SWP705 Financial Discipline and Structural Adjustment in Yugoslavia Rehabilitation and Bankruptcy of Loss-Making Enterprises Peter T. Knight WORLD BANK STAFF WORKING PAPERS Number 705 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
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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
All rights reservedManufactured in the United States of AmencaFirst printing November 1984
This is a working document published informally by the World Bank. To presentthe results of research with the least possible delay, the typescript has not beenprepared in accordance with the procedures appropriate to formal printed texts, andthe World Bank accepts no responsibility for errors. The publication is supplied at atoken charge to defray part of the cost of manufacture and distribution.
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.
The full range of World Bank publications, both free and for sale, is descnbed in theCatalog of Publications; the continuing research program is outlined in Abstracts ofCurrent Studies. Both booklets are updated annually; the most recent edition of each isavailable without charge from the Publications Sales Unit, Department T, The WorldBank, 1818 H Street, N.W, Washington, D.C. 20433, U.S.A., or from the EuropeanOffice of the Bank, 66 avenue d'lena, 75116 Paris, France.
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.
Rehabilitation and Bankruptcy of Loss-Making Enterprises. 6
The Problem .................................. 6The Legal Framework as of April 1983 .... ..... 9Recent Experience ............................ 11Developments through June 1983 .... ........... 26
The Problem .................................. 31The Legal Framework as of April 1983 .... ..... 32Recent Experience ............................ 35Developments through June 1983 .... ........... 37
Conclusions and Recommendations ......................... 39
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
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
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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.
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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
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
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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
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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
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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
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) ( )
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
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
g ~ ~ ~ ~ ~ ~ ~~~; c' a u v n n.!~4 R I X L 1. la I 9 S . 6e a a a V O S _t :t e r.s -'a , D s
-a S'
" > bg, u g a a .G a aaed i Cs
e~~~~S -, . C m ma -d ii ,me °C°S i S S i0 8 mObQ0 a a R OS C O a f - Sm S p s G ,,CO S oo ooo O o aoo o a S a o a o o S o ma
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
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
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)
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
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
(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
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))
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
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
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
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
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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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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Trends in Rural Savings and and outstanding medium- and long- sample purchase agreement.Private Capital Formation in term total debt in excess of $13.5 bil- (9-track, phase-encoded, recordingIndia lion at the end of 1982. Includes peri- density 1600 bpi)Raj Krishna and G.S. odic supplements as fresh data are re- Stock No. IB 0500, $5,000 (service bur-Raychaudhuri ceived. eaus for reselling to their clients); StockWorld Bank Staff Working Paper No. 382. 1984. 328 pages. No. IB 0667, $2,000 (banks and commer-1980. 43 pages (including 2 tables, 3 ap- Stock No. BK 0315 $75 (annual sulbscrip- cial corporations); Stock No. IB 0666, $500pendixes, reerences). tion) (univesities and libraries).Stock No. WP 0382. $3.
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