Yugoslavian workers threatened by free-market reforms


TITOGRAD, Yugoslavia -- Soviet-style economic reforms have reached Yugoslavia -- with a bang.

Titograd Kombinat, a construction firm in the undeveloped Republic of Montenegro, is among nearly 800 Yugoslav businesses employing 200,000 workers that may be forced out of existence soon by a tough new bankruptcy law.


If these businesses have not found a way to meet their losses by Sept. 30, the government must cut off the subsidies that have kept them going and declare them bankrupt.

'There is a feeling the government will be much tighter than before,' said one Western economic analyst. 'If the bankruptcy law is strictly applied, there would be massive disruptions.'

But for many firms, bankruptcy won't mean going broke in a capitalist-style liquidation, according to interviews with officials in the Montenegran capital and in Belgrade. It will give the firms a chance to reorganize.


And, in some cases, the government is still stepping in with last-minute financial bailouts. In the Republic of Serbia, for example, the metallurgical conglomerate Smederovo, a white elephant for years, was granted emergency funding in August to keep 10,000 workers on the job.

Throughout Eastern Europe, Communist governments are wrestling with Western-style economic penalties as they try to implement the economic reforms promoted by Soviet leader Mikhail Gorbachev.

Although Yugoslavia broke with the Soviet Union in 1948, it shares the same problems of the Warsaw Pact states: an emphasis on central planning that has bred inefficiency in state-run countries with no incentives to be productive when all the orders come from the top.

Poland and Hungary have started bankruptcy proceedings with dozens of firms. But as in Yugoslavia, many firms were either re-established in slimmed-down versions, or were simply swallowed by bigger businesses.

The managers of Titograd Kombinat decided not to prolong the agony. The firm went bankrupt last month and 1,600 of its 2,600 workers lost their jobs immediately. The rest are finishing up uncompleted projects.

'There was no point in waiting,' said Bozidar Vucinic, secretary for economy in Titograd. 'It was better to start now and make preparations for forming a new firm.'


In Kombinat's case, the creditors -- banks and companies supplying construction materials -- are attempting to form a new, sleeker operation, with about 1,000 to 1,200 workers, that can be profitable.

It will be a formidable task. The Yugoslavian construction industry has been in a slump since the boom of late 1970s and Montenegro's situation is especially somber. Of its four construction firms employing 13,000 workers, two others also face bankruptcy. Only one is operating in the black.

For the jobless workers at Titograd Kombinat, the bankruptcy proceeding provides for about 400 to be retrained and another 400 to retire, according to bankruptcy manager Rajki Milovic.

The rest will get the socialist equivalent of unemployment compensation, plus subsidized rents and fuel bills, while they search for other jobs. The unemployment rate already tops 14 percent.

The upheaval is expected to be greatest among administrative workers, whose ranks have ballooned under Yugoslavia's unique, workers' self-management system.

At Kombinat for example, 330 of 400 management-level employees were let go.

'In my office, they fired the photographer. So I am taking pictures myself,' said Lasovic Vladimic, who publishes the company newspaper. 'We tried to keep him, but couldn't. Out of 30 company attorneys, three are left, so we really didn't have much of a case.'


Bankruptcy procedures have also begun in several other Montenegro firms, leaving about 45,000 workers at least temporarily jobless.

'These measures are not pleasant but they mark an end to a long-standing practice of the so-called socialization of losses, when the state or other firms were giving money to those firms who were losing it,' said Milo Djurovic, president of the Montenegrin Trade Union Association.

There is evidence that the bankruptcy law is forcing businesses to wean themselves of the government subsidies. Last year, more than 2,000 Yugoslav companies were in the red, compared with 800 on June 30 of this year.

The law says businesses operating at a loss on June 30 that cannot find lenders or partners to make up their deficits by Sept. 30, must be declared bankrupt.

Many firms are learning -- painfully -- how to be more efficient.

Vito Kuc, who took over Aug. 5 as manager of a Kombinat housing construction project Aug. 5, immediately pared the workforce by 40 percent to 80 people and introduced daily work charts. He concedes there was a lot of grumbling.

'They have to finish the work in that day -- whether by midday or midnight,' Kuc said. 'But if they build more within that eight hour period than is on their work chart, they get more pay.'


The idea of additional pay contradicts yet another socialist practice: wage levelling, in which everyone gets the same salary regardless of performance.

'This is an excellent system of payment -- when it is well organized,' said Rajko Pavicevic, director of information at the firm.

Probably the biggest dilemma for socialist societies is that widespread bankruptcies will threaten their guarantee of job security and lead to massive unemployment.

'Under the bankruptcy procedure, it is easy to fire those who work improperly,' said Miladin Mijic, a 48-year-old bricklayer who is one of the 1,000 laborers still working on uncompleted Kombinat project.

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