THE PRESENT STATE OF YUGOSLAV ECONOMY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82-00457R008000840011-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 6
• Document Creation Date: December 14, 2016
• Document Release Date: March 21, 2001
• Sequence Number: 11
• Publication Date: July 10, 1951
• Content Type: REPORT

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CLASSIFICATION T/CONT 0L ? tJ.Sm OFF CIA.?S ONLY
CENTRAL IN LLIGENGIw AGENCY REPORT NO.
INFORMATION REPO. ~ CG NO, 25X1A
COUNTRY Yugoslavia
SUBJECT The Present State of Yugoslav Economy
PLACE
ACQUIRED
DATE OF
INFO.
25X1A
DATE DISTR. 10 July .95:1
NO. OF PAGES 6
NO. OF ENCLS.
(LISTED BELOW)
SUPPLEMENT TO
REPORT NO.
25X1X
1. No branch of Yugoslav industry showed satisfactory results during 1950.
The basic reason for this lay in the difficulties. in obtaining equipment
from abroad. The realization of the Economic Plan, which was worked out
five years ago, will have to be abandoned and on'y the very mildest form
of economic planning will take its place. Development of certain branches
of industry will have to be restricted to a minimum.
2. Efforts to realize the target figures for the elsctro-technical,
metallurgical and iron and steel industries _will,not be slackened for any
reason. For political reasons, certain successes in the economic field
are vital to the regime. They can be used as a stimulus to the recognition
of the economic power of the counter, which in turn will bolster up the
power of resistance to foreign aggression.
3, There have been individual successes in certain fields of industrial pro-
duction which merit high praise despite the fact that these successes
ha'e been obtained at the price of costly method:. A complete analysis
of the situation necessitates a separate examination of each branch of
production.
Mining Indust
4. Coals Coal production was more or lese satisfactory and the 1950 place
waW acbiedw It west, however,, be noted that this plan had been re-
ducts in comparison with the original targets for the fourth year of the
Five Year Plan,
50 Non-ferrous ,.?Ietalss The output of non-ferrous metals was not only ur -
aat cad ry, i - no relation to the original plan*
the breakdown of the national production of drilling equipment,,
Petroleum Tan is
6. The output of crude oil was a complete failure. Only 60,000 tons were
produced against a planned total of 11.00?000 tone.. The Donja Lendava
wells only produced 30 percent of their target, and the new Serbian wells
did not progress beyond the planning stage. This was largely caused by
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7. Sabotage at the Bosanaski Brod and Rijeka refineries reduced the
possibility of processing imported oil.
Timber XnLuStM
8. The timber industry achieved only 50 percent of the target set. This
was caused by the lack: of labor and the increasing migration of peasants
to the cities, "Volunteer" brigades of students and tows di ellerr are
no longer being fornecl. This reduction in timber output reduced building
activity at home and torts abroad. Only Great Britain received the
full quota. The Italian, French and Middle East markets were neglected
because of the impossibility of supply a sufficient quantity of timber
of the required quality and price.
Electric der
9. The production of electric power did not reach 60 percent of the planned
output. The most important now construction work not carried out,
as is shown by the toll ow ing 2
a. The hydroelectric power station on Maribor island,, started under
the German occupation, has not been cc leted.
b. The thermoelectric power stations at Kostolac, Thud and Bitd1J
are only half-completed and are not expected to be finished before
September 1952.
The large hydroelectric power station on the Drs n river, Bch was
started in 1947-15-48., Is still under construction and the final
date of completion cannot be estimated.
10. The diminished output of the .toatroj factory at Ljubljana and the
failure to complete the Dris- project have caused a serious situation
which threatens to affect the economy of the whole country. The Drim
station is largely linked with the economic life of Bosnia and Bercego.nas,,
the electrification of the ?loco (arde1 jevo)-S ?ajevo-Ss .c railroad line
and the development of the aluminium industry on the bauxite deposits of
Hercegovina.
11.x, The vital yards in the shipbuilding ' industry are the 3 May yards at
Rijeka. Not only are they the most important, they also supply the smaller
yards at Senj, T'rogir, Split and Tivat.
12. Up to the second half of 1949, the l914 rate of output was maintained,
but during the second half of 1949 the situation deteriorated and re-,
mained at that level during 1950. The Plan had laid down the con-
struction of five motorships per year. Not only was this not realized.,
but lack of rolled steel and Diesel engines forced the yard to 'reduce:
its activity to repairs only. By April 1951, a large number of these
repairs were being carried out in Trieste and Italian ports.
13. The costs of the 3 May shipyard have risen appallingly, as not a single
workman has been dismissed despite the decrease of putput. This has been
forced on the yard for political reas onss, Most of the women are of
Italian descent who came to Rijeka after World War 11 to obtain work or
for political reasons. This situation is threatening a stagnation of the
Yugoslav Merchant Marine.
Chemical Industry
14. Lack of vital materials and the disruptive effect of the production
ay^stem caused the chemical industry to attain only 72 percent of the set
target. Croatia and Slovenia were the worst affected.
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Cellulose
iS. Lack of spare parts and of the necessary chemicals for the production of
sulphitic cellulose, reduced the output of the Brozice and Bosnian in-
dustries to less than 50 percent of their targets. The continual change
of technical and political managers has disrupted the Slovenian
industries which represent 60 percent of the total output of Yugoslavia.
The productivity of the workers, too, has fallen . off considerably; they
no longer have the drive and energy of the days immediately after the war.
16. The lack of cellulose and paper also affects the Tugoalav cement industry
which has been deprived of the necessary packing materials.
17. The greatest efforts in the chemical industry have been in those
commodities where the problem of raw materials was easier such as poly-
vinyl chlorides, which achieved their target and, by exporting almost
100 percent of their output, greatly aided the balance of the Ministry of
Foreign Trade,
Light Industries
13. The light Industries have been 'Wesy badly hit. The level of the output
of Zagreb, the hub of the Yugoslav light industry, has been reduced to a
level corresponding to that of 19th, the worst year since 1920. The
main reasons for this are as follows:
a. Neglect by the Government in favor of heavy industry, particularly
steel,
Lack of new equipment.
c. Lack of skilled technicians and workers, particularly in the foodstuffs
industryrm
20. Textiles: The textile industries were the worst hit of the light industries.
mpaasf wool and cotton yarns deed as the State tended more and
more to use the wool and cotton grown in the southern regions of the
country. Modernization of plants moved very slowly. only the k aribor
and Varazdin combine realized the saw output as in 1947-1948. The Paracin
textile factory, one of the most modern wool cloth mil.Zs, which was
transferred from Federal to Regional administration, only reached 33J
percent of the output of preceding years.
21. Aluminium: The aluminium manufacturing industries were the only branch
irth0light industries which showed an improvement.
22,. Foodstuffs Industries: The following have been badly hit by the economic
ion:
a. The fish and meat canning industries, which have great poscibili.ties
of exporting to central Europe.
b. The salt fish exports to Italy.
c. The Vojvodina food industries,,,
23. The main cause of the debacle in the foodstuffs industries lies in the
failure of the peasants and agricultural cooperatives to deliver the quotas
laid down. The production of agricultural produce has not been supervised,
or at best,, only inefficiently controlled. Chaos has naturally followed,
24. r he control of the State over the peasants is weak. By instituting "free
,markets" the State had the intention of releasing hoarded monies from the
cities. At the same time, this v institution created a danger for the
State industries dependent on agricultural produce, because the peasants
did not fulfil their quotas for the controlled markets,, being certain as
they were of selling it at prices many times higher on the free market.
Z>, In ttne vo wee ein favor
of i Y ~as means he peasants have been abl
_y]
'Al o
e ffi a-ore
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ota the free market direct to the consumers. This has meant, ever,
that the sugar fa rlo have not received their quotas, the output of
sugar has diminished, the output of factories dependent on the sugar
has been affected, sugar has disappeared from the how maaicet and a orto
which brought a valuable source of foreign currency have decreased.
26. Agricultural Uac hi.ne : The Zeman works, producers of 'sZW 'P' agricultural
machinery, were ven ae task of supplying the bulk of the needs of the
agricultural cooperatives. They also had to manufacture the greater part
of the excavators for the canal construction work on the Tisa-Danube-Tisa
canal. Their production luts noticeably fallen off, mainly through the
lack of raw materials, particularly rolled steel, Ploughs have had to be
imported from Italy, but lack of foreign currency has restricted the extent
to which defects of home production can be made up by imports from abroad.
Plans for irrigation and the construction of navigable canals have been
affected by the failure of these works.
27. TobaCOea Induet r This has been one of the brighter spots in !ugoalav
economy. argetss for the Five Year Plan have been reached.
ning xnduatx _a
28 The economic blockade , cited by the USSR and her satellite countxd.
was a direct blow to the mirdra industry, The Yagoolav sines were already
badly equipped before the ware Germn over-exploitation,, partisan sabotage,
and the dentruetion wrought by fighting, brought theem to a state in 1945
where all a ipment needed replacing within a short time. The Czech Trade
Agreement included a section which provided for the re--equipping of the
larger 'xgoslav mines. Other agreements made in 19147 provided for the
partial re-equi nt of second and third class mines under the Five Tear
Plan. In addition, the work of Czech technicians placed at the disposal
of the Yugoslav Government was of equal value to that of the equipment
supplied by that country.
29.
Many of the mines operating at the moment were to have raced by
mines,, as they were becoming partially or totally exhausted.
30. Apart from the lose of Czech equipment and skilled manpower, the Hungarian
reparations, which consisted in part of mining equipment produced by the
Budapest metallurgical industries., was also lost. The possibility of ob-
taining supplies from the current production of Eastern Germany ceased
with the expulsion of the Yugoslav Mission from East Berlin,
Effect of they Cominform Break on the Industrialization Plan
319 In 190 the Yugoslav Government found itself in the middle of the execution
of an economic plan which did not allow a stop back, not only for political
reasons but above all because the economy had been set off on a given
track without considering whether it was good or bad,, profitable or
disastrous. After two years of ruthless adaptation of the country to this
plan, which meant a complete industrial, financial, and cowercial trana-
formation, they could not reverse mvw7thing without risking c * plete
economic chaoso
32. At the beginning of the break with the Satellite bloc Yagosslsvia believed
herself capable of solving matters on her own. By 196, howe3 , she had
been convinced that this was impossible. This conviction came too late
as the year of fighting the battle on her own had exhausted the conntryess
economic resources. Attempts had been made to got the maximum output from
their subterranean resource op. to reduce grain and food consumption to a
minimsasm, to give bonuses to exports in the hope of thereby covering their
imports of equipment and machinery. These attempts, while not frsaitlesss,
caused a catastrophic lowering of the productivity of labor because the
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guaranteed mini=m rations were insufficient. Workers began to leave
their work in search of food in the provinces. Croatia, was the first
province to suffer noticeably from this lowering of the productivity of
labors
Effect of lame by the West
33. The Yugoslav Govermm)ut decided in 19119 to appeaal for aid to the Westo
The aid from the Imporb4 port Bank and other Minor financial loans were
not of the size which could have an immediate and noticeable effect on
the difficult situation. The Anglo-?Txgoslav Agreement of July 3,949
a step towards closer lines with the West and it gave Yugoslavia the
possibility of easing the difficult situation in the mining industry
through barter with Great Brritain, but the main problem r ed unsolved.
Negotiations with other countries did not give the Larpected results.
The blockading countries extended their blocky on the European markets;
they undercut Yugoslav prices and overbid their offers.
314 Italy responded better than Pra nc.s, Switzerland, Belgium and Holland
to Yugoslav appeals. Yugoslavia tried, therefore, to increase her
T,nxge es to that ofct sin wand to South America using Italian middlemen*
ere sent to Argentina as re-exports fItaly.
d
This procured a little necessary foreign exchange.
35, Negotiations with Western , to whom Yugoslav at last turned, which
could have largely solved the problem, have not reached a satisfactory
conclusiono
Conoleasione
36. Yugoslavia Is in difficult straits but has not yet lost hope; she believes
she can yet win her economic battle. Geographically, the worst spots, from
the economic point of view, are Croatia and Serbia for different reasons.
37. Serbia: The Serb fatalistic attitude toward life, traditional. hatred of
ea M ms. and the x elucta.nce of the Government to intervene for political
reasons in an area Which ban shown the greatest support for their foreign
policy, have a created a paradoxical situation. Politically the Serbs
are the Government x a stoutest supporters., economically they create is-
surmountable dif.P'icul ti ee They support the attitude towards the Soviet
Urd on, yet sabotage at every step the Gav t a a internal and economic
policy.
38. Croatia In Croatia the Communist Party, wi.thr the exception of Vladimir
ca the secretary, is anti govw to There is continual sabotage
in industry.
Slovenia 3 Despite the most veriam condition of certain industries, the
29.
pos 3.cmri in Slovania, in better than in Croatia.
ILA. Bosnia,, Hereto oyina and edoni.,jx The young technicians of Bosnia,
Hercegovina, nuke e c el etch will probably stabilize
and grad=lly improve the situation. The economic situation of Bosnia and
Hercegovina in relatively better than that of the other rep b i.cs.
The output of coal and Iron ore mines has been satisfactory; the pro-
ductivity ductivity of labor is higher than. elsewhere. The same applies to
agriculturaal production. The initial u e of the young Macedonian
industries has not spent itself. The experimental cotton d rubber
plantations have given very good results; very good crops of rice have
been raised. On an industrial., compared to a geographical basis, it,
can be said that owW.n industries have a a n great productivity and
self-sacrifice to overcome diffiou ltie , even though they may not have
reached the planned to .,gets.
41. Youth as a whole has ranalned. faithful to the Government. Youth has no
preconceived ideologies, is the lea influenced by abroad, and was closely
&' mo'% / f R[981-tb ~" 1- ?this
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ymth from the army and allow them to retuni homes they could radicals
change the economic situation. Not only would the labor position, which
is always difficult, be relieved but they would also have a profound
paychol ogical effect on the workerea
Lit. In the meantime, the 7xgosalav Govermwnt has given up rigid eoo c
ping.. Boris .dric, who defended the position that the Plan had to
be carried out at all costa, even though it mewit complete orientation
towards the West, has been dismissed
10. Politically the situation is not dangerous to the ter t, who control
the Armed Forces and the political strings of the country. "Democratic"
opposition is lacking in courage and is disorganized. The closer the
contacts with the rest become, the less people believe in the "d ocrats".
44. The G afore opposition is of a different nature. It is hidden and
not easily uncovered. They have groups in the mountaine of Bosnia and
Montenegro but they are inactive. Their main effects lie in the cis
.
org .ztation of production, where they make use of reactionary engineers
tither they are .tiang for the critical m nt or they a reorganizi
this respect, Montenegro will present the greatest difficulties to
the Govea t, as the oppos ition In favored by the t 4torial location
and mountainous nature of the c t u
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