,2 mill. US$. So, the total of these two categories would be 2,4 bill. US$ (cumulative damages) until 1995.

5.After 1989, within a very short period of time, the economic cooperation of Kosova with foreign partners was significantly reduced. The destruction of the economic structure resulted in a rapid decline of export activities. Kosova before 1989 had a dynamic level and a constant structure with all foreign markets of EU, socialist countries, and those of the third world and the neighboring ones. So, in 1992, compared to 1991, the foreign exchange declined for 63,2 %, (exports –78,2% and imports –26,7%)

6.Negative effects (damages) in banking and finance system are extremely high. The destruction of the economic system was accompanied by a blockade of the finance system. Before 1989, besides the activity of the banking system of the Bank of Kosova, several other banks had their branches such as Bank of Ljubljana, Jugobanka, The investment bank of Belgrade etc. Even the system of the Bank of Kosova was put under installed administrative measures introduced by the Serbian government, so that in 1990, the complete system of this bank was under the bankruptcy proceedings. By this totally illegal way, the property and banking activity of this banking system was transferred to other banks out of Kosova. The property of this bank, just before these measures was 1,23 bill. US$ while commitment amounted to 1,22 bill. US$ which means that it had a consolidated balance. All bank accounts in foreign banks and foreign currencies in these accounts were withdrawn, while the transfer of property was effected to the funds this bank had in the accounts of other banks in former Yugoslavia. A significant amount of money at the private accounts of citizens (private savings) were stolen. According to the figures provided by the National Bank of Yugoslavia-Prishtina branch, these savings as of 30 June 1996 reached the amount of 360,5 mill. US$. The only domicile bank, Economic Bank, cannot be established as a real bank, because of the present circumstances, and the same one can not operate with foreign partners.

THE OPERATION OF PUBLIC ACTIVITIES

Under these conditions, in particular the public activities, such as education, health care, science, culture, sports, and social care faced survival problems. In these sectors, in order to survive, the Albanian population created the appropriate survival mechanism, in accordance with the declaration on independence, expressed through the referendum. The institutional life in these fields is taking place through an independent parallel system. The Albanian population is self-organized intending a continuation of the institutions suspended by force, in particular in the field of education starting from the elementary to higher and university degree, science, culture and others such as information and publishing institutions.

Until 1992, the overall education activity was carried out by the education personnel free of charge, or a symbolic aid was provided to them from various donators and other volunteer contributions of the citizens. In later stages, the Central Financing Council of Kosova was established as well as councils on the commune level. This is the first step in the institutional collection of funds-obligations from the Albanian citizens and budget expenses for the public activities.

As a source of budget income are the contributions from citizens, which are determined in an obligatory form. As a starting point to determine the level of the contributions is the income from any economic activity by the family, family members working abroad, the cadastre incomes, rents, legal entity activities (company, shop or handicraft workers), and income tax, which is 5 %.

All these income sources are effected in Kosova, while in foreign countries Albanians should pay 3% of their net incomes to the Republic Fund. Each two sources are a constitutive parts of the Budget system of Kosova. A dominant expenditure participation on these funds has the education system, in fact all levels of education, even over 80% during the period between 1992-1997, while quite a symbolic participation effected other fields. These funds provided minimal working conditions in order to provide a continuation of such services.

By budget funds administrated by Albanian bodies, about 24.500 employees in different public jobs are financed, out of which 66,3 % belong to elementary schools, 18% to secondary schools, and 5,3% to the University and other institutions and bodies of education, science and culture. The average salary per person varies from 150-160 DM per month.

These figures represent the economic position of the population, whose only existential source is their personal income coming from the Financing Council, or personal income realized by some economic activity, which are approximately the same as of the employees remaining in the public sectors administered by the installed regime.

Contributions on insurance and health care are not paid for the employees, who are financed by Albanian foundations. The health services free of charge can be offered only at the health centers of the Humanitarian Association "Mother Teresa". This Association provides even medicines free of charge for the population of Kosova. Employees and other persons covered by insurance are not in a better position. The average number of patients to a doctor is 3,380 inhabitants. According to statistical figures, inhabitants of Kosova see the doctor once a year. The health situation of the population is not favorable at all. As a result of the very difficult living conditions (accommodation, nursery, and clothing), infective diseases are quiet often present, especially TBC. In 1993, in Kosova there were 3.263 people infected by TBC, which is as twice as high as in Vojvodina.

School buildings and equipment are old, amortized, and in many cases out of use. The facilities of public enterprises with better conditions in order to maintain the education process are usurped by Serbs.

Student dormitories and dining halls, culture centers and stadiums are in complete occupation by the Serbian authorities.

Organized cultural life in the Albanian language is almost totally destroyed. With the exception of some activities on the amateur level, financed and maintained in the communes by Albanians, because of lack of funds, are barely financed, despite the fact on their importance for the affirmation of Kosova, Albanian culture, and tradition in international level. The budget expenses for this purpose are 0,4% of the budget funds for the period between 1992-1997. It is the same situation in sports with only 0,2% of the budget destination.

Regarding information and publishing field, the situation seems to be a little better. A private initiative was undertaken in publishing of some newspapers and magazines in a different number of copies in order to substitute the vacuum in the field of information, caused by an administrative banning of publishing of the daily "Rilindja". Also the Radio and TV Prishtina remain occupied, while the employees are expelled from their jobs.

According to statistics (Serbian Yearbook of 1995), it is indicated that Serbia spends in Kosova, in the form of budget funds, about 199 mill. din. (figures from 1994). All these expenses are dedicated to education, health care, culture and other administrative activities in Kosova, basically used by only 10% of the population of Kosova. On the other hand, about 400 mill. DM (1994), are carried out from Kosova as different taxes hitting the population of Kosova.

RECENT ESCALATIONS

The suspension of the territorial and political autonomy, which was guaranteed by the legal constitution system of former Yugoslavia, was experienced by the Albanian population as an occupation by another federal unit. The installed apparatus authority in Kosova was totally rejected by the Albanian population.

This was manifested by a nonviolent peaceful resistance, to be later accepted and articulated by the political parties. The delegates of the Kosova Parliament, which was suspended and banned, were the first to announce the Constitutional Declaration, and later the Constitution was approved (1991), thus declaring the independence of Kosova. This was verified by a referendum the same year. In 1992, parliamentary and presidential elections were organized. The Parliament never convened because of obstacles caused by Serbian authorities, until the next elections held in spring 1998. However, the government in exile, elected by the previous parliament, in cooperation with political parties, continued its activity.

The situation in Kosova was characterized as follows:

• The installed Serbian authority communicates with about 90% of the population exclusively through the force apparatus.

• The majority population, who completely rejected this imposed authority, considering it as an occupation, established its own institutional mechanism of administration and responding to the public needs, intending freedom and independence. Unfortunately, the peaceful resistance movement of Albanians, which very successfully expressed the Albanian aspirations for seven years, did not succeed to make any progress nor open any process for a substantial change of the situation. The Serbian authorities permanently rejected to open talks with the representatives of this movement, not recognizing them and proclaiming the problem of Kosova as in-existent. The international community supported the peaceful forms of resistance and conditioned lifting the outer wall of sanctions against Yugoslavia with a substantial change of the situation in Kosova. But, all these undertakings were not sufficient to make any positive changes. Therefore, the predictions that the situation of the status-quo under such systematic repression measures cannot last very long, became a reality. By the end of February 1998, the armed conflicts continued between the Yugoslav military-police force and Kosova Liberation Army (KLA), and the population forced to protect their families, houses and property. About 40% of the territory of Kosova is included in the war conflicts, which with an estimation by the end of September of this year, resulted in the deaths of about 1600 people, mostly civilians, with 15-20% of displaced population. The humanitarian situation became extremely difficult, with a potential risk for a humanitarian catastrophe and ethnic cleansing. Grave problems and difficulties are facing the Albanian population after the blockade in food and necessities. Economic activities have also become very difficult. The economic damages are not yet evaluated, but are considered to be evidently high, especially after the destruction of private houses - about 40.000 (humanitarian organizations and press estimation), destruction of small family enterprises (economies), private company facilities. In fact, a total blockade of the activity in the war conflict included many regions and a significant activity reduction in other regions. The financial transactions operating by private companies through Banka Ekonomike in Prishtina have been recently reduced to 75%. That is an illustration of the new environment for the business community of Kosova.

The Kosova crisis as well as the crisis in Croatia and Bosnia have proved that the situation can exceed and a process of solution can be open, only by a strong involvement of the international community, before the risk of a conflict expanded and the ethnic cleansing becomes a reality. The problem of Kosova is a very complex one, and it can be presented in many aspects and dimensions. The economic dimension, as indicated here, is very complicated and extremely important in the whole matter. This dimension, no doubt, has a strong influence in taking of positions of both sides, therefore also to Serbian authorities, regardless the fact that quite often this position is intended to be presented in the light of medieval sentiments. The economic interests of Serbia are very transparent and first of all are in conjunction with:

1. To exploit the natural resources of great importance in the relations of rump Yugoslavia (Serbia & Montenegro) and,

2. The market of Kosova, where the products of Serbia can be sold without any competition of domestic or foreign market products.

The previous experience has clearly proved that the Serbian authorities have been permanently leading a colonial policy towards Kosova, adjusting to these needs the appropriate mechanisms of their political and economic system.

Institue for Development Research - RIINVEST - Instituti për hulumtime zhvillimore  © 1998