JPRS 69270

17 June 1977

TRANSLATIONS ON EASTERN EUROPE

ECONOMIC AND INDUSTRIAL AFFAIRS

No. 1638

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JPRS 69270

17 June 1977

TRANSLATIONS ON EASTERN EUROPE

ECONOMIC AND INDUSTRIAL AFFAIRS

No. 1638

CONTENTS PAGE

EAST GERMANY

Deputy Minister on Weed for Keeping Water Clean, Usable

(Rudolf Miehlke; ERESSE-INFORMATIONEN, 28 Apr 77) 1

Water Management Minister Discusses Effective Water

(Hans Reichelt; PRESSE-INFORMATIONEN, 28 Apr

Use

77) ... k

Railroad Construction Chief Outlines Tasks Following

Plenum

(Horst Thomas; SIGNAL UND SCHIENE, May 77) ..

Party

7

Figures Provided on Use of Household Consumer

(Werner Bischoff; DIE WIRTSCHAFT, 5 May

Goods

77) • 12

Decreased 1976 Agricultural Yields Analyzed

(Bernd Spindler; DEUTSCHLAND ARCHIV, Apr 77) 17

HUNGARY

Nation's Financial Administration Discussed

(Lajos Faluvegi Interview; VALOSAG, Apr 77) • 29

Bank Issues Quarterly Report on Credits, Money Circulation

k8

Production of Real Denim To Begin

f HETFOI HIRLAP. 2^ Mav 77) 52

- a - [III - EE - 64]
CONTENTS ^Continued) page

ROMANIA

Political Education Important for Economic Success of

Cooperatives

(Alexandra Dinulescu; AGRICULTURA SOCIALISTA,

21 May 77) 54

Job Training Planned for All Cooperative Workers

(Gheorghe Cristea; AGRICULTURA SOCIALISTA, 9 Apr 77). 58

Modernization of Commercial Activity Necessary

(Gh. Feteanu; AGRICULTURA SOCIALISTA, 7 May 77) 62

YUGOSLAVIA

Law on Foreign Trade in Goods and Services Published

(SLUZBENI LIST SFRJ, 11 Mar 77) 65

Law on Foreign Business Ventures Published

(SLUZBENI LIST SRFJ, 11 Mar 77) 112

Interaction of Business Efficiency, Productivity and

Employment Surveyed

(EKONOMSKA POLITIKA, 1 May 77) 16k

- b -
EAST GERMANY

DEPUTY MINISTER ON NEED FOR KEEPING WATER CLEAN, USABLE

East Berlin PRESSE-INFORMATIONEN in German 28 Apr 77 pp II-III

[Article by Rudolf Miehlke, deputy minister for environmental protection

and water management: "Cleanliness of Water—An economic requirement"]

[Text] According to calculations to date, by 1990 water requirements of the

population will rise by two-thirds, of industry by more than one-third and

of agriculture by even two and one-half. On the other hand the natural

supplies will remain essentially constant—water in creeks, rivers, lakes

and subterranean reservoirs from which we obtain drinking water for the

people and industrial water for industry and agriculture. Measures for

keeping the waters pure, therefore, have the greatest economic importance.

The growing requirements for water can only be met by steadily increasing

multiple use of water. Multiple use includes thorough cleaning of the water

before it can be returned to the natural cycle. The cleaner it is when

drained off, the lower the damages to the bodies of water in the first

place, and in the second place the lower the costs for renewed purification.

The costs for purification as unobjectionable enterprise water from polluted

water rise markedly as a function of the degree of pollution. Purification

of water in quality class IV (badly polluted), for example, costs eight

times as much as for quality class I (clean). And industrial waste products

still influence the quality of the water in about 40 percent of our waters.

On the other side, from an economic point of view, extensive purification of

water is cheaper than obtaining usable water from strongly polluted bodies

of water since to do this very complicated purification processes are

necessary. And naturally waste products also influence the life of plants

and fish in our waters and adversely affect recreation possibilities. Thus

exhausing all possibilities for waste water purification is one of the

principal duties of water users.
Increasing Efforts by Industrial Enterprises and Communities

Various initiatives by enterprises and communities in recent years have

resulted in the fact that in spite of substantial increases in waste waters

and waste products the quality of the water in moving waters remained almost

constant and in some river courses the water became cleaner. The enterprises of the brown coal industries are among those making great efforts

to keep the waters clean. In this case because of drainage measures about

3.4 million cubic meters of water are produced every day. More than a

third of it is used in the refining plants and power plants, the rest,

purified, is fed into the rivers. In some areas this water, especially in

dry periods, substantially improves the water balance, for example the Spree

in the Cottbus area.

Numerous enterprises have changed over to the so-called closed circulation

of water in which the water necessary for production is cooled and purified

in the enterprise's own installations so that it can be used again and again.

The daily water requirements of about 250,000 cubic meters in the Schwarze

Pumpe [black pump] combine VEB for example are exclusively met by waste

water from mines which is purified in the combine's own system. By beginning

to use a settling tank for the purpose of reusing wash water for gravel it

is no longer necessary to take from the public water system the roughly 1,500

cubic meters of water every day for the Ottendorf-Okrilla gravel plant VEB.

It is especially important that no impurities of any kind such as iron and

other metals, oils and fats, phenols or acids and lyes get into the water.

The Schwedt petrochemical combine VEB is among the exemplary water users.

Although quantities of impurities are produced in the combine, the complex

filter plant guarantees impurity-free waste water. The quality of the water

of the Oder remains unimpaired.

Water Control With Higher Responsibility

Many new filter plants have been built in the past few years. They purify

1,000-10,000 cubic meters of waste water per hour. In addition to the

construction of new plants in Berlin, Rostock, Potsdam, Eisenhuettenstadt,

Halberstadt, Halle-Neustadt, Nordhausen, Gera and Dresden, the capacity of

existing plants is to be expanded by rationalization. The clarification

plant in Leipzig-Wahren for example has twice the output since being rebuilt. At the same time the purification effect was improved with the

installation of new technology. In the matter of water protection the

cooperation of enterprises, cities and communities in the framework of

territorial rationalization takes on great importance. Building common

clarification plants for both municipal and industrial waste waters and

using them jointly or expanding existing plants for joint use has been

proven effective.

Special responsibility for keeping our waters clean falls to the state water

control authority. Its controls are to help systematically reduce the
pollutants in the waste water and to prevent water averages. It very systematically controls enterprises which feed waste water into the waters,

especially those in the case of which dangers for the waters can rise

because of pollutants.

In this regard it is a matter of involving a wide circle of helpers. In

many enterprises such as the Bitterfeld chemical combine VEB the questions

of water use and the observance of critical values of water quality are a

component of the competition program and thus a cause for concern by every

worker. Indices for water requirements and waste waters are in this connection allocated as far as the brigades. Such examples should be generalized, for the protection of our waters is a matter that affects everyone.

What great importance society attaches to keeping our waters clean was

demonstrated by the fourth congress of the People's Chamber on 7 April of

this year which established new legal provisions for this.

12124

CSO: 5000
EAST GERMANY

WATER MANAGEMENT MINISTER DISCUSSES EFFECTIVE WATER USE

East Berlin PRESSE-INFORMATIONEN in German 28 Apr 77 pp I-II

[Article by Dr Hans Reichelt, Council of Ministers deputy chairman and

minister for environmental protection and water management: "Effective

Utilization of Water—A Requirement of Economic Discretion: Economic Water

Usage Is Part of Intensification"]

[Text] The directive of the Ninth SED Party Congress to the Five-Year Plan

for the development of the GDR economy in the period 1976-1980 gives water

management in our republic the task of "aiming its efforts at supplying

the population, industry and agriculture steadily with drinking water and

industrial water, respectively. This requires economic management of water

resources with minimal social outlay and effective use of water management

installations in all sectors of the economy." Thus, water management contributes in a very diversified manner to realizing the chief task in its

unity of economic and social policy.

In 1980 the demand for water in our republic will be about one-fifth higher

than in 1975. By 1990 figures indicate an increase of 60-65 percent, thus f

4-5 percent annually. In contrast to that, the natural water supply will

remain virtually constant; beyond that it is subject to pronounced fluctuations due to time and location. Water supplies are, moreover, not always

available where they are needed for the growing demand. Thus it is a matter

of building drinking and waste water purification plants, laying new pipe

systems, erecting barrages, laying-up basins, extensive conduits and opening

up additional ground water reserves.

Use Water Several Times

The building of barrages and laying-up basins, conduits and long distance

lines takes over agricultural areas under cultivation, thus removing them

from production. Even residential buildings, factories, railways, streets,

indeed entire villages must often be rebuilt at another location. This

likewise requires significant outlays of financial means and material.

From this it follows that investments for water management are rising faster

than average for the economy. The enormous basic assets of water management

k
plants in all sectors have a value of about M 45 billion, that is roughly

12 percent of all basic assets in the production sectors of our economy.

To be sure water, vis-a-vis other raw materials, has an advantage—it can

be used several times. That is indispensable not only in dry periods, but

is more and more becoming an ongoing concern. Water from Saale and Elster

is already being used seven times with average precipitation. This imposes

high demands especially on waste water purification. Thus even in this area

the outlays are rising substantially. But if the waste waters are sufficiently purified then up to 75 percent of the costs can be saved which are necessary for the repurification of the unpurified water in a following enterprise.

In this connection the building of joint waste water treating plants is

gaining in importance, in which case the advantages of territorial rationalization are utilized.

What Erich Honecker, secretary general of the SED Central Committee forcefully called for at the fifth meeting of the Central Committee likewise

holds for economic use of water: achieve high quality and effectiveness in

our work. Therefore, it must become a matter of course to regard effective

utilization of water in all sectors of the economy as a component of socialist intensification. This requires a variety of scientific-technical

measures. In that way we will achieve better use of the basic assets and

greater effectiveness in social work. At the same time we will reduce costs

and save investments, among other things, for additional storage facilities

or conduits.

Buna workers, for example, with the use of new technologies and advanced

norms, normative provisions and indices in socialist competition in 1975

vis-a-vis 1971 saved 2,500 cubic meters of water per million marks of

goods production and thus saved M 3,340. Enterprise costs for water purification was reduced by M 4,625 per million marks of goods production.

Applied to overall goods production of the Buna works the savings thus

amounted to M 13.9 million in the period 1971-1975.

New Ways With Science and Technology

In the current five-year plan the task has been set to reduce the specific

water requirements in industry by 20 percent. The significance of this

plan becomes clear if one considers that over 16 million cubic meters of

industrial water must be made available to industry every day. The water

is used as follows: 70 percent for cooling, 20 percent for production

(processing water) and 10 percent for boiler feeding. The demand for

cooling and processing water, above all, must be reduced to an economically

justifiable amount. The use of cooling-water circulation alone in place

of traditional continuous operation reduces water requirements up to 95

percent. Systematic use of less water often achieves a great economic

value. Changes in water pressure, the cross-section of the conduits,

temperature or other factors cause the demand for water to decline.
But that also requires the purposeful implementation of scientific-technical

measures. Thus, completely new ways must be pursued and methods without

water or using little water must be developed. Large tasks and possibilities

are the result for the industrial processing engineers and designers, for

innovators and rationalizers in almost all sectors of industry, especially

machinebuilding.

For us it is of incalculable value to utilize the rich experiences of the

Soviet Union in the matter of efficient water management. This is true

of the use of new methods or the improvement of existing methods for reducing

the specific water consumption per unit of production as well as for better

water purification in circulation. For example, in the Soviet Union purified municipal waste waters are being used as industrial water for industry.

A Moscow heating power station uses 20,000 cubic meters of purified waste

water daily which until now was fed into the Moscow River. In Dresden a

year ago Soviet scientists reported about these and other experiences at

the CEMA symposium dealing with technologies free of or low in waste products.

In all, the USSR offers a great wealth of experiences which we as well as

all CEMA countries are extensively utilizing.

The economic use of water and the exact observance of critical values for

waste waters are an element of the competition programs of the collectives

in industries using water. The competition for the titlle "exemplary enterprise in water management" in addition creates new possibilities for additional furthering of the workers initiatives.

12124

CSO: 5000
EAST GERMANY

RAILROAD CONSTRUCTION CHIEF OUTLINES TASKS FOLLOWING PARTY PLENUM

East Berlin SIGNAL, UND SCHIENE in German No 5, May 77 pp 147-148

[Article by Horst Thomas, GDR Railroad Construction Directorate president:

"Basic Tasks of the GDR Railroad Construction Directorate Following the

Fifth SED Central Committee Plenum"]

[Text] In the course of the Fifth SED Central Committee Plenum impressive

evidence was brought to demonstrate how the GDR is advancing in the organization of the developed socialist society and the gradual creation of the

bases of communism in all spheres of social life. Among the active collaborators in the realization of these inspiring and challenging targets are

the railroad construction workers of the Railroad Construction Directorate

(Rbbd). That is shown by the results of the past year which was also the

first of the new five-year plan. Thanks to the indefatigable work of all

railroad construction workers, their many initiatives and their handling of

the many problems arising, we experienced stability in the progress made by

the Railroad Construction Directorate. For the 10th consecutive time the

sector of railroad construction has fulfilled or overfulfilled the plan.

That is an excellent basis for meeting the requirements of the 1976-1980

Five-Year Plan and beyond.

The resolution adopted by the Fifth SED Central Committee Plenum "On the

Further Implementation of the Resolutions Adopted by the Ninth SED Congress

for the Construction Industry" has fundamental significance for the GDR

Railroad and, therefore, also for the sphere of the Rbbd. The railroad construction sector must contribute the construction of high-capacity and good

quality track facilities to ensure that the GDR Railroad may continue to

meet the steadily rising requirements of the national economy—especially

the construction industry. This includes such major investments as the construction measures for Berlin, the GDR capital, the construction of 850 km

of secondary tracks, the building projects of the central superstructure renewal department, the electrification of the sections Dresden-Berlin and

Muldenstein-Berlin, the mechanization of switching yards as well as followup investments for the economy and measures relating to energy supply.
It is the responsibility of the Rbbd to prepare, develop and use capacities

for the material assurance of projects relating to the simple and expanded

reproduction of rail facilities. In addition it renders considerable services to sectors outside the GDR Railroad. One of the crucial tasks involves

the necessity for raising our internal building production to M850 million

by 1980. That assumes maintenance of the available production structure

and at the same time the expansion of the sections railroad underground construction and bridge construction. By 1980, compared to the actual 1975 output, we must raise production

— By 10 percent in track construction

— By 55 percent in underground construction

— By 32 percent in reinforced concrete bridge construction

— By 20 percent in steel bridge construction.

That will require the building-up or further development of special capacities in order to supplement present construction services and meet cooperation requirements not so far satisfied.

On this basis the Rbbd and its subordinated technical organs, plants and

facilities will focus on the following tasks:

1. As track construction continues the main task, it will be necessary in the

completion of the final product "track kilometers" even more tightly to link

track construction with underground construction. Priority in track construction lies with

— The more rational production of uninterrupted tracks including the necessary welding operations

— Mechanization and the better organization of the transport of long rails,

the exchange of rails and the conduct of final welding operations

— The reconstruction of selected yoke assembly sites.

2. Railroad underground construction must develop and generally introduce

new technical solutions and processes for the drainage, reorganization and

improvement of the load capacity of railroad substructures as well as build

up the respective preparation and storage capacities for plastic materials

and semifinished products.

3. The most important points with respect to bridge construction are these:

— To develop new design elements as well as processes for their manufacture

— To extensively standardize components and subassemblies
— To increase prefabrication as the prerequisite for rationalization and

the speed-up of assembly.

4. In general it will be necessary

— To adapt suitable and tested technical-technological solutions of the construction industry to the conditions and circumstances of railroad construction, and

— To provide manufacturing capacities for the production (in the Rethwisch

concrete plant) of railroad-typical concrete components for railroad

underground construction and reinforced concrete bridge construction.

5. The crucial concern of the industrial plants will be the more rational organization of their own production and manufacturing processes. Other key

points are

— The new and further development of wear resistant switch designs within

the switching system

— The development of diagnostic maintenance technologies in the plant for

track construction engineering, and

— The development of a new prestressed concrete tie as well as a new slab

facility in the Rethwisch concrete plant.

6. The research and development unit at Blankenburg will be assigned the task

to prepare the further perfection and rationalization of switching and the

development/manufacture of devices for the construction and equipment sector.

The railroad transport sector requires the concentration of construction measures and the optimum utilization of the planned shut-downs by "round-theclock" construction operations. This group of problems will asume steadily

increasing importance within the framework of the intensification at the GDR

Railroad. With these aspects in mind the Engineering Office for Railroad

Construction Rationalization and the Naumburg Track Construction Works are

preparing the construction project Vieselbach-Erfurt for 1977. Although we

must wait for the actual results, it may be assumed even now that "round-theclock" construction will yield real intensification effects only in those

cases where such an operation is indispensable in the interest of the transport sector. Anyway, the decision should always be based on the economically defensible optimum. All track and engineering construction enterprises

must adjust to this modus operandi. This again presumes—and without exception—the preparation and assurance of long-term stable construction programs.

The existing research and development capacities—largely constant through

1980—will be used to deal with the scientific-technological tasks in the

departments listed earlier. At the same time it will be necessary to keep

ready the necessary capacities for immediate work on rationalization tasks

of the current production processes.
For the further speed-up of scientific-technological advances and the improvement of their economic and social efficacy the following intensification factors in the field of science and technology will be applied in the

coming years:

— Much greater importance will be assigned future-oriented work. To provide the groundwork for several years to come it will be necessary to arrive

at a fundamental long-term decision about scientific-technological targets.

— The standard of scientific-technological work must be improved throughout.

The research and development collectives will be called upon to contribute

great creative services, the maximum personal commitment (especially the correct politico-ideological attitude to their assignments) and persuasive force

in the transfer of the results to productive utilization, especially relating

to the useful exchange of opinions in the production collectives as well as

with innovators and rationalizers.

The competition and innovator movements hold a decisive part in the accomplishment of tasks involved in socialist intensification. It will be imperative further to develop and apply the tried and tested methods of the competition. Beginning with the stage of development achieved the leadership conception on the development of the innovator movement through 1980 has set out

the corresponding tasks and targets. The social benefit derived from the

innovator movement, for example, is to amount to M82.4 million, that is an

annual average of M16.5 million. This presumes raising the involvement of

production workers in the innovator movement from 25 percent to 30 percent

and increasing the share of the planned innovator activities from 45 percent

in 1977 to 60 percent in 1980. In this context the innovators and their collectives are oriented to the most important—indeed crucial—tasks relating

to plan fulfillment. It has been found useful in this connection to classify

the measures of the plan science and technology, and this method will be

steadily persued.

To close still persisting or new mechanization gaps it is intended for the

workshops in 1980 to develop and construct nearly twice the rationalization

aids turned out in 1976. This trend shows that it is imperative for the expansion of decentralized manufacturing capacities in the various sectors to

continue. It will be most important quickly to provide those rationalization

aids and introduce them in practice, which originate in the innovator movement. The available production capacities in the Blankenburg research and

development plant, the Brandenburg plant for track construction engineering,

the machine and repair department of the Naumburg track construction factory,

the Erfurt development and prototype construction plant will be optimally

utilized for the design and manufacture of rationalization aids.

The development and effective utilization of the existing labor capacity has

become a key question. Every hour, every minute is becoming more and more

valuable and expensive. In the track construction and building construction

enterprises one single hour lost by a production workers equals a loss of

10
production worth some M27, in the industrial plants a loss of as much as

M47. It will therefore be imperative to concentrate all efforts on fullyusing working hours for productive activities and provide the necessary

technical-organizational prerequisites for doing so. All factories must,

as per plan and with the greatest thoroughness, analyze all time lost in

order to be able to adopt complex measures for gradual implementation, beginning with the improvement of labor organization, the use of technically

justified labor norms and the appropriate organization of working hours

through the improvement of working and living conditions. It is particularly important to insist on the application of the measures set out in the

Rbbd program on the development of working and living conditions of railroad

construction workers through 1980. They must be planned, prepared and implemented as well as they possibly can be on the basis of long-term construction preparations.

In order to accomplish the challenging tasks confronting them and act in

the spirit of the Fifth SED Central. Committee Plenum the railroad construction workers will offer their contribution in honor of the Red October by

outstanding performances.

11698

CSO: 2300

11
EAST GERMANY

FIGURES PROVIDED ON USE OF HOUSEHOLD CONSUMER GOODS

East Berlin DIE WIRTSCHAFT in German No 9, 5 May 77 p 21

[Article by Dr Werner Bischoff, Leipzig Institute for Market Research: "The

Development of the Demand for Household Consumer Goods"]

[Text] The growing interlocking of the economies of the CEMA member countries

also calls for the joint research and development of individual consumption

and the demand for consumer goods and services. The urgency of arriving at

common strategies for meeting the demand in all countries of our community

arises from the following factors (among others):

— The main task has, in one form or another, become the long-term strategic

orientation of the economic and social policies in all CEMA countries;

— The Complex Program orients to the gradual adaptation of the material

standards of living and therefore also the standards of consumption of consumer goods;

— Satisfaction of the expected demand for consumer goods and services necessitates long-term and often far reaching decisions regarding the development

of the consumer goods industries in all countries as well as the appropriate

cooperation and specialization among the various countries.

The latter is reflected in the preparation of long-range target programs for

important consumer goods, for example durable domestic consumer goods such

as refrigerators and washers.

Study Group Market Research

To improve cooperation in the field of market research the study group market

research was set up in 1976 as the advisory organ of the ministers for inland

trade of the CEMA countries. Its members are employees of the commercial

research institutes of all CEMA countries. In accordance with the plan for

long-term multilateral scientific-technological cooperation four topics are

currently the subject of joint research. All of them concern problems of

consumption and the demand for consumer goods. One involves the preparation

12
of a forecast of the development of the public's demand for durable household consumer goods. All CEMA member countries are involved in this project

The Leipzig Institute for Market Research was designated coordinator The

work is to be completed by the end of 1978. It will provide data on'the

total development of demand in all CEMA countries for the widest possible

range of domestic consumer goods through 1990, the structure of this demand

and the requirements involved in regard to the use values of the consumer

goods to be supplied. The work is so laid out that it may be used as the

basis for the preparation of long-range target programs for household consumer goods.

The results of the first stage of work—the preliminary combination of national forecasts—were discussed and approved at the second meeting of the

study group market research, which recently took place in Leipzig. Established at the same time were the future steps for the planned handling of

Rationalizing Housework

Regardless of specific national conditions the appropriate supply of the

public with domestic consumer goods is considered a particularly urgent task

now and m future. Various common starting points or criteria were ascertained.

—Private households have important functions in connection with the physical and mental reproduction of the members of society and the satisfaction

of many needs. The importance of these functions is unlikely to decline in

the forecast period. In fact it will probably increase.

— The time currently needed for housework is substantial in all countries

It fluctuates between 37 hours (USSR) and 47 hours (Hungarian People's Re-'

public, GBR) per household and week. In all countries women carry the preponderant burden of housework, holding a share of 70-80 percent.

— In the interest of the all-round development of the personality it is a

social requirement to reduce this burden of housework by rationalization.

The members of the study group are agreed that this is bound to be a longterm process.

b

— Technological consumer goods are assuming increased importance as rationalization aids in households, and this is accompanied by the growing socialization of household operations (such as the use of service facilitieslaundries, communal meal facilities, and so on). The social need for the

use of appliances in the household is matched in all countries by the public's

demand for the use of a wide assortment of household consumer goods.

It should be noted that consumer demand for household consumer goods has

tended to develop very rapidly indeed. In the GDR, for instance, the public s expenditure on household goods rose from some Ml.8 billion in 1960 to

13
M2.8 billion in 1970 and to about M4 billion in 1976. In fact this expenditure rose faster than people's net earnings in the same period.

This development provides evidence of the rising public demand on the one

hand, and of the greater opportunities for their satisfaction by the availability of appropriate supplies on the other.

A similar development may be observed in most CEMA countries regardless of

the relatively wide differences in the standard of the level of consumption

and the fact that the process of equipment with respect to some consumer

goods began only a short while ago. In addition we must of course take into

account national and regional peculiarities in consumer habits.

Rising Demand for Replacement

Studies have shown that the existing trend regarding the equipment with

household consumer goods will continue.

The range of appliances used in households will expand. Estimates for the

GDR assume that the figure for appliances serving the average household will

rise from 10 in 1976 to more than 15 by 1990. (The calculation includes

18 of the most important household consumer goods.)

Ownership of many household consumer goods will approach or achieve satiety.

Linked with this fact is the progressing leveling out of the standard of

equipment among various sections of the public within the countries. Demand

is now concentrated increasingly on the replacement of outworn appliances.

Greater demand is to be expected especially for those appliances which are

not yet generally owned or have only recently come on the market.

The rate of demand and consumption development will differ from assortment

to assortment and from country to country. However, there will be a gradual

adjustment of the level of consumption among all the countries. In fact

this trend is already apparent with respect to some countries and assortments (see table).

This process is coupled with the gradual adjustment of consumer habits and

lifestyles of the peoples in the various countries. This provides significant

prerequisites for the increasing internationalization of the supply of household consumer goods. Yet in future also national specifics will persist in

consumption and utilization, and that will result in differences in the demand of the various countries.

We must assume the increasing shift of demand in all countries and for all

assortments to modern appliances with optimum use values. That applies especially to the extent of automation of the devices, rational energy use,

minimal care, ease of operation, maintenance and control and also attractive

shapes and colors. Demand will be increasingly influenced by the success

achieved in meeting this trend by an adequate supply of new and further developed household consumer goods.

Ik
All countries of our community are confronted with the task of ensuring, by

the appropriate activities, that the expected demand for household consumer

goods may be satisfied both as to quantity and quality, thereby meeting an

important sociopolitical requirement of our society. A satisfactory basis

is established by the long-term target programs which are currently in preparation for some consumer goods.

Tasks for Industry

To satisfy the demand it will be necessary for every country to develop its

consumer goods production taking into consideration the national demand and

the total needs of the community. That involves reasonable specialization

and cooperation. These should proceed primarily and from the preparatory

stages on with respect to subassemblies, technological parameters, the provision of standardized norms, and so on; rather less in the specialization

of the production of finished products.

Special importance lies with the increased production of new and further developed items based on demand. Industry carries a great deal of responsibility in this matter.

In addition to the need for the steady improvement and standardization of

the methodological equipment and the ongoing examination of the topicality

of data regarding demand, new questions and obligations arise for the joint

work on market research. Answers must be found to outstanding problems such

as (to name only a few)

~ The improved ascertainment of the development of demand within the assortments, that is the quantity-quality-value consideration,

— The more accurate ascertainment of approaching satiety,

— The more accurate determination of the useful life of items and the need

for replacement,

~ The determination of the effect produced by such factors as the rapid advance of housing construction on the demand for certain appliances,

— The determination of the interrelation between the use of appliances and

the demand for services.

Future joint work will certainly be able to find answers to many of these

problems. We will, however, achieve complete success only if institutions of

the consumer goods industries as well as those of the retail trade are involved, because the former especially can significantly contribute to the

clarification of certain questions by undertaking their own studies and collaborating in others with the retail trade. In our opinion it is in fact

their duty to make such a contribution.

15
Graph

Key:

Bestands an auswählten

hauswirtschaftlichen

Konsumgütern

in den Haushalten

der DOR

Bestände je 100 Haushalte

I 11970

1. Stocks of selected household consumer goods in GDR households

2. Stocks per 100 households

3. Refrigerators

4. Kitchen appliances

5. Water heaters

6. Toasters

7. Washers

8. Sex^ing machines

9. Vacuum cleaners

Table— Development of Stocks of Refrigerators and Washers per 100 Households

in Selected Countries

CountryBulgaria

Hungary

GDR

USSR

CSSR

Refrigerators Washers

1960 1970 1975 1960 1970 1975

1 29 61 4 50 55

1 32 68 15 56 70

6 56 84 6 54 76

4 31 61 4 52 65

12 57 77 52 75 90

11698

CS0: 2300

16
T

EAST GERMANY

DECREASED 1976 AGRICULTURAL YIELDS ANALYZED

Cologne DEUTSCHLAND ARCHIV in German Vol 10 Apr 77

Signed to press 25 Mar 77 pp 383-389

[Article by Dr Bernd Spindler, staff member of the All-German Institute,

Bonn: "GDR Agriculture and Forestry in 1976"]

[Text] Due to the drought, 1976 was for GDR agriculture and forestry

one of the worst years in the last decade. This is the picture presented in the reports published by the Central State Administration for

Statistics. According to the available information on the individual

crops, total production—rated in terms of grain units—decreased by

approximately 14 percent. With regard to animal products, on the other

hand, plan targets were met. However, according to the plan fulfillment report, agricultural net production decreased by almost 10

percent; thus production in this sector of the economy fell short of the

targets set by the government and the SED.

Effect of the Drought

In some GDR bezirks, the precipitation deficit—50 percent of the precipitation occurred during the first months of the year, from January until

the end of June1'—led to losses of up to 50 percent of the plan

targets for crop production. In the case of winter barley, for example,

the decrease in yield amounted to 30 to 40 percent. The forage crops

suffered equally great damage: In many areas, the second harvest dried

up so that increased intercrop cultivation became necessary. The drought

also led to a lowering of the ground water table. In the south of the

GDR, the ground water tables were 10 to 80 centimeters below the averages

established over many years; in the central bezirks, the decreases

ranged from 40 to 120 centimeters, and in the north, from 60 to 120

centimeters. This impeded especially the growth of the root crops. Due

to the lowered ground water tables, the capacity of the surface wells in

rural areas, especially in the central and northern GDR bezirks, proved

insufficient for meeting the water needs of the population or the irrigation requirements of agriculture2

); consequently, additional expenditures

17
were necessary, in order to ensure a sufficient water supply. In the

GDR forests, approximately 5,500 hectares of timber were lost through

forest fires; in comparison with previous years, this represents an

increase of 300 to 400 percent.3) The damage amounted to approximately

M 10 to 15 million.

More than 6,000 hectares of forest preserves with millions of young

trees were lost on account of the drought; in some parts, all young

growth dried up and in other parts, damage amounted to between 30 and

50 percent of the total area. Furthermore, the pine needle litter—10

to 30 cm in depth—dried up completely.4)With regard to reforestation,

this caused considerable difficulties. Another danger to the forests,

especially to extensive coniferous stands, were the noxious insects, the

propagation of which was very much helped by the drought. Some parts

were infested by three generations of the dangerous bark beetle.

The long-lasting drought and the extreme heat considerably reduced the

vitality of large parts of the GDR forests. The effects of this—short

pine needles and shoots and reduced trunk diameters—will become evident

in the next few years. At present, the extent of the damage—caused by

the drought and the effect of solar radiation on older stands of timber—

cannot be correctly appraised yet.5) Heavy losses occurred also in other

areas: the extreme weather conditions reduced the yield of resin by

approximately 2,500 tons and led to considerable decreases in yield in

the osier stands.6)

Due to the water and oxygen shortage and the higher water temperatures,

the extreme weather conditions also led to considerable losses in freshwater fishing, causing the death of approximately 200,000 one-year-old

and 20,000 two-year-old carps. Due to the low water levels, 20 percent

of all ponds in the Dresden bezirk could no longer be used for fishing.

In a single trout-breeding installation, production losses amounted to

10 tons of fish.7)

Assistance by the GDR Government

Upon recognizing the bad situation in agriculture, the GDR Government

decided to adopt remedial measures in support of this sector of the

economy. In contrast to the Federal Republic, these measures were hardly

mentioned in the press. The first measure was the appropriation of

M 50 million for the agricultural enterprises. These funds were to be

used for the expansion of intercrop cultivation, in order to reduce the

livestock feed losses.8) Since the GDR was not able fully to satisfy

out of its own resources the heavy demand for seeds, it took advantage

of the possibility to obtain additional supplies through the intraGerman trade. The funds are managed by the Bank for Agriculture and

18
Food Production (BLN). The Bank granted the farms credits for ensuring

the monthly advance payments and for covering the cost of the replanting

of fruit trees and of reforestation. The farms and the drying plants

were granted an interest remission of 3 percent, if the accumulating

straw was fully utilized for processing into fodder. The state also promoted the construction of additional silo capacities and the purchase of

acorns and chestnuts by the state forestry enterprises and state grain

combines.") Subsequently, in the course of the year, the agricultural

subsidies were increased to M 300 million, in order to compensate the

enterprises for the losses incurred.10)

Grain Crop

Due to the drought, the grain harvest—approximately 2.5 million hectaresstarted ten days earlier than in previous years. The grain acreage was

further expanded in 1976 and by 1980, it is to be increased to 3 million

hectares at the expense of the feed grain area. Taking into consideration the condition of the plants and the prospective yield, the decision

was made as to whether to harvest merely the grain or the entire plant.

In the latter case, the chopped straw was enriched with urea in drying

installations and then converted into pellets, in order to obtain highgrade fodder. The grain harvest was carried out in shifts with approximately 11,350 E513 harvester combines. In 1975, the degree of mechanization in this partial sector was reported to be 100 percent, with older

combine models constituting 1.9 percent. ) Last year, the combines

were employed in units comprising 10 to 15 machines—a measure based on

the experience gained during the 1975 harvest. By means of such concentration, it would be possible to reduce by approximately 50 percent the

number of maintenance trucks—which are still in short supply—, trfnsport capacity by 10 to 15 percent and manpower by 10 to 15 percent.12

)

Some of the difficulties and problems encountered during the 1975 harvest,

above all the lack of transport capacity, came up again last year. This

shortage was eliminated by borrowing trucks from enterprises in industry

and forestry. The insufficient supply of spare parts and the shortage of

mechanics resulted in additional down time for the harvester combines.

The long conversion times required by the units caused a reduction of

output. Since the roofed-over storage space and the drying capacity of

the corresponding installations were likewise insufficient, it is safe

to assume that there were losses as well.-")

The first unequivocal statement concerning the results of the grain

harvest was made by Erich Honecker in a speech delivered in Karl-MarxStadt: He mentioned that the yield per acre amounted after all to 32

quintals.!4) Thus, with an area of approximately 2.5 million hectares

under cultivation, the yield can be assumed to have totalled approximately 8 million tons of grain.

19
Potato Crop

Last year's potato harvest likewise got an earlier start. The area

under cultivation probably approximated 550,000 hectares. The harvest

was carried out at a mechanization level of approximately 95 percent.15'

The standard harvesting machine was the double-row trailer lifter, model

E665, with its numerous variants. In addition to the partial mechanical

separation of rocks and clods, the E665 model also made possible the removal of foreign matter and rotten tubers. In places with a high content

of foreign matter, it was still necessary to do a great deal of the work

by hand and even with reduced output the elimination of foreign matter

was insufficient and additional in-plant removal was required. In places

with low rock content, the new E684 model was employed, a triple-row trailer lifter-loader which is considerably more efficient. This work was

also done in shifts.

In order to minimize harvest losses, special damage inspectors were employed, who examined the harvested areas and the crop for damages. Since

the pickup rate of the harvesting machines was less than 100 percent, it

was necessary to use manpower for gleaning. Maintenance and repair work

was carried out with maintenance trucks by the mechanics and other

specialists of the kreis enterprises for agricultural technology. The

agrochemical centers were also responsible for transporting the crop from

the field to the sorting place, where the potatoes were graded in three woik

shifts.16) In comparison with the previous year, there was a 30 percent

decrease in crop yield. The low yields per hectare was again caused by

an insufficient supply of new high-yield varieties suitable for industrial production and storage, by the poor quality of the seedlings, by deficiencies in the production of plants for reseeding and by the failure

to comply with the agricultural and agrotechnical requirements in the

production of seed and cooking potatoes. Crop damage—caused by deficiencies in the use of technology—was still too ex ensive; moreover,

there are still shortcomings in storehouse management.17)

Sugar Beet Crop

Sugar beets were harvested from an acreage of 270,000 hectares. Last

year, this crop occupied the largest area. The harvest was again carried

out by machine units; so far it has proved optimal to have each unit

comprise four sets each of triple-row toppers and lifters. With this

setup, it was possible with two shifts in twenty labor-days to dig up

approximately 380 hectares. For this work, the workers had at their

disposal over 5,800 toppers and over 4,000 lifter loaders, including

approximately 500 self-propelled machines of the KS6 model18) which is

produced within the CEMA domain. This new self-propelled six-row

lifter, which was employed in units of three, produced excellent results.

Since the pickup rate of the harvesting machines fell short of 100 percent, it was necessary to fall back on manual labor for gleaning.

20
Quality inspectors in the harvesting units were instructed to pay

special attention to the reduction of harvesting losses.^9) in order

to minimize idle time, mechanics and other specialists of the kreis

enterprises for agricultural technology again assumed the maintenance

and repair duties. The beet transport was for the most part handled by

agrochemical centers (ACZ). With the high-speed unloading operations at

the plant proceeding without a hitch, it took approximately five W60

trailer trucks per lifter to handle the direct transport to the plant.

Among the advantages of direct transport were the elimination of the

need for intermediate storage and the reduction of losses. As in 1975,

several hundred trailer rigs and trucks were employed supra-regionally

last year, since transport capacity was still in short supply.20)

The processing of the sugar beets was carried out by the 47 sugar factories21

) which in 1966 had been assigned to 13 control enterprises

(in Guestow, Stralsund, Anklam, Letschin, Genthin, Haldensleben,

Oschersleben, Halberstadt, Bernburg, Halle Artner, Zeitz and Oschatz).

Most of these plants are located in the Halle beet-growing region and in

the Magdeburg Boerde.22) The sugar factories have for the most part

become obsolete. The delivery taking, processing and storage of sugar

beets still caused problems for many factories; for several years great

efforts have been made to reduce storage losses in particular. For

this reason, storage capacity has been steadily expanded.•")

The yield of the 1976 sugar beet harvest amounted to 187 quintals per

hectare. In comparison with the five-year average computed for the

period from 1971 to 1975, the decrease in yield amounted to 33 percent.2^

Further Causes of the Decreases in Yield

The primary causes underlying the low crop yields in 1976 were the

drought and the extreme heat; however, there were other contributing

factors. In many cases, the crop rotation was not strictly adhered to.

Moreover, due to the insufficient supply of organic substances, the soils

lacked the buffer capacity necessary in extreme weather conditions. For

this reason, it is planned to increase the use of organic fertilizer:

All organic substances obtainable in crop production and livestock

breeding, in industry and in municipal enterprises are to be collected

and processed for the purpose of further increasing soil productivity.25)

In 1976, the soil did not receive a sufficient supply of micronutrients,

such as boron, copper, manganese, molybdenum, zinc and magnesium. Due

to the drought, the magnesium flow and diffusion was restricted to such

an extent that the soil could not provide a continuous magnesium supply.

Soil examinations showed that micronutrient-intensive crops could not

be assured a sufficient supply of these substances (in the case of boron,

43 percent; copper, 50 percent; manganese, 12 percent; molybdenum, 38

21
percent and zinc, 2 percent of the samples examined).26) One of the

reasons for this is probably the fact that until 1971 the agricultural

enterprises were only rarely requested to undertake soil examinations

for micronutrient content; consequently, there is a great need for remedial action.27

^ Further difficulties arose in the optimal distribution of fertilizer by the plant protection service—which was not always

equal to the task—and in the selection of the suitable seed varieties

for the various locations in accordance with the regional distribution

program for grain and potatoes.^"/

Livestock Breeding

In contrast to agriculture, the plan targets for livestock breeding

were fully met in 1976. It was not possible however, to maintain or expand present livestock resources. The reason for this is probably the

reduced production of feed grain and coarse fodder (hay, chaff and straw),

for in comparison with the five-year average computed for the period

from 1971 to 1975, truck forage crops, field forage crops and silo corn

showed yield decreases of 26, 13 and 41 percent respectively; this

falling off in yield occurred despite the cultivation of an additional

160,300 hectares of winter intercrops and despite the production of over

1.4 million tons of straw pellets. Thus, in comparison with 20 November

1975, beef cattle decreased by 1.1 percent, cows by 0.5 percent, hogs by

1.8 percent, and sheep by 0.7 percent; on the other hand, it was possible

during the same period to increase the stock of layer hens by 2.6 percent."9

^ It will be at least two years, before this decrease in the

stock of dairy and beef cattle can be made good, since the animals need

this much time to become fit for breeding or milk production. In the

coming months, the livestock resources will probably show a further decrease, since fodder is still in short supply. At present, it is diffcult to predict to what extent this will affect the supply of animal

products for the GDR population. However, major shortages are unlikely

to occur.

Within the individual GDR bezirks, there was also variation in the level

of production in livestock breeding. Thus the data obtained in 1975

probably also applies to 1976. G. Winkler points out that in 1975 in

the Frankfurt/Oder bezirk, each cow produced an average of 3,636 kg of

milk, whereas the yield in the Leipzig bezirk was 4,067 kg per cow.

However, the genetic production potential, which should be at least

4,500 kg of milk, was not achieved in any bezirk. >

In livestock breeding, which in 1976 was undertaken by 3,394 LPG [Agricultural Producer Cooperative] and 389 VEG [State Farm] with conventional

production methods, 7 LPG and 29 VEG with specialized production methods,

360 inter-plant or inter-cooperative livestock breeding installations

22
and 30 KIM [Industrial Fattening Combine], the percentage of efficient

production facilities is still relatively small: For dairy cattle, 3.6

percent; for hogs, 17.8 percent, and for layer hens, 33.8 percent.31)

For some time, it will therefore be necessary in livestock breeding to

fall back on the great number of available old sheds. Last year, for

example, 55 percent of all cow stalls were in sheds built before 1960.

Approximately 35 percent of the cows were still being kept in buildings

with a capacity of less than 90 stalls;-^) consequently, the tending of

the dairy cattle still required a great expenditure of labor, for in

these old buildings mechanization is extremely costly.

Fodder Management

The problem of.fodder management is aggravated by the fact that on the

one hand the harvest was insufficient and that on the other hand many

enterprises failed to attain an optimal feed utilization. In many cases

the quality of the feed produced—equalling an annual M 10 billion in

value—still remains insufficient.33) By providing information and

feeding suggestions, savings and an Improved feed utilization are to be

made possible. A TV program, which has been broadcast every Thursday

since 18 November 1976, deals with problems of feed economy. Complementing the program, the NEUE DEUTSCHE BAUERNZEITUNG [New German Farmer's

Paper] publishes reports based on the practical experience of the agricultural enterprises. ^) Another measure was the construction of additional drying plants in the GDR; at the end of the year, there were over

300 of such facilities. The drying plants continued to produce straw

pellets, in order to expand the feed basis for livestock breeding. Plan

projections for last year had stipulated the production of 600,000 tons;

on account of the crop failure, however, over 1.4 million tons of straw

pellets were produced. -*' In addition, the production of mixed fodder

was steadily expanded. Last year, it totalled approximately 4.5 million

tons and according to plan projections, it is to reach 6.12 million tons

by 1980. Approximately 100 enterprises of varying capacity were engaged

in the production of this type of feed, which was used above all in the

production of hogs, eggs and fowl by industrial methods.36) The poor feed

utilization results in livestock breeding were caused on the one hand

by the immanent shortage of protein feeds and on the other hand by the

insufficient use of mineral substances and additives.37)

Agricultural Technology

Although it was possible to increase the level of mechanization in

agriculture—by providing more tractors and harvester combines for example the plan targets for 1976 were not met. As to tractors,

production fell 470 units short of the plan target, while in regard to

23
combines, the deficit amounted to 50 units.38

) As to other types of

agricultural machinery and the respective spare parts, the situation is

probably the same. However, no pertinent data has been published on this

subject. It is safe to assume that in many cases the lack of spare parts

led to unnecessary down time.

The enterprises varied greatly in regard to the rate of utilization of

agricultural machinery. Thus, investigations in 160 KAP [Cooperative

Crop Production Department] regarding the use of the K700 tractor showed

an average of 2,121 hours of operating time per year, whereas some tractor drivers logged over 3,000 hours.3

") This variation is probably

caused on the one hand by better maintenance and on the other hand by

quicker repair work. So far, it has not been possible to find out to

what extent the variation can be attributed to the fact that many KAP

relinquished their repair capacities to the kreis enterprises for agricultural technology.^0) Certainly, these enterprises can do the necessary repair jobs more quickly and at lower cost, since they are technically much better equipped than the agricultural enterprises.

Forestry

According to information published by the Central State Administration

for Statistics, the state forestry enterprises met the 1976 plan

targets. ^' These 73 enterprises succeeded in clearing up the damage

caused by rolled timber in 1972 and in reforesting parts of the deforested areas.^2) In this sector of the economy, the number of workers

employed was approximately 43,700. During the period from 1965 to 1975,

the workers were able by means of new logging methods to increase logging

productivity by 27 percent. ) These forestry enterprises closely cooperated with the agricultural enterprises. During the summer, they

gave manifold support to agriculture; in the winter, they provided jobs,

above all to the KAP workers, for upon the completion of the harvest work

in the fields, the crop production departments did not have enough work

for their employees. In accordance with contractual agreements reached

with approximately 7,000 cooperative farmers and agricultural workers,

these workers were employed in logging, forest management, timber transport and in the production of building materials and consumer goods in

the state forestry enterprises. The women were for the most part employed in the production of building materials and consumer goods.

Apart from labor, the agricultural enterprises also provided the necessary means of transportation as well as the fuel required. The cost

accounting was done jointly with the forestry enterprises upon the completion of the work.2

*

4

) In 1976, shift work found increasing acceptance

also in this sector of the economy; this resulted on the one hand in

increased labor productivity and improved machine utilization and on

the other hand in a reduction of cost per cubic meter of timber.

2k
Due to the insufficient supply of spare parts, however, work stoppages

still occurred.**$) in order to minimize breakdowns of logging equipment, cooperation with the kreis enterprises for agricultural technology

was further intensified. Studies had shown that the available repair

capacity was insufficient and that orderly stock management was impossible in view of the many different models of equipment to be repaired; consequently, the repair shops of the logging industry have of

late begun to concentrate just on maintenance and light repair work.

The reis enterprises for agricultural technology, on the other hand,

took care of the major reconditioning jobs; they stocked up on the

appropriate spare parts and continued their efforts at specialization

and concentration. °'

In order to improve the housing and living conditions in the countryside, the enterprises of the logging industry took a greater share in

supplying building materials, hardwood panels and roof standards for

private homes;^) in addition, they did the preparatory work for the

production of wooden or prefabricated houses.^°)

It is safe to assume that it will not be possible in all sectors of

agriculture to meet the targets set by the five-year plan for the

period from 1976 to 1980. On the one hand, it will take years to undo

the soil damage caused by extreme heat and drought. On the other hand,

the funds and materials available for the measures necessary for improving the situation in agriculture are limited. Since the GDR—a

country lacking in raw materials—will have to pay increasingly higher

prices for raw materials even within the CEMA domain, the targets set

by the five-year plan will probably have to be considerably reduced in

the course of the next few years.

FOOTNOTES

1. "The TV Press Conference," GDR Television 7 July 1976.

2. NEUES DEUTSCHLAND, 20 July 1976, p 2, and 21 July 1976, p 2.

3. GDR Statistical Yearbook for 1976, East Berlin, 1976, p 2.

4. NEUES DEUTSCHLAND, 1 January 1976, p 11.

5. BAUERN-ECHO, 21 July 1976, p 2, and NEUES DEUTSCHLAND, 21 July

1976, p 2.

6. NEUE DEUTSCHE BAUERNZEITUNG, No 31, 1976, p 10.

7. NEUES DEUTSCHLAND, 21 July 1976, p 2.

25
8. NEUE DEUTSCHE BAUERNZEITUNG, No 34, 1976, p 13.

9. Ibid.

10. NEUES DEUTSCHLAND, 11/12 December 1976, p 4.

11. GDR Statistical Yearbook for 1976, p 187.

12. FELDWIRTSCHAFT, No 6, 1976, p 250 ff. and KOOPERATION No 4, 1976, p 161 ff.

13. FELDWIRTSCHAFT, No 6, 1976, p 251.

14. NEUES DEUTSCHLAND, 16/17 October 1976, p 3.

15. GDR Statistical Yearbook for 1976, p 187.

16. NEUES DEUTSCHLAND, 27 August 1976, p 3.

17. M. Pflaumbaum, "Causes of Potato Blue-Spotting and Measures for

Its Prevention," SAAT-UND PFLANZGUT, No 9, 1976, p 139 ff, and

D. Schulze, "Experience Gained by the Broderstorf and Reichenbach

KAP in the Production of High-Quality Cooking Potatoes,"

FELDWIRTSCHAFT, No 9, 1972, p 4031.

18. NEUES DEUTSCHLAND, 9/10 October 1976, p 2.

19. NEUES DEUTSCHLAND, 27 October 1976, p 3.

20. PRESSE-INFORMATION, No 118, 14 October 1975, p 2.

21. NEUES DEUTSCHLAND, 27 September 1976, p 2.

22. "Oekonomische Geographie der GDR" [Economic Geography of the GDR],

Gotha/Leipzig, 1970, p 467.

23. G. Willer; F. Klipp, "Delivery-Taking, Processing and Storage of

Sugar Beets Under Conditions of Mass Production,"

FELDWIRTSCHAFT, No 8, 1976, pp 363 ff.

24. NEUES DEUTSCHLAND, 22/23 January 1977, p 4.

25. PRESSE-INFORMATION, No 8, 20 January 1977, pp 3 ff.

26. G. Markgrav; W. Borchmann, "Functions of the Soil in Ensuring an

Optimal Supply of Plant Nutrients under Industrial Production

Conditions," ARCHIV FUER ACKER- UND PFLANZENBAU UND BODENKUNDE,

Vol 20, No 12, 1976, pp 848 ff.

26
27. BAUERN-ECHO, 3 February 1977, p 7.

28. 0. Schroeder, "Some Points of Emphasis in the 1977 Crop

Production," FELDWIRTSCHAFT, No 1, 1977, p 6.

29. NEUES DEUTSCHLAND, 22/23 January 1977, p 4.

30. G. Winkler, "Observations on the Importance of Material Economy

in the Management Process," KOOPERATION, No 1, 1977, p 2.

31. G. Gruenberg, "How Are the Resolutions of the Ninth Party Congress

Implemented in Agriculture and Food Production?" EINHEIT, No 9,

1976, p 1008.

32. W. Meissner, "Further Intensification—a Political Task of High

Priority," DER PFLUEGER, No 1, 1977, p 10, and BAUERN-ECHO,

26 November 1976, p 6.

33. NEUES DEUTSCHLAND, 19 November 1976, p 1 and 20 November 1976,

P 2.

34. Ibid.

35. NEUES DEUTSCHLAND, 31 December 1976, p 1.

36. BAUERN-ECHO, 5 January 1977, p 1.

37. G. Wacker, "Tasks of Fodder Production in 1977," FELDWIRTSCHAFT,

No 1, 1977, p 9.

38. NEUES DEUTSCHLAND, 22/23 January 1977, p 4, and 8 December 1976,

p 4.

39. G. Winkler, op. cit., p 3.

40. NEUES DEUTSCHLAND, 28 October 1976, p 3.

41. Ibid., 22/23 January 1977.

42. Ibid., 28 December 1976, p 2.

43. Ibid., and NEUE DEUTSCHE BAUERNZEITUNG, No 4, 1977, p 2.

44. BAUERN-ECHO, 20 December 1976, p 5.

27
45. D. Koehler, "Shiftwork Increases Efficiency and Improves Working

and Living Conditions," DIE SOZIALISTISCHE FORSTWIRTSCHAFT, No 8

1976, p 231.

46. H. Woetzel, "The Development of Close Cooperative Relations Between

the State Forestry Enterprises and the Kreis Enterprises for

Agricultural Technology in the Magdeburg Bezirk," DIE SOZIALISTISCHE

FORSTWIRTSCHAFT, No 8, 1976, p 237.

47. NEUES DEUTSCHLAND, 28 December 1976, p 2.

48. PRESSE-INFORMATION, No 2, 6 January 1977, p 4.

8760

CS0:2300
HUNGARY

NATION'S FINANCIAL ADMINISTRATION DISCUSSED

Budapest VALOSAGf in Hungarian No 4, Apr 77 pp 14-26

[Interview with Lajos Faluvegi, finance minister: "The Nation's Finances'»;

date and place not given]

[Text] [Question] No matter how I keep looking at the list of Hungary's

17 ministries, the one which is alphabetically the last is the one°which

I know the least as to exactly what it does. What does it guide and regulate? Where is its position in the structure of the economy and the state

administration, between the Plan Office and the ministries guiding industrial

and agricultural production? And in the determining of financial affairs what

is its role, along with or over the OTP (National Savings Bank) in arranging

for the payment means of the Hungarian state, the finances, deposits and credits of the currency-issuing Hungarian National Bank and others — there are

two more, the State Development Bank and the Commercial Bank — and to a considerable extent of the population.

Once, as a matter of fact, the activity of the Ministry of Finance — or does

it now only seem so? — was of a comprehensive nature on one hand and of an

overall reviewing nature on the other. It arranged state finances, determined

receipts, and with this it basically influenced expenditures. Only at the

time, the overwhelming bulk of state receipts consisted of taxes, fees, custom

duties and monopolies. Today, on the other hand, state income derives primarily from production profits and the withholding of a part thereof, and expenditures are represented by the redistribution of the sums withheld (for centrally financed investments, allotments excluding wages, and purposes serving the

common public interest, and so forth). The guidance of all these processes,

however, takes place in a structure so complicated that at times the individual decision-making organs and levels — as far as outsiders are concerned,

and we can also state as far as public opinion is concerned — are rather coniusmg.

Lajos Faluvegi, the minister of finance who has filled this post since 1Q72

has worked in his specialized field, which he now heads, for 111 III ?'

career. My first question is '.gray» but inevitable: Whai is the position of

teln 2TnL°l "A" ^

sta*e

admlaiatration system? ^hat do s t

mean when it is said that from year to year you are the one who presents the

accounting of the state budget in Parliament? presents the

29
[Answer] The management and financial characteristics of every state are

determined by the kind of social-economic system it has. When the means of

production in Hungary did not belong to society and economic policy did not

serve the interests of the working people, there was no plan management, and

naturally the relations between the budget and the enterprises, the budget and

the population were different from today's.

In 1938, the state budget distributed one third of the national income, but

it concentrates three fourths of today's national income. Today, the economic

plan guides "capital movement" among enterprises, and largely through the

budget. The state budget balances out the differences in domestic and foreign

price systems and the variations in domestic producer and consumer prices.

Before the war, scarcely one-tenth of all the country's investments were

covered from the state budget, whereas in 1950 three fourths were so covered;

nowadays it is again less, but still one-third. The state's social policy is

also more extensive. In 1950, we devoted 20 percent of budgetary expenditures

to social allowances, and in 1975 this increased to 37 percent. The scope of

institutions financed by the budget also expanded considerably. On the other

hand, the population's tax assessment is substantially more narrow. While in

1950 the population's tax payments made up 20 percent of budgetary receipts,

nowadays it is scarcely 2 percent. All this has changed the role of the

budget in the economy and its place in guidance.

Naturally, the state budget is not only the result of work by the Ministry of

Finance. The working out of the budget is a complicated, manifold task in

which numerous other institutions and, without exception, every organ of state

administration participates. Economic and social-political guidelines are

established at political forums, and these are concretely conceptualized to

a considerable extent in the economic plan, and their realization is made

possible in establishing the financial targets, of the budget. Of course, it

is not possible directly to conduct every item of the budget from the economic

plan. The financial targets are more detailed, and are finalized in broadscale collations and discussions.

In establishing the receipts and expenses of the budget, therefore, we must

coordinate national economic interests with the partial interests of individual branches, areas, organizations, collectives and population groups and

strata.

A unified financial outlook — commonly called the financial policy — assumes

that every money institution, whether belonging directly under the supervision

of the finance minister or not, must conduct a money policy coordinated and

harmonized with the Ministry of Finance. The institutional limits are naturally also adjusted thereto. The financial balances — the budget, the national

credit balance, and the balance of international payments — must also be

harmonized in the course of planning.

Finally, the state budget, at the same time as the economic plan, is debated

by the State Planning Office, and then the Council of Ministers, it is

30
discussed by the parliamentary committees (there are 11 standing committees).

Taking into account all their positions, the finance minister presents it to

Parliament for enactment into law. These same forums also debate the financial processes of the past year and the summary final account on the fulfillment of the budgetary targets.

It is no small task for the Ministry of Finance to transact the approved

budget. This year, for example, we are handling about 36O billion. The

money necessary for the management of the approximately 25 institutions,

financed from the budget, must be collected and forwarded. We must exercise

control over whether the enterprises, the cooperatives and the population are

paying the appropriate sums into the budget and whether the expenditures, as

accounted for, are justified and the goals are proper. We must also evaluate

the reports on the financial management of the managing organs.

In the latter half of the 1960's, the importance of finances changed because

money was given greater — although in my opinion still not great enough —

attention in management. Stress was laid on the question: What is the cost,

and how economical is it? Thus finances play a substantially greater role in

the guidance of decision-making and enterprise activity; to put it in our

customary way, they mediate national economy interests to the managing

organs. The enterprise tax and support system developed from income withholding into income regulation, and material incentive appeared as one of

the major motivational factors in enterprise decisions. In foreign trade,

moreover, international financial relations expanded further, and for this

reason rates of exchange, customs duties, and the receiving and granting of

international credits became greatly important. The local councils were

given greater autonomy, and for this they received money resources. The

central budget, on the other hand, undertook to reduce the differences in

area provisions; because of the differences in higher living standards and

incomes, the role of taxes on the population is also again increasing. Economic analyses in large numbers and applied research are necessary for the

solution of tasks of this nature. Thus we cannot believe that it is the

Ministry of Finance exclusively x^hich assembles and coordinates budgetary and

final account data. The tasks are much more manifold, for financial means must

be developed and maintained for the indirect economic regulation of enterprise

operation.

We must also devote a great deal of attention to the shaping of a concrete

financial outlook and making this known. When financial affairs not only have

an informational role but also a guiding, stimulating, limiting and controlling role, it is very important for us on the financial side, to try to promote the constantly moving balance of the economy, the sensitivity of the

economic experts for social problems, the development of democratism in guidance, and frank dialogs and discussions concerning the problems to be solved.

These, of course, are not specialized financial problems but principles, I

think, which we cannot permit to be forgotten in any area or at any'post. We

would^like to promote this in the professional periodicals as well as in

training, economic debates, where we try to harmonize our views with those of

other management guidance institutions and economic organs — enterprises and

31
cooperatives. I think that the population also knows more about the budget

and, in general, about finances than it once did. Interest in economic matters is gradually increasing, and along with it information on the details of

management. Now the finance minister appears twice a year in the media —

press, radio and television — presenting the state housekeeping plan, the

"budget", and later the final account of its fulfillment to Parliament under

maxiumum publicity. Public opinion encourages and judges him.

[Question] Your post is one forum where you may have the most comprehensive

view. Prom this post how do you see our economic situation, the development

and the prospects of its internal and external balance?

[Answer] It is possible to characterize the balance situation of the economy

only by analyzing many factors and drawing conclusions therefrom. I regard

the employment ratio as a basic characteristic. In Hungary, everyone receives

work. In fact, the problem is that manpower is not located in all places

where it would be needed. This also means a lack of balance, which can be

solved only through intensive investments and better work organization. Another important characteristic is the ratio of consumer demand satisfaction. We

may state that the population is well provided with food, clothing and household apparatuses. In general, these can be purchased by anyone who has

the money, although the poor variety still causes a great deal of irritation.

Unfortunately, the housing shortage is still considerable, and there are

still many houses built according to low standards. The housing shortage

makes it difficult for young people who are starting their life, for families

with a large number of children, and for societal mobility. Thus it causes

basic problems, the solution of which can be expected only with more and faster housing construction. In general, we could not create a balance between

investment demand and supply. It is well known that we have a standing problem of more investments in process than vie are able to construct. This

causes many disturbances in the carrying out of investments. Certain services are also in short supply, ifhich means many difficulties for administration.

The balance situation of a given country is also indicated by whether prices

are realtively stable or inflationary. In Hungary, price movement has

picked up, but prices from an economic point of view can still be described

as rather rigid. The general disposition of the consumer could be more

favorably affectedby full price stability, but the absence of accommodation

to world market price movements — which are causing us extremely unfavorable

and great losses — is hindering the development of an advantageous production,

marketing and consumption structure. In the final analysis, this limits the

restoring of balance, and over the long run it could only lead to affecting

the disposition of the public adversely. The way out, naturally, is not

through inflation but a regulated and flexible price mechanism harmonized

with income policy.

Balance or balance disturbances can also be studied from other points of view

not yet mentioned here, but among these the clearly most prominent and characteristic is the study of the financial balance. Finances react with

32
particular sensitivity to changes in the balance situation, and they show

comprehensively the combined effect of various dynamic phenomena in the

economy and the balance situation of the entire economy. Financial balance

can forecast disturbances.

Beginning in the mid-19601s, the state budget has shown a deficit for every

year. The deficit is not an important one, for even the largest was scarcely 2 percent of total expenditures, and in 1975 i"t aid no"t even reach 1 percent. And still the deficits exist, that is, expenses are greater than

receipts. (Let me note that in 1938, for example, the deficit in the Hungarian state budget was close to 6 percent.) The economists are debating their

judgment of the budgetary deficit. There is a widely held view — which is

mine, too — that we must first of all study the combined balances of the

total financial balance because the permanent money accounts of enterprises

and the population in domestic banks is a good cover for budgetary expenses

— naturally along with the obligation to repay. And foreign credits, if not

excessive and repayment opportunities exist, are also useful sources for

budgetary expenses. Many countries besides Hungary use this latter means,

particularly in periods of rapid development. Our foreign debts are not

excessive; we regularly meet our payment obligations, and our credit ability

is classified as "first class" on the international money markets.

In any event, hwoever, our economy is not in full balance in the mirror of

financial balance. There are a number of reasons. We would like to develop,

grow more rapidly than we are able from our own resources. The increase in

the effectiveness of our economy is slower than the growth of our social and

economic demands. This difference has been increased in recent years by the

price losses we have suffered on the world market. It is exactly because of

the lack of balance experienced in the broad sense that we regard it important

to show the budgetary deficit, because we hold this as a sign for economic

leaders, in fact for the whole society, that also in this connection we should

think of the necessity and the conditions for more successful and organized

work.

We have reason for confidence because we have in our hands the possibility for

creating a permanent economic balance: if we increase economic production and

foreign trade, force out uneconomic production, and our products are competitive, at world level, and economically marketable to a greater degree than

today. To do this, we need to raise the technical level of production, modernize manufacturing technology, and substantially increase productivity.

Investment decisions merit special attention from this aspect. We need a

strict priority ranking for possible ideas, which is not easy to do. We must

at once be assured that future energy and raw material needs will be met,

that the long-neglected infrastructure will be substantially improved, and at

the same time assure a rapid structural change in foreign trade sales to make

our participation in international work specialization more economical. Only

economy can be the guide to how we assign priorities.

33
[Question] There is always a reserve in the state budget. What is this

used for and what criteria are employed? How can we interpret the reserve

when the balance of the annual budget is negative, that is, the planned

expenditures already exceed receipts?

[Answer] We are striving to put together a realistic budget. Experiences,

however, show that we cannot foresee everything. There are certain costs

which we cannot plan exactly. Certain investments may cost more than we

estimated. If agricultural production is poor, we must make it up possibly

from more expensive imports. But if production turns out much better than

estimated, it is possible we will have to give special subsidies for harvesting the surplus and for organizing deliveries. We must also allow some possibilites for a very favorable industrial innovation of great importance, and

for technical modernization. Frequently, the reserves are needed for good

buys, or sometimes for an investment that must be rapidly completed. Many

more people took advantage of child care assistance than we had assumed and

this, too, was an unexpected expense for the budget (and the cause of a drop

in production).

Practice has given us great experience in the prior assessment of uncertainty,

the "planning" for a degree of unexpected events. A budget which left these

out of consideration would not be realistic because every unexpected event

would increase the deficit. The planning of reserves is possible when

despite the money demand caused by unexpected and unavoidable events, the

deficit remains by and large no greater than planned.

We must state, however, that the reserve is regularly smaller than what is

actually needed. In 1977, for example, it is 1.5 billion forints, altogether

0.4 percent of expenditures. This is not too much. Our budgetary management

is not indulged in this regard. We have to delay certain justified decisions

at times to avoid an increase in the deficit. But the councils and enterprises

also have reserves available, the lowest permissible level of which is prescribed. In this way, we can share the burden of extremely severe happenings.

[Question] Please review briefly our social policy and educational policy —

from the viewpoint of the Ministry of Finance. To mention only a few major

groups, what was the trend in the development of expenses for health, pensions,

training and education. And are these forecasts of their necessary and possible increase for the period affecting long-range planning?

[Answer] An overview conducted from financial signs is a bit one-sided since

quantitative changes reflect only partly the quality transformations of our

life. In 1950, the budget devoted 20 billion forints for social and cultural

goals, and in 1976 a total of 85 billion. I think that this in itself shows

a great deal has happened in the past 25 years. Social allowances have

increased twice as fast as income for work. Today, one-third of the population's income is in the form of allowances. This expresses the effort of our

income policy to reduce the living standard differences of famiiieq whi1p +hp

plis°Leentsf.

ferenCeS Stemming fr°m W

°

rk 1S lnCreaSin

"

aS a

^-tiorofaccom3^
The basic principles and directions of social and educational policy are

fixed by state administration positions, decisions and law; to mention only

the latter category — health, social security, youth and educational laws.

The Ministry of Finance, in cooperation with the National Planning Office and

the appropriate branch ministers — surveys the material requirements for

realizing social policy decisions, and with their recommendations they seek

to create a harmony between economic possibilities and a realistic pace for

these programs. This is often by no means an easy task because despite the

fact that for a long time the expenditures for these goals have been growing

substantially faster than the national income, the results are not in all

cases sufficent as compared to need.

In 1976, we provided 32 billion forints for pensions, 6 times more than 15

years ago. We have gradually extended the pension system to every layer of

society, and today 17 percent of the population is on pensions. More than

10 percent of the population's total income derives from pensioons, while

15 years ago it was only 5 percent. Five years ago, when price movements

picked up, we introduced an automatic pension-escalation system. We maintain

at present more than 30,000 places in social homes and 16,000 places in day

homes to care for the elderly. In many familes there is no wage earner, only

a pensioner. Among these families there a large number — those whose earnings were low before retiring — who are still living on very little money.

Although recently we have raised low pensions a number of times, the living

circumstances of the very old and of pensioners living alone are very difficult. I regard this as the greatest debt owed by our social policy.

Parents are at present receiving family allowances for raising 1.8 million

children, which is 17 percent of the population. In 1976, we paid out 7

billion forints in family allowances, 5 times more than 15 years ago, and this

raised the total income of families with two or more children by almost 10

percent. The family allowance for one child also increased significantly,

having doubled in the past 10 years. At the same time, we also increased the

number of places in children's institutions, and since 1971 we have not

changed the fees paid by parents. At present, about 30 percent of the costs

are; paid by families as differentiated by income and the number of children.

All this still does not solve the living standard problems of families with

many children. The per capita income of these families is still low; their

housing conditions are poor in many cases, and they cannot be expected to

solve these difficulties from their own resources. Their living'conditions

are in general more difficult, and therefore the advanced education ratio of

children from large families is lower.

Ten years ago, we introduced child-care assistance. In the first year, this

represented an expenditure of one half billion forints; today it has risen to

3.5 billion because we have increased the payments, but particularly because

today 300,000 mothers use this assistance. And although this undertaking is

If . S+? ° ;

s

°ciety ~ I should observe that this solution is almost

unique ^the world — we also know that a mother does not always have the

opportunity to choose whether she will raise her child at home or put it in

35
a nursery while she is working because there are not enough nurseries,

although the number of nursery places was increased ninefold from 1950 and

doubled from i960.

We consider it a great step forward that today the law secures health care for

every citizen. In 1976, we paid more than 9 billion forints from the state

budget for medical, hospital and clinical provisions; this is 3 times greater

than it was 15 years ago. In addition, we supported the provision of medical

supplies with 5 billion forints. Despite these large sums, we still cannot

secure at an adequate level the facilities in child birth divisions; in international comparison, the death rate of children under the age of 1 year is

high in Hungary; for some illnesses there is a long wait before the patient

can be admitted to a hospital.

Thus I believe all in all our social policy has significantly levelled the

differences of living standards among families in that social allowances have

increased faster than income from work. But the differences are still considerable, and therefore over the long range the continuation of this line is

still necessary. According to prognoses, the ratio of social allowances in

the population's income will continue to increase from 30 percent to 40 percent over 10-15 years. It may appear as a contradiction when I say that we

want to increase the ratio of social allowances while we would like to

strengthen income differentiation according to work. I am convinced that

distribution according to work can be actually stronger only if living standard differences because of family sizes are reduced. In the future, we will

need to pay more attention to the consequences of demographic waves when

expanding places in nurseries, schools and colleges. In making our. lon^-range

plans, we must consider something of which we still do not know enough: How"

will our manner of life be transformed?

We are also devoting significant sums in the state budget to the realization

of education policy goals, a total of 23 billion forints, or almost 4 times

as much as 15 years ago. Our educational institutions are supporting learning

to a considerable degree. In one educational year, they account for state *

support of 4,600 forints for every general school student, 8,400 forints for

trade students, 9,100 forints for middle school students and 33,000 forints

for university students. Educational allowances have reached 3.7 percent of

the population's total income.

To raise the political, trade and general education of the workers, our society intensified its efforts to improve the network of public educational

institutions and widen their sphere of influence. Those who use cultural

services are also enjoying state support. The subsidy on an opera ticket is

70 forints, on a theater ticket 40 forints. Books are sold at 30 forints less

on the average.

We are unable to satisfy every demand in training, public education, and

scientific areas; and it is not easy to rank the tasks by priorities Difinr

s

etudeeS ZV 1am0nVCh°0lS are Stm V6ry ^eat

« ThePnumLr or'plLes in student dormitories for vocational training students is still extremely

36
small. Our vocational training does not take adequate account of our perspective need for skilled tradesmen, and thus there is a shortage in certain

areas for trained workers, while in other areas young people fail to obtain

tasks and jobs appropriate to their training. We are familiear with discussions on the lack of use to which culture homes are put. We are giving

little attention to the development of mass sports. These things signifythat

we do not always manage rationally and economically the resources that are

available.

It is not enough to speak of how mcuh we spend on our social policy goals. We

also need to study whether we choose the goals well and have recourse to economic solutions. Our financial organs always keep these questions alive and

promote their circulation in public opinion; but only the managing organs,

enterprises and institutions can turn them into reality. In certain areas,

experiences in the strength of social unity are very favorable, which can

help a great deal in the realization of social policy goals.

[Question] In recent times, the bank depositor does not, in essence, receive

interest — it is "taken away" by the decline in the purchasing power of the

forint. But savings are still not declining. I believe that while formerly

the effect of compulsory savings was strong in increasing the volume of

deposits (because of the narrow goods base there was nothing to buy), more

recently a different kind of "compulsory" savings is taking place. And this

is because the use for money is limited. Let us look at the problem of what

becomes of savings from high income in wages. In principle, what can one

do and practice what does one do who has a house, summer home and automobile

— but as a consequence of his family and income relations his budget still

closes out with strong surpluses?

[Answer] We are speaking here, are we not, of incomes from work? For now,

we feel that this problem affects a narrow circle of people, and is not a

social problem. If there were an excessive amount of unspent income from

work, we would have to consider whether the income distribution ratios are

good and whether we ought to be thinking of better distribution or a stronger

taxation of large incomes. But this is not the situation today. A good portion of families are saving for a house, vacation home, travel, a car, or

durable consumer items. According to one survey, one third of all savings

deposits is laid aside to buy or build a home, one fifth for a car, one tenth

for children, 10-15 percent for a lot, summer home, or week-end home. The survey has been repeated a number of times. Changes in the goal of savings are

interesting. There is a rapid Increase in the ratio of savings for summer

homes, travel and recreation; and there is a strong decline in savings for a

goal which the depositor has not decided on beforehand. This also shows

that money savings still has its place in the bulk of households. There are

many who want to provide their children with a house. They are very few in

number who already have everything and have no concern except for what to do

with the money they saved. In such cases, the problem is often caused by low

requirements, the lack of inclination to use their opportunities, their

money. The solution in these instances can be, or could be, a more demanding

way of life for their family, more travel, and more culture.

37
It is well known that in recent years the stores have teen showing expensive

fur coats, jewelry, eating utensils of precious metal, and furniture at

astronomical prices in the eyes of those of average incomes. Our public

opinion has reacted rather strongly, objects to it, and sees these things

as a mockery of a way of life and goals. This is also food for thought.

We do not consider — it would not he compatible with our social system —

making if. possible to "invest" the money savings in some kind of business.

Nor would we consider it proper if a family had more than one summer home, or

one house. With these actions they would reduce the chances, the acquisition

possibilities, of those who do not have any at all as yet. I believe, however, that in any event we must provide a way for the spending of very high,

but legal, incomes, that there should be goods for that purpose. With the

general rise in living standards, we should also apparently consider providing recreation and services of a substantially higher level. We must continue to devote a greater portion of the national income to this purpose.

I would like to return to the introduction of this problem. I would debate

little with the assertion that "the bank depositor does not, in essence,

receive interest" because of the decline in the purchasing power of the forint. It is well known that the purchasing structure, which serves as a basis

for calculating the consumer price index, varies from the purchasing structure for which the regular depositors save and spend. It is also true that

anyone who saved, for example, for a house or building has been afflicted in

recent years by the increase in prices for houses and construction costs. But

if someone took a loan for a house or building, he is repaying his debt with

increasingly "cheaper" money over the years. If others, however, kept their

money in deposit for a car or other durable item, only some of them were

deprived of interest on their deposit by a price increase, because on these

items the prices reamined unchanged for years. We can also observe that —

and this is borne out by the lasting confidence in the forint — people are

not too involved with acquiring precious metals. We find little "treasure

buying" parallel with the fact that in recent years the price index was less

stable. As compared to the volume of deposits, the total auction purchases

of art objects or jewel trade is not significant.

Hence, what we consider as permanently characteristic and determining is that

with the increase of 8-10 billion forints in deposits, the society's good

economic feeling is being expressed and the confidence which obligates us to

pursue a responsible policy.

[Question] One of the "discoveries" of Hungary»s discovery series — at least

the sociographies made it known — was that in some villages of our country

producer cooperatives were not established and peasant farming remained in

effect because the poor production endowments of the locality made agrarian

management uneconomical. And still, the peasants of these villages have to

pay land and income tax. The proprietors of family houses with little value

pay a higher residence tax than their rent would be if a house were not their

property, and they did not have to maintain it. House trailers with a relatively small value are taxed much more heavily, for example, than summer

38
homes, and that can come to millions in value; as if it were a greater luxury

to pass the summer on wheels than in a fixed habitation. Sailing "boats, which

do not pollute air and water, come under a higher tax category than motor

boats. However, if you have a sail boat for racing, your vessel is tax-free;

here, therefore, competitive sport is sanctioned as having a higher social

value than sport that is "only" interested in recreation and restoring work

capability.

I do not bring up the foregoing so that I can be recruited as a "defense

attorney: for one social group or another — although at times this would not

be unjustified. The problem for me is, and this was touched on also by the

preceding problem, the following: According to what basic principles shall

we conduct the taxation of citizens andthe population? Beyond the foregoing,

we could also study other, more problematical, phenomena. In taxation, should

we not take as the base the family income, the per capita family income

instead of personal income? And similarly, in regard to the limitation on

the extent of property, the present extent appears antisocial and contradictory to our demographic goals when we do not take into account family size,

particularly the number of children.

Since the world was a world, people do not like to pay taxes. What goals are

served in Hungary by the direct taxes and fees paid by citizens? An economic

one — and hence does the budget have a need for this source of receipts? Or

a social political one — and hence is the reduction of income and property

differences the basic goal? What is the weight of taxes from the population

in state receipts? And included therein, how much comes from the different

taxes and how much from real estate transfer and inheritance fees?

[Answer] Altogether 2-3 percent of state budgetary receipts come from taxes

on the population and from fees, and therefore we can state with assurance

that it is not on these that the budget rests, but first of all it has a

social political meaning — it is called on to moderate income differences and

property differences. But neither do I want to underrate a sum of money that

is over 8 billion. This is the amount which the local councils have available, and this not a negligible portion of their budgets or of the common social expenditures covered thereby. To mention only one example, the oxters of

vehicles pay 1 billion forints in vehicle taxes. But the councils devote 3

billion forints to road repair or building. Moreover, we use large sums for

the roads also from central sources. Vehicle taxes do not cover road repair

costs, but without taxes the roads would be worse.

The income differences of the population are reduced by the income tax, which

is not placed on incomes from the work relation and cooperative membership.

Wages and payments are so differentiated as to make the payment of such taxes

unnecessary. It is paid, therefore, primarily by small industrialists,

private dealers (altogether 1.1 billion), small agricultural producers (700

million), and those who perform independent intellectual activity (250 million

forints), a total of 110,000 persons, or scarcely more than 2 percent of the

earners. Small service industrialists and private dealers who conduct their

activity in unprovided for areas, do not pay taxes in order to promote the

revival of services which have disappeared in the villages.

39
Various taxes are called on to reduce property differences: the real estate

purchase fee (close to 1 billion in the past year); the gift and inheritance

fee (about 300 million) and the house value tax (which altogether was 10

million forints). I do not dispute the possibility that in some individual

instances the tax authorities do not proceed according to the principles, and

they commit mistakes. Still I would like to say I feel that such individual

mistakes are more publicized than those principles — correct, in my opinion

— which define taxation on property differences. The ending of the old

inequalities does not result in the creation of a new equality. In the spirit of socialist principles, we must still be active here. The tax system

does not have the major role in this, but we must undertake our own share as

well.

Seventy nine percent of taxes on taxable objects of property are paid on vehicles, 18 percent on houses, 1.5 percent on recreation sites, and 0.5 percent

on water vehicles. These ratios indicate that certain complaints are exaggerated. Without going into details, I must state that, in general, I do not

consider these complaints as justified. I see thereby that we have much to

do in order that public opinion should understand it as justifiable when we

want a contribution to the public obligation and when we design the population's taxes a significant role in the reduction of property and income differences. In addition, it is obvious that we must improve the work of the

tax apparatus, and this is not easy. At one time, this was regarded as a

good occupation. Bat today it does not count as such.

I also acknowledge that the system of taxation on the population has problems

of principle. It is also a fact that the taxes do not take into account family size. It is true, on the other hand, that social allowances serve to even

out "social injustice" deriving from family size differences. Let us look at

the advantages of taxation on family income, but for the present let us not

regard it as clearly shown that it will assure a more correct and equal distribution than the present system. The .greatest concern is still the taxation on

incomes which do not derive from wages and payments, and in many cases not

even from work. But to "catch" this income, to establish its real extent,

would not be made easier by taxing actual income. Therefore, we must study

the problem further before we can propose a new personal income tax system.

[Question] What is your opinion of the bureaucracy? This question, of

course, is meant to be provocative. Because there are many who see the explanation for the very high ratio of adminstrative personnel, prolonged procedures,

and many other concerns in the complexity of financial processes, in the mass

of money-management statements, and in the excessively detailed controls, and

chiefly in the mass of decrees, directives and prescriptions even for specialists, and in their "heavy" bulk. Would it not be better to look at the final

results of the activities by plants and institutions, the final total of their

accounts, the balance, and be less occupied with a thousand entries and columns,

sometimes down to the last filler? Can we regard it as attainable that in the

future more decrees will lose their validity than are created?

1+0
[Answer] Naturally, there is no one who will avow that "I am a believer in

bureaucracy!" And still there is a bureaucracy. My judgment is, therefore,

not important, for it is natural that I will condemn it. But the question is

whether we know where and what the bureaucracy is, and can we do anything

about it, and what.

The keeping of records is indispensable for organized work, the analyses of

circumstances, the evaluation of interrelationships, and control. But if we

do this for itself without making it, in fact, serve analysis and evaluation,

and only verify that something happened at all, then this is a bureaucracy.

If it handles matters listlessly, only looking at and multiplying papers, but

without looking at people or using reason, then this is a bureaucracy.

Unfortunately, there is still a great deal of excessive record keeping; and

a complicated bureaucratic handling of affairs is common. In fact, it

appears to have increased in recent years. Among the factors that evoke a

bureaucracy are: excessively detailed guidance, an effort to pass on responsibility, weak organization, lack of understanding, irresponsibility, and a

disinterest in the concerns of others. It is primarily with the elimination

of these factors that we can expect a substantial change in the extent of the

bureaucracy.

Certain results can also be achieved by symptomatic treatment. First of all,

of course, we must study the requirements of central record keeping. We have

already begun this, and we have simplified numerous statistical, bookkeeping

and accounting duties, and some we have eliminated. We do not regard this

work as finished; we are studying our statutory provisions on the°basis of a

plan that has been worked out. We are proceeding, I believe, on a good

course in population taxation and its affairs; in the past 1-2 years we have

taken various stepS toward simplification, and we expect to do more.

Reduction in personnel within the bureaucracy can also contribute to simplification because enterprises and institutions have to study their own systems

if they want to do their tasks with fewer people. The use of computers and

other office technical means is rapidly spreading in accounting, statistics

and economic analyses. For the time being, this will not reduce work, but

once we learn their use and a systems outlook becomes more general, the procedures will be simplified and we will need substantially less manual work.

Despite all this, I do not think that we will ever be able to dispense with

filler accuracy in financial accounting. There is no place for grand-scale

procedures in accounting and auditing. But I emphasize an effort at accuracy

does not bring on bureaucracy, rather an excessive complexity of affairs and

records.

Excessive regulation and central prescription of detailed duties are accompanied by an extremely large number of decrees. It is again being strongly

recognized in the government that we are restraining the initiative of enterprises and cooperatives and increasing the size of the bureaucracy by excessively detailed regulation. Therefore, we are making a stronger effort than

in the recent past to strengthen the general nature of regulation and leave the

details to those who carry them out.

in
But speaking of 'bureaucracy, let us not forget certain features and capabilities, or the lack thereof. For example, organizational culture. In Hungary,

we smile at those countries where two persons on arriving at a bus stop immediately line up according to who arrived first. This smile costs us a lot. It

is costly when a self-understood sense of organization, which part of the

blood, and the necessary feeling for developing it is, as it were, alien to

us. It is true that excessive organization can also give birth to bureaucracy. But lack of organization and order in official, office and administrative work will cause much more irrational waste of time, and squander more

energy than orderly work and an effort at accuracy.

At the same time, many of those who perform managerial and administrative work

are short on understanding and qualification, their level of schooling is

low, a good part without full middle-school education. This is also because

in general the material and moral reward for administrative and office work is

small.

[Question] It is the opinion of workers in enterprise management that the

system of withholdings and enterprise taxes is so complicated and changeable

today that it makes a proper evaluation of economic processes impossible;

enterprises can at the best work out tactics for themselves, but not a strategy. Can we expect a simplification and stablization of the withholding and

enterprise tax systems?

[Answer] Enterprise management circumstances are indeed complicated and

changeable, but in my opinion not only because of withholdings and taxes but

because international commerce as a whole is developing in a very changeable

way. I shall mention only several of the causes like the unprecedented rate

of changes in products because of rapid technical development, a basic change

in the role of developing countries in trade, the dollar crisis, the explosive

price changes, and so on. These circumstances call for extremely flexible

adaptation by the enterprises; an understanding of technical development, constant market research, orientation in price developments and currency values,

etc.^ I do not maintain that this situation is simplified by the tax system,

and in fact I know that at present it makes for more complicated circumstances.

But it must be seen that it is not a simple task to work out tax rules. Our

enterprise withholding and tax system has a very short past. Prior to 1968

we withheld everything from the enterprises. This was in fact a more simple

accounting system than the present one, only it excluded enterprise interest

from the economy in their complicated and manifold activities. We created

the present new withholding and tax system precisely in order to stimulate the

enterprises to effective management of means — that is why we introduced the

capital use tax; to provide an incentive for appropriate manpower management

but at the same time maintan a flow of purchasing power appropriate to the

plan; to provide a cover for social security costs — this is why we have a

pay tax; to assure that the state budget, too, will share, in appropriate

ratio, in produced net income and the enterprise sources develop in ratio with

k2
profits — this is the goal of the profit tax; and to make it possible for the

domestic price system to be relatively stable in case of a rapid change in

foreign prices — this is the balancing role of price supports and production

taxes.

Before economic guidance reform, we sought to work out these tasks with a

broad range of plan indexes, but this did not lead to an adequate result.

Now it is not the plan indexes that mediate national economic interests to

the enterprises but tax and support rules. We are unfamiliar today with any

other income regulation system which solves so many tasks so simply. It is

possible, of course, that we would not have to make so many different withholding channels for these tasks. It is possible that the present financial

regulation excessively simulates a plan-dismantling guidance, and therefore

carries its own mistakes. We are considering the fact that we must reduce the

number of withholding forms. That is why we are studying, for example, the

possibility of eliminating the capital use tax. We want to reduce significantly, although not in a year or two, the production tax and supports. We,

too, feel that one of the problems of taxation is that at present it is too

complicated.

There is also no doubt that in the,past 2-3 years the regulators have been

changed frequently, and this is disturbing to the enterprises. But we think

that these changes cause fewer problems than would have been the case if we

had not limited the domestic effects of the runaway price changes on international markets and had permitted them to enter directly into the Hungarian

economy. Presumably, it would have led to inflation, on one hand, to the

sudden crash of certain enterprises, and to the excessive enrichment of

others. In the final analysis, these effects can be seen in the economies

of capitalist countries, where the budget was not used to counter world

market price effects.

In part, this is what causes the changeability in the rules, but it does not

contradict the fact that enterprises, and consumers, have a hard time realistically evaluating actual cost relations. Thus it hinders the frequently

called for and desired structural transformation of production, foreign

trade, and consumption alike. Therefore, we are, of course, striving'gradually to simplify and stabilize the system of withholdings and supports, modernize prices so that they will all the better mirror actual value and cost

relations.

The complexity and excessive changeability of the tax and suport rules is

also increased by the fact that we did not permit the principles of economic

guidance reform to be consistently realized, and we interfered too often when

losses or an excessively high profit appeared in an enterprise or branch

balance. This was accompanied by the damaging consequence that an independent,

fully responsible mode of thinking could not be developed. Instead, it was

expected that local problems as well should be solved at the cost of central

money funds. We frequently saw that when a concrete imbalance occurred they

returned to old methods which had already proved to be wrong. In my opinion,

we need to look forward, not backward. Instead of ad hoc interventions, we

^3
need to look for new and more modern guidance systems. If we are now moving this way in small steps, we must not lose sight of the strategy, and

we must adjust our steps thereto.

[Question] In socialist plan management, state "intervention" is an obvious

element; first of all, this is what mediates the interests of society as a

whole, to which the operation of the economy is subordinated. But since we

have given up a rigid, plan-directed system for the present one of economic

guidances making a broad use of economic-financial regulators, which are

much more effective, regulation has at times become too complicated, and in

fact it has become afunctional.

The kind of investments a state prefers, supports with credit or without

repayment, is naturally decided on at numerous forums and organs. And still,

all this "appears" in concrete processes in such a way that the Ministry of

Finance "gives" the money — and later they find out whether they put it in

a good place or not.

What is your opinion, for example, of the unit costing of animal spaces established in agriculture with state support? Shall we study the returns in case

of investments that are supported and those that are not — although having

the same goal and character? How can we fight the frequently evident "state

milking cow" attitude and practice, or a kind of initiative that is evident

only in obtaining the grant but does not extend to a fruitful use of the

support?

[Answer] Investment decisions are made at many levels. The biggest investments are decided on individually by the Council of Ministers, for example,

the construction of new power works, mine, fertilizer factory, sugar factory,

meat combine, metro, etc. The right to decide on many investments belongs to

the ministries, or the councils. Thus it is the appropriate ministries or

councils who decide on the construction of electric energy network developments, road building, forestration, purchase of railroad vehicles, state housing construction, hospitals, schools, and research institutions within definite financial limits. Half of all investments consiste of the foregoing. The

remainder belongs to the enterprise or cooperative sphere of authority. If

an enterprise plans an investment for which its own money is not sufficient, it

may ask for state credit.

The government decides on the general conditions and goals of allocating credit

and supports on basis of the economy's conception. The banks have a role in

that they should choose properly among the enterprises meeting the given conditions and goals, and promote the realization of the most economic development

concepts. The enterprises must repay the credits with interest within a definite period of time. We are imposing increasingly strict conditions also on

enterprises whose investments we are supporting. There is no doubt, however,

that no matter how strict the requirements, as long as it is possible to invest with "free" money, the enterprises will rationally try to acquire these.

We can hardly object if someone wants to achieve greater results with the least

effort. If there is a chance that the milk will come, naturally they will go

kk
on milking the cow. We understand this, and therefore we are tightening control for the fulfillment of support conditions. This year we hegan extending

supports as a tax rebate, and the enterprise can take an advance thereon in

credit. This credit must, in any event, be repaid; but the tax rebate will be

given only if they actually fulfilled those conditions which they agreed on at

the awarding of the support. If these conditions are not met, the enterprises

must repay the credit from their own resources. This is a very heavy requirement, but its consistent application will assure an actually effective use

of state supports in accordance with plan, and enterprise requests for support

only in cases of real need.

We have frequently seen — for example, in the case of animal facilities built

with state support, and with industrial facilities as well — that the investment was in fact realized but the buildings and equipment were not used. We

do not consider it to be the main problem that modern furnishings are more

expensive than old. Remaining with the above-raised example, the per unit

cost for animal space was increased and is a natural consequence of the fact

that in livestock breeding we are today using important technologies, and

because of the large-scale concentration the establishment of a livestock

breeding facility may include roads, social premises, veterinary facilities,

fertilizer sites, emergency slaughtering, help at animal births, fire-fighting

facilities, and so on. The result is more expensive investments, but operations are substantially more modern and easy. But the problem is that these

modern facilities are left unused, and hold fewer animals than capacity permits.

Sometimes a facility with excessively large capacity is built because they do

not study the need and the economy of the solution, but seek for spectacular

results. Showing off and provincialism are cousins. A narrow outlook and

mode of thinking along with a desire to show off are still causing many problems and expenses for our economy.

We are attempting to restrain these efforts in the awarding of investment

credits and supports and to see that control over investment resources does

not end with the completion of the project, but is continued, and material

sanctions and personal accountability results where use of the capacities that

were established is not assured. It actually happens that more energy may be

devoted to gaining supports than to their fruitful use, but I think this is

becoming increasingly less frequent; not only because our methods of control

are more effective and definite but also because the selection of economic

leaders is more and more considered, the qualifications of our leaders betterfounded and the realization of the responsibilities more consistent.

[Question] As I came to the ministry, across the Inner City, I was soaked

10 minutes, and not only because of the rain. I shall, therefore, use thi

great opportunity to ask why the finance minister does not provide money

for the improvement of rain pipes in Budapest? That is, for the maintenan

of apartments and houses?

h5
[Answer] That is a very good question. It gives me the chance to say, not as

a complaint, but only for the sake of truth: It frequently happens that the

Ministry of Finance is reproached in many forums, including Parliament, for

"not giving money» for this or that since at year's end a considerable amount

of money available for a purpose was left unused. In the case of repairs,

where several billion forints were left unused in the Fourth Five-Year Plan,

the reason was primarily the shortage in capacity and manpower, chiefly the .

shortage of highly qualified workers. It is more difficult to understand why

considerable sums are left unused from year to year which were intended for

health and training expenses, including, for example, the wages of health

workers and of teachers. It was customary to say the people could not be

found. But if someone already on the rolls had undertaken more, he could

well have been given more. But caution and egalitarianism are more rational.

It is also frequently said that large investments are not adequately prepared,

and it is objected to that the sum alloted for this purpose is too trifling

a. fragment of the total investment. This criticism is just if the money

allocated is actually spent for investment preparation. Naturally, I emphasize this because such money is often left over. All these, believe me, are

savings of a kind that do not make the finance minister hapoy. It would be

good to have those do the explaining who do not make, use of" the money opportunities given, or manage it poorly.

[Question] In conclusion, I would ask about yourself. First of all, the

development of your career, your earlier areas of work. And how do you find

escape from the world of money and figures. Do you have a hobby, a "preferred" kind of recreation?

[Answer] Formerly, leaders in our country showed very little of their personalities. Now, however, I see that interviews end with such or similar questions, and I regard this, too, as a formality. Well, when I say that I like

to drive a car, I do not add that at times my thoughts return to the financial labyrinths, but fortunately up to now nothing adverse has happened. When

I say that m my intellectual exhaustion I relax with reading poetry, it does

not make clear whom I identify with and what kind of poetry I read.

But if the character of this series calls for it, I can easily summarize. During the war, I was employed at the Central Tax Office; I cannot say that I

began working then and there because it ivas a period toward the end of the war

and a time for the struggle to survive. I came to my present place of work 3

decades ago when they needed me on the soccer team of the Ministry of finance.

Then this "transfer" turned out to be permanent. I was everything a man

could be, I went through every gradation. I was a bookkeeper, I worked in

area cost projections and on the affairs of local industrial enterprises: for

a time I taught fields of expertise; I was an accounting chief at the budgetarydepartment; when the new guidance system was being developed, I was head

of the economic and budgetary department; as a deputy"minister, i was responsible for budgetary, social and cultural affairs.

k6
But I believe that public opinion is interested primarily in how one member

of a collectively working government thinks about important affairs of the

country and society, what efforts lead him, in his own area of specialty, to

their solution. I hope that my answers — thanks to you — have adequately

shown my concepts and their essence. Perhaps we have fulfilled the appropriate norm of the old philosophers: "Ho greater profit can come from question

and answer than that we clearly see what we knew before and that we can only

arrive at such understanding as was already in us in germ form!"

6691

CSO : 2500

^7
HUNGARY

BANK ISSUES QUARTERLY REPORT ON CREDITS, HONEY CIRCULATION

Budapest FIGYELO in Hungarian 25 May 77 P 4

[Article: "Credit and Money Management"]

[Text] The financial situation of enterprises and cooperatives in the first

quarter of the year varied by "branch and time, hut was satisfactory in its

entirety« This is indicated by the rise in sight drafts and various special

deposits, the volume of which was 19 percent higher than last year. The

expansion in capital use became stronger in the second part of the period than

the formation of resources, and therefore the demand for circulating fund

credits increased as compared to the year before.

Circulating Fund Credit

In January-March, the managing organs put in to the bank for 7 percent more

circulating fund credits than last year, while the licensed amount rose by 8

percent. The economic justification for the credit requests did not improve

in their numerical preparation, and this was expressed in the fact that the

bank had to reject about 9 percent of the proposals in order to reduce the

money demand to a realistic level.

Of the circulating fund credits which were licensed, 66 billion forints were

for new relations and 4 billion forints were for contract renewal. The industrial branches, including the construction industry, took 52 percent of the

licensed credits, agriculture 25 percent, commerce and the non-producing

branches 23 percent.

Eighty-nine percent of the approvals were for short-term credit and 11 percent

for medium-term, circulating fund advances. The term credits provide financial cover in one third and one third ratios for the purchase of basic materials and goods, or the financing of capital obligated in unfinished production.

Twenty eight percent of the credits serve for temporary supplement of

resources; credit license in case of realization difficulties are negligible.

The expiration time for short-term credits increased this year, while the

ratio of repayments undertaken within the quarter is still relatively high

k8
— 63 percent of the licensed term credits. A significant portion of the

medium-term, circulating fund credits may be repaid in price receipts, and

this is the reason that more than 6o percent of such loans extended in the

first quarter are due within one year.

In the past 3 months, the demand for all types of circulating fund credits

was 10-15 percent below the permitted level. This unused portion, as in the

year before, is a cover for continuing expenses as they arise, chiefly in the

food economy and the building industry. The enterprises and cooperatives

paid back 94 percent of their credit obligations by the deadline, a more

favorable ratio than in the same period a year ago.

A negotiating surplus characterized the movement of circulating fund credits

in the first quarter of the year; the stock of credits increased by 9 percent

(a year ago it was 11 percent) over the year's beginning, primarily in agriculture, the construction industry, and the light industry. In agriculture,

the expenditures necessary for smooth production and the further advance of

cost-intensive production systems raised the demand for credits beyond the

usual seasonal effects. In the construction industry, the price receipts

failed to follow the increase in production this year as well; and by March

almost every building enterprise had established credit relations with the

bank. In the light industry it was chiefly a delay in import purchases that

increased credit demand. In contrast to the foregoing, there were opportunities for credit repayment in the food industry and in commerce where sales

were accompanied by declining inventories.

Investment Credits

Applications for credit investments from state enterprises and farms were

about the same, in total, as for the same period a year ago (they exceeded

9 billion forints). Licensed credits in the aforementioned sphere amounted

to 5.3 billion forints, about three fourths of what it was a year ago. The

average credit amount per development declined this year to scarcely more

than a half of what it was last year. In agriculture, to be sure, there were

numerous, relatively small credit extensions. At the same time last year in

certain industrial branches there were unprecedentedly large credits for

expanding the development of the export goods base. All this was expressed in

the moderation of the average credit volume.

Seventy percent of all licenses were for industrial branches and 10 percent

for state farms. During the quarter, the agricultural producer cooperatives

applied for almost 1 billion forints* worth of investment credits, and the

approved sum was double last year's.

The decisive portion (76 percent) of credit extension obligation undertakings

were to promote an increase in the export goods base. The demand for these

credits has not declined this year, and bank credits represent about 60 percent of the sources for establishing capacities to produce economically marketable products.

k-9
The economic indexes have improved as compared to the same period for the preceding year. At state enterprises and farms, the profit per 100 forints of

money value was 15 percent in the case of developments realized with mediumterm special credits, and 21 percent in the case of long-term credits; the

formers is lower than it was a year ago, and the latter higher. This index

reaches the level set as a cover for credit extension in every branch of the

economy. The average term for licensed credits decreased in comparison to

the year before: in the case of medium-term credits from 54 to 51 months, and

long-term credits from 120 to 96 months.

The total stock of enterprise and cooperative investment credit declined by

+0 ^iJJi°nJ

0r a

-

c

?

rapared t0 the year's ^ginning, since in contrast

to credit extensions in the past period, repayments were in preponderance.

The population's cash receipts from the socialist sector in the first quarter

expanded at a rate considerably exceeding last year's, and the grea?er^rchasing power was taken up by retail trade to a degree similar to the yllT

morr^dftatly thanifthf * ***** if

reaTOd more

mure moaerateiy **»**. «ving» deposits than m the same period a year ago.

The Population's Receipts and Purchases

The population's cash receipts exceeded by 10 (last year it was 2^ T>erpPr,+

those of the year before; and within the total receijt£ wag^s rose lenerallv

ItIr?Vhii

e reCeiptS relatinS t0 ^cultural P-dictiS -I chiffly L a

wSJif 11*** mrchases-

rose *° « extent exceeding the plan' cLh

in %

Y ma°r SOUrCeS'devel°Ped ^ follows: wages aSd othJr personal

£ lTJjt+

PerCT\aSri^nnnral inCOme 17 *ercent> financial social Swnces

llZtrt'o S ^us10y^ent-

S

^

ifiCant *"~ «• "* evident^063

incre^S\vToerC^+

th0Se f

°

P

Tfcultural P *"« cooperative employees)

SiÄÄl'iSÄ.'SIiS: Sä""?*0-rt-Jl*»! P-ducUon grew 16

50
Cash sales of retail goods in the first quarter was 10 (last year 6) percent

higher than in the same period the year before. The rate of increase, which

exceeded last year's — despite the higher price index for the target — is

related primarily to a stronger circulation of the populations receipts.

The use of purchasing power, despite a goods selection that was not always

satisfactory, did not change in comparison to earlier periods — from every

100 forints of receipts the population used 67.86 (last year 67.83) forints

for cash purchase of goods. At the same time, the ratio of receipts used

for savings deposits decreased from 7»53 to 6.3O forints. The increase of

cashe in trade, which is stronger than a year ago, indicates the will to

buy.

6691

CSO : 2500

51
HUNGARY

PRODUCTION OF REAL DENIM TO BEGIN

Budapest HETFOI HIRLAP in Hungarian 23 May 77 pp 1, 3

A new more effective method is being initiated—according to license—in

place of the present assembly line system at the Debrecen Clothing Factory.

Mrs Jozsef Hajmasi, deputy managing director, told HETFOI HIRLAP that new

demands for quality and fast changing styles cannot be met by the present

labor force which cannot be expanded anymore—and its machinery. For this

reason, they bought the West German RAWE firm's work assembly process and

signed a 5-year cooperative agreement.

The Main Features of the New Process:

The assembly line will be discontinued. In the workshop three large collectives working side by side will produce several colors and styles of clothing

at the same time. One group will be producing pockets, belts, collars and

various decorative elements; the other will sew the main pieces of the

clothing; the third will assemble the item, and line it. The work will be

organized so that no one will have to wait on another, nor will he have to

make unnecessary movements. As the women say, "everything comes to hand."

Since more than one thing is worked on the work is more varied. The individual norm will be discontinued. The wages will be based on the entire

collective's production and evenly distributed to each group and will be

quite a bit higher since the output will grow significantly. The wages of

the workers will be about 400 forints more. To this is also added the

sliding wage scale which will be given to the groups half on the basis of

extra output and half on the basis of good quality.

What Were the Results of the First Experiment?

Since last October 100 individuals have been working according to the new

method. In the first month, production increased by 6 percent and by an

additional 10 percent in the second. We took 2,600 measurements during the

experiment and discovered that the operations could be reduced and simplified

by 30 percent. This further increased productivity. Of course the work of

production managers, foremen and technicians increased considerably. Soon

the whole central plant with 600 workers will switch to the new work system.

52
Already this year, the Debrecen Clothing Factory is producing 3,000,000

dresses, pants, skirts, and coats. Of these, 1,000,000 are for the domestic

market and the rest for export.

What Kind of New Items Are Promised the Public?

We began the experimental manufacture of genuine denims. The Szeged Hemp

Processing arid Weaving Plant is producing the basic material for us based

on American technology. We will be producing dresses, skirts and pants in

denim blue, white and khaki. The first larger series will be less expensive

than the private market prices and will be available in stores by this summer.

CSO: 2500

53
ROMANIA

POLITICAL EDUCATION IMPORTANT FOR ECONOMIC SUCCESS OF COOPERATIVES

Bucharest AGRICULTURA SOCIALISTA in Romanian 21 May 77 p 11

/Article by Alexandru Dinulescu, member of the Bureau of the Exec -

utive Committee of the Central Union of Consumer Cooperat ives_/

/Text/ The program of ideological activity worked out by the

Romanian Communist Party Central Committee Plenum of November 1971

as well as the Code of principles and standards of life and work

of communists and of socialist ethics and equity are overwhelmingly important documents adopted and approved by the 11th party congress, which decided that these should be components in the party

program to create the multilaterally developed socialist society

and direct Romania toward communism.

Special successes have been obtained in all areas of Romania's

political, economic, social and cultural life by consistently

implementing the ideological program and by intensifying political, ideological and cultural-educational work.

Proving this are the particularly high rates of development of

Romania's economy, the remarkable results illustrated by the fulfillment of the provisions of the 1971-1975 five-year plan ahead

of schedule, the surge with which the tasks of/the 1976-1930

five-year plan of the scientific-technical revolution are being

fulfilled, the continued rise in the working people's material

well being and the prestige Romania is enjoying in the world.

o

With its 7-6 million members, the Consumer Cooperative, a member

of the Front of Socialist Unity, has particularly important

tasks in the broad activity of the prospering of the Romanian

village, of intensification in the exchange of goods between

village and city, of satisfying the demands of the population

for goods and services, of better utilization of agricultural

products, contributing through its activity to strengthening

the alliance between the working class and the peasantry and to

continually broadening and improving the material-technical base.

54
The Central Union of Consumer Cooperatives Executive Committee

has directed its attention particularly to the way in which the

collective leadership and control organs, to which more than

150,000 cooperative members are elected, are fulfilling their

duties in order to implement these tasks.

The regularly held meetings of cooperative members and plenums of

the councils and executive bureas of the organizations and enterprises of the consumer cooperative are means of communist education of the masses in order to draw them to the leadership of the

units and to solving the problems connected with fulfilling the

plan tasks. The decisions of the 11th party congress and provisions of the Code of principles and standards of work and life of

communists and of socialist ethics and equity have been the subject of broad discussion with all workers and members of the consumer cooperative organizations.

An important contribution to educating the population and to increasing its socialist consciousness has been made by the consumer

cooperative organizations and by dissemination of political-ideological and technical-scientific books and novels by the press.

Many books in Romanian and in the languages of the coinhabiting

nationalities have been sold by the 2,200 book stores and specialized departments and by broadcasting and loudspeaker points.

The Central Union of Consumer Cooperatives Executive Committee

has adopted a broad program which provides for carrying out constant activity to develop the socialist consciousness of the workers and cooperative members.

Special emphasis in this program is being placed on the wellfounded organization of work to fulfill the plan tasks, strengthen

the sense of responsibility and the aid which the higher organs

give to the basic link--the consumer cooperative.

The program provides for the organization and holding of ordinary

meetings of the councils and executive bureaus of the cooperatives

with strict regularity, meetings' which must be well prepared with

the agenda and date they are to be held to be communicated to all

members of the collective organs in leadership in time.

In conformity with the provisions of this program, speeches are

made on party and state domestic and foreign policy and problems

are discussed regarding the defense and development of the public

wealth, problems of ethics, changing and combatting the backward

manifestations of some workers; conferences are worked out on the

activity of the consumer cooperative which will be presented both

in meetings with cooperative members as well as in the cultural

halls with the entire population of the villages; culturalartistic activity of Romania's workers is being developed, reaching

55
more than 120 formations with about 2,500 workers from the consumer cooperatives. Taking into account the specific nature and

territorial spread of our units, special emphasis is being placed

on the organization of artistic agitation brigades, through whose

repertory the successes obtained by the Romanian people in the

country's social-economic development and the achievements of the

consumer cooperative are to be popularized, at the same time

satirizing the lacks, the negative attitude of some workers and

units with a view to forming a powerful and intransigent mass

opinion against any such manifestations.

An important role in training the youth from the consumer cooperative schools belongs to the confern with forming them in the

spirit of the Romanian party's concept of the world a.nd life and

with creating really new cadres capable of handling the increasingly larger demands of our society.

Also, the action of advanced training, which includes all leadership cadres and the great majority of workers from our units, aims

not only at freshening and improving their vocational knowlddge

but also at raising their level of political-ideological training.

In the spirit of the provisions of the Code of principles and

standards of work and life of communists and of socialist ethics

and equity, which require steady improvement in vocational and

specialized training and continual enrichment of the culturalscientific horizon, instructive meetings are organized monthly

with the presidents of the consumer cooperatives, occasions on

which an analysis of fulfillment of the plan tasks is made and

speeches on various subjects of the cooperative's activity are

presented. This is similar to the quarterly procedure with the

head accountants from the consumer cooperatives. These instructions aim at increasing responsibility for the most efficient

management of the resources entrusted to them, intensification

of the actions against waste of any kind, negligence in keeping

and administering goods and all demonstrations of wasting the

public wealth. On this occasion discussions are organized and

exchanges of experience are carried out with a view to knowing

and generalizing good methods in various areas of activity.

Members of leadership councils, the auditing commissions and

other cooperative members must be consulted on the way in which

the managers and other workers are behaving, with discussions organized to make a record of those with good behavior or to combat backward manifestations.

Also toward the goal of fulfilling the tasks provided in the program of measures, it is necessary to take action more insistently to ensure an increase in the number of members and receive

the social fund, to improve guidance and control activity and

56
the work style and methods of the leadership organs with a

viev to fulfilling the economic-financial and organizational

tasks and to deepen and enrich mass educational work.

Parallel with its own activity the consumer cooperative annually

contributes large funds and materials to the actions for bringing culture to the masses through the cultural halls, with each

cooperative allocating a certain portion of the annual profit

to the cultural halls and sports associations.

Making the principles and standard of socialist ethics and equity

take root more and more strongly in practice, combatting backward mentalities and practices, transforming the workers of the

consumer cooperative into progressive people resolved to devote

all their energy and creative ability to the cause of socialism

are especially important tasks of the organizations of leadership

of the consumer cooperative organizations. No effort should be

spared to fulfill them.

8071

CSO : 2700

57
ROMANIA

JOB TRAINING PLANNED FOR ALL COOPERATIVE WORKERS

t

Bucharest AGRICULTURA SOCIALISTA in Romanian 9 Apr 77 p 7

[Article by Gheorghe Cristea, deputy director of the Directorate for

Organization, Control, Personnel and Training in the Central Union on Consumer Cooperatives: "Workers' Training - In Step With Current Demands"]

[Text] The application of the new organizational structure in the Central

Union of Consumer Cooperative system and the creation of the 2,830 consumer

cooperatives make it necessary to resolve certain problems, including improving the political and professional composition of the cadre who lead

and work in this system and ensuring the appropriate conditions for the

continuing improvement of their qualifications. For these reasons, we

have accorded special attention to the selection of cadre who will be

entrusted with the position of president or chief accountant at the consumer cooperatives. We have oriented ourselves towards hardworking people

with good political-ideological and professional training who are devoted

to the policies of our party and receptive to new things, have a developed

organizational spirit and a healthy moral profile, are well known by the

members of the cooperative, and who enjoy the trust and respect of these

memb ers.

In order to come to the aid of the leadership cadre in the communal consumer cooperatives, who are now confornted, at the start of their activities

under the new organizational conditions, with numerous problems of an

economic, juridic, administrative nature, the Executive Committee of

CENTR0C00P organized in January of this year, in 19 inter-county centers,

instructional courses for 1,797 cooperative presidents and 1,555 chief

accountants. At the time these courses were held, I kept track of many

of the proposals made by the participants: organize some periodic training sessions at the county level, especially for those cadre who do not

have much experience in the position of president or chief accountant of

the consumer cooperative; ensure the cooperatives get copies of the

normative acts in effect (or extracts of these acts) which regulate cooperative activities and copies of the price catelogues covering public food

prices, and so forth.

58
We are looking into both the satisfaction of these fully justified demands

and the provision of training, through CEPECOOP, for those presidents and

chief accountants at the communal consumer cooperatives who, for whatever

reason, did not participate in the above-mentioned training. Certainly,

the training that we have referred to above represents only a beginning

which must be continued on the county level so that, in the shortest time

possible, we can give the necessary training to all the personnel of the

consumer cooperatives.

Keeping in mind the complexity of the problems that are currently being

raised in the activities of the communal consumer cooperatives, as well

as the fact that a protion of the leadership carde do not have sufficient

experience in consumer cooperatives, on 7 February 1977, a meeting of the

Bureau of the Executive Committee of CENTROCOOP decided upon a complex

series of measures, including a two day monthly session organized by the

county unions of consumer cooperatives both to profoundly and operatively

analyze the manner in which the previous month's plan was fulfilled by

each cooperative, each unit, and so forth, and by each plan indicator (for

the acquisition of each type of product), and to hold certain discussions

and exchanges of experience in each sector of activity.

At this time, the presidents of the cooperatives which obtained good results will share the experiences of these units so that their progressive

methods will be spread to others. Compartment chiefs and other specialists

from the county unions will present lectures on the most current problems

of consumer cooperatives, especially insisting upon the practical side of

the measures that should be taken and, at the same time, deepening and

consolidating the knowledge that the presidents of cooperatives received

during the training organized at the central level. They will also deal

with the normative acts publsiehd or sent by CENTROCOOP which view the

activities of the organizations within the consumer cooperative system

and, where necessary, will organize seminars.

Special actions are also to be undertaken for the purpose of improving

the training of cooperative chief accountants. Thus, quarterly and

immediately after the closing out and turning over of the balance statements, two day sessions will be organized to analyze finance and accounting activities and to instruct the cooperatives' chief accountants. They

must prepare for these sessions so as to have true exchanges of experiences,

on the basis of certain materials presented by those cooperatives which

obtained good results, stressing the methods used there so they can be

spread to all the other units. On the basis of field trip findings,

specialists from the county unions will present lectures, reports and other

materials designed to contribute to the enrichment of the professional

knowledge of the participants and to the improvement of activities. During these sessions, the participants will work with and discuss the normative

acts that have appeared during the quarter, as well as other documents

that should be reviewed.

59
As is natural, these measures should also be applied to the other workers

of the communal consumer cooperatives. At the cooperative level, bi-monthly

analyses will be initiated by the cooperative executive bureaus and attended

by unit chiefs, administrative workers, purchasers, key personnel from production units and service units, as well as other cadre. At this time, the

stage of fulfilling all plan indicators will be analyzed and the participants will be instructed regarding the objectives of the following period

and operative measures that must be taken to recoup shortfalls, recover

good organization and operation of activities, and to do away with shortcomings which may still exist. At the present time, there is in the

developmental stage a broad program for improving the professional qualifications of the workers through on-the-job training, short-term courses

away from the work site, exchanges of experience, work experience in production units of the consumer cooperatives having a high level of equipment

and work organization, and so forth.

With regards <to the mobilizing economic tasks that the consumer cooperatives

have in the 1976-1980 five year plan, the number of personnel will increase

in this time frame in all sectors of activity and, by 1980, totaling more

than 188,000 workers, or approximately 19,000 more than in 1975. Thus, in

the commercial and public food supply sectors—corresponding to the 44.6

percent increase in the volume of sales when compared to the preceding five

year plan—the number of workers and operative personnel will increase by

nine percent (it is worth mentioning that 80 percent of the increase in

the volume of sales will be achieved through increased worker productivity).

In the fields of production and services, the provisions of the current

five year plan call for a volume of activity 62.3 percent greater than the

achievements of the previous five year plan. This increase in the volume

of economic activities, as well as the organization of 5,000 new units

necessitates an increase in the number of workers by 17 percent compared

to the number in 1975 (under the conditions where 73 percent of the increase

in the volume of production will be achieved through increased worker

productivity). And, in the fields of contracting and purchasing agro-food

stuffs for the state fund, there will be an increase in the volume of goods

of 138.6 percent over the level of the 1971-1975 five year plan which will

be ensured by an increased number of workers totaling 55 percent more than

in 1975.

Under these conditions, in order to ensure the necessary number of cadre

in the 1976-1980 period, it will be necessary to qualify over 20,000

workers, of which 10,000 will be trained in the 18 consumer cooperative

schools and 10,000 through other forms of training.

In order to acquire the necessary number of workers for all sectors of

activity, the consumer cooperatives and county unions are to organize

qualification courses and post-high school specialization courses. Along

these lines, an important role will be played by the consumer cooperatives

in instructing the students and course participants in those units which

offer appropriate training conditions so that, after graduation, these

people can be easily integrated into situations of practical activities.

6o
In order to improve the efficiency of professional training programs, the

organizations of the consumer cooperatives which recruit candidates for

schools and courses will take steps to carry out testing beforehand to

determine the aptitudes absolutely necessary for the future of their

professions.

Concomitently with these concerns for ensuring the necessary number of

cadre and in view of the continuing improvement in the level of professional

training, in the 1976-1980 period all workers in the consumer cooperative

system will be included in diverse forms of training, with the majority

being trained without being removed from production.

8724

CSO: 2700

61
ROMANIA

MODERNIZATION OF COMMERCIAL ACTIVITY NECESSARY

Bucharest AGRICULTURA SOCIALISTA in Romanian 7 May 77 p 10

[Article by Dr Gh. Feteanu: "Modernization of Trade—An Urgent Problem"]

[Text] As is well known, socialist state and cooperative trading is with

each passing year registering higher growth rates in retail sales; these

rates are manifested in the spectacular dynamism of our whole national

economy. When we consider that this year, as in the coming years of the

current five-year plan, within the trade network it will be necessary to

sell an increased volume of goods of an expanded assortment and that about

two thirds of fahe increase in sales will have to be accomplished with better

utilization of existing commercial space, it is perfectly clear that the

development of new sales techniques constitutes a new stage in the quality

organization of trade.

Modernization must be approched from many points of view.

First of all, modernization requires the rational use of sales areas, so

that in each outlet it is possible to accomplish the most possible sales

per square meter of commercial space in the same amount of time. This

requires the use of types of furniture having superior display parameters.

The rational use of every linear meter of shelf or gondola space, not only

in length but also in height and depth, has become an element on which

the most efficient operation of a store depends. In some cases it is

also possible to gain commercial space by doing away with (or reducing)

areas used for storage (adjacent warehouses), which in fact represent one

third of the store's area. In this way, experience has shown that it is

impossible to achieve significant expansion of sales space. *

Secondly, modernization of trade requires providing the particular store

with the whole assortment stipulated for the respective type of outlet, as

a function of the commercial importance of each locality. At the same

time, goods must be displayed in fullest view of the customers ("an item

well displayed is half sold"), and selling should be done on the basis

of self-service or open display—rapid forms of selling that have spread

throughout the world.

62
In the third place, modernization requires a higher level of customer

service ("the customer is the boss"), a task which necessitates the

"modernization" of the store personnel themselves, by improving their

professional training.

All of this shows that technical progress in trade has a somewhat

specific character of application, the notion of modernization including

all essential aspects of commercial activity.

The experience of modernizing around 10,000 commercial outlets of the consumer cooperative in 1971-1975 and more than 1,800 stores in 1976 has

shown the necessity and usefulness of managing commercial facilties in

accordance with the requirements of a well-ordered commercial operation.

The following were accomplished in just this way: a rise of about 80 percent in sales, a rise in per-worker labor productivity up to 30 percent,

and an expansion of about 35 percent in sales area (by doing away with or

reducing the size of adjacent storage space).

Party documents and the Resolution of the Sixth Consumer Cooperative Congress emphasize the necessity, in the coming years, of acting more decisively to modernize all suitable existing outlets so as to increase the

efficiency of commercial operations in accordance with the specific

conditions of the trade network in this country. Modern forms of marketing must be introduced as far as possible for all groups of foodstuffs

and non-food items, the guiding idea being that of providing consumers

with all the conditions for making their own goods selection, thereby,

so to speak, doing away with the traditional barriers—the counters.

J

All this shows that on the level of each county union, of each consumer

cooperative, there must be a constant concern for the way in which the

distribution of goods is accomplished. The modernization plan for 1977

makes it necessary to take account especially of intercommunal central

commercial localities that are to become towns of an agroindustrial nature

in this five-year plan, outlets located in communal commercial centers, and

those located on principal tourist routes, without, of course, ignoring

any of the other outlets.

Greater efforts must be made by county unions (and, of course, cooperative

managers) in cases where the stage of modernization has not yet reached

adequate proportions, since, as is well known, in accordance with the

decisions of the Sixth Consumer Cooperative Congress the work of modernization is to be completed, by and large, by the end of this five-year plan.

In the coming years, it will also be necessary to reexamine, from the standpoint of commercial engineering, the stores which were modernized four

or five years ago, considering the fact that modernization has, so to

speak, a short life span; new techniques in trading must always keep in

step with the rapid development of the country's economy.

63
It is, of course, the task of every cooperative chairman to examine this

problem carefully, to undertake specific measures with precise timetables

to complete the modernization of outlets. These efforts will require the

mobilization of all trade workers both to complete the rearrangement of.the

furnishings and to set up the appropriate internal organization of the

outlets—and, especially, to arrange tasteful displays of the goods both

in the store and in the display windows.

Chief accountants of the cooperatives must be active supporters of these

efforts; they must help in precisely estimating the necessary financial

outlays in accordance with the need of ensuring higher efficiency,

realizing that with this aim in mind CENTROCOOP [Central Union of Consumer

Cooperatives] has stipulated in each county union's investment plan the

funds necessary to provide furnishings and other essential modernization

projects.

Through the joint efforts of all county unions and consumer cooperatives

it will be possible to achieve new and important successes in efforts to

modernize consumer cooperative trading operations.

9078

CSO: 2700

6k
YUGOSLAVIA

LAW ON FOREIGN TRADE IN GOODS AND SERVICES PUBLISHED

Belgrade SLUZBENI LIST SFRJ in Serbo-Croatian No 15, 11 Mar 77 pp 628-643

[Law on Trade of Goods and Services With Foreign Countries]

[Text]

Basic Provisions

Article 1

This law regulates the system of foreign trade business activities and sets

conditions that are to govern business transactions in goods and services

with foreign countries (hereafter: "foreign trade business transactions")

and conditions that are to govern the business activities of basic and other

organizations of associated labor (hereafter: "organizations of associated

labor") in their relations with foreign countries.

Article 2

Foreign trade business relations are an integral part of relations in the

process of social reproduction based on the association of labor and resources

and on workers self-management of socially owned resources.

Workers employed in a basic organization of associated labor and in all other

forms of organization assumed by the association of labor and resources are

possessed of the right and the duty to make decisions within their organizations concerning business activities pertaining to economic relations with

foreign countries.

Organizations of associated labor regulate mutual relations in connection

with the realization of rights and duties in foreign trade operations by

means of a self-management accord governing the association of labor and

resources in accordance with established common policies on economic relations with foreign countries, obligations undertaken by virtue of selfmanagement accords, and agreements on the fundamental provisions of plans

formulated by self-management organizations and the sociopolitical communities.

65
Article 3

Organizations of associated labor engaged in foreign trade business transactions are organized and conduct their operations in line with the principles governing contractual cooperation with industrial and other organizations of associated labor on whose behalf such business transactions are

performed, in accordance with a self-management accord or agreement governing such cooperation, and pursuant to the terms of contract they combine

their labor and resources in association with industrial or other organizations of associated labor with whom they do business, where provided for by

federal law.

Article 4

Organizations of associated labor conduct foreign trade business transactions

in accordance with established common policies governing economic relations

with foreign countries, obligations undertaken by virtue of self-management

accords and agreements on the fundamental provisions of plans formulated by

self-management organizations and the sociopolitical communities, regulations

and other general rulings which serve to regulate such relations, trade and

other international conventions, social compacts, and self-management accords.

Common policy in matters related to economic relations with foreign countries

is determined by the Assembly of the SFRJ in the form of the social plan for

Yugoslavia and other rulings.

Article 5

By means of a self-management accord organizations of associated labor may

regulate the conduct of foreign trade business transactions on the territory

of a specific foreign country or in specific goods and services in accordance

with established common policy governing economic relations with foreign

countries and pursuant to the law and regulations enacted on the basis of

law.

Organizations of associated labor and other self-management organizations

and communities, chambers and other general associations, organs of the

sociopolitical communities, and sociopolitical organizations may enter into

social compacts as a means of regulating specific questions related to the

conduct of foreign trade business transactions that are in the general public interest.

Article 6

When engaging in foreign trade business transactions organizations of associated labor are required to abide by proper business practices and to look

after the interests and honor of the Socialist Federal Republic of Yugoslavia in foreign countries and, hence, to conduct their business in a

66
manner which is not detrimental to other organizations of associated labor

or the social community.

Foreign Trade Transactions

1. Conditions Governing the Conduct of Foreign Trade Transactions

Article 7

Foreign trade transactions are undertaken by organizations of associated

labor which are engaged in economic activities and which are registered to

conduct foreign trade business transactions.

Pursuant to paragraph 1 of this article, organizations of associated labor

are defined as follows:

1) a basic organization of associated labor which, on the basis of a selfmanagement accord on the decision to incorporate into a work organization,

a combined organization of associated labor, a commercial affiliation of

organizations of associated labor, or some other form of incorporation entered

into by organizations of associated labor, conducts foreign trade business

transactions;

2) a work organization which is not composed of basic organizations of

associated labor, a work organization which is composed of basic organizations of associated labor and which, on the basis of a self-management accord

on the decision to incorporate into a work organization, conducts foreign

trade business transactions, or a work organization which, on the basis of

a self-management accord on the decision to incorporate into a combine organization of associated labor, a commercial affiliation of organizations of

associated labor, or some other form of incorporation entered into by organizations of associated labor, conducts foreign trade business transactions;

3) a combined organization of associated labor, insofar as it is provided

for by means of a self-management accord on the decision to incorporate into

a combined organization that such a combined organization engages in foreign

trade business transactions.

Foreign trade transactions are also undertaken by commercial affiliations of

organizations of associated labor, insofar as it is provided for by means of

a self-management accord on the incorporation into a commercial affiliation

that such a commercial affiliation engages in foreign trade business transactions.

The provisions of this article pertaining to a work organization also apply

to cooperatives which are engaged in productive activities or in the organization of productive activities, and the provisions of this article pertaining to commercial affiliations of organizations of associated labor correspondingly apply to affiliations of associated labor dedicated to mutual cooperation in the fields of planning and business activities and to cooperative

unions.

67
Foreign trade transactions in the area of armaments and military equipment

are the responsibility of the Federal Secretariat for National Defense and,

on its authorization, the Federal Directorate for the Trade and Stockpiling

of Strategic Goods.

Article 8

Organizations of associated labor which are engaged in the trade of goods

and services may conduct foreign trade business transactions only insofar as

they have undertaken to combine labor and resources in association with industrial and other organizations of associated labor on whose behalf they

conduct foreign trade business transactions on a lasting and extensive basis

and with whom they share the risks that attend such transactions.

The provision contained in paragraph 1 of this article does not apply to

business activities pertaining to the representation of foreign firms, except

insofar as the Federal Executive Council, acting with the consent of the

appropriate republic and provincial organs, may otherwise direct that the

provision contained in paragraph 1 of this article does apply to certain

business activities pertaining to the representation of foreign firms.

The Federal Executive Council, acting with the consent of the appropriate

republic and provincial organs and at the instance of the Economic Chamber

of Yugoslavia, will issue a regulation, pursuant to paragraph 1 of this

article, that will define what is meant by the conduct of foreign trade

business transactions on a lasting and extensive basis.

Article 9

Industrial organizations of associated labor engage in foreign trade business transactions within the limits of the range of business activities which

they are engaged in in Yugoslavia and which they are legally registered to

perform by the appropriate court of record and in accordance with this law.

Organizations of associated labor engaged in business activities involving

trade in goods and services in Yugoslavia may conduct foreign trade business transactions within the limits of the range of business activities

which they are legally registered to perform by the appropriate court of

record and in furtherance of which they have combined labor and resources

in association with industrial or other organizations of associated labor

and in accordance with this law.

Article 10

Foreign trade transactions are subject to the same regulations which apply

to trade in goods and the rendering of business services in Yugoslavia unless otherwise provided for by this law or by regulations enacted pursuant

to this law.
Article 11

Working people and private citizens may not establish work organizations

that will be engaged in business activities involving foreign trade.

Article 12

For the purpose of conducting foreign trade business transactions an organization of associated labor is listed in the judicial registry kept by the

appropriate court of record within whose jurisdiction such organization has

its main office.

To be listed in a court registry an organization of associated labor must

file the report and record of consent of the appropriate coordinating committee for organizations of associated labor engaged in foreign trade business transactions (hereafter: "the coordinating committee") indicating that

such organization is in compliance with the conditions specified in Article

16 of this law.

Organizations of associated labor may not be registered by courts to engage

in the exportation or importation of armaments and military equipment.

Article 13

To conduct foreign trade business transactions an organization of associated

labor must employ appropriate workers who possess special authorizations and

responsibilities in the conduct of such transactions and other appropriate

workers who perform tasks and duties pertaining to the conduct of foreign

trade business transactions.

The Economic Chamber of Yugoslavia, in agreement with the economic chambers

of the republics and the economic chambers of the autonomous provinces, sets

minimal professional qualifications and other conditions which must be met

by workers possessing special authorizations and responsibilities and other

professional workers with a view to the efficient conduct of foreign trade

business transactions.

An organization of associated labor employs a self-management general ruling

as the means by which it defines the tasks and duties which are considered

to be tasks and duties relevant to the conduct of foreign trade business

transactions and stipulates the specific professional qualifications and

other conditions which must be met by workers possessing special authorizations and responsibilities and other workers specified in paragraph 1 of

this article in accordance with the ruling specified in paragraph 2 of this

article.

The economic chamber of a republic or the economic chamber of an autonomous

province within whose jurisdiction the main office of an organization of

associated labor is located determines, at the request of an organization

of associated labor, which workers possessing special authorizations and

69
responsibilities and which other professional workers employed by an organization of associated labor are in compliance with the conditions governing

the performance of the tasks and duties specified in paragraph 3 of this

article with respect to the minimal professional qualifications and other

conditions which such workers must meet in order to conduct foreign trade

business transactions, in accordance with the ruling of the Economic Chamber

of Yugoslavia specified in paragraph 2 of this article, and serves notice of

its determination to the coordinating committee attached to the competent

republic or competent autonomous province organ.

Article 14

The coordinating committee is established as an adjunct of the competent

organs of the republics and autonomous provinces and as an adjunct of the

Federal Executive Council.

The chairmen and members of the coordinating committees attached to a competent republic organ and to a competent autonomous province organ are appointed by the executive councils of the republics and autonomous provinces.

The chairmen and one third of the committee members are appointed at the express initiative of the councils, while up to one third of the committee

members are appointed on the recommendation of the republic and provincial

trade union councils and the economic chambers of the republics and autonomous provinces.

The chairmen of the coordinating committees attached to the competent republic organ and competent autonomous province organ are by virtue of their

positions members of the Coordinating Committee attached to the Federal

Executive Council.

The chairman and one third of the members of the Coordinating Committee

attached to the Federal Executive Council are appointed by the Federal Executive Council at its own initiative, while up to one third of the committee

members are appointed on the recommendation of the League of Trade Unions

of Yugoslavia and the Economic Chamber of Yugoslavia.

Article 15

The coordinating committee attached to the competent republic organ and the

competent autonomous province organ evaluates and makes recommendations on

questions pertaining to the operations of organizations of associated labor

which conduct foreign trade business transactions or which conduct business

activities in foreign countries, with particular reference to the following

matters:

1) the development of socioeconomic and self-management relations in such

organizations;

2) the implementation of self-management accords and social compacts;

70
3) the implementation of cadres policy;

4) the organization and development of foreign trade distribution channels

in Yugoslavia and in foreign countries;

5) the legality of foreign trade business transactions.

The coordinating committee specified in paragraph 1 of this article:

1) approves the registration of organizations of associated labor with the

appropriate court of record to engage in foreign trade business transactions;

2) approves the provisions contained in self-management general rulings of

organizations of associated labor which are intended to regulate the tasks

and duties performed by workers possessing special authorizations and responsibilities and by other workers in the course of conducting foreign trade

business transactions and those provisions which are intended to regulate

the manner in which such tasks are assigned to these workers;

3) approves in advance the selection of workers who are to possess special

authorizations and responsibilities in the course of conducting foreign trade

business transactions;

4) may request that legal action be taken due to a break of contract committed by an employee of a joint commercial representation office in a foreign country and to be advised as to the outcome of such an action;

5) and performs other tasks as stipulated by federal law and by regulations

enacted pursuant to federal law.

Article 16

The coordinating committee attached to a competent republic organ or competent autonomous province organ gives its consent which is a condition of

registration with the appropriate court of record for the conduct of foreign

trade business transactions insofar as it has ascertained:

1) that an organization of associated labor is in compliance with specified

conditions for the effective conduct of foreign trade business transactions;

2) that the self-management accord on the association of labor and resources

insures that the relations affirmed by this accord are in accordance with the

law;

3) that the self-management accord and self-management general rulings of

an organization of associated labor provide for appropriate conditions in

connection with its organizational framework, operation, business activities,

and accountability;

71
4) that an organization of associated labor employs suitable workers who

possess special authorizations and responsibilities and other workers who

engage in foreign trade business transactions.

If the coordinating committee specified in paragraph 1 of this article determines that an organization of associated labor has not provided for appropriate conditions in furtherance of the effective conduct of foreign trade

business transactions, it will request that such an organization of associated

labor take steps which will insure the effective conduct of foreign trade

business transactions or it will withhold its consent [to the registration

of such an organization].

If the coordinating committee specified in paragraph 1 of this article refuses to give its consent in accordance with paragraph 2 of this article,

an organization of associated labor may file an appeal with the competent

republic organ or competent autonomous province organ. The decision of these

organs in reviewing such an appeal is final.

Article 17

The Coordinating Committee attached to the Federal Executive Council evaluates and makes recommendations on questions pertaining to the operations of

organizations of associated labor which conduct foreign trade business transactions or which are engaged in business activities in foreign countries,

with particular reference to the following matters:

1) the development of socioeconomic and self-management relations in such

organizations;

2) the implementation of self-management accords and social compacts;

3) the implementation of cadres policy;

4) the organization and development of foreign trade distribution channels

in Yugoslavia and in foreign countries;

5) the legality of foreign trade business transactions.

The coordinating committee specified in paragraph 1 of this article:

1) establishes uniform criteria for declarations of consent per article 16

of this law;

2) coordinates the work of the coordinating committees attached to competent

organs in the republics and autonomous provinces;

3) performs tasks as stipulated by federal law in connection with the operation of joint commercial representation offices in foreign countries and

the conduct of their employees;

T2
4) may request that legal action be taken due to a breach of contract committed by an employee of a joint commercial representation office in a foreign

country and to be advised as to the outcome of such an action;

5) and performs other tasks as stipulated by federal law and by regulations

enacted pursuant to federal law.

Article 18

If the coordinating committee attached to a competent republic or autonomous

province organ determines that a legally registered organization of associated

labor is no longer in compliance with any of the conditions specified in

article 16 of this law governing the conduct of foreign trade business transactions, it will enjoin such an organization of associated labor to take action within a specified time period so as to conform to said conditions; and

if such an organization of associated labor fails to conform to said conditions within the specified time period, the coordinating committee will

render a decision nullifying the legally registered rights of such an organization to engage in foreign trade business transactions.

If on the basis of information supplied by the Social Accountancy Service

and organs authorized to conduct audits the coordinating committee attached

to a competent republic or autonomous province organ determines that the

operating costs of an organization of associated labor engaged in foreign

trade transactions are consistently disproportionate to the foreign trade

sales in furtherance of which such costs were incurred, it may render a

decision to nullify the legally registered right of such an organization of

associated labor to engage in foreign trade business transactions.

An organization of associated labor may file an appeal against the decisions

of a coordinating committee specified in paragraphs 1 and 2 of this article

with a competent republic or autonomous province organ.

Pursuant to the decision of the coordinating committee specified in paragraphs 1 and 2 of this article against which no appeal is filed or pursuant

to the decision of the competent organ specified in paragraph 3 of this

article, the appropriate court of record will nullify the legally registered

right of an organization of associated labor to engage in foreign trade

business transactions.

Article 19

The Coordinating Committee attached to the Federal Executive Council may

request that a coordinating committee attached to a competent republic or

autonomous province organ or a joint commercial representation office in a

foreign country provide it with information and data which it needs to carry

out its work.

A coordinating committee attached to a competent republic or autonomous

province organ may request that the Coordinating Committee attached to the

Federal Executive Council or a joint commercial representation office in a

73
foreign country provide it with information and data which it needs to

carry out its work.

Article 20

Professional and administrative work in support of the requirements of a

coordinating committee attached to a competent republic or autonomous province

organ and the Coordinating Committee attached to the Federal Executive Council is performed by administrative organs designated by the executive council of a republic assembly, the executive council of an autonomous province

assembly, or the Federal Executive Council.

Article 21

A coordinating committee reaches decisions on matters within its jurisdiction by a majority of votes cast by its members. Detailed regulations on

the organizational framework, working procedures and conditions, decisionmaking procedures, time limits for filing appeals, and other significant

questions affecting the work of a coordinating committee are enacted by the

Federal Executive Council with the consent of the executive councils of the

republic assemblies and the executive councils of the autonomous province

assemblies.

Article 22

An organization of associated labor may begin to engage in foreign trade

business transactions only after it has been legally registered to do so.

Prior to legal registration with the appropriate court of record an organization of associated labor may not engage in any preliminary or preparatory

dealings connected with foreign trade business transactions (soliciting or

making bids, sending out promotional samples, initiating or conducting negotiations, and so on).

Article 23

When legal registration is completed and when registration records are

amended an organization of associated labor must provide the appropriate

republic or provincial organ and the Federal Secretariat for Foreign Trade

with a certified copy of the court ruling attesting to the completion of

registration in the court registry or the effectuation of amendments to

registration records, doing so within a period of 30 days after the date

of the record entry.

Article 24

If after having been legally registered an organization of associated labor

is no longer in compliance with any of the conditions specified in article

16 of this law, it must serve notice to this effect within a period of 8

days after the date on which it ceased to be in compliance with said conditions before the appropriate republic or provincial administrative organ and

the Federal Secretariat for Foreign Trade.
Article 25

Rulings on the completion of legal registration, rulings on the revocation

of legal registration, and rulings on the nullification of legally registered

rights to engage in foreign trade business transactions involving certain

goods or certain business services are published in SLUZBENI LIST SFRJ at

the expense of the organization of associated labor concerned.

2. Exports and Imports

Article 26

In order to carry out and regionally coordinate the common policy of economic

relations with foreign countries specified in article 4 of this law and in

order to implement economic development policy foreign trade business activities are conducted freely or within a framework of quotas based on official licenses and permits.

Foreign trade business activities are regulated, in keeping with the provision of paragraph 1 of this article, on the basis of a long-range program

which is enacted by the Federal Executive Council subject to the consent of

the appropriate republic and provincial organs.

The Federal Executive Council, subject to the consent of the appropriate

republic and provincial organs, prescribes in due course the standards and

other conditions and procedures that will govern the setting of quotas for

any given year and the distribution of such quotas among organizations of

associated labor and the conditions and procedures governing the issuance

of export and import licenses and permits.

The prescriptive measures specified in paragraph 3 of this article are to

be published in SLUZBENI LIST SFRJ no later than 2 months before they go

into effect.

Article 27

In order to provide for the implementation of policies for the economic development of Yugoslavia and in order to promote and protect domestic industries certain goods may be imported within limits prescribed by a set quota.

A quota is used to determine the volume of imports of a specific commodity

over a specified period of time, in terms of the quantity of goods (commodity

quota) or in terms of the value of goods (foreign exchange quota).

Quotas are set by means of a self-management accord which is concluded between organizations of associated labor—producers, consumers, and importers

of a specific commodity—or between organizations of associated labor comprised within an association engaged in planning coordination and commercial

cooperation.

75
If the association specified in paragraph 3 of this article does not comprise

all of the organizations of associated labor which are producers, consumers,

and importers of a specific commodity or if such organizations of associated

labor are affiliated into several different associations, the self-management

accord on the setting of quotas is to be concluded by those organizations of

associated labor which are not affiliated in this association and the association of associated labor engaged in planning coordination and commercial

cooperation or between associations of associated labor engaged in planning

coordination and commercial cooperation.

The self-management accord specified in paragraph 3 of this article, as an

element of the materials supply projections based on the anticipated growth

rate of production for any given year, serves as the means for determining

the volume of imports in terms of quantity (commodity quota) or in terms of

value (foreign exchange quota), as synchronized with anticipated domestic

production and consumption levels; the regional distribution of imports as

coordinated with the common economic policy and valid trade and other government-to-government accords; the procedure for distributing imports among

individual organizations of associated labor; the structural breakdown and

rate of imports; the method and organization of import activity, and so on.

The prescriptive measure specified in article 26, paragraph 3 of this law

may direct that the commodity quota or foreign exchange quota for a given

commodity can be set so as to cover a period longer than 1 year.

The self-management accord on the setting of quotas in accordance with the

provision set forth in paragraph 3 of this article will not go into effect

insofar as the federal administrative organ, which is designated by the Federal Executive Council, may determine that such quotas have been set in a

manner which runs counter to the provision set forth in paragraph 5 of this

article.

If an organization of associated labor does not conclude a self-management

accord as specified in paragraph 3 or paragraph 4 of this article within

the time limit stipulated by the Federal Executive Council, commodity quotas

and foreign exchange quotas will be set by a federal administrative organ

designated by the Federal Executive Council.

By way of exception to the provisions of this article, the Federal Executive

Council may, on the basis of the prescriptive measure specified in article

26, paragraph 3 of this law, direct that the quota for a commodity which is

supposed to be imported on the basis of a commodity quota or foreign exchange

quota is to be set by the Federal Executive Council or by a federal administrative organ of its designation.

Article 28

In order to promote the fulfillment of contractual obligations undertaken

pursuant to international conventions and trade and other government-togovernment accords, the stabilization of business conditions on the unified

Yugoslav market, and the prevention of deviations from established price

policy, certain goods may be imported and exported on the basis of licenses.

76
A license to import or export certain goods is issued by a federal administrative organ designated by the Federal Executive Council.

The issuance of licenses to import certain goods may be made conditional upon

the acceptance of an obligation on the part of an organization of associated

labor to export domestic goods in specified quantities or values, to provide

for the participation of a domestic producer in the delivery of such goods,

or to make sure that certain goods for which an import license is issued may

be imported only through an organization of associated labor which is engaged

in the business of representing foreign firms.

Article 29

In order to conclude an agreement on the exportation or importation of narcotic drugs an organization of associated labor must first obtain a license

to do so from the Federal Secretariat for Foreign Trade in accordance with

the law which regulates the production and sale of narcotic drugs.

Article 30

In accordance with the established common policy on economic relations with

foreign countries and within the framework of the long-range program specified in article 26, paragraph 2 of this law, the Federal Executive Council

draws up a schedule of the commodities encompassed by the specific types of

export and import arrangements (unrestricted imports and exports, commodity

quotas, foreign exchange quotas, and licenses).

Article 31

In order to provide for the more favorable regional flow of commodity trade

with foreign countries certain goods may be imported and exported on the

basis of permits.

The Federal Executive Council designates which goods may be exported or

imported on the basis of permits and the federal administrative organ which

is to issue such permits.

Article 32

In order to realize the interests and goals identified in their respective

plans and in order to increase the production of goods and the performance

of services which serve to generate joint revenues and greater foreign exchange earnings organizations of associated labor may jointly take advantage

of established commodity quotas, foreign exchange quotas, licenses and

permits on the basis of a self-management accord on the association of labor

and resources.

77
Pursuant to paragraph 1 of this article, organizations of associated labor

may jointly take advantage of established commodity quotas, foreign exchange

quotas, licenses, and permits for purposes specified by a self-management

accord on long-term industrial cooperation, commercial-technical cooperation,

and other arrangements for the association of labor and resources.

Article 33

Organizations of associated labor which on the basis of an agreement on longterm industrial cooperation with foreign countries import or export parts,

assemblies, subassemblies, components, component parts, semimanufactures,

and essential components engage in import or export transactions in accordance with the provisions of the specification which is subjoined to the contract agreement accompanying the issuance of the permit granted by the Federal

Committee for Energetics and Industry, in agreement with the Federal Secretariat for Foreign Trade. The permit is issued in conjunction with the official approval of the agreement on long-term industrial cooperation with a

foreign country, and said permit remains valid for the life of the agreement.

Article 34

An organization of associated labor in which foreign legal or physical persons invest assets in the form of equipment or on whose behalf an investment

contract provides that the assets of a foreign person, as the means of investment, are to be used to acquire equipment which is to be imported under

the terms of a commodity quota, foreign exchange quota, or license may import

such equipment on the basis of a permit which is issued by the Federal Committee for Energetics and Industry, in agreement with the Federal Secretariat

for Foreign Trade.

An organization of associated labor in which foreign legal or physical persons invest assets in the form of raw materials or reproduction materials,

which are to be imported under the terms of a commodity quota, foreign exchange quota, or license, may engage in such import transaction on the basis

of a permit which is issued by the Federal Secretariat for Foreign Trade, in

agreement with the Federal Committee for Energetics and Industry.

Article 35

Capital goods (machinery, apparatuses, plant equipment, transport vehicles,

and so on) may be imported under terms of direct purchase for use in the

production of goods and the rendering of services.

Pursuant to paragraph 1 of this article, the provisions of articles 26

through 28 and articles 30 and 31 of this law apply to imports of capital

goods.

78
Article 36

An organization of associated labor which exports fully assembled plants or

carries out capital construction projects in foreign countries may undertake

to purchase abroad a portion of the equipment needed to complete the plant

which is being delivered or to complete the capital construction project

which is being built without being considered to have imported goods into

Yugoslavia, subject to the conditions and procedures which are prescribed by

the Federal Executive Council with the consent of appropriate republic and

provincial organs.

Regulations governing the importation of the same goods into Yugoslavia do

not apply to the purchase of goods in accordance with paragraph 1 of this

article.

Article 37

The provisions contained in articles 26 through 28 and articles 30 through

36 of this law do not apply to the importation of armaments and military

equipment and their related parts or to the importation of plant equipment

and reproduction materials which are required for the production of armaments

and military equipment in Yugoslavia.

Goods specified in paragraph 1 of this article are imported on the basis of

a license issued by the Federal Secretariat for National Defense.

Article 38

Insofar as other economic policy measures fail to overcome the effects of

major dislocations in foreign trade, the balance of payments, or on the

market, the Federal Executive Council may prescribe measures for the temporary

curtailment of foreign trade transactions.

The measures specified in paragraph 1 of this article must be of limited

duration, and they may remain in effect only for as long as the dislocations

which prompted their enactment continue to exist.

The measures specified in paragraph 1 of this article do not apply to transactions concluded and reported as a matter of record to a banking institution prior to the implementation of regulations pertaining to the measures

specified in said paragraph.

By way of exception, insofar as the conduct of transactions concluded or

reported as a matter of record to a banking institution prior to the implementation of a regulation pertaining to the measures specified in paragraph

1 of this article may be significantly detrimental to the development of the

economic relations specified in paragraph 1 of this article or provoke more

serious dislocations in the context of these relations, a regulation pertaining to the measures specified in paragraph 1 of this article may be enacted in order to impose restrictions on the conduct of such transactions

79
that have already been concluded or reported as a matter of record to a

LThTconduc^r011 °

r StlPUlate C°ndlti0nS UndWhich «"* "t^s

fÄ/eaiela\tXeCUtlr

C°Unf1 mUSt immediatel

y advise the Assembly of the

SFRJ as to the enactment of regulations pertaining to the temporary restric

tive measures specified in this article. Insofar as the measures specifled"

ZltrTZaPb 1 0f-

th±S artiCle reSUlt ±n a

violation of the equal Sghts

enjoyed by organizations of associated labor in terms of the attainment of

taken "" ^ ^^ °

Ut OWing t0 the effects °f

*"> -Lures under-'

3. Miscellaneous Provisions on Exports and Imports

Article 39

Goods may be imported on the basis of a previously held auction, on the basis

ders HZ LTll fH

erS SUbmitt6d by a SpeCified min

aers, or on the basis of direct agreement. number of bid"

as

rsoaciationsS

an°d T^^f .

labor>other -elf-management organizations, and

associations and organs of the sociopolitical community at whose costs goods

are being imported determine the manner in which such goods are to be import insofar as this law or regulations enacted pursuant to this law do

not provide that certain types of goods to be used for specified purJoLs

ZliT^f /

lmP°rted °n th

u

B baS±S °f a

P-vi°-ly held auction or

P

on

P

the basis of a previously gathered offers.

Article 40

Goods are imported on the basis of a previously held auction or on the basis

Sldde^SÄ^ °

fferS SUbf"ed by a SpeCifled ml number of bidders m order to choose a supplier which offers the most acceptable tPrm*

T/Tultulr 800df

are t0 be imP°rted in la^ quantities a^TSrJe nuTr of suppliers or a large number of importers have an interest in such a trTs

action or if certain goods are to be imported for a special purpose""

SLbEe

0

rs

0

ofCth

Cea

ren

erK1f YUgC\SlaVia'actin8in agreement with the economic

of TnZt J republics and autonomous provinces, determines which types

hfld^ circumstances must be imported on the basis of a previously

sneci^H -

r

°

n fc\e baSlS °f

P

revlousl

y Sphered offers submitted by a

SovLn themconductnUf" °J ^^^ *>resCribes the procedures which are to

govern the conduct of such auctions and the gathering of such offers for fhP

exportation and importation of goods, and it may also8 direct that the importation of certain kinds of equipment be made conditional upon the exlrtation of domestic equipment. expor

80
The provisions contained in paragraphs 2 and 3 of this article do not apply

to the importation of armaments and military equipment nor to the importation

of equipment and reproduction materials for the production of armaments and

military equipment in Yugoslavia.

Article 41

Domestic producers of goods which are expected to be acquired abroad must be

allowed to participate in auctions; and if offers are being gathered, domestic producers must be allowed to submit their own offers.

If the terms offered by domestic and foreign bidders are identical, preference is given to the domestic bidder.

If foreign bidders offer more favorable terms than domestic bidders, preference is given to the offer of the foreign bidder who contracts more extensively

with domestic producers for the production of the goods that are to be delivered and who grants more extensive credits to a domestic producer to be

engaged in producing the goods in question or spends more for the purchase

of products manufactured by domestic producers.

Article 42

The Federal Secretariat for Foreign Trade may approve the application of a

self-management organization or community, a sociopolitical or other social

organization, or an organ of the sociopolitical community, exclusive of the

organizations of associated labor specified in article 7 of this law, to conduct^ specific foreign trade business transaction in furtherance of its own

requirements.

If an organization of associated labor specified in article 7 of this law

imports a fully assembled apparatus or plant equipment and in the future

will have to import individual parts which constitute an integral element

of such apparatus or plant equipment for the importation of which it is not

registered, the Federal Secretariat for Foreign Trade may approve the application of such an organization of associated labor to import these parts.

Article 43

The Federal Executive Council, with the consent of the appropriate republic

and provincial organs, enacts regulations governing import and export transactions which are conducted as reciprocity transactions and service transactions in connection with the physical enhancement of goods (industrial

finishing, manufacturing, processing). These regulations may make the conduct of certain transactions conditional upon the issuance of a special approval by an appropriate organ or the National Bank of Yugoslavia, and they

may also direct that such transactions must be secured by security deposits

or bank guarantys in addition to other conditions.

81
If the regulations specified in paragraph 1 of this article direct that a

security deposit must be paid or that a bank guaranty must be undertaken and

in the event that the right to recover the security deposit or to claim reimbursement for the bank guaranty is forfeited, the amount of the deposited

security or the amount paid for the bank guaranty is disposed of in accordance

with the procedures and conditions stipulated by the republic or autonomous

province within whose jurisdiction is located the main office of the organization of associated labor which deposited said security or which undertook

said bank guaranty.

Article 44

Organizations of associated labor may enter into agreements with foreign legal

and physical persons on long-term industrial cooperation, commercial-technical cooperation, and the granting and acquisition of patents, licenses, models,

brands, and so on.

The Federal Executive Council, with the consent of the appropriate republic

and provincial organs, enacts detailed regulations on the procedures and

conditions under which agreements may be entered into as specified in paragraph 1 of this article, in addition to agreements on the utilization of

knowledge and experience (know-how) and long-term industrial cooperation in

accordance with the provisions of paragraph 1 of this article.

Preliminary and preparatory dealings related to the conclusion of an agreement as specified in paragraph 1 of this article for the purpose of producing

armaments and military equipment may be undertaken by organizations of associated labor only with the consent of the Federal Secretariat for National

Defense.

An agreement as specified in paragraph 3 of this article may be concluded

in its final form only on the basis of the approval of the Federal Secretariat for National Defense.

An agreement concluded in accordance with paragraph 3 of this article is

submitted, at a time specified in the notice of approval, to the Federal

Secretariat for National Defense so that it may be recorded.

The regulations specified in paragraph 2 of this article do not apply to the

agreements specified in paragraph 3 of this article nor to agreements which

might be concluded by the Federal Secretariat for National Defense.

Article 45

An organization of associated labor which is engaged in commodity trade in

Yugoslavia and which is registered to conduct foreign trade business transactions may conclude an agreement with foreign firms on the sale or purchase

of goods for a third party account; and where agricultural products are concerned, such an organization of associated labor may also engage in preliminary and preparatory dealings in connection with the conclusion of such an

82
agreement insofar as it has previously concluded on agreement in Yugoslavia

as to the quantity of goods which are supposed to be sold or purchased abroad.

In the case of an agreement concluded in Yugoslavia on the purchase or sale

of goods the quantity of agricultural products to be sold or purchased may also

be stipulated on the basis of a harvest yield estimate or on the basis of a

tentative agreement on the export of agricultural products concluded between

the organization of associated labor engaged in the production of and the

organization of associated labor engaged in the marketing of agricultural

products.

Article 46

An organization of associated labor which is registered to perform maintenance

and provisioning services for foreign ships berthed in domestic ports and

anchorages or to perform maintenance and provisioning services for foreign

aircraft at domestic airports or to export goods to foreign armies as well

as an organization of associated labor which is registered to engage in border

district and maritime trade with neighboring countries may conduct such

foreign trade business transactions regardless of the nature of the business

activity which they are registered to engage in in Yugoslavia.

Goods destined for foreign armies, in accordance with paragraph 1 of this

article, may be exported by organizations of associated labor only on the

basis of a special authorization issued by the Federal Secretariat for Foreign

Trade.

Article 47

The Federal Executive Council, with the consent of appropriate republic and

provincial organs and in accordance with existing government-to-government

accords, enacts regulations governing the exportation and importation of goods

and services in border district and maritime trade with neighboring countries.

Article 48

Armaments and military equipment may be exported and imported only on the

basis of the approval of the Federal Secretariat for National Defense.

Armaments and military equipment may be exported and imported by organizations of associated labor which receive the approval of the Federal Secretariat for National Defense regardless of the business activity for which

they are registered.

The Federal Secretariat for National Defense prescribes which objects are

considered to be armaments and military equipment.

83
Article 49

Sociopolitical communities, organizations of associated labor, and other

self-management organizations and associations import armaments and military equipment for the territorial defense needs which they are required to

finance through the Federal Secretariat for National Defense.

The federal secretary for national defense will enact detailed regulations on

the importation of armaments and military equipment in accordance with paragraph 1 of this article.

Article 50

The provisions of this law do not apply to foreign trade business transactions which are conducted directly by the Federal Secretariat for National

Defense in order to meet the needs of the armed forces of the SFRJ and, at

the discretion of the Federal Executive Council, in order to fulfill the

international obligations of Yugoslavia.

Detailed regulations governing the procedures for conducting foreign trade

business transactions as specified in paragraph 1 of this article are enacted by the federal secretary for national defense.

Article 51

If under the terms of an agreement with a foreign firm or international

agreements it is provided that goods which are to be exported must be

accompanied by specified affidavits or specified certification

documents, such affidavits or documents will be issued to or

certified for an organization of associated labor, at its request, by the Economic Chamber of Yugoslavia, which may also

delegate this authority to other economic chambers insofar as

regulations do not designate aspecific administrative organ

or some other organization for this purpose.

If pursuant to a regulation of the country in which an affidavit or other

document (invoices and so on) as specified in paragraph 1 of this article

must be legally authorized by an appropriate official organ in Yugoslavia,

the legal authorization of such affidavits or documents is performed by the

Federal Secretariat for Foreign Affairs.

Detailed regulations concerning the issuance of affidavits and the certification of documents which are to accompany exported goods in addition to

regulations addressing the question as to which goods are deemed to be of

Yugoslav origin are enacted by the Federal Executive Council. Such regulations may authorize the Economic Chamber of Yugoslavia to define issuance

procedures, the types of affidavits, and the procedures governing the certification of such documents.

84
The regulations specified in paragraph 3 of this article may provide that

certain types of affidavits are to be issued by a specified customs organ.

Article 52

The Federal Secretariat for Foreign Trade may order that in certain cases

organizations of associated labor which are importing goods must make provisions in their sales agreements for the obligation on the part of foreign

sellers to obtain from the appropriate organs of their country affidavits

attesting to the origin of the goods which they are exporting, in some cases

certified by a Yugoslav consular representative in the country concerned, and

to submit such affidavits to the appropriate official organ when said goods

reach their point of entry.

The Federal Secretariat for Foreign Trade may order that in certain cases

or in the case of certain goods organizations of associated labor which are

exporting goods must make provisions in their sales agreements for the obligation on the part of a foreign buyer to obtain from the appropriate organ

of his country a statement in confirmation of the fact that said buyer will

be the ultimate user of said goods in the country of destination and to forward this statement to the organization of associated labor which will be

exporting said goods.

Article 53

The federal secretary for foreign trade may, where necessary, enact a regulation on the conditions under which goods are exported or imported without

payment in cash or without payment in kind of equivalent value.

4, Commercial Services and Other Forms of Foreign Trade Transactions

Article 54

International freight-forwarding transactions, transactions involving the

international transportation of goods and passengers, international commercial transport agency transactions, tourist trade transactions with foreign

countries, transactions involving the contractual inspection of the quality

and quantity of goods in international trade, work on capital construction

projects in foreign countries, representation of foreign firms, intermediary

transactions in foreign trade, and other commercial services involving foreign trade may be engaged in by organizations of associated labor provided

that they are registered to engage in such commercial services involving

foreign trade, unless otherwise provided for by this law.

An organization of associated labor registered to perform commercial services

in association with foreign countries may, without benefit of a special listing in the registry of representatives of foreign firms, also represent foreign firms which provide corresponding services.

85
Article 55

In accordance with this law, international freight-forwarding transactions

are defined as transactions involving the organization of the forwarding

and shipping of goods in international trade as performed by an organization

of associated labor on its own behalf and on the commission and at the cost

of a consignor and the performance of prescribed or customary auxiliary

services in connection with such transactions.

The transactions specified in paragraph 1 of this article are deemed to include in particular the conclusion of shipping agreements, the loading of

goods onto or off of transport vehicles, the filling out or furnishing of

consignment papers, bills of lading, and so on, the conclusion of agreements

on the insurance and warehousing of goods, dealings connected with the collection of customs duties on goods, and the control of the payment of shipping costs.

Article 56

In accordance with this law, transactions involving the international transportation of goods and passengers are defined as the performance of services

related to transportation of goods and passengers along international routes

by rail, road, sea, air, river and lakes.

Article 57

In accordance with this law, international commercial transport agency transactions are defined as transactions conducted by agents or intermediaries in

the transportation goods and passengers along international routes by rail,

road, sea, air, rivers, and lakes and the performance by them of prescribed

or customary auxiliary services in connection with such transportation.

The transactions specified in paragraph 1 of this article are deemed to include in particular: securing space abroad a transport vehicle for a consignor's goods, securing the necessary quantity of goods to be shipped by a

client's transport vehicle, the rendering of services or acting as an intermediary in the rendering of services with regard to the use of a transport

vehicle for the transportation of goods, passengers, and cargo and with

regard to meeting the needs of crew and passengers; ticket sales and other

transactions connected with the services of agents and intermediaries engaged

in the international transport business.

An organization of associated labor which engages in international commercial

transport agency transactions concludes an agreement on international commercial transport agency transactions on behalf of and at the expense of a

client or merely acts as an intermediary in the conclusion of such agreements.

86
Article 58

In accordance with this law, tourist trade transactions are defined in particular as: the provision of hotel and restaurant services (lodging, food

services, and so on), the organization and operation of travel tours and

excursions in Yugoslavia and foreign countries, the organization of trips

to attend cultural, commercial, athletic, or other presentations, the organization of hunting and fishing expeditions, and the performance of travel

services in the international tourist trade.

Article 59

The provision of special hotel and restaurant and other services for foreign

tourists and travelers and for foreign tourist organizations may also be contracted for in Yugoslavia by hotel and restaurant organizations of associated

labor and their trade associations even though they are not registered to provide such services in international trade.

Article 60

Specially arranged sports hunting and fishing services may be provided for

foreigners by organizations engaged in sports hunting and fishing and in the

breeding of wild game and fish in Yugoslavia even though they are not registered to provide such services in international trade.

Article 61

In accordance with this law, transactions involving the contractural inspection of the quality and quantity of goods in international trade are defined

as the inspection of the quality, quantity, and other attributes of goods as

performed on the basis of an agreement concluded between the organization of

associated labor engaged in making such inspections and its client primarily

in order to determine whether the quality, quantity, and other attributes of

goods meet the standards stipulated in the agreement concluded between the

buyer and seller of the goods.

A contract on the inspection of the quality and quantity of goods concluded

between the buyer of goods and the organization of associated labor which

performs such an inspection at the commission of the buyer may provide for

the qualitative and quantitative assumption of responsibility for goods at

the buyer's expense as well as for the guaranty of the organization of

associated labor performing such an inspection as to the quality, quantity,

and other attributes of the goods being inspected.

An organization of associated labor which inspects the quality and quantity

of goods in international trade may also engage in prescribed or customary

activities related to such an inspection, such as: the control of the packing and expediting of goods, supervision of the on-loading, off-loading,

reloading, shipping, and arrangement of goods in transport vehicles, inspection of warehouse space, inspection of transport vehicles, consulting

work, and so on.

87
An organization of associated labor which performs any of the tasks specified

in paragraphs 1 through 3 of this article must issue an appropriate written

report to its client on the results of a completed inspection or on the results of any of the other tasks referred to in these paragraphs.

Article 62

In accordance with this law, work on capital construction projects in foreign countries is defined as:

1) the preparation of expert analyses and studies, the preparation of capital investment programs, technical documentation for investment projects,

auction memoranda (tender documents), and other capital investment documents

for facilities and projects;

2) the performance of geodetic and other survey work, land reclamation work,

land improvement, and the development of arable farmlands;

3) work on all types of construction, geological, mining, hydrotechnical,

and other similar projects in addition to interior design and decorating work;

4) work on all types of installation, assembly, and disassembly projects in

addition to work on the maintenance and repair of industrial and other kinds

of plants;

5) putting into operation plants or plant equipment at completed facilities

and the operational management of completed plants, facilities, and operations

for the length of warranty periods;

6) construction of complete plant installations and the delivery of fully

assembled plant equipment for such installations;

7) supervision of construction work on facilities and projects;

8) provision of professional assistance in the course of construction work

and in the course of carrying out projects at completed facilities;

9) performing other tasks related to work on capital construction projects

in foreign countries.

Detailed regulations on the organization and operational procedures of organizations of associated labor which perform capital construction work in

foreign countries as well as the conditions under which organizations of

associated labor perform capital construction work in foreign countries in

cooperation with other organizations of associated labor or foreign firms

are enacted by the Federal Executive Council, with the consent of appropriate

republic and provincial organs.
Article 63

An industrial organization of associated labor which is legally registered

with an appropriate court of record to export complete plants or plant equipment may, without benefit of a special listing in a court registry, also engage in work on the installation of the plants or plant equipment which it

has exported.

Article 64

An organization of associated labor which is legally registered with an appropriate court of record to perform capital construction work in foreign

countries may, without benefit of a special listing in a court registry, export and purchase abroad plant equipment, reproduction and other materials,

and accessory equipment needed for the capital construction projects which

xt is working on in a foreign country as well as goods intended for the

personal use of the workers employed in its operations in a foreign country.

Article 65

In accordance with this law, transactions involved in the representation of

foreign firms are defined as:

1) the conduct of transactions on behalf of and at the expense of a foreign

firm that are preliminary to the conclusion of a contract for the purchase

or sale of goods or a contract for the rendering of services, the establishment of contacts between a foreign firm and organizations of associated labor

with a view to the conclusion of such contracts, and the performance of tasks

related to the execution of such contracts;

2) the conclusion of contracts for the purchase or sale of goods or contracts

for the rendering of services on behalf of and at the expense of a foreign

firm;

3) the operation of a consignment warehouse for foreign goods for the purpose of expediting sales;

4) the performance of product service work in support of the maintenance of

imported plant equipment and durable consumer goods in addition to the rendering of technical and other services.

Organizations of associated labor engaged in transactions involving the

representation of foreign firms serve as a point of contact between the

foreign firm which they represent and domestic industrial organizations of

associated labor, take part in transactions involving the organization of

long-term industrial cooperation programs, the joint investment of assets

and commercial-technical cooperation, and by committing their own resources

they also participate in such transactions and in the process of establishing

reciprocal links between the imports of goods supplied by the foreign firms

which they represent and exports of domestic goods.
The transactions specified in paragraph 1 of this article may be conducted

insofar as a written contract has been concluded with a foreign firm governing representation transactions, and the transactions specified in points 3

and 4 in paragraph 1 of this article may be conducted insofar as, in addition

to the contract on the representation of a foreign firm, a written contract

has also been concluded with a foreign firm for the purpose of governing said

transactions. Records of such contracts are filed with the Economic Chamber

of Yugoslavia.

The contracts specified in paragraph 3 of this article are concluded throughout the territorial jurisdiction of the Socialist Federal Republic of Yugoslavia.

An organization of associated labor which is engaged in transactions involving

the representation of foreign firms may as a rule conclude a contract on the

representation of a foreign industrial firm.

An organization of associated labor engaged in transactions involving the

representation of foreign firms may conduct such transactions within all

fields of commerce.

An organization of associated labor which is engaged in transactions involving the representation of foreign firms may, without benefit of special registration permitting it to engage in the importation or exportation of goods,

import goods with which it has been entrusted by a foreign firm on a consignment basis for the purpose of expediting sales and export goods to meet the

needs of the foreign firm which it represents.

An organization of associated labor which is engaged in transactions involving the representation of foreign firms may also act as the agent of a foreign

firm on foreign markets.

The Federal Executive Council, on the recommendation of the Economic Chamber

of Yugoslavia, enacts detailed regulations where necessary governing transactions involving the representation of foreign firms in Yugoslavia.

Article 66

In accordance with this law, intermediary transactions in foreign trade are

defined as:

1) the importation of goods for the purpose of their re-exportation in an

unaltered or essentially unaltered state;

2) the purchase of goods in a foreign country, the importation of said

goods from a foreign country, and the exportation of said goods to a foreign

country in the same quantity and at the same tariff rate indicated in the

Customs Tariff Schedule (ramplasman [term used to describe distribution channel mentioned in point 2 above; translation unknown]);

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3) the purchase of goods in Yugoslavia and in foreign countries, their

storage in domestic customs warehouses, and their sale abroad in an unaltered state;

4) the purchase of goods in a foreign country and their direct sale in a

foreign country;

5) intermediary services in the distribution of foreign goods on foreign

markets;

6) the purchase of goods in a foreign country for purposes of industrial

manufacture, finishing, and processing in domestic industrial organizations

of associated labor in addition to effecting payment for services rendered

in the finishing, manufacturing, and processing of said goods and in the

export of said goods;

7) the conduct of transactions related to the performance of intermediary

services in foreign trade, such as: conversion, arbitration, the handling

of accounts payable in certain foreign currencies, and the handling of accounts

receivable in foreign currencies which have a significant bearing on the maintenance of liquidity in international payments, and so on.

The Federal Executive Council, with the consent of the appropriate republic

and provincial organs, enacts detailed regulations governing intermediary

transactions in international trade. These regulations may make the conduct

of individual transactions referred to in this article conditional upon the

issuance of a special approval of an appropriate official organ or the

National Bank of Yugoslavia.

Article 67

In accordance with article 54 of this law, other commercial services involving

foreign trade are defined in particular as: port services, storage in public

warehouses, postal, telegraph and telephone services, hauling operations,

ship rescue and salvage operations, airport services, and international commercial fair operations, insofar as such services are rendered in the context of commerce with foreign countries.

The Federal Executive Council, with the consent of the appropriate republic

and provincial organs, enacts detailed regulations as to the definition of

other commercial services involving foreign trade, in accordance with paragraph 1 of this article, and as to which commercial services, exclusive of

the services specified in said paragraph, are deemed to be other commercial

services.

Article 68

The Federal Executive Council may, with the consent of the appropriate republic and provincial organs, prescribe the conditions under which commercial

services provided by foreigners may be utilized.

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Article 69

The Federal Executive Council, with the consent of the appropriate republic

and provincial organs, may regulate commercial and technical cooperation

with foreign firms as practiced in duty-free zones, in particular as such

commercial and technical cooperation relates to the construction of industrial plants, warehouses, and other facilities intended to facilitate the

conduct of business activities in such zones, the utilization of such facilities, and the conditions governing the construction and financing of such

facilities.

Article 70

The Federal Executive Council, with the consent of the appropriate republic

and provincial organs, prescribes the conditions governing the operation of

agencies representing foreign firms, agencies representing foreign banks and

other foreign financial institutions in Yugoslavia as well as the conditions

governing the operation of foreign commercial agencies in Yugoslavia.

Regulations which are enacted in accordance with paragraph 1 of this article

may make provisions with regard to which federal administrative organ is responsible for approving and stipulating the detailed conditions governing the

operations of individual agencies representing foreign firms, agencies representing foreign banks and other foreign financial institutions, and foreign

commercial agencies.

Article 71

Organizations of associated labor registered to perform airport services may

sell foreign goods in duty-free stores, on the basis of a contract entered

into for the purpose of representing a foreign firm solely through the sale

of its goods in such stores.

Article 72

An organization of associated labor which is engaged in foreign trade business transactions and an industrial organization of associated labor which

is not registered to engage in foreign trade business transactions may collaborate with each other at international expositions, fairs, and so on and

may by themselves or in conjunction with other organizations of associated

labor organize expositions, fairs, and so on to be held abroad.

5. Cooperation Among Organizations of Associated Labor in the Conduct of

Foreign Trade Business Transactions

Article 73

In order to coordinate their mutual interests and in order to implement common policy with regard to economic relations with foreign countries as established by the social plan of Yugoslavia and by other official enactments,

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organizations of associated labor which engage in foreign trade business

transactions with a specific country or with a group of countries are required

to organize themselves into sections for the promotion of economic relations

with foreign countries within the Economic Chamber of Yugoslavia, in accordance with the Statutes of the Economic Chamber of Yugoslavia.

In order to achieve the goals specified in paragraph 1 of this article organizations of associated labor which conduct foreign trade business transactions and are organized into sections do the following in particular: they

agree upon the manner in which they will make an organized entry into the

market of specific country or group of countries; they determine the general

conditions that are to govern their business activities, in accordance with

existing regulations; they analyze conditions and familiarize themselves with

trends on foreign markets; they monitor and direct the work of joint commercial

representations in foreign countries, and they engage in cooperation with the

coordinating committees specified in articles 16 and 18 of this law and with

the economic chambers of the republics and autonomous provinces.

The tasks of the sections and their operating procedures are stipulated in

detail by a general ruling enacted by the sections, in accordance with the

Statutes of the Economic Chamber of Yugoslavia.

An organization of associated labor as specified in paragraph 1 of this

article which deems that its self-management rights have been violated by a

general ruling of any section may file a complaint to this effect with a

court of associated labor.

Sections may make binding resolutions and decisions in furtherance of the

performance of their tasks under conditions and in a manner established by

the Statutes of the Economic Chamber of Yugoslavia and by the general rulings

of any section.

Resolutions and decisions arrived at in accordance with paragraph 5 of this

article are binding upon an organization of associated labor as specified

in paragraph 1 of this article even though its representative was not present

at the time when the resolution or decision was made.

The binding resolutions and decisions specified in paragraphs 5 and 6 of this

article are made by the sections in the course of exercising their public

mandate granted to them by the Economic Chamber of Yugoslavia.

Article 74

Organizations of associated labor which are involved in the conduct of foreign trade business transactions on a certain market or in terms of certain

goods or services may by means of a self-management accord regulate the

joint organization of export or import activities and the joint entry into

foreign markets, designate coordinators or agents responsible for matters

pertaining to the execution of a self-management accord, pool resources and

set up joint, special-purpose funds, and agree upon other forms of mutual

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cooperation in foreign trade with a view to advancing the volume of that

trade, in accordance with the law and existing social compacts.

The Federal Executive Council may order that an organization of associated

labor as specified in paragraph 1 of this article must take action toward

arriving at a self-management accord in accordance with said paragraph, and

it may also prescribe a time limit within which such an organization of

associated labor must conclude a self-management accord.

If organizations of associated labor do not take action toward concluding a

self-management accord or if they fail to conclude a self-management accord

within the prescribed time limit, the Federal Executive Council may then

enact regulations governing the conduct of foreign trade business transactions within a certain territorial jurisdiction or in terms of certain

goods and services or governing other questions referred to in paragraph 1

of this article.

Organizations of associated labor must present the self-management accords

which they conclude in accordance with paragraphs 1 and 2 of this article to

the Federal Secretariat for Foreign Trade within a period of 8 days after

the date on which said accord was concluded.

If the Federal Secretariat for Foreign Trade holds that the self-management

accord concluded pursuant to paragraph 2 of this article runs counter to the

provisions contained in article 75 of this law, it will so advise the Federal

Executive Council, the Coordinating Committee attached to the Federal Executive Council, and the Economic Chamber of Yugoslavia within a period of 15

days after the date on which the self-management accord was received.

Organizations of associated labor must present the self-management accords

referred to in this article to the Economic Chamber of Yugoslavia so that

they may be officially recorded.

Article 75

If under the terms of the self-management accord specified in article 74

of this law organizations of associated labor which conduct foreign trade

business transactions on a certain market or in terms of certain goods and

services do not provide for the necessary degree of cooperation in the conduct of such transactions and thereby jeopardize the realization of the anticipated volume and structure of commodity trade with foreign countries and

the implementation of trade and payments accords and other international

agreements regulating foreign trade, the Federal Executive Council may act

to prescribe the manner in which and the conditions under which such transactions are to be conducted.

9h
Article 76

The Economic Chamber of Yugoslavia, acting in conjunction with the economic

chambers of the republics and autonomous provinces and with the consent of

the Federal Executive Council, is to pass a ruling which will regulate business relations with certain foreign firms and foreign physical persons which

are engaged in foreign trade business activities.

The Economic Chamber of Yugoslavia, acting in conjunction with the economic

chambers of the republics and autonomous provinces and with the consent of

the Federal Executive Council, is to pass a ruling which will regulate the

material working conditions of employees in organizations of associated labor

at specific places of work in foreign countries in connection with the conduct of foreign trade business transactions,

6, The Role of Physical Persons in the Conduct of Export and Import Transactions

Article 77

Physical persons who are citizens of Yugoslavia may not engage in foreign

trade activities,

Foreign physical persons may not engage in foreign trade activities in

Yugoslavia,

Article 78

A physical person who is a citizen of Yugoslavia and a foreign physical

person may import, bring in, or receive from abroad objects which are meant

to be used to meet their personal needs and the personal needs of members of

their immediate families, objects which are meant to be used to meet their

household needs, and equipment and reproduction materials which are meant to

be used to perform legally sanctioned activities based on their personal

labor,

A physical person who is a citizen of Yugoslavia and a foreign physical person

may export, take out, or send abroad any quantity of objects which are not

intended for resale, unless otherwise provided for by law,

A foreign physical person may export, take out, or send from Yugoslavia to

a foreign country any objects which have been acquired by right of inheritance free from the restrictions specified in paragraph 2 of this article,

unless otherwise provided for by law.

The Federal Executive Council prescribes the detailed conditions and procedures governing the importation, bringing in and receiving from abroad

or the exportation, taking out, and sending from Yugoslavia of objects in

accordance with paragraphs 1 through 3 of this article.

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7. Reporting Agreements on Completed Foreign Trade Business Transactions

Article 79

Organizations of associated labor and other legal persons which conduct

foreign trade business transactions are required to file a report on a concluded agreement, within a prescribed time period which begins as of the

date on which an agreement is concluded with a foreign contracting party,

or a report on the abrogation of a previously valid agreement or on any

other means by which an agreement is to be cancelled. A report on a concluded agreement and a report on the abrogation of a previously valid agreement or any other means by which an agreement is to be cancelled is filed

with the national bank of the republic or the national bank of the autonomous

province within whose jurisdiction is located the main office of an organization of associated labor or other legal person.

The national bank of a republic or the national bank of an autonomous province will refuse to accept a report on a concluded agreement if in light

of the information contained in the report and accompanying documentation

it determines that a concluded agreement on foreign trade is not in compliance with the law.

The decision of a national bank of a republic or of a national bank of an

autonomous province to refuse to accept a report on a concluded agreement

is final under the rules of administrative procedure.

Appeal procedure in an administrative dispute is expeditious.

Article 80

The acceptance of a report on a concluded agreement as specified in article

79 of this law by a national bank of a republic or by a national bank of an

autonomous province does not relieve organizations of associated labor or

other legal persons of any of their responsibilities insofar as it is subsequently determined that the law has been violated.

A report on a concluded agreement and a report on the abrogation of a previously valid agreement or on any other means by which an agreement is to

be cancelled as specified in article 79 of this law are filed by the Federal

Directorate for Trade in and the Stockpiling of Strategic Goods with the

National Bank of Yugoslavia in the manner prescribed by this law.

Article 81

The federal secretary for foreign trade, acting in agreement with the

National Bank of Yugoslavia, enacts detailed regulations governing procedures and time limits for filing the reports specified in article 79,

paragraph 1 of this law.

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The regulations specified in paragraph 1 of this article may by way of

exception provide that in certain cases organizations of associated labor

and other legal persons are not required to file a report on an agreement

concluded for the purpose of rendering certain kinds of commercial services,

trading in certain goods through the mails, and in other similar cases.

Article 82

In an agreement with foreign legal or physical persons organizations of

associated labor are required to include clauses which will contain language

that will provide for the effective execution of such an agreement, while

also taking into account proper business practices, general and special

usances, and the principles of fair trade, and protect their own interests

and general public interests.

In addition to all of the essential factors that make up a contract (contract objective, prices, and so on), an agreement as specified in paragraph

1 of this article must also stipulate a time for the execution of obligations,

appropriate assurances for the fulfillment of the contract terms, and all

other factors which provide for the execution of the agreement.

An agreement as specified in paragraph 1 of this article must contain a

stipulation as to who will be responsible for resolving any disputes that

may arise and as to how the implementation of the arbitration clause will

be provided for.

The Economic Chamber of Yugoslavia, acting in accord with the economic chambers of the republics and autonomous provinces, will determine the basic

elements which must be contained in certain types of agreements which are

concluded in the realm of foreign trade.

The Federal Executive Council, with the consent of the appropriate republic

and provincial organs, where necessary enacts detailed regulations governing

the implementation of the provisions contained in this article.

Article 83

In connection with the process of entering into agreements with foreign

legal and physical persons organizations of associated labor may request

the legal opinion of the Federal Public Defender's Office. The Federal

Public Defender's Office is required to give its opinion within a period

of 30 days after the date on which such a request is received.

If the Federal Public Defender's Office determines that the execution of contractual obligations under the terms of an agreement may be significantly

prejudicial to the interests of an organization of associated labor, it will

apprise the management of such an organization of its opinion and propose

that it take steps which will prevent or minimize such prejudicial effects.

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The Federal Executive Council may direct that organizations of associated

labor are required, prior to entering into certain types of agreements or

agreements which involve amounts of money in excess of a given value, to

obtain the opinion of the Federal Public Defender's Office, in addition to

determining the conditions under which and the manner in which the Federal

Public Defender's Office will give its opinion.

Article 84

Organizations of associated labor and other legal persons which conduct

foreign trade business transactions are required to notify the Federal Public Defender's Office of any legal proceedings which they or any of their

subsidiaries in foreign countries intend to institute against a foreign

citizen or foreign legal person as well as of any legal proceedings which

a foreign citizen or foreign legal person intends to institute against them

or against any of their subsidiary enterprises in foreign countries, regardless of whether such legal proceedings are conducted before a Yugoslav

or foreign court of law, arbitration panel, or other organ.

Notice of intent to institute legal proceedings is filed no later than 30

days prior to the date on which such legal proceedings are scheduled to

begin, and notification of legal proceedings instituted by a foreigner is

made immediately upon receipt of the complaint and no later than 3 days after

the date on which such a complaint was received. If owing to the danger

that a claim in law will become invalid by virtue of a statute of limitations

or that the time limit set by law for the filing of a complaint will elapse

such a notice may not be served prior to the start of legal proceedings, an

organization of associated labor or other beneficiary of socially owned

property will institute such legal proceedings and simultaneously notify

the Federal Public Defender's Office to this effect.

Such a notification will contain information as to the parties to the dispute, the reason for the dispute and the amount of money in controversy,

the commercial or other context in which the dispute arose, the court of

law or arbitration panel before which the dispute is to be litigated, and

all evidence which may have an impact on the resolution of the dispute.

An organization of associated labor must notify the Federal Public Defender's

Office of its decision to file for an appeal in due course or prior to the

expiration of the period within which an appeal may be filed against a legal

judgment or degree.

Adherence to Honorable Standards in the Conduct of Foreign Trade Transactions

Article 85

In the course of conducting foreign trade business transactions organizations

of associated labor and their representatives are required to show due care

for their own honor, the honor of other organizztions of associated labor,

and the honor of the Socialist Federal Republic of Yugoslavia in foreign

countries.
Any action on the part of an organization of associated labor which runs

counter to proper business practices, standards of good conscience, and

general principles of fair trade as well as any action which neglects the

moral and property interests of the social community is deemed to be an

offense against the honor of such an organization of associated labor and

against the honor of the Socialist Federal Republic of Yugoslavia in foreign countries.

An offense has been committed against the honor of an organization of

associated labor and against the honor of the Socialist Federal Republic

of Yugoslavia in particular insofar as an organization of associated labor

in connection with the conduct of foreign trade transactions seriously violates its contractual obligations, insofar as it undertakes to fulfill its

contractual obligations in an irresponsible manner, insofar as it enters

into an agreement with a foreign buyer for the sale of goods which it cannot deliver, or insofar as it is in any way negligent in the conduct of its

foreign trade business activities.

The Economic Chamber of Yugoslavia, acting in accord with the economic chambers of the republics and autonomous provinces, determines and promulgates

in regard to the conduct of foreign trade transactions what is deemed to be

contrary to proper business customs, standards of good conscience, and the

general principles of fair trade as well as what actions are deemed to be

neglectful of the moral and property interests of the social community.

Article 86

In accordance with article 5 of this law, a representative of an organization of associated labor is considered to be any employee, agent, and plenopotentiary of an organization of associated labor as well as any other person

who on behalf of an organization of associated labor and in connection with

its foreign trade business activities comes into contact with a foreign

firm or foreign physical persons.

Forfeiture of the Right to Conduct Foreign Trade Transactions and Other

Measures

Article 87

A coordinating committee attached to the competent republic organ or

autonomous province organ may, under circumstances described in article 18

of this law, determine the time limit within which an organization of associated labor is required to comply with the conditions established by the

coordinating committee in accordance with article 16 of this law.

If an organization of associated labor does not act to comply with such

conditions within the period of time specified in accordance with paragraph

1 of this article, the coordinating committee attached to the competent republic organ or competent autonomous province organ will render a decision

to abrogate the legally registered right of such an organization to conduct foreign trade business transactions.

99
The provisions of article 18 of this law apply in connection with the abrogation of the legally registered right of an organization of associated labor

under the circumstances specified in paragraphs 1 and 2 of this article.

Under the circumstances specified in paragraph 2 of this article an organization of associated labor may complete foreign trade business transactions

already begun or it may concede responsibility for such transactions to

another organizations of associated labor registered to conduct foreign

trade business transactions insofar as such transactions were concluded

with a foreign firm and reported to a banking institution prior to the date

on which its legally registered rights were abrogated.

Article 88

The Federal Secretariat for Foreign Trade may take action against an organization of associated labor by banning it from participating in the foreign

trade transactions which it is otherwise legally registered to engage in:

1) if by the judgment a court of an appropriate jurisdiction in a republic

or autonomous province it is convicted of an economic offense as specified

in articles 97, 99, and 101 of this law;

2) if on more than two occasions in the course of the past 2 years it was

convicted by a court of appropriate jurisdiction in a republic or autonomous

province of an economic offense as determined by this law or by some other

enactment which regulates the business activities of organizations of associated labor in foreign countries;

3) if on more than two occasions over the course of the past 2 years sanctions were imposed against it by the Court of Ethics attached to the Economic Chamber of Yugoslavia, the court of ethics attached to the economic

chamber of a republic, or the court of ethics attached to the economic chamber of an autonomous province.

Sanctions banning the conduct of foreign trade business transactions as

specified in paragraph 1 of this article may not be imposed after the expiration of 1 year and 6 months after the date on which notice is filed

with the court of appropriate jurisdiction or with a court of ethics.

On the basis of an imposed sanction banning the conduct of foreign trade

business transactions the court of appropriate jurisdiction renders a decision by means of which the legally registered right of an organization of

associated labor to conduct foreign trade transactions is abrogated.

Article 89

In less serious cases as specified in article 88 of this law and in other

cases whereby an organization of associated labor is convicted by the

judgment of a court of appropriate jurisdiction of having committed an economic offense as determined by the law which regulates business relations

100
between an organization of associated labor and foreign countries or whereby

any sanction is imposed against it by the Court of Ethics attached to the

Economic Chamber of Yugoslavia, a court of ethics attached to the economic

chamber of a republic, or a court of ethics attached to the economic chamber

of an autonomous province, the Federal Secretariat for Foreign Trade may impose one or more of the following sanctions against an organization of associated labor:

1) a written reprimand coupled with a warning to the effect that if the case

at issue recurs any of the sanctions specified in points 2 through 5 will be

imposed against it. Such a reprimand is delivered to the management of the

organization of associated labor;

2) to ban the conduct of certain types of foreign trade transactions if it

is legally registered to conduct two or more types of foreign trade transactions;

3) to ban the exportation and importation of goods in certain fields of commerce if it is legally registered to export and import goods in two or more

fields of commerce;

4) to ban the exportation and importation of certain kinds of products;

5) to ban exportation to and importation from certain markets (regions);

6) to recommend to its organs that they take action against the responsible

party in light of the harm which said party has caused through his wrongdoing and that they notify the Federal Secretariat for Foreign Trade of the

results of such action within a specified period of time.

The bans specified in points 2 through 5 of paragraph 1 of this article may

remain in effect for a period of from 1 to 3 years. The term of such a ban

begins as of the date on which the decision authorizing the imposed sanction

is received.

The Federal Secretariat for Foreign Trade delivers the decision authorizing

the imposition of any of the sanctions specified in points 2 through 5 of

paragraph 1 of this article to the court of appropriate jurisdiction so

that the imposed sanction may be recorded in the court registry. The Federal Secretariat for Foreign Trade also delivers such a decision to appropriate republic or provincial organs.

Article 90

The court of appropriate jurisdiction will deliver to the Federal Secretariat

for Foreign Trade and to the appropriate republic or provincial organ the

lawful judgement by means of which an organization of associated labor was

declared to be convicted and penalized for an economic offense in consequence

of any violation of the provisions of this law or other enactments which

101
regulate business relations between organizations of associated labor and

foreign countries, and the Court of Ethics attached to the Economic Chamber

of Yugoslavia, a court of ethics attached to the economic chamber of a republic, or a court of ethics attached to the economic chamber of an autonomous

province will deliver the decree by means of which it has imposed any sanction within its jurisdiction.

Article 91

An organization of associated labor whose legally registered right to conduct foreign trade business transactions has been abrogated on the basis of

sanctions imposed in accordance with articles 87, 88, and 102 of this law

may not have its right reinstated in the registry of the appropriate court

of record prior to the expiration of a period of 3 years after the date of

abrogation.

Article 92

In circumstances as described in articles 88 and 89 of this law and prior

to the handing down of a verdict by a court of appropriate jurisdiction or

prior to the issuance of a decree by the Court of Ethics attached to the

Economic Chamber of Yugoslavia, a court of ethics attached to the economic

chamber of a republic, or a court of ethics attached to the economic chamber of an autonomous province, the Federal Secretariat for Foreign Trade

may impose a sanction against an organization of associated labor calling

for a provisional ban on the conduct of a specific foreign trade transaction insofar as a significant danger exists that such a transaction will

cause unavoidable harm.

If it renders a decision by means of which a sanction is imposed calling

for a provisional ban on the conduct of a specific foreign trade transaction in accordance with paragraph 1 of this article, the Federal Secretariat

for Foreign Trade will file a report with the appropriate organ, doing so

within a period of 15 days after the date on which such a provisional ban

is imposed, for the purpose of instituting proceedings in the court of

appropriate jurisdiction or in a court of ethics, and it may on its own

accord file a complaint with the Court of Ethics attached to the Economic

Chamber of Yugoslavia, a court of ethics attached to the economic chamber

of a republic, or a court of ethics attached to the economic chamber of

an autonomous province.

If the Federal Secretariat for Foreign Trade does not file a report as

specified in paragraph 2 of this article or if the organ responsible for

instituting proceedings in the court of appropriate jurisdiction or in a

court of ethics rejects the report of the Federal Secretariat for Foreign

Trade, a provisional ban is cancelled. If the Federal Secretariat for

Foreign Trade fails to file a report within the time period indicated in

paragraph 2 of this article or if an economic court or court of ethics

determines that an organization of associated labor is not guilty, such

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an organization of associated labor against which a sanction was imposed

calling for a provisional ban on the conduct of a specific transaction may

sue the Federal Secretariat for Foreign Trade for the damages which it suffered owing to the imposition of the provisional ban.

Penalty Provisions

1. Economic Offenses

Article 93

A monetary fine of from 30,000 to 1,000,000 dinars will be assessed against

an organization of associated labor for an economic offense insofar as it

proceeds without prior authorization to engage in foreign trade business

transactions for the conduct of which it is not legally registered with the

appropriate court of record (article 22, paragraph 1).

A person in an organization of associated labor who is responsible for an

action as specified in paragraph 1 of this article will be assessed a monetary fine of from 1,500 to 30,000 dinars.

Article 94

A monetary fine of from 30,000 to 1,000,000 dinars will be assessed against

an organization of associated labor for an economic offense:

1) insofar as it fails to abide by regulations enacted by the Federal Executive Council pursuant to articles 26, 30, 31, 36, 38, 51, 62, 65, 66, 67, 68,

70, 74, 75, 78, and 83 of this law;

2) insofar as it completes a transaction involving the exportation or importation of narcotic drugs without the prior permission of the Federal

Secretariat for Foreign Trade (article 29);

3) if it imports capital goods on the basis of direct purchase contrary to

the provisions of article 35 of this law;

4) insofar as it exports or imports armanents and military equipment contrary to the provision contained in article 37, paragraph 2 of this law;

5) insofar as while engaging in trade transactions involving exports and

imports it enters into an agreement with a foreign firm for the purchase or

sale of goods on behalf of a third party account without previously concluding an agreement in Yugoslavia as to the quantity of goods which are supposed

to be purchased or sold in a foreign country (article 45, paragraph 1);

6) insofar as it exports or imports goods without payment in cash or without payment in kind of equivalent value contrary to any regulation enacted

pursuant to article 53 of this law;

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7) insofar as an agreement on the representation of a foreign firm is not

made in writing or insofar as such an agreement is not delivered to the

Economic Chamber of Yugoslavia so that it may be officially recorded (article

65, paragraph 3);

8) insofar as in the course of conducting foreign trade business transactions it does not abide by the resolutions, decrees, or rulings enacted

pursuant to the provisions of articles 73 and 76 of this law;

9) insofar as contrary to the provisions of article 77 of this law it enters

into a commercial relationship with a Yugoslav physical person or with a foreign physical person;

10) insofar as in the course of conducting foreign trade transactions it

acts in a manner that is detrimental to its own honor, the honor of other

organizations of associated labor, or the honor of the Socialist Federal

Republic of Yugoslavia in foreign countries (article 85).

A person in an organization of associated labor who is responsible for any

of the actions specified under paragraph 1 of this article will be assessed

a monetary fine of from 1,500 to 30,000 dinars.

i

Article 95

A foreign firm will be assessed a monetary fine of from 30,000 to 1,000,000

dinars for an economic offense insofar as it fails to abide by regulations

enacted pursuant to article 70 of this law.

A person in a foreign firm who is responsible for an action as specified

in paragraph 1 of this article will be assessed a monetary fine of 30,000

dinars.

Article 96

An organization of associated labor will be assessed a monetary fine of from

30,000 to 1,000,000 dinars for an economic offense insofar as it conducts

foreign trade business transactions without having pooled labor and resources

in association with industrial and other organizations of associated labor

under circumstances as defined in article 8, paragraph 1 of this law and

as stipulated by regulations enacted pursuant to said article.

Any person in an organization of associated labor who is responsible for an

action as specified in paragraph 1 of this article will be assessed a monetary fine of from 1,500 to 30,000 dinars.

Article 97

An organization of associated labor will be assessed a monetary fine of from

30,000 to 1,000,000 dinars for an economic offense:

iok
1) insofar as it fails to specify the professional qualifications and other

conditions which must be met by workers possessing special authorizations

and responsibilities as well as the professional qualifications and other

conditions which must be met by other workers which perform tasks and duties

related to the conduct of foreign trade business transactions (article 13);

2) insofar as it completes a transaction involving the importation of plant

equipment which is being imported on the basis of a commodity quota, foreign

exchange quota, or license without obtaining the prior consent of the Federal

Committee for Energetics and Industry (article 34, paragraph 1);

3) insofar as it completes a transaction involving the importation of raw

materials and reproduction materials whose importation is regulated without

obtaining the prior consent of the Federal Secretariat for Foreign Trade

(article 34, paragraph 2);

4) insofar as it fails to abide by regulations governing the purchase of

plant equipment abroad and its direct delivery to a foreign country for the

purpose of completing work on delivered plant equipment or a complete capital

construction facility in a foreign country (article 36);

5) insofar as it carrys on export or import business activities without

benefit of a preliminary auction or without benefit of the preliminary gathering of offers from- a specified minimum number of bidders in cases where such

auctions or the gathering of such offers is prescribed by law (article 40),

or insofar as it fails to allow domestic producers to participate in auctions

or to tender offers, or insofar as it proceeds to act in a manner contrary

to the provisions of article 41, paragraphs 2 and 3 of this law;

6) insofar as it fails to abide by regulations governing import and export

transactions which are conducted as reciprocity transactions and service

transactions in connection with the physical enhancement of goods (article

43);

7) insofar as it fails to abide by regulations governing the procedures and

conditions under which agreements may be entered into for the granting and

acquisition of patents, licenses, models, brands, and so on in foreign countries, agreements on commercial and technical cooperation with foreign countries, or agreements on long-term industrial cooperation with foreign countries (article 44);

8) insofar as it fails to abide by regulations governing the exportation

and importation of goods and services in border district and maritime commerce with neighboring countries (article 47).

Any person in an organization of associated labor who is responsible for any

of the actions specified under paragraph 1 of this article will be assessed

a monetary fine of from 1,500 to 30,000 dinars.

105
Article 98

An organization of associated labor will be assessed a monetary fine of

from 30,000 to 1,000,000 dinars for an economic offense insofar as it proceeds to act in a manner contrary to the provision of article 82 of this

law and contrary to the regulations enacted pursuant to paragraph 5 of said

article.

Any person in an organization of associated labor who is responsible for any

action as specified in paragraph 1 of this article will be assessed a monetary fine of from 1,000 to 30,000 dinars.

An organization of associated labor and any individual in question will not

be penalized for an economic offense as specified in paragraph 1 of this

article if it is determined that through no fault of their own there has

been a change in the circumstances under which an agreement was originally

concluded.

Article 99

An organization of associated labor will be assessed a monetary fine of from

10,000 to 500,000 dinars for an economic offense insofar as it engages without authorization in any preliminary or preparatory work connected with foreign trade transactions and is not registered with an appropriate court of

record (article 22, paragraph 2).

Any person in an organization of associated labor who is responsible for an

action as specified in paragraph 1 of this article will be assessed a monetary fine of from 1,000 to 20,000 dinars.

Article 100

An organization of associated labor will be assessed a monetary fine of from

5,000 to 500,000 dinars for an economic offense insofar as it fails to make

provisions in a sales agreement for the obligation of a foreign buyer to

provide a statement in confirmation of the fact that said buyer will be the

ultimate user of exported goods in the country of destination as stipulated

by the regulations specified in article 52 of this law.

Any person in an organization of associated labor who is responsible for an

action as specified in paragraph 1 of this article will be assessed a monetary fine of from 1,000 to 25,000 dinars.

Article 101

Property interests acquired through an economic offense by an organization

of associated labor or foreign firm will be confiscated.

106
Article 102

With regard to the economic offenses provided for in articles 93 and 94 of

this law an economic court may impose preventive sanctions against an organization of associated labor banning it from engaging in one or more forms of

foreign trade transactions.

With regard to the economic offenses specified in paragraph 1 of this article

an economic court may, in addition to a monetary fine, impose a sanction

against any responsible person banning said person from performing work

duties at workplaces where foreign trade business transactions are conducted.

An economic court may not impose a preventive sanction as specified in

paragraph 1 of this article if the affected category of foreign trade transactions is the sole business activity of the organization of associated

labor in question.

2. Misdemeanors

Article 103

An organization of associated labor which conducts foreign trade business

transactions will be assessed a monetary fine of from 5,000 to 50,000 dinars

for a misdemeanor insofar as it delegates responsibility for the conduct of

foreign trade business transactions to a person convicted of any of the

crimes specified in article 112 of this law or to a person convicted of an

economic offense as specified in articles 93, 94, 95, 96, and 97 of this law.

Any person in an organization of associated labor who is responsible for an

action as specified in paragraph 1 of this article will be assessed a monetary fine of from 500 to 5,000 dinars.

Article 104

An organization of associated labor will be assessed a monetary fine of from

5,000 to 30,000 dinars for a misdemeanor insofar as it conducts foreign trade

business transactions without recourse to the services of workers who possess

special authorizations and responsiilities and of other workers required for

the conduct of foreign trade business transactions or insofar as its workers

with special authorizations and responsibilities and other workers who perform tasks and duties related to the conduct of foreign trade business transactions do not possess the professional qualifications which are required by

law in order to conduct such transactions (article 13).

Any person in an organization of associated labor who is responsible for an

action as specified in paragraph 1 of this article will be assessed a monetary fine of from 500 to 3,000 dinars.

107
Article 105

An organization of associated labor will be assessed a monetary fine of from

5,000 to 30,000 dinars for a misdemeanor insofar as it fails to notify the

coordinating committee attached to the competent republic or autonomous

province organ of the fact that it is no longer in compliance with any of

the conditions specified in article 16 of this law, doing so within a period

of 8 days after the date on which said compliance has ended.

Any person in an organization of associated labor who is found to be responsible for any action as specified in paragraph 1 of this article will

be assessed a monetary fine of from 500 to 3,000 dinars.

Article 106

An organization of associated labor will be assessed a monetary fine of

from 5,000 to 30,000 dinars for a misdemeanor insofar as, in accordance

with article 23 of this law, it fails to deliver to the appropriate republic

or provincial organ and to the Federal Secretariat for Foreign Trade a certified copy of the ruling attesting to the completion of registration in the

country registry or to the effectuation of amendments to said registration.

Any person in an organization of associated labor who is found to be responsible for an action as specified in paragraph 1 of this article will be

assessed a monetary fine of from 500 to 3,000 dinars.

Article 107

An organization of associated labor will be assessed a monetary fine of from

5,000 to 30,000 dinars for a misdemeanor insofar as it fails to give notice

within the prescribed time period pursuant to the provision of article 84

of this law.

Any person in an organization of associated labor who is found to be responsible for the misdemeanor specified in paragraph 1 of this article will be

assessed a monetary fine of up to 1,000 dinars.

Article 108

A Yugoslav physical person or a foreign physical person will be assessed a

monetary fine of from 5,000 to 50,000 dinars for a misdemeanor insofar as

they engage in foreign trade transactions.

A Yugoslav physical person or a foreign physical person will be assessed a

monetary fine of up to 10,000 dinars for a misdemeanor insofar as they import, bring in, or receive from abroad or export, take out, or send out

from Yugoslavia objects contrary to the provision contained in article 78

of this law or insofar as they fail to abide by any regulation enacted

pursuant to said article.

108
Article 109

An organization of associated labor or other legal person will be assessed

a monetary fine of up to 10,000 dinars insofar as within the prescribed

time period they fail to file a report on a concluded agreement or a report

on the abrogation of a previously valid agreement or on any other means by

which a valid agreement with a foreign contracting party is to be cancelled

or insofar as they file a report on a concluded agreement which contains

incorrect information.

Any person in an organization of associated labor or associated with any

other legal person who is found to be responsible for an action as specified

in paragraph 1 of this article will be assessed a monetary fine of up to

1,000 dinars.

Article 110

Any object and property interest acquired througha misdemeanor will be confiscated from the perpetrator of such a misdemeanor.

Article 111

Misdemeanor court proceedings dealing with the misdemeanors specified under

this law are conducted in the first instance by the Federal Foreign Exchange

Inspectorate.

An appeal against a ruling of the Federal Foreign Exchange Inspectorate is

heard by the Federal Secretariat for Finance.

3. Legal Consequences of Adjudication

Article 112

Persons who have been sentenced to an unconditional term of imprisonment

for having committed a premeditated crime against the basic principles of

the socialist self-management social system and the security of the SFRJ,

against the economy of the SFRJ, against self-management rights, against

socially owned property, or in violation of an official trust may not be

employed to perform tasks and duties related to the conduct of foreign trade

business transactions in an organization of associated labor which is legally

registered with an appropriate court of record to engage in foreign trade

business transactions.

The ban specified in paragraph 1 of this article remains in effect for a

period of 5 years after the date on which said sentence is commuted or

served out.

109
The provisions specified in paragraphs 1 and 2 of this article do not apply

to persons sentenced to a period of probation or to persons sentenced to

pay a monetary fine.

Article 113

An organization of associated labor which is legally registered with an

appropriate court of record to engage in foreign trade buusiness transactions may not delegate responsibility for the performance of tasks and duties

related to such transactions to persons who have been convicted of an economic

offense as specified in article 94 of this law or against whom, pursuant to

regulations governing foreign exchange business transactions, sanctions have

been imposed banning them from performing tasks and duties involving foreign

exchange business transactions.

The ban specified in paragraph 1 of this article remains in effect for a

period of 3 years after the date on which such a verdict becomes legally

valid.

Transitional and Concluding Provisions

Article 114

An organization of associated labor which on the date when this law goes

into effect was legally registered with an appropriate court of record to

engage in foreign trade business transactions is required to bring its registration to engage in such transactions into conformity with the provisions

of this law, doing so within a period of 1 year after the date on which this

law goes into effect.

If after this law goes into effect an organization of associated labor loses

the right to conduct certain kinds of foreign trade transactions, it may

complete those transactions already in process or concede the right to do

so to another organization of associated labor registered to engage in foreign trade business transactions insofar as prior to the date when this law

goes into effect it has concluded a valid agreement with a foreign firm and

reported said agreement to a banking institution.

Article 115

Self-management accords and social compacts concluded in accordance with

articles 24, 53c and 54 of The Law on Trade in Goods and Services With Foreign Countries (SLUZBENI LIST FNRJ No 27/62 and SLUZBENI LIST SFRJ Nos

14/65, 28/66, 54/67, 15/71, 29/71, and 26/72) will be brought into conformity with the provisions of this law and the regulations enacted pursuant

to this law within a period of 1 year after the date on which this law goes

into effect.

110
Article 116

Regulations and other rulings affecting foreign trade which have been

enacted by the Federal Executive Council and federal administrative organs

prior to the date on which this law goes into effect will be brought into

conformity with the provisions of this law within a period of 3 months

after the date on which this law goes into effect.

Article 117

Organizations of associated labor which prior to the date on which this law

goes into effect are legally registered with an appropriate court of record

to engage in foreign trade business transactions are required to deliver to

the organs specified in article 23 of this law a certified copy of the court

ruling on said registration, doing so within a period of 3 months after the

date on which this law goes into effect.

Article 118

The rights and duties which pursuant to the provisions of this law are vested

in the Coordinating Committee attached to the Federal Executive Council or

in the coordinating committees attached to the competent republic or autonomous province organs are exercised, until such time as the aforementioned

coordinating committees are established or no later than 1 January 1978, by

the Federal Secretariat for Foreign Trade or by an appropriate republic or

autonomous province organ.

Article 119

The Law on Trade in Goods and Services With Foreign Countries (SLUZBENI LIST

FNRJ No 27/62 and SLUZBENI LIST SFRJ Nos 14/65, 28/66, 54/67, 15/71, 29/71,

and 26/72) will be rendered null and void as of the date on which this law

goes into effect, with the exception of the provisions contained in articles

la, 37, 37a, 37b, and 37e of the aforementioned law which will be rendered

null and void on 1 January 1978.

Article 120

The provisions contained in articles 26, 27, 28, 30, and 31 of this law will

be implemented as of 1 January 1978.

Article 121

This law goes into effect on the eighth day after the date of its publication

in SLUZBENI LIST SFRJ.

11,813

CSO: 2800

111
YUGOSLAVIA

LAW ON FOREIGN BUSINESS VENTURES PUBLISHED

Belgrade SLUZBENI LIST SRFJ in Serbo-Croatian No 15, 11 Mar 77 pp 644-661

[Law on the Conduct of Business Activities in Foreign Countries]

[Text]

Basic Provisions

Article 1

Pursuant to this law, the conduct of business activities in foreign countries

is defined as the founding of enterprises in foreign countries, the founding

of banks and other financial institutions in foreign countries, the founding

of insurance and reinsurance organizations in foreign countries, the investment of assets in foreign enterprises, the conduct of business activities in

foreign countries through commercial entities, the establishment and operation

of joint commercial representations in foreign countries, the delegation of

responsibility for the conduct of business activities to foreign firms, and

the conduct of other forms of business activities as provided for by this

law.

Article 2

The business activities specified in article 1 of this law may be pursued

by basic and other organizations and associated labor which are registered

to engage in foreign trade (hereafter: "organizations of associated labor")

unless otherwise provided for by this law.

Article 3

Organizations of associated labor may conduct business activities in foreign

countries with a view to the realization of individual and joint business

objectives, the advancement of joint production ventures, long-term industrial collaboration and long-term commercial and technical cooperation, the

acquisition of raw materials, the achievement of greater labor productivity

112
through incorporation into the international division of labor, the achievement of positive business results with regard to the realization of earnings,

and with a view to the development and advancement of a common policy on

economic relations with foreign countries and the development of a uniform

and coordinated approach to the conduct of business activities in foreign

countries.

Article 4

Organizations of associated labor, being guided by the pursuit of their own

economic interests, freely arrive at their own decisions concerning the

conduct and the forms of business activities in foreign countries, on the

basis of the provision of this law and other enactments.

Workers employed in an organization of associated labor are responsible for

arriving at decisions through the self-management process concerning the

conduct of and the forms of business activities in foreign countries.

Article 5

Organizations of associated labor which are engaged in export and import

transactions or in other forms of foreign trade business transactions and

which by law are required to combine labor and resources in association

with industrial and other organizations of associated labor conduct business

activities in foreign countries in conformity with a self-management accord

on the pooling of labor and resources or an agreement on joint cooperation.

Article 6

The rights and resources which an organization of associated labor acquires

through the conduct of business activities in foreign countries are an integral part of the social resources subject to the control of the workers

employed in such an organization of associated labor.

Workers in an organization of associated labor whose places of work are

located in foreign countries enjoy the same rights, duties, and responsibilities as do those workers in the same organization of associated labor

whose places of work are located in Yugoslavia, in accordance with the regulations, self-management accord, statutes, and other self-management general

rulings enacted by such an organization of associated labor.

Article 7

The provisions of the Law on Trade in Goods and Services With Foreign

Countries which apply to the establishment and operations of the coordinating committees for organizations of associated labor engaged in foreign

trade attached to the competent republic or autonomous province organs

(hereafter: "coordinating committee attached to the competent official

organs of a republic or autonomous province") and the Coordinating Committee for Organizations of Associated Labor Engaged in Foreign Trade attached

113
to the Federal Executive Council (hereafter: "the Coordinating Committee

attached to the Federal Executive Council") also apply correspondingly to

the conduct of business activities in foreign countries pursuant to this

law.

Article 8

In the course of conducting business activities in foreign countries organizations of associated labor and workers in an organization of associated

labor whose places of employment are located in foreign countries are required to abide by proper business customs and the general principles of

fair trade and to be mindful of the interests and honor of the Socialist

Federal Republic of Yugoslavia in foregin countries.

The Economic Chamber of Yugoslavia determines and promulgates in regard to

the conduct of business activities in foreign countries what is deemed to

be contrary to proper business customs and the general principles of fair

trade.

Types of Business Activities Conducted in Foreign Countries

1. The Founding of Enterprises in Foreign Countries

Article 9

Organizations of associated labor may found enterprises in foreign countries.

Enterprises are founded in foreign countries with a view to increasing exports of goods and services from Yugoslavia, improving and developing production and joint production ventures, importing goods and services for purposes of economic development, the advancement of long-term industrial collaboration and long-term commercial and technical cooperation, exchanges of

scientific and technical-technological know-how, and the realization of

other economic interests.

Article 10

An organization of associated labor may found an enterprise in a foreign

country of its own accord or in association with other organizations of

associated labor or foreign legal or physical persons.

Article 11

In terms of the assets invested by organizations of associated labor enterprises which are founded in foreign countries may be:

1. Enterprises which are founded exclusively through the investment of

assets at the disposal of organizations of associated labor (hereafter:

"wholly-owned enterprises");

11^
2. Enterprises which are founded through the investment of assets at the

disposal of organizations of associated labor and assets at the disposal of

foreign legal or physical persons (hereafter: "joint venture enterprises").

An organization of associated labor may found an enterprise in a foreign

country which is accountable for its liabilities solely in terms of the resources invested in such an enterprise or in an amount set under the terms

of a limited guaranty.

Article 12

In order to found an enterprise in a foreign country organizations of associated labor may have recourse to:

1. Foreign exchange and dinar funds, in accordance with the Law on Foreign

Exchange Transactions and Credit Relations With Foreign Countries;

2. Revenues realized within an enterprise located in a foreign country,

in accordance with the provisions of this law;

3. Foreign exchange funds acquired on credit through an enterprise founded

in a foreign country;

4. Plant equipment, patent, license, and technical advancement rights, and

other rights which constitute a capital asset as expressed in terms of

monetary value;

5. The value of capital construction projects carried out in foreign countries and other rights as expressed in terms of monetary value.

Article 13

If several organizations of associated labor jointly found a wholly-owned or

joint venture enterprise in a foreign country, such organizations of associated labor qua founders of such an enterprise in a foreign country enter

into a self-management accord which regulates their mutual relations, accreditation rights as business representatives and agents, rights and duties

vis-a-vis a business enterprise, the goals of founding a business enterprise, the type of business activity to be pursued by the enterprise, operational control and supervision, apportionment of founder's equity, the

method of profit distribution, transfer of profits to Yugoslavia, conditions governing the reduction and withdrawal of assets, closure of a business enterprise, and other conditions related to the operations of a business enterprise in a foreign country.

Article 14

In order to found an enterprise in a foreign country an organization of

associated labor is required to secure prior authorization which is granted

115
by the federal administrative organ responsible for foreign trade affairs,

after having previously obtained the opinion of the federal administrative

organ responsible for financial affairs and of other federal administrative

organs responsible for the economic sphere within which the founders of a

business enterprise in a foreign country will be conducting their activities.

If an enterprise located in a foreign country is being founded for the

purpose of producing, reconditioning, and trading in armaments and military

equipment, the granting of the authorization specified in paragraph 1 of

this article is also contingent upon obtaining the opinion of the federal

administrative organ responsible for national defense affairs.

Article 15

An organization of associated labor files an application for authorization

to found a wholly-owned enterprise in a foreign country with the federal

administrative organ responsible for foreign trade affairs through a competent official organ in a republic or autonomous province.

Together with such an application an organization of associated labor is

required to subjoin:

1. The decision arrived at by the appropriate organ responsible for the

management of the operations and business transactions of the organization

of associated labor (hereafter: "decision of the appropriate management

organ"), in conformity with the self-management accord on incorporation,

the statutes, and other self-management general rulings of the organization

of associated labor, concerning the foundation of an enterprise in a foreign country, the type of business activity to be pursued by an enterprise

in a foreign country, the business activities program together with financial reports and a memorandum on the economic justifications for founding

an enterprise in a foreign country, and the commitment pledging that a

certain percentage of annual profits will be transferred to Yugoslavia;

2. A draft of the statutes and bylaws governing the organization and operations of an enterprise in a foreign country, including the original

draft and a certified translation thereof;

3. An excerpt from the operative legislation of the country in which an

enterprise is to be founded, in a certified translation, and a confirmation issued by the diplomatic or consular representation of the Socialist

Federal Republic of Yugoslavia in said country together with its opinion

as to the legality of founding such an enterprise, its legal status, and

the prospects for profit transfer and the realization of returns on invested assets;

4. The confirmation of a banking institution to the effect that the investment capital specified in article 12, items 1 through 3 of this law

116
(founder's equity) is secured or the confirmation of the appropriate social

accountancy service as to the book value of the assets specified in article

12, item 4 of this law which are to be used as a founder's equity contribution, in accordance with the law;

5. Documenting proof that provisions have been made for the professional

control and supervision of the material and financial operations of an enterprise in a foreign country;

6. The opinion of the coordinating committee attached to the competent republic or autonomous province organ of the republic or autonomous province

within whose territorial jurisdiction is located the main office of organization of associated labor as to '.the desirability of founding an enterprise

in a foreign country;

7. The attestation of the coordinating committee attached to the competent

official organ of the republic or autonomous province within whose territorial jurisdiction is located the main office of the organization of associated labor to the effect that workers possessing special authorizations

and responsibilities and other professional workers assigned to enterprises

located abroad are in compliance with the conditions governing the performance of such tasks or duties.

Together with its application for authorization to found a joint venture

enterprise in a foreign country, in addition to the documents specified in

paragraph 2 of this article, an organization of associated labor is also

required to subjoin a draft of the agreement which it intends to conclude

with a foreign partner on the founding of a joint venture enterprise, in

the original text and in certified translation, and a report on the credit

rating of the foreign partner obtained from the Economic Chamber of

Yugoslavia.

If several organizations of associated labor jointly found a wholly-owned

or joint venture enterprise in a foreign country, in addition to the applications and documents specified in paragraphs 1, 2, and 3 of this article, such organizations of associated labor are also required to subjoin

a self-management accord (article 13).

The documents specified in this article constitute official secrets.

Article 16

An organization of associated labor which is founding an enterprise in a

foreign country which will be engaged in commercial activities is required,

together with its application for authorization and in addition to the documents specified in article 14 of this law, to subjoin a statement in writing

pledging that of the total annual turnover realized by said enterprise the

greater volume of said turnover will be realized by means of exports of

goods and services from Yugoslavia.

117
Detailed regulations relative to the implementation of the provision contained in paragraph 1 of this article are enacted by the Federal Executive

Council, with the consent of appropriate republic and provincial organs.

Such regulations may make provisions stipulating in which circumstances

the scope of the pledge specified in paragraph 1 of this article may be

reduced for the benefit of an enterprise founded in a foreign country.

Article 17

Upon receipt of the application and documents specified in articles 15 and

16 of this law, the federal administrative organ responsible for foreign

trade affairs, after having previously obtained the opinion of the organ

specified in article 14 of this law, will grant authorization for the

founding of an enterprise in a foreign country insofar as the Coordinating

Committee attached to the Federal Executive Council has judged that, in

accordance with established policy on the advancement of economic relations with foreign countries, the guidelines and regulations enacted pursuant to the implementation of said policy, and the security interests of

the SFRJ, it is desirable to found such an enterprise in a foreign country.

If an organization of associated labor fails to found an enterprise in a

foreign country within a period of 9 months after the date on which the

authorization specified in paragraph 1 of this article is granted, said

authorization is rendered null and void.

Article 18

The federal administrative organ responsible for foreign trade affairs,

acting in accord with the federal administrative organ responsible for

financial affairs and within bounds established by the Federal Executive

Council, with the consent of the appropriate republic and provincial organs, may, pursuant to article 15, paragraph 2, item 1 of this law, set a

minimum profit percentage which an organization of associated labor must

transfer to Yugoslavia.

Article 19

An organization of associated labor is also required to obtain the authorization specified in article 14 of this law in the event that it increases

its founder's equity interest in an enterprise founded in a foreign country.

An organization of associated labor is required to subjoin to its application for authorization as specified in paragraph 1 of this article the

documents specified in article 15, paragraph 2, items 1, 4, and 6 of this

law in connection with the increase in its equity interest.

Article 20

An organization of associated labor whose enterprise founded in a foreign

country founds a new enterprise in a foreign country is required to proceed

118
to act in accordance with the provisions contained in articles 14 through

15 and article 22 of this law.

Article 21

An organization of associated labor which buys out an equity interest in

an enterprise in a foreign country is required to proceed to act in accordance with the provisions contained in articles 14 through 16 and article

22 of this law.

Article 22

An organization of associated labor is required, acting within a period of

30 days after the date on which all transactions are completed in a foreign

country in connection with the founding of an enterprise in a foreign

country, to file an application for the registration of an enterprise located in a foreign country in the registry of enterprises in foreign countries maintained by the federal administrative organ responsible for foreign trade affairs (hereafter: "registry of enterprises in foreign countries") .

In addition to the application specified in paragraph 1 of this article,

an organization of associated labor is required to file:

1. A document attesting to the completion of the registration of an enterprise founded in a foreign country in the registry maintained in said

country by an appropriate official national organ and the certified statutes

of an enterprise founded in a foreign country in their original version and

in certified translation;

2. The confirmation of a banking institution, insofar as an enterprise is

founded in a foreign country through the issuance of stock certificates,

attesting to the fact that stock shares in invested assets are on deposit

with an authorized banking institution in Yugoslavia or the confirmation

of the national bank of a republic or autonomous province within whose territorial jurisdiction is located the main office of the organization of

associated labor qua founder of an enterprise in a foreign country attesting to the fact that on its express authorization stock shares are on

deposit with a foreign bank;

3. Documented proof of the fact that the rights of an organization of associated labor which founds an enterprise in a foreign country are secured

in connection with the disposition of assets invested in such a foreign

country (as evidenced by a court certified agreement, bills of exchange,

other securities, and so on) insofar as it is provided under the law of

such a foreign country that several persons are founding such an enterprise, and a physical person is registered as holding title to invested

assets.

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The stock certificates on deposit with banking institutions as specified in

paragraph 2, item 2 of this article may only be disposed of by those workers

in an organization of associated labor who are authorized to do so by the

appropriate management organ of such an organization of associated labor.

The banking institution which holds such stock certificates on deposit must

be furnished with a record of such authorization. Authorized principals who

are responsible for the disposition of stock certificates may not at the

same time be persons who, pursuant to the authorization of a principal, are

responsible for the issuance and control of such stock certificates.

The national bank of a republic or the national bank of an autonomous province within whose territorial jurisdiction is located the main office of

an organization of associated labor may, insofar as business transactions

with a foreign country so require, authorize an organization of associated

labor to utilize the stock certificates on deposit with a banking institution as specified in paragraph 2, item 2 of this article for special

purposes.

Together with the application for the registration of a joint venture enterprise in a foreign country in the registry specified in paragraph 1 of this

article and in addition to the documents specified in paragraph 2 of this

article, an organization of associated labor is also required to file a

record of the agreement concluded with its foreign partner (article 15,

paragraph 3).

The following entries are made in the registry specified in paragraph 1 of

this article: the firm, name, and main office location of an organization

of associated labor which founds an enterprise in a foreign country, the

firm, main office location, and business activity of an enterprise founded

in a foreign country, and the amount of invested assets.

In the case of a joint venture enterprise founded in a foreign country, in

addition to the data specified in paragraph 6 of this article, entries must

also be made in the registry specified in paragraph 1 of this article as to

the firm and main office location of a foreign partner and the amount of

assets by means of which such a partner participates in the founding of a

joint venture enterprise.

The federal administrative organ responsible for foreign trade affairs issues ruling attesting to registration in the registry of enterprises located

in foreign countries.

Article 23

Insofar as any of the documents or facts specified in article 15 of this

law or any of the data entered into the registry of enterprises located

in foreign countries may be the subject of future amendments, an organization of associated labor is required, acting within a period of 60 days

after the date on which such amendments become effective, to so notify,

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through a competent republic or autonomous province organ, the coordinating

committee attached to the competent official organ of a republic or autonomous province within whose territorial jurisdiction is located the main

office of such an organization of associated labor and the federal administrative organ responsible for foreign trade affairs so that said amendments may be recorded in the registry of enterprises located in foreign

countries.

Article 24

The profits which are realized by an organization of associated labor in a

wholly-owned enterprise and the profits which accrue to an organization of

associated labor by virtue of the distribution of profits within a joint

venture enterprise may be used by an organization of associated labor,

after the settlement of outstanding debts (article 15, paragraph 2, item 1)

and other liabilities stemming from appropriate legislation of the host

country, for the following purposes:

1. To Increase the founder's equity interest in the enterprise in a foreign country through which such profits are realized;

2. To grant credits (for working capital and so on) to the enterprise in

a foreign country through which such profits are realized or to another of

its enterprises in a foreign country, in accordance with regulations governing foreign exchange transactions and credit relations with foreign

countries;

3. To found new enterprises or to buy out the founder's equity interest of

an enterprise in the country where such profits are realized or in some

other country;

4. To repay foreign exchange credits used to found an enterprise in a

foreign country;

5. For other purposes in accordance with regulations governing foreign

exchange transactions and credit relations with foreign countries.

Until such time as they are utilized, the profits specified in paragraph 1

of this article are placed by an organization of associated labor in a

foreign exchange bank account in Yugoslavia or in a foreign bank account

subject to the authorization of the national bank of a republic or the

national bank of an autonomous province within whose territorial jurisdiction its main office is located, in accordance with the general conditions

governing such transactions as imposed by the National Bank of Yugoslavia.

The certain percentage of profits which it is pledged to transfer to

Yugoslavia (article 15, paragraph 2, item 1) is placed by an organization

of associated labor in a foreign exchange bank account in Yugoslavia and

used for the purposes specified in paragraph 1 of this article.

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Insofar as the profits specified in paragraph 1 of this article are used to

found a new enterprise in a foreign country or to buy out the founder's

equity interest of an enterprise in a foreign country, an organization of

associated labor is required to proceed to act in accordance with articles

14, 15, 16, and 22 of this law.

Insofar as the profits specified in paragraph 1 of this article are used

for re-investment (to increase equity interest), an organization of associated labor is required to proceed to act in accordance with article 19 of

this law.

Article 25

An organization of associated labor is required to transfer a certain percentage of the profits specified in article 15, paragraph 2, item 1 of this

law to Yugoslavia within a period of 30 days after the date on which an appropriate official organ of the host country accepts and verifies the financial statement of an enterprise founded in a foreign country.

If in accordance with articles 14, and 19 through 21 of this law and other

legislation an organization of associated labor does not receive authorization to utilize the profits specified in article 24, paragraph 1 of this

law, it is required to transfer such profits to Yugoslavia within a period

of 30 days after the date on which it is served with the ruling by authority

of which such authorization is denied.

Article 26

The decision to close out a wholly-owned enterprise founded in foreign

country is made by an appropriate management organ.

The decision to close out a wholly-owned enterprise founded in a foreign

country jointly by several organizations of associated labor is made by

an appropriate management organ in conformity with the self-management accord concluded pursuant to article 13 of this law.

An organization of associated labor is required to furnish the federal administrative organ responsible for foreign trade affairs with a certified

copy of the decision specified in paragraphs 1 and 2 of this article, doing

so within a period of 30 days after the date on which such a decision is

made.

Insofar as a wholly-owned enterprise founded in a foreign country is closed

out, an organization of associated labor is required to initiate liquidation proceedings for the disposition of such an enterprise and to transfer

to Yugoslavia in cash or kind all assets which have accrued to it at the

conclusion of such proceedings, doing so within a period of 90 days after

the date on which such proceedings are concluded.

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Insofar as a wholly-owned enterprise founded in a foreign country becomes

the subject of bankruptcy proceedings, an organization of associated labor

is required to transfer to Yugoslavia in cash or in kind all assets which

have accrued to it at the conclusion of such bankruptcy proceedings, doing

so within a period of 90 days after the date on which such proceedings are

concluded.

Insofar as a joint venture enterprise founded in a foreign country is closed

out or goes into bankruptcy, an organization of associated labor is required

to transfer to Yugoslavia in cash or in kind all assets which have accrued .to

it at the conclusion of liquidation or bankruptcy proceedings, doing so within a period of 90 days after the date on which such proceedings are concluded.

Article 27

A decision to reduce invested assets, to withdraw invested assets, or to

effect other status changes in a wholly-owned or joint venture enterprise

founded in a foreign country is made by an appropriate management organ.

Insofar as an organization of associated labor reduces the assets which it

has invested in an enterprise founded in a foreign country, it is required

to clear its outstanding financial and material accounts in such an enterprise and to transfer to Yugoslavia in cash or in kind all assets which

have accrued to it on the basis of such a settlement, doing so within a

period of 90 days after the date on which such a settlement is reached.

Insofar as an organization of associated labor withdraws the assets which

it has invested in an enterprise founded in a foreign country, it is required to make a final settlement of all outstanding financial and material

accounts with such an enterprise and to transfer to Yugoslavia in cash or

in kind all assets which have accrued to it by reason of such a final settlement, doing so within a period of 90 days after the date on which such

a final settlement is reached.

Article 28

An organization of associated labor is required, acting within a period of

60 days after the date on which a financial statement of liquidation or

bankruptcy is accepted by an appropriate management organ, to present such

a financial statement to the appropriate national bank of a republic or to

the appropriate national bank of an autonomous province within whose territorial jurisdiction is located the main office of such an organization

of associated labor and to the social accountancy service and to notify

thereof the federal administrative organ responsible for foreign trade

affairs, which will then issue a ruling revoking the authorization to

found an enterprise in a foreign country and delete said enterprise from

the registry of enterprises in foreign countries.

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In the event of a reduction of assets invested in an enterprise founded in

a foreign country, an organization of associated labor is required to present a record of the settlement of financial and material accounts, subsequent to the receipt of such a settlement from an appropriate management

organ and within a period of 60 days after the date on which such settlement is received, to the national bank of the republic or the national bank

of the autonomous province within whose territorial jurisdiction is located

the main office of such an organization of associated labor and to the

social accountancy service and to notify thereof the federal administrative

organ responsible for foreign trade affairs so that appropriate amendments

may be entered in the registry of enterprises in foreign countries.

In the event of a withdrawal of assets invested in an enterprise founded in

a foreign country, an organization of associated labor is required to present a record of the final settlement of all outstanding financial and

material accounts, after such a settlement has been received from an appropriate management organ and within a period of 60 days after the date on

which such a settlement is received, to the national bank of the republic

or to the national bank of the autonomous province within whose territorial

jurisdiction is located the main office of such an organization of associated

labor and to the social accountancy service and to notify thereof the federal

administrative organ responsible for foreign trade affairs, which will then

issue a ruling on the abrogation of its ownership interest in a foreign business enterprise.

Article 29

An organization of associated labor disposes of the assets specified in

articles 26 and 27 of this law as follows:

1. Foreign exchange assets, up to the total amount of invested assets

(founder's equity), are returned to the funding sources from which they

were originally obtained;

2. Foreign exchange assets in excess of the total amount of invested assets (founder's equity) may be used for the purposes specified in article

24, paragraph 1, items 3, 4, and 5 of this law;

3. Foreign exchange assets which are earned in a foreign country through

the sale of founder's equity in kind of domestic origin may be used as

foreign exchange assets earned from the exportation of goods.

Article 30

Upon being returned to Yugoslovia, plant equipment and other objects of

domestic origin which have been invested as founder's equity or used as in

kind assets in an enterprise founded in a foreign country are not subject

to the regulations which apply to imports.

12k
Plant equipment and other objects of domestic origin invested in an enterprise founded in a foreign country are defined as plant equipment and other

objects manufactured in Yugoslavia and plant equipment and other objects

imported from abroad on which regular import duties have been paid.

Physical assets of foreign origin which are invested as founder's equity or

used as capital or working assets in an enterprise founded in a foreign

country may only be brought into Yugoslavia subject to the approval of the

federal administrative organ responsible for foreign trade affairs, acting

in accord with the federal administrative organ responsible for the appropriate economic sphere and after having paid all regular import duties.

Patent, license, and technical advancement rights and other rights which

are invested in support of the business activities of an enterprise founded

in a foreign country are restored to Yugoslavia in accordance with paragraph

1 of this article.

Article 31

The federal administrative organ responsible for foreign trade affairs,

after having previously obtained the opinion of the federal administrative

organ responsible for financial affairs and of the coordinating committee

attached to the competent organ in the republic or autonomous province within whose territorial jurisdiction is located the main office of an organization of associated labor, issues a ruing revoking authorization to found an

enterprise in a foreign country and deletes said enterprise from the registry of enterprises located in foreign countries provided that the Coordinating

Committee attached to the Federal Executive Council has also made a judgment

in favor of the closure of such an enterprise:

1) if a possibility no longer exists for the transfer of profits and for

the recovery of invested assets (article 15, paragraph 2, item 3);

2) if provisions are no longer being made for the professional control and

supervision of the material and financial operations of an enterprise in a

foreign country (article 15, paragraph 2, item 5);

3) if negative changes occur which affect the credit rating of a foreign

partner (article 15, paragraph 3);

4) if out of the total annual turnover realized by an enterprise in a

foreign country which is engaged in commercial activities such an enterprise

fails to realize the greater volume of said turnover by means of exports of

goods and services from Yugoslavia (article 16, paragraph 1);

5) if the operations of an enterprise in a foreign country no longer conform to established policy governing the advancement of economic relations

with foreign countries, the guidelines and regulations enacted pursuant to

the implementation of said policy, and the security interests of the SFRJ

(article 17, paragraph 1).

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Article 32

If the national bank of the republic or the national bank of the autonomous

province within whose territorial jurisdiction is located the main office

of an organization of associated labor determines on the basis of an annual

report (article 105) that an enterprise in a foreign country is not transferring profit earnings or is transferring such earnings in amounts less

than was provided for under the terms of its pledge (article 15, paragraph

2, item 1) or is not transferring such earnings within the prescribed time

period (article 25), it will submit a report to the appropriate official

organ calling for the initiation of legal proceedings to prosecute an economic offense.

Article 33

The federal administrative organ responsible for foreign trade affairs, after

having previously obtained the opinion of the federal administrative organ

responsible for financial affairs, other federal administrative organs specified in article 14 of this law, and the coordinating committee attached

to the competent official organ of a republic or autonomous province, may,

by way of exception, release an organization of associated labor which has

established an enterprise in a certain geographic area or which is engaged

in exporting goods and services from Yugoslavia, at its request, from its

commitment pledging an annual transfer of a certain percentage of its profits

(article 15, paragraph 2, item 1).

Article 34

If at the time when application is being made for authorization to found an

enterprise in a foreign country or during the course of the actual operation

of such an enterprise an organization of associated labor, in accordance with

its operational program and financial projections and its memorandum on the

economic justifications for founding an enterprise in a foreign country,

anticipates that such an enterprise will be operating at a loss, the federal

administrative organ responsible for foreign trade affairs, after having

previously obtained the opinion of the coordinating committee attached to

the competent official organ in a republic or autonomous province and the

Coordinating Committee attached to the Federal Executive Council, may

authorize an organization of associated labor to operate an enterprise in

a foreign country at a loss for a period of up to 3 consecutive years.

If after examining an annual financial statement the social accountancy

service determines that an enterprise founded in a foreign country has

been operating at a loss during the year for which said financial statement

was filed and if such a financial loss is not anticipated and authorized in

accordance with paragraph 1 of this article, the social accountancy service

will so inform the federal administrative organ responsible for foreign

trade affairs which, after having previously obtained the opinion of the

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coordinating committee attached to the competent official organ in a republic or autonomous province and the Coordinating Committee attached to

the Federal Executive Council, may issue a ruling revoking authorization

to found an enterprise in a foreign country and delete such an enterprise

from the registry of enterprises in foreign countries.

2. Founding Banks and Other Financial Institutions in Foreign Countries

Article 35

Banks and other financial institutions are established in foreign countries

in order to encourage and provide credit support for exports of goods and

services from Yugoslavia, long-term industrial collaboration and commercialtechnical cooperation with foreign countries, to handle payments transactions

in foreign countries on behalf of enterprises in foreign countries founded

by organizations of associated labor, to accumulate savings deposits, and

to conduct other banking transactions.

Article 36

A principal bank authorized to conduct business transactions with foreign

countries may of its own accord or in association with other principal banks

authorized to conduct business transactions with foreign countries or with

foreign legal or physical persons may establish a bank or other financial

institution in a foreign country.

The decision to establish a bank or other financial institution in a foreign

country is made by the appropriate management organs of interested organizations of associated labor, self-management interest communities, and other

social legal persons qua members of a principal bank.

Members of a principal bank enter into a self-management accord on the

establishment of a bank or other financial institution in a foreign country

which serves as an instrument for regulating their mutual relations, rights

and duties vis-a-vis the bank or other financial institution to be established in a foreign country, the goals of such an establishment, the nature

of the activities to be pursued, the apportionment of founder's equity, the

method of profit distribution, the transfer of profits to Yugoslavia, conditions governing the reduction and withdrawal of invested assets, the increase

of founder's equity, closure, and other conditions related to the operations

of a bank or other financial institution in a foreign country.

Article 37

A banking group may of its own accord or in association with other banking

groups or foreign legal or physical persons establish a bank or other financial institution in a foreign country.

The decision to establish a bank or other financial institution in a foreign

country is made by the appropriate management organs of the interested organizations of associated labor, self-management interest communities, internal banks, and other social legal persons qua members of principal banks

which have become affiliated within a banking group.

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Members of principal banks which are affiliated within a banking group enter

into a self-management accord on the establishment of a bank or other financial institution in a foreign country which serves as an instrument for

regulating their mutual relations, their rights and duties vis-a-vis the

bank or other financial institution to be established in a foreign country,

the goals of such an establishment, the nature of the activities to be

pursued, the apportionment of founder's equity, the method of profit distribution, the transfer of profits to Yugoslavia, the conditions governing

the reduction or withdrawal of assets, the increase of founder's equity,

closure, and other conditions related to the operations of a bank or other

financial institution in a foreign country.

Article 38

In terms of the assets which are to be invested banks or other financial

institutions which are established in foreign countries may be:

1) banks or financial institutions which are established exclusively through

the investment of assets at the disposal of members of a domestic bank (hereafter: "wholly-owned bank or wholly-owned financial institution");

2) banks or financial institutions which are established through the investment of assets at the disposal of members of a domestic bank and assets controlled by foreign banks or other financial institutions and other foreign

legal or physical persons (hereafter: "banking consortium or syndicated

financial institutions").

Domestic banks as specified in article 36 and 37 may establish a bank or

other financial institution in a foreign country which is accountable for

its liabilities solely to the extent of the assets invested in such a bank

or other financial institution or up to an amount set under the terms of

limited guaranty.

Article 39

The establishment, operations, closure, and other status changes of a bank

or other financial institution in a foreign country are correspondingly

governed by the provisions contained in articles 12, 14, and 15, articles

17 through 19, and articles 22 through 32 of this law.

3. Founding Insurance and Reinsurance Organizations in Foreign Countries

Article 40

Insurance and reinsurance organizations are founded in foreign countries in

order to conduct transactions pertaining to the insurance and reinsurance

of goods and services which are exported and imported and to conduct other

transactions involving the insurance and reinsurance of property and persons in foreign countries.

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Article 41

A property and personal Insurance company may of its own accord or in association with other property and personal insurance companies or foreign legal

or physical persons found an insurance organization in a foreign country.

The decision to found an insurance organization in a foreign country is made

by the appropriate management organs of interested organizations of associated labor, self-management interest communities, and other social legal persons

qua insurers of a company insuring property and persons.

The insurers specified in paragraph 2 of this article enter into a selfmanagement accord on the founding of an insurance organization in a foreign

country which serves as an instrument for regulating their mutual relations,

their rights and duties vis-a-vis the insurance organization to be founded

in a foreign country, the goals of founding such an organization, the nature

of the activities to be engaged in by such an organization, the apportionment of founder's equity, the method of profit distribution, the transfer

of profits to Yugoslavia, conditions governing the reduction and withdrawal

of invested assets, increases in founder's equity, closure, and other conditions related to the operations of an insurance organization in a foreign

country.

Article 42

A reinsurance company may of its own accord or in association with other reinsurance companies or foreign legal or physical persons found a reinsurance

organization in a foreign country. The decision to found a reinsurance organization in a foreign country is made by the appropriate management organs of

interested organizations of associated labor, self-management interest communities, and other social legal persons qua insurers of a company insuring

property and persons who have become affiliated within a reinsurance company.

The insurers of a property and personal insurance company who are affiliated

within a reinsurance company enter into a self-management accord on the

founding of a reinsurance organization in a foreign country which serves as

an instrument for regulating their mutual relations, their rights and duties

vis-a-vis the reinsurance organization to be founded in a foreign country,

the goals of founding such an organization, the nature of the activities

to be engaged in by such an organization, the apportionment of founder's

equity, the method of profit distribution, the transfer of profits to Yugoslavia, conditions governing the reduction and withdrawal of invested assets,

increases in founder's equity, closure, and other conditions related to the

operations of a reinsurance organization in a foreign country.

129
Article 43

In terms of the assets which are to be invested insurance and reinsurance

organizations which are founded in foreign countries may be:

1) insurance or reinsurance organizations which are founded exclusively

through the investment of assets at the disposal of the insurers in a domestic property and personal insurance company or reinsurance company (hereafter: "wholly-owned insurance or reinsurance organizations");

2) insurance or reinsurance organizations which are founded through the

investment of assets at the disposal of the insurers in a domestic property

and personal insurance company or reinsurance company and assets at the

disposal of foreign insurance or reinsurance organizations and other foreign

legal or physical persons (hereafter: "joint insurance or reinsurance organizations") .

A property and personal insurance company and reinsurance company as specified in articles 41 and 42 of this law may found an insurance or reinsurance

organization in a foreign country which is accountable for its liabilities

solely to the extent of the assets which they have invested in such an insurance or reinsurance organization or up to an amount set under the terms

of a limited guaranty.

Article 44

The founding, operation, closure, and other status changes of an insurance

or reinsurance organization in a foreign country are correspondingly governed

by the provisions contained in articles 12, 14, and 15, articles 17 through

19, and articles 22 through 32 of this law.

4. Investment of Assets in Foreign Enterprises

Article 45

Organizations of associated labor may invest assets in foreign enterprises.

The investment of assets in foreign enterprises is defined as the investment

of assets for the purpose of realizing common business objectives at joint

risk in a joint production venture, promoting long-term industrial collaboration, long-term commercial and technical cooperation, exchanges of scientific,

technical and technological know-how, and realizing other economic interests

(through joint business ventures).

Article 46

An organization of associated labor may invest assets in foreign enterprises

by itself or in association with other organizations of associated labor or

foreign legal or physical persons.

130
If assets are invested jointly by several organizations of associated labor,

such organizations of associated labor enter into a self-management accord

which serves as an instrument for regulating their mutual relations, their

rights and duties, the purpose and nature of the joint investment program,

representation rights, capital contribution amounts in connection with the

investment of assets in a foreign enterprise, procedures and conditions

government the investment and withdrawal of assets, the procedures and conditions governing the distribution of profits, and other conditions related

to joint investments in a foreign enterprise.

Article 47

Organizations of associate labor may invest assets:

1) in foreign enterprises founded by foreign legal or physical persons;

2) in joint venture enterprises founded by organizations of associated

labor and foreign legal or physical persons.

Article 48

An organization of associated labor is accountable for the liabilities which

it incurs as a result of joint business ventures solely up to the amount of

the assets which it has invested.

Article 49

Organizations of associated labor may draw upon the following resources for

the investment of assets in foreign enterprises:

1) foreign exchange and dinar assets in accordance with the Law on Foreign

Exchange Transactions and Credit Relations With Foreign Countries;

2) profits earned as a result of joint business ventures based on such an

investment;

3) plant equipment, patent, license and technical advancement rights and

other rights which constitute capital assets as expressed in terms of monetary value;

4) the cash value of capital construction projects in foreign countries and

other rights as expressed in terms of cash value.

Article 50

Investment of assets in a foreign enterprise is made on the basis of an

agreement concluded with a foreign enterprise in writing.

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The agreement specified in paragraph 1 of this article regulates the following matters in particular: mutual relations, the purposes for the investment of assets, the nature of the joint business venture, procedures for

setting up a joint management organ, procedures for controlling and supervising the joint business venture, the value of total assets and the amount

of the capital contributions which are to be invested in the joint business

venture, the method of profit distribution, the transfer of profirs to Yugoslavia, recovery of invested assets, procedures and conditions governing the

closure of the joint business venture, and other conditions related to joint

business ventures.

Article 51

In order to invest assets in a foreign enterprise an organization of associated labor is required to obtain prior authorization from the federal

administrative organ responsible for foreign trade affairs, which grants

said authorization after having previously obtained the opinion of the federal

administrative organ responsible for financial affairs and other federal administrative organs responsible for appropriate economic spheres.

If assets are invested in a foreign enterprise for the purpose of promoting

the production, reconditioning, or trade in armaments and military equipment,

it is also necessary to obtain the opinion of the federal administrative

organ responsible for national defense affairs.

Article 52

An organization of associated labor files an application for authorization

to invest assets in a foreign enterprise with the federal administrative

organ responsible for foreign trade affairs through the competent official

organ of a republic or autonomous province.

In addition to the application for investment authorization, an organization of associated labor is required to subjoin the following documents:

1) the decision of the appropriate management organ to invest assets for

the purpose of entering into a joint business venture together with a memorandum stating the economic justifications for such an investment, a draft

of the agreement which is to be concluded with a foreign partner, and a

report on the credit rating of said foreign partner furnished by the Economic Chamber of Yugoslavia;

2) excerpts from the operative legislation of the country in which assets

are to be invested, in certified translations, and the endorsement of the

diplomatic or consular representation of the Socialist Federal Republic of

Yugoslavia in said country together with its opinion as to the legality of

the investment of assets in a foreign enterprise and the prospects for the

transfer of profits and rate of return on invested assets;

132
3) the confirmation of an appropriate banking institution attesting to the

fact that the assets to be invested are secured or the confirmation of the

social accountancy service as to the book value of the assets specified in

article 49, item 3 of this law, as required by law;

4) the opinion of the coordinating committee attached to a competent official organ of a republic or autonomous province as to the desirability of

the investment of assets;

5) the attestation of the coordinating committee attached to the competent

official organ of a republic or autonomous province to the effect that workers possessing special authorizations and responsibilities and other professional workers which are assigned to positions in a foreign enterprise are

in compliance with the conditions governing the performance of such tasks

and duties.

Insofar as assets are being invested in a foreign enterprise jointly by

several organizations of associated labor, such organizations of associated

labor are also required to subjoin, in addition to the application and documents specified in paragraphs 1 and 2 of this article, a self-management

accord (article 46, paragraph 2).

The documents specified in this article constitute official secrets.

Article 53

Upon receipt of the application and documents specified in article 52 of

this law the federal administrative organ responsible for foreign trade affairs, after having previously obtained the opinion of the official organs

specified in article 51 of this law, will grant authorization for the investment of assets provided that the Coordinating Committee attached to the

Federal Executive Council has rendered a judgment declaring that the investment of assets in a foreign enterprise is desirable and in accordance with

established policy on the advancement of economic relations with foreign

countries, the guidelines and regulations enacted for the implementation of

that policy, and the security interests of the SFRJ.

If an organization of associated labor fails to conclude an agreement as

specified in article 50 of this law within a period of 6 months after the

date on which the authorization specified in paragraph 1 of this article

is granted,' said authorization is rendered null and void.

Article 54

An organization of associated labor is also required to obtain the authorization specified in article 53 of this law whenever it invests additional

assets in a foreign enterprise in furtherance of a joint business venture.

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An organization of associated labor is required to subjoin to its application for authorization as specified in paragraph 1 of this article the documents specified in article 52, paragraph 1, items 1, 3, and 4 of this law.

Article 55

Acting within a period of 30 days after the date on which it enters into

an agreement as specified in article 50 of this law, an organization of

associated labor is required to submit said agreement to the federal administrative organ responsible for foreign trade affairs for its approval and for

registration in the registry of agreements on the investment of assets in

foreign enterprises.

Acting within a period of 30 days after the date on which application is

filed, the federal administrative organ responsible for foreign trade affairs

issues a ruling on the approval of the concluded agreement and on its registration in the registry specified in paragraph 1 of this article.

The following entries are made in the registry specified in paragraph 1 of

this article: the firm, name, and main office location of the organization

of associated labor which is investing assets in a foreign enterprise, the

firm and main office location of the foreign enterprise with which an agreement has been concluded, the nature of the joint business venture, the amount

of assets invested, the date on which the agreement was concluded and the

date on which said agreement was submitted for approval, and the number and

date of the ruling on the approval and registration of the concluded agreement.

An agreement on the investment of assets in a foreign enterprise becomes

legally valid as of the date on which it is recorded in the registry specified in paragraph 1 of this article.

Article 56

Insofar as any of the documents or facts specified in article 52 of this

law or any of the data recorded in the registry specified in article 55 of

this law are subjected to future amendments, an organization of associated

labor, acting within a period of 60 days after the date on which such amendments become effective and through the competent official organ of a republic or autonomous province, is required to so notify the coordinating committee attached to the competent official organ of the republic or autonomous

province within whose territorial jurisdiction is located the main office

of such an organization of associated labor and the federal administrative

organ responsible for foreign trade affairs so that such amendments may be

recorded in the registry of agreements on the investment of assets in foreign

enterprises.

13^
Article 57

The profits earned by an organization of associated labor as a result of a

joint business venture with a foreign enterprise, after the settlement of

liabilities specified in a joint business venture agreement and other obligations imposed by the laws of the host country, may be used by such an organization of associated labor for the following purposes:

1) to increase its contribution to the assets constituting a joint investment in a foreign enterprise (additional investment);

2) to invest in other foreign enterprises, in accordance with this law;

3) to repay foreign exchange credits which were undertaken for the purpose

of investing assets in a foreign enterprise;

4) for other purposes in accordance with regulations governing foreign exchange transactions and credit relations with foreign countries.

Until such time as they are to be used, the profits specified in paragraph

1 of this article are placed by an organization of associated labor in a

foreign exchange bank account in Yugoslavia or in a foreign bank account

subject to the authorization of the national bank of the republic or the

national bank of the autonomous province within whose territorial jurisdiction its main office is located, in accordance with general conditions imposed at the discretion of the National Bank of Yugoslavia.

Insofar as the profits specified in paragraph 1 of this article are used

for purposes of additional investment, an organization of associated labor

is required to proceed to act in accordance with article 54 of this law.

Article 58

An organization of associated labor is required to recover invested assets

or the remainder of invested assets insofar as an agreement on the investment of assets in a foreign enterprise is rendered inoperative by the realization of agreed upon business objectives or by the expiration of the

contract term, insofar as an agreement on the investment of assets in a

foreign enterprise is cancelled for reasons provided for by this law

(article 59), or insofar as an agreement on the investment of assets in a

foreign enterprise has provided that a domestic contracting party may also

withdraw a portion of its invested assets during the life of such an agreement.

Article 59

The federal administrative organ responsible for foreign trade affairs,

after having previously obtained the opinion of the federal administrative

organ responsible for financial affairs and the coordinating committee attached to the competent official organ in the republic or autonomous province

within whose territorial jurisdiction is located the main office of an organization of associated labor, issues a ruling revoking authorization for

135
the investment of assets in a foreign enterprise and deletes said agreement

from the registry of agreements on the investment of assets in foreign enterprises provided that the Coordinating Committee attached to the Federal

Executive Council has rendered a judgment as to the closure of a joint business venture in a foreign enterprise:

1) insofar as assets are invested or a joint business venture is conducted

in a manner that runs counter to the provisions of a previously concluded

and authorized agreement (articles 50 and 55);

2) insofar as the investment of assets or a joint business venture is found

to be no longer compatible with established policy on the advancement of

economic relations with foreign countries or with the guidelines and regulations enacted pursuant to the implementation of that policy (article 53);

3) insofar as the investment of assets or a joint business venture is

found to be no longer compatible with the security interests of the SRFJ

(article 53).

Article 60

In the event of circumstances as specified in articles 58 and 59 of this

law an organization of associated labor is required to clear its oustanding

financial and material accounts related to the conduct of a joint business

venture and to transfer to Yugoslavia in cash or in kind all assets which

have accrued to it on the basis of such a settlement, doing so within a

period of 90 days after the day on which such a settlement is reached.

After it has accepted the settlement of outstanding financial and material

accounts related to the conduct of a joint business venture as made by an

appropriate management organ, an organization of associated labor is required

to present a record of said settlement, within a period of 60 days after

the date on which a settlement is reached, to the national bank of the

republic or to the national bank of the autonomous province within whose

territorial jurisdiction is located the main office of such an organization

of associated labor and to the social accountancy service.

Article 61

Insofar as an agreement on the investment of assets is rendered inoperative

by the realization of agreed upon business objectives or by the expiration

of the contract term or insofar as it is rendered inoperative for any other

reasons, an organization of associated labor, acting within a period of 60

days after the date on which such an agreement becomes inoperative, is required to so notify the coordinating committee attached to the competent

official organ of a republic or autonomous province through a competent

official organ of a republic or autonomous province and the federal administrative organ responsible for foreign trade affairs, which will issue a

ruling on the deletion of such an agreement from the registry of agreements on the investment of assets in foreign enterprises.

136
5. The Conduct of Business Activities in Foreign Countries Through Commercial Entities

Article 62

Organizations of associated labor may establish the following commercial

entities in foreign countries:

1) permanent representations and permanent trade mission offices;

2) temporary representations and temporary trade mission offices;

3) warehouses (consignment or wholly-owned), salesrooms, service centers,

and similar commercial entities.

As specified in items 1 and 3 of paragraph 1 of this article, a commercial

entity is defined as a permanent representation, a permanent trade mission

office, a warehouse, salesroom, service center, or other similar commercial

entity which an organization of associated labor establishes in a foreign

country for the purpose of conducting business activities in such a foreign

country over an extended period of time (hereafter: "permanent commercial

entity").

As specified in item 2, paragraph 1 of this article, a commercial entity

is defined as a temporary representation or a temporary trade mission office

which an organization of associated labor establishes in a foreign country

for the purpose of conducting a specific business transaction in such a

foreign country or for the purpose of conducting business transactions which

may not extend over a period longer than 1 year (hereafter: "temporary

commercial entity").

Article 63

An organization of associated labor may establish a permanent or temporary

commercial entity of its own accord or in association with other organizations of associated labor.

Article 64

Insofar as a permanent or temporary commercial entity is founded jointly by

several organizations of associated labor, such organizations of associated

labor qua founders of such a commercial entity enter into a self-management

accord which serves as an instrument for regulating their mutual relations,

the limits on their authority to act as business representatives or agents,

their rights and duties vis-a-vis such a commercial entity, the program and

nature of their business operations, cost payment procedures, and the closure

of such a commercial entity.

137
Article 65

The establishment of a permanent commercial entity is recorded in the registry of permanent commercial entities in foreign countries which is maintained

by the federal administrative organ responsible for foreign trade affairs.

An application for registration in the registry of permanent commercial

entities in foreign countries is filed by an organization of associated

labor with the federal administrative organ responsible for foreign trade

affairs through the competent official organ of a republic or autonomous

province.

An organization of associated labor is required to subjoin the following

documents to its application for registration:

1) the decision of the appropriate management organ on the establishment

of a permanent commercial entity in a given country, on the nature of its

business activities, on its business operations program, and on the limits

on the authority of workers possessing special authorizations and responsibilities in such a permanent commercial entity;

2) the opinion of the coordinating committee attached to the competent official organ of a republic or autonomous province as to the desirability of

establishing such a permanent commercial entity;

3) the attestation of the coordinating committee attached to the competent

official organ of a republic or autonomous province to the effect that workers possessing special authorizations and responsibilities and other professional workers which are assigned to positions in such a permanent commercial entity are in compliance with the conditions governing the performance

of their respective tasks and duties.

The documents specified in this article constitute official secrets.

Article 66

Upon receipt of the application and documents specified in article 65 of this

law, the federal administrative organ responsible for foreign trade affairs

will issue a ruling on the registration of a permanent commercial entity in

the registry of permanent commercial entities in foreign countries provided

that the Coordinating Committee attached to the Federal Executive Council

has rendered a judgment declaring that the establishment of a permanent commercial entity is desirable and in accordance with established policy on the

advancement of economic relations with foreign countries, the guidelines

and regulations enacted pursuant to the implementation of that policy, and

the security interests of the SFRJ.

138
The following entries are made in the registry of permanent commercial entities in foreign countries: the firm, name, and main office location of

the founder of a permanent commercial entity, the type of permanent commercial entity, and the location and country in which a permanent commercial

entity is to be established.

A permanent commercial entity may open for business in a foreign country

after it has been registered in the registry of permanent commercial entities

in foreign countries.

Article 67

A permanent commercial entity is required to file the ruling attesting to

its registration in the registry of permanent commercial entities in foreign

countries with a joint commercial representation of the Socialist Federal

Republic of Yugoslavia or, if such a joint commercial representation has not

been established in a given country, with the diplomatic or consular representation of the Socialist Federal Republic of Yugoslavia, doing so within

a period of 30 days after the date on which it opens for business.

As of the date on which the ruling specified in paragraph 1 of this article

is filed a permanent commercial entity becomes a member of a joint commercial

representation and as such is endowed with the rights and duties determined

by this law and by the uniform statues governing joint commercial representations .

Article 68

Insofar as any of the documents or facts specified in article 65 of this

law or any of the data recorded in the registry specified in article 66 of

this law may be subjected to future amendments, an organization of associated

labor, acting within a period of 30 days after the date on which such amendments become effective, is required to so notify the federal administrative

organ responsible for foreign trade affairs so that such amendments may be

recorded in the registry of permanent commercial entities in foreign countries.

Article 69

A permanent commercial entity is required to furnish the appropriate management organ of the parent organization with an annual report on its operations.

An organization of associated labor is required to forward an annual report

on the operations of permanent commercial entity to a joint commercial representation and to the coordinating committee attached to the competent official organ of a republic or autonomous province through the competent official organ of the republic or autonomous province within whose territorial

jurisdiction is located the main office of such an organization of associated

labor.

139
If after examining the annual report on the operations of a permanent commercial entity the coordinating committee attached to the competent official

organ of a republic or autonomous province determines that such a permanent

commercial entity is no longer in compliance with the conditions specified

in article 65, paragraph 2, item 2 and article 66 of this law, it will recommend to the federal administrative organ responsible for foreign trade affairs

that such a permanent commercial entity should be deleted from the registry

of permanent commercial entities in foreign countries.

The federal administrative organ responsible for foreign trade affairs issues

a ruling on the deletion of a permanent commercial entity from the registry

of permanent commercial entities in foreign countries provided that the Coordinating Committee attached to the Federal Executive Council has rendered

a judgment on the deletion of said permanent commercial entity.

Article 70

The decision to close a permanent commercial entity is made by an appropriate

management organ.

Acting within a period of 30 days after the date on which a permanent commercial entity is closed, an organization of associated labor is required

to so notify the federal administrative organ responsible for foreign trade

affairs so that said commercial entity may be deleted from the registry of

permanent commercial entities in foreign countries.

The federal administrative organ responsible for foreign trade affairs issues

a decree on the deletion of a permanent commercial entity from the registry

of permanent commercial entities in foreign countries.

Article 71

Enterprises founded in foreign countries may establish permanent commercial

entities.

Insofar as a permanent commercial entity is established by a wholly-owned

enterprise in a foreign country, an organization of associated labor qua

founder of a wholly-owned enterprise in a foreign country is required to

proceed to act in accordance with article 65 and articles 67 through 70 of

this law.

Insofar as a permanent commercial entity is established by a joint venture

enterprise founded in a foreign country, an organization of associated labor

qua founder of a joint venture enterprise in a foreign country is required

to notify the federal administrative organ responsible for foreign trade

affairs of the establishment of a permanent commercial entity so that it

may be recorded in the appropriate registry.

Article 72

Insofar as an organization of associated labor establishes a temporary commercial entity, it is required to so notify the federal administrative

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organ responsible for foreign trade affairs within a period of 30 days

after the date on which such an entity is established so that it may be

recorded in the appropriate registry.

As soon as it commences operations a temporary commercial entity is required

to register with a joint commercial representation of the Socialist Federal

Republic of Yugoslavia or, if such a joint commercial representation has not

been established in a given country, with the diplomatic or consular representation of the Socialist Federal Republic of Yugoslavia.

As of the date when it has completed registration as specified in paragraph

2 of this article a temporary commercial entity becomes a member of a joint

commercial representation and is endowed with the rights and duties determined

by this law and by the uniform statutes governing joint commercial representations.

Article 73

Principal banks authorized to conduct business transactions with foreign

countries and associated banks may establish the following commercial entities :

1) permanent representations and permanent trade mission offices;

2) temporary representations and temporary trade mission offices;

3) branch offices;

4) information centers;

A commercial entity as specified in items 1, 3, and 4 of paragraph 1 of this

article is defined as a permanent commercial representation, a permanent

trade mission office, a branch office, or an information center which is

established by any of the banks specified in paragraph 1 for the purpose of

conducting banking transactions as specified in article 35 of this law in

a foreign country over an extended period of time.

As specified in item 2, paragraph 1 of this law, a commercial entity is defined as a temporary commercial representation or a temporary trade mission

office which is established by any of the banks specified in paragraph 1 for

the purpose of conducting a specific banking transaction in a foreign country

or for the purpose of conducting banking transactions which may not extend

over a period longer than 1 year.

Article 74

Banks and other financial institutions founded in foreign countries may

establish commercial entities as specified in article 73, paragraph 1, items

1, 3, and 4 of this law.

lAl
Insofar as a commercial entity as specified in article 73, paragraph 1,

items 1, 3, and 4 of this law is established by a wholly-owned bank or

other financial institution founded in a foreign country, the domestic

parent institutions are required to proceed to act in accordance with

article 65, article 66, paragraph 3, and articles 67 through 70 of this

law.

Insofar as a commercial entity as specified in article 73, paragraph 1,

items 1, 3, and 4 of this law is established by a banking consortium or

other syndicated financial institution founded in a foreign country, the

domestic parent institutions are required to so notify the federal administrative organ responsible for foreign trade affairs of the establishment

of such a commercial entity so that it may be recorded in the appropriate

registry.

Article 75

Property and personal insurance companies and reinsurance companies may

establish the following commercial entities:

1) permanent commercial representations and permanent trade mission

offices;

2) temporary commercial representations and temporary trade mission

offices.

As specified in item 1, paragraph 1 of this article, a commercial entity

is defined as a permanent commercial representation or a permanent trade

mission office which is established by property and personal insurance

company or reinsurance company for the purpose of conducting transactions

over an extended period of time involving insurance and reinsurance in

foreign countries as specified in article 40 of this law.

As specified in item 2, paragraph 1 of this law, a commercial entity is

defined as a temporary commercial representation or a temporary trade mission office which is established by a property and personal insurance or

reinsurance company for the purpose of conducting a specific transaction

involving insurance and reinsurance in a foreign country or for the purpose

of conducting insurance and reinsurance transactions which may not extend

over a period longer than 1 year.

Article 76

Insurance and reinsurance organizations founded in foreign countries by

property and personal insurance companies and reinsurance companies may

establish commercial entities as specified in article 75, paragraph 1,

item 1 of this law.

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Insofar as a commercial entity as specified in article 75, paragraph 1,

item 1 of this law is established by a wholly-owned insurance or reinsurance

organization founded in a foreign country, a property and personal insurance

company or reinsurance company qua founder of a wholly-owned insurance or

reinsurance organization in a foreign country is required to proceed to act

in accordance with article 65, article 66, paragraph 3, and articles 67

through 70 of this law.

Insofar as a commercial entity as specified in article 75, paragraph 1,

item 1 of this law is established by a joint insurance or reinsurance organization founded in a foreign country, a property and personal insurance company or reinsurance company qua founder of a joint insurance or reinsurance

organization in a foreign country will so notify the federal administrative

organ responsible for foreign trade affairs of the establishment of such a

commercial entity so that it may be recorded in the appropriate registry.

Article 77

The establishment, operations, closure, and other status changes affecting

a commercial entity as specified in article 73, paragraph 1, items 1, 3, and

4 and article 75, paragraph 1, item 1 of this law are correspondingly governed

by the provisions contained in articles 63 through 70 of this law.

The establishment, operation, closure, and other status changes affecting

commercial entities as specified in article 73, paragraph 1, item 2 and

paragraph 75, paragraph 1, item 2 of this law are correspondingly governed

by the provisions contained in article 72 of this law.

6. The Establishment and Operation of Joint Commercial Representations in

Foreign Countries

Article 78

In order to promote cooperation and the coordination of mutual relations

among organizations of associated labor and other selfmanagement organizations and communities in the conduct of business activities in foreign countries joint commercial representations are founded in foreign countries

(hereafter: "joint commercial representation"), in accordance with the

provisions of this law and the laws of the countries in which they are

founded.

Business transactions which are conducted by a joint commercial representation are especially important in terms of the general public interest.

Article 79

A joint commercial representation is founded for one country or several

countries.

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The Economic Chamber of Yugoslavia, with the consent of the Federal Executive Council, is responsible for founding a joint commercial representation

and assigning it a name and location for its main office.

In accordance with established policy on the advancement of economic relations with foreign countries, the Economic Chamber of Yugoslavia, at the

request of the Federal Executive Council, will establish a joint commercial

representation for a specific country or for a broader geographic region or

it will work out a regional distribution of joint commercial representations.

Article 80

A joint commercial representation conducts specific transactions in foreign

countries on behalf of organizations of associated labor and other selfmanagement organizations and communities in accordance with the procedures

and conditions which are determined by the uniform statutes governing joint

commercial representations.

The statutes specified in paragraph 1 of this article are enacted by the

Assembly of the Economic Chamber of Yugoslavia, with the consent of the

Assembly of the SFRJ.

Article 81

Working within a joint commercial representation, organizations of associated

labor and other self-management organizations and communities which perform

business activities as specified in article 1 of this law in a country where

a joint commercial representation has been established mutually coordinate

their respective interests within the framework of international economic

cooperation as well as with the economic policies provided for in the social

plan of Yugoslavia.

Organizations of associated labor and other self-management organizations

and communities may delegate the responsibility for the conduct of business

transactions on their behalf and at their expense to the institutional structures engaged in business activities in foreign countries as specified in

articles 85 through 91 of this law.

Responsibility for the business transactions specified in paragraph 2 of

this article is assigned through a joint commercial representation, and

such transaction are conducted in accordance with the procedures and conditions determined by the uniform statutes governing joint commercial representations.

Article 82

In performing its tasks and duties a joint commercial representation is

required to abide by the directives which are enacted by the Federal Executive

Council and its organs within the limits of their respective jurisdictions

and by the Economic Chamber of Yugoslavia, in accordance with the procedures

and conditions determined by the uniform statutes governing joint commercial

representations.
Article 83

The means by which the operating costs of a joint commercial representation

are to be paid are regulated by the uniform statutes governing joint commercial representations and by a self-management accord between organizations

of associated labor and other self-management organizations and communities

which are engaged in business activities in foreign countries.

The self-management accords specified in paragraph 1 of this article must

be compatible with the uniform statutes governing joint commercial representations.

The operating costs of joint commercial representations may be paid for with

funds designated for the advancement of foreign trade activities, in accordance with the existing agreement between the Federal Executive Council and

the Economic Chamber of Yugoslavia.

Article 84

A joint commercial representation performs the following tasks in particular:

1) it promotes commerce in the country in which it has been established;

2) it endeavors to implement decisions calling for united action;

3) it monitors economic trends in the country in which it has been established and keeps organizations of associated labor, economic chambers, and

other appropriate organs informed about issues in the field of economic relations;

4) it coordinates individual, common, and general economic interests so as

to promote the organized exportation and importation of goods and services;

5) it engages in market research and monitors legislative activities in the

country in which it has been established;

6) it encourages and promotes long-term industrial collaboration, commercial

and technical cooperation, joint investments of capital, and exchanges of

scientific, technical, and technological know-how with foreign countries;

7) pursuant to this law, it provides assistance in the conduct of business

activities in the country in which it has been established;

8) it monitors the operations and performance of business ventures in foreign

countries;

9) it keeps a record of concluded business transactions.

1^5
A joint commercial representation may, on the authorization of the Federal

Executive Council, perform other specific tasks in foreign countries when

commissioned to do so by the Council.

Article 85

Organizations of associated labor and other self-management organizations

and communities are required to incorporate the institutional structures

engaged in business activities in foreign countries as specified in article

11, paragraph 1, item 1, article 38, paragraph 1, item 1, article 43, paragraph 1, item 1, article 62, paragraph 1, article 71, paragraph 2, article

73, paragraph 1, article 74, paragraph 2, article 75, paragraph 1, and article

76, paragraph 2 of this law into a joint commercial representation and to

conduct their various transactions in accordance with the uniform statutes

governing joint commercial representations.

Article 86

The official organs of a joint commercial representation are the conference,

the secretariat, and the director.

The conference is made up of representatives of the organizational structures

engaged in business activities in foreign countries as specified in article

85 of this law, and the proceedings of the conference are also attended by

an authorized representative of the diplomatic or consular representation of

the Socialist Federal Republic of Yugoslavia accredited to the country in

which a joint commercial representation has been established.

Organizations of associated labor and other self-management organizations and

communities involved in the conduct of business activities in the country in

which a joint commercial representation has been established as well as representatives of the institutional structures engaged in business activities as

specified in article 91 of this law may also take part in the work of the

conference, in accordance with the uniform statutes governing joint commercial

representations.

The secretariat is made up of from 3 to 5 representatives of the members of

the joint commercial representation who are elected by the conference and

the director.

The director is appointed by the Assembly of the Economic Chamber of Yugoslavia or by an organ authorized by it with the consent of the Federal Executive Council. In appointing the director of a joint commercial representation care will be taken to see to it that all republics and autonomous provinces are fairly represented.

In smaller joint commercial representations the duties of the secretariat

may be performed by the director, in accordance with the uniform statutes

.governing joint commercial representations.

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Article 87

The conference of a joint commercial representation:

1) ratifies the operational plan and activities program of a joint commercial representation;

2) deliberates on matters related to and prospects for economic cooperation

with the country in which a joint commercial representation has been established;

3) deliberates on and accepts reports on the work of a joint commercial

representation and together with its recommendations on measures designed

to promote economic cooperation forwards such reports to the Federal Executive

Council and the Economic Chamber of Yugoslavia;

4) and performs other tasks sanctioned by the uniform statutes governing

joint commercial representations.

Article 88

The secretariat of a joint commercial representation:

1) does advance work in preparation for conference meetings;

2) keeps a record of the business transactions specified in article 92 of

this law;

3) monitors and sees to the implementation of conference decisions;

4) prepares recommendations for the advancement of economic cooperation and

advises the Economic Chamber of Yugoslavia of violations of the uniform

statutes governing joint commercial representations or the work duties of

workers employed in any of the institutional structures engaged in business

activities as specified in article 85 of this law;

5) and performs other tasks as authorized by the conference.

The data entered into the records specified in item 2, paragraph 1 of this

article constitute official secrets and may be used solely for the purpose

of reaching a mutual agreement and coordinating business activities in accordance with article 92 of this law.

Article 89

The director of a joint commercial representation:

1) organizes and coordinates the work of a joint commercial representation

in accordance with the uniform statutes governing joint commercial representations and the decisions of the conference;

1^7
2) endeavors to implement the decisions of the conference;

3) endeavors to see to it that a joint commercial representation functions

in a manner that is compatible with established policy on the advancement

of economic relations with the host country, and the directives and regulations enacted pursuant to the implementation of that policy;

4) endeavors to implement social compacts, self-management accords, and

other appropriate rulings of official organs as well as the resolutions of

the sections and other organizational structures in the Economic Chamber of

Yugoslavia concerned with economic relations with foreign countries;

5) endeavors to make sure of the legality of activities pursued by the institutional structures engaged in business activities as specified in article

85 of this law;

6) and performs other tasks sanctioned by the uniform statutes governing

joint commercial representations.

The director of a joint commercial representation is responsible for seeing

to it that the business transactions of a joint commercial representation

are conducted in accordance with the law and the uniform statutes governing

joint commercial representations.

Article 90

The representatives of the Economic Chamber of Yugoslavia in a joint commercial representation are accountable for their actions to the Economic Chamber

of Yugoslavia.

The representatives of institutional structures engaged in business activites

as specified in articles 85 and 91 of this law are accountable for their

actions to the organization of associated labor or other self-management organization or community which assigned them to their positions in a foreign

country.

Article 91

Organizations of associated labor and other self-management organizations

and communities are required to register the institutional structures engaged

in business activities in foreign countries as specified in article 1 of this

law, in addition to the institutional structures referred to in article 85

of this law, with a joint commercial representation and to see to it that

such activities are conducted in accordance with the uniform statutes governing joint commercial representations.

Article 92

Representatives of organizations of associated labor and other self-management organizations and communities who are temporarily in a foreign country

in connection with certain business transactions are required to notify the
joint commercial representation accredited to a given country of their activities, preliminary and preparatory dealings which are related to completed

transactions, and completed transactions in connection with which it was

necessary to reach a mutual agreement and agree upon the mutual coordination

of business activities.

Artocle 93

Organizations of associated labor and other self-management organizations

and communities which are engaged in business activities in a country where

a joint commercial representation has not been established are required to

report such activities to the diplomatic or consular representation of the

Socialist Federal Republic of Yugoslavia accredited to said country and to

conduct such activities in accordance with the uniform statutes governing

joint commercial representations.

Article 94

The uniform statutes governing joint commercial representations regulates

the general working conditions and other matters of importance to the work

of a joint commercial representation.

Article 95

The legality of the activities carried on by joint commercial representations

in foreign countries and by the institutional structures engaged in business

activities pursuant to this law is subject to the general supervision of the

Federal Executive Council acting through the first officer of the diplomatic

representation of the Socialist Federal Republic of Yugoslavia in the country where a joint commercial representation has been established and of the

Economic Chamber of Yugoslavia within the limits of its various jurisdictions,

in accordance with the uniform statutes governing joint commercial representations.

The Federal Executive Council may authorize the Coordinating Committee attached to the Federal Executive Council to supervise the legality of the

activities carried on by joint commercial representations and the institutional

structures engaged in business activities pursuant to this law.

Article 96

Joint commercial representations are required to conduct their business

transactions in a manner that is compatible with established policy on economic relations with foreign countries, the laws and other general rulings

which regulate such relations, and the resolutions of the sections and other

competent bodies of the Economic Chamber of Yugoslavia which apply to business transactions which countries in which joint commercial representations

have been established.

1^9
7. The Delegation of Responsibility for the Conduct of Business Activities

to Foreign Firms and the Conduct of Other Types of Business Activities in

Foreign Countries

Article 97

An organization of associated labor may commission a foreign firm to act as

its agent, to sell goods from a consignment warehouse, and to perform product

servicing work solely on the basis of an agreement concluded in writing.

Before entering into an agreement as specified in paragraph 1 of this article

an organization of associated labor is required to obtain a report from the

Economic Chamber of Yugoslavia on the credit rating of the foreign firm in

question.

An organization of associated labor may not enter into an agreement as specified in paragraph 1 of this article insofar as the report on the credit

rating of the foreign firm in question indicates that there are unwarranted

risks involved in doing business with such a firm.

Article 98

An organization of associated labor is required to file the agreements specified in article 97 of this law with the Economic Chamber of Yugoslavia so

that they may be recorded in the appropriate registry, doing so within a

period of 30 days after the date on which such agreements are concluded.

The data comprised in an agreement as specified in paragraph 1 of this article

constitute official secrets.

Article 99

The delegation of responsibility for the conduct of business transactions

related to the insurance of property, goods, and persons thorugh foreign

insurance companies is correspondingly governed by the provisions contained

in articles 97 and 98 of this law.

Article 100

Organizations of associated labor specializing in work on capital construction projects in foreign countries may for purposes related to the completion of such capital construction projects establish plants, building sites,

and other labor entities (hereafter: "labor entity") in foreign countries

insofar as, pursuant to an agreement concluded with a foreign contracting

party on the completion of capital construction projects in a foreign country,

the national bank of the republic or the national bank of the autonomous

province within whose territorial jurisdiction is located the main office

of such an organization of associated labor has accepted the report on the

concluded agreement.

150
Insofar as several organizations of associated labor jointly establish a

labor entity, they enter into a self-management accord which serves as an

instrument for regulating their mutual relations in connection with the

establishment and operation of such a labor entity.

Article 101

Before they establish a labor entity organizations of associated labor are

required to file a report with the federal administrative organ responsible

for foreign trade affairs so that said entity may be recorded in the registry of labor entities in foreign countries.

In addition to the report specified in paragraph 1 of this article, organizations of associated labor are also required to file:

1) the decision of the appropriate management organ on the establishment

of a labor entity;

2) the attestation of the coordinating committee attached to the competent

official organ of a republic or autonomous province ot the effect that workers

possessing special authorizations and responsibilities and other professional

workers who are assigned to positions in a labor entity in a foreign country

for an extended period of time are in compliance with the conditions governing iithe performance of such tasks and duties;

3) the opinion of the Economic Chamber of Yugoslavia as to the desirability

of establishing such a labor entity;

4) proof of the fact that the national bank of the republic or the national

bank of the autonomous province, within whose territorial jurisdiction is

located the main office of an organization of associated labor, has accepted

the report on the agreement concluded with a foreign contracting party.

Insofar as several organizations of associated labor jointly establish a

labor entity in a foreign country, such organizations of associated labor

qua founders of such an entity are required, in addition to the documents

specified in paragraph 2 of this article, to file a self-management accord

as specified in article 100, paragraph 2 of this law.

The following entries are made in the registry specified in paragraph 1 of

this article: the firm, name, and main office location of the organization

of associated labor which is establishing a labor entity and the country and

location where such a labor entity is to be established.

The federal administrative organ responsible for foreign trade affairs issue

a decree on the registration of labor entities in the regustry of labor entities in foreign countries.

151
The documents specified in this article constitute official secrets.

Article 102

Insofar as any of the documents or facts or any of the data entered into the

registry specified in article 101 of this law are subjected to future amendments, an organization of associated labor is required, acting within a

period of 30 days after the date on which such amendments become effective,

to so notify the federal administrative organ responsible for foreign trade

affairs so that said amendments may be recorded in the registry of labor

entities in foreign countries.

Article 103

Organization of associated labor are required to notify the Economic Chamber

of Yugoslavia and the federal administrative organ responsible for foreign

trade affairs of the closure of a labor entity in a foreign country within

a period of 30 days after the date on which such an entity is closed so that

it may be deleted from the registry of labor entities in foreign countries.

At the request of an organization of associated labor as specified in paragraph 1 of this article the federal administrative organ responsible for

foreign trade affairs may, after having previously obtained the opinion of

the Economic Chamber of Yugoslavia and having ascertained that opportunities

exist for undertaking new projects in a foreign country and in other justified circumstances, postpone the deletion of a labor entity from the registry

of labor entities in foreign countries for a specified period of time.

8. Miscellaneous Provisions

Article 104

Organizations of associated labor and other self-management organizations

and communities which are engaged in business activities in foreign countries, pursuant to this law, are required to keep separate accounting records

for such activities in accordance with the laws on accountancy.

Organizations of associated labor as specified in paragraph 1 of this article

are required to furnish the authorized social accountancy service with one

copy each of rulings on the foundings, registration, or change of status of

an enterprise, bank or other financial institution, insurance or reinsurance

organization, commercial entity, or labor entity founded in a foreign country,

in addition to copies of rulings on the investment of assets in foreign

enterprises, doing so within a period of 30 days after the date on which

such rulings are served.

Article 105

Organizations of associated labor and other self-management organizations and

communities which are engaged in business activities in foreign countries

152
pursuant to this law are required to submit annual reports on the conduct of

such activities to the national bank of the republic or to the national bank

of the autonomous province within whose territorial jurisdiction is located

the main office of such an organization of associated labor or other selfmanagement organization or community.

The national banks of republics and the national banks of autonomous provinces

are required to furnish the National Bank of Yugoslavia with summarized annual

reports on the conduct of the business activities specified in paragraph 1 of

this article.

The federal secretary for finance, acting in accord with the federal secretary for foreign trade, will direct what kinds of data must be comprised in

the reports specified in paragraph 1 of this article and set the time limits

within which such reports must be filed.

Article 106

The Federal Executive Council, with the consent of the appropriate republic

and provincial official organs, enacts detailed regulations where necessary

on the founding of enterprises in foreign countries in association with foreign legal or physical persons pursuant to article 10 of this law, on the

disposition of profits as specified in article 24 of this law, on the conditions under which organizations of associated labor qua founders of a business

enterprise may compensate for the losses incurred by an enterprise founded

in a foreign country (article 34), on the founding of banks or other financial institutions in foreign countries in association with foreign legal or

physical persons pursuant to article 38 of this law, on the founding of insurance or reinsurance organizations in foreign countries in association with

foreign legal or physical persons pursuant to article 43 of this law, and on

the investment of assets in foreign enterprises in association with foreign

legal or physical persons pursuant to article 46, item 1 of this law.

Article 107

Organizations of associated labor and other self-management organizations and

communities which file an application requesting permission to engage in business activities in a foreign country pursuant to this law may propose that

such an application together with accompanying documents be designated state

secrets.

A final decision on the proposal specified in paragraph 1 of this article is

made by the federal administrative organ responsible for foreign trade affairs

after having previously obtained the opinion of the competent official organ

in a republic or autonomous province.

Article 108

The provisions of the Law on Trade in Goods and Services With Foreign Countries having to do with adherence to honorable standards in the conduct of

foreign trade transactions will also apply correspondingly to organizations

153
of associated labor and other self-management organizations and communities

in connection with the conduct of business activities in foreign countries

pursuant to this law.

The provisions of the Law on Measures Aimed at Combatting Unfair Competition

and Monopolistic Accords will also apply correspondingly to organizations of

associated labor and other self-management organizations and communities in

connection with the conduct of business activities in foreign countries pursuant to this law.

Article 109

Insofar as an organization of associated labor may be convicted of an economic offense as specified in article 94, paragraph 1, item 10 of the Law

on Trade in Goods and Services With Foreign Countries, in article 24, paragraph 1 of the Law on Measures Aimed at Combating Unfair Competition and

Monopolistic Accords, or in articles 110 and 111 of this law or insofar as

any sanction is imposed against it by the Court of Ethics attached to the

Economic Chamber of Yugoslavia in connection with the operations of any of

its enterprises or commercial entities located in foreign countries in relation to Yugoslav organizations of associated labor, banks, property and

personal insurance companies and reinsurance companies and their enterprises,

banks and other financial institutions, insurance and reinsurance organizations,

and commercial entities in foreign countries, the federal administrative

organ responsible for foreign trade affairs may penalize such an organization of associated labor by imposing against it one or more of the sanctions

specified in article 80 of the Law on Trade in Goods and Services With Foreign Countries, which sanction or sanctions it must in turn apply to its

own enterprise located in a foreign country to the extent that such action

is provided for by a ruling of the federal administrative organ responsible

for foreign trade affairs or it may issue a ruling revoking the authorization

granted on the basis of article 17 of this law or on the basis of a ruling

issued pursuant to article 65 of this law and delete said enterprise from

the registry of enterprises in foreign countries or a permanent commercial

entity from the registry of permanent commercial entities in foreign countries.

The provisions of paragraph 1 of this article will also apply correspondingly

to other self-management organizations and communities in connection with

the operations of their banks or other financial institutions, insurance

and reinsurance organizations, and commercial entities in foreign countries

in relations to Yugoslav organizations of associated labor or other selfmanagement organizations and communities.

Penalty Provisions

1. Economic Offenses

15^
Article 110

An organization of associated labor or other self-management organization or

community will be assessed a monetary fine of from 100,000 to 1,000,000 dinars

for an economic offense:

1) if it uses assets other than the assets specified in article 12 of this

law in order to found an enterprise in a foreign country or in order to invest

additional capital in such an enterprise;

2) if it founds an enterprise, bank or other financial institution, or insurance organization in a foreign country without authorization or if it

undertakes to invest additional capital in a foreign country without authorization (articles 14, 19, 39, and 44);

3) if an enterprise it has founded in a foreign country founds a new enterprise in a foreign country contrary to the provision contained in article 20

of this law;

4) if it buys out the founder's equity interest in an enterprise in a foreign

country contrary to the provision contained in article 21 of this law;

5) if it fails to place its stock certificates issued as shares invested

assets on deposit with a banking institution (article 22, paragraph 2, item

2) or if founder's rights are not safeguarded in connection with the disposition of assets invested in the country of investment (article 22, paragraph

2, item 3);

6) if the profits earned by an enterprise, bank or other financial institution, insurance or reinsurance organization in a foreign country are used in

a manner contrary to the provisions of article 24 of this law (articles 39

and 44);

7) if the profits which are earned by an enterprise, bank or other financial

institution, insurance or reinsurance organization in a foreign country are

not transferred to Yugoslavia within the prescribed period of time (articles

25, 39, and 44);

8) if proceedings are not initiated for the liquidation of a wholly-owned

enterprise, bank or other financial institution, insurance or reinsurance

organization-founded in a foreign country or if the assets which have accrued

to it at the conclusion of liquidation or bankruptcy proceedings are not disposed of in accordance with the provisions of article 26, paragraphs 4 and 5

of this law (article 39 and 44);

9) if in the event of the closure or bankruptcy of a joint venture enterprise, consortium of banks or other syndicated financial institutions, joint

insurance or reinsurance organizations founded in a foreign country the assets

which have accrued to it at the conclusion of such liquidation or bankruptcy

155
proceedings are not disposed of in accordance with the provision contained

m artxcle 26, paragraph 6 of this law (article 39 and 44);

10) if in the event of the reduction of assets or withdrawal of invested

assets from an enterprise, bank or other financial institution, insurance

or reinsurance organization founded in a foreign country outstanding financial and material accounts are not settled and assets which have accured to

it on the basis of such a partial or final settlement of accounts are not

disposed of in accordance with the provision of article 27 of this law.

11) if assets other than the assets provided for by article 39 of this law

are used to found a bank or other financial institution in a foreign country

or to invest additional capital in such institutions;

12) if assets other than the assets provided for by article 44 of this law

are used to found an insurance or reinsurance organization in a foreign country or to invest additional capital in such organizations;

13) if assets other than the assets specified in article 49 of this law are

used to invest assets or to invest additional assets in a foreign enterprise;

14) if assets are invested or additional assets are invested in a foreign

enterprise without prior authorization as specified in article 53 of this

15) if profits which are earned as a result of a joint business venture with

a foreign enterprise are used in a manner contrary to the provisions of

article 57 of this law;

16) if invested assets or the remainder of invested assets which have accrued

to it aftera settlement of outstanding financial and material accounts held

jointly with a foreign enterprise is reached are not transferred to Yugoslavia

within the prescribed period of time (article 60);

17) ifa permanent commercial entity in a foreign country opens for business

before it is registered (article 66, paragraph 3);

18) if in the event of the closure of a permanent commercial entity located

in a foreign country it fails to act in accordance with the provision contained m article 70, paragraph 2 of this law;

19l.i

!.lt fa"

S t0 ±ncorP°rate institutional structure engaged in business

activities in foreign countries into a joint commercial representation and if

it tails to conduct business transactions in accordance with the uniform

statutes governing joint commercial representations (article 85);

2

°^. 1!.±t fall

S t0 re8±ster institutional structures engaged in business

activities m foreign countries with a joint commercial representation and

if it fails to perform such activities in accordance with the uniform statutes

governing joint commercial representations (article 91);

156
21) if it fails to report business activities in a foreign country to the

diplomatic or consular representation of the Socialist Federal Republic of

Yugoslavia accredited to the country in question in accordance with article

93 of this law;

22) if it fails to keep separate accounting records in accordance with

article 104, paragraph 1 of this law;

23) if it fails to submit an annual report in accordance with article 105,

paragraph 1 of this law;

24) if it fails to abide by regulations enacted pursuant to article 106 of

this law;

25) if it fails to act in accordance with article 121 of this law;

26) if it fails to act in accordance with article 122 of this law.

Any person in an organization of associated labor or other self-management

organization or community who is found to be responsible for any of the

actions specified under paragraph 1 of this article will be assessed a monetary fine of from 5,000 to 30,000 dinars.

Article 111

An organization of associated labor or other self-management organization or

community will be assessed a monetary fine of from 20,000 to 500,000 dinars

for an economic offense:

1) if it fails to file an application for the registration of an enterprise

founded in a foreign country in the registry of enterprises in foreign countries or if it fails to notify the federal administrative organ responsible

for foreign trade affairs of amendments made in documents of record or of

changes in relevant fact situations (article 22, paragraph 1 and article 23);

2) if it disposes of the stock certificates specified in article 22-, paragraph

5 of this law in a manner that is contrary to the authorization granted by

the national bank of a republic or the national bank of an autonomous province;

3) if it fails to serve notice of a decision to close out a wholly-owned

enterprise, bank or other financial institution, insurance or reinsurance

organization located in a foreign country in accordance with article 26,

paragraph 3 of this law;

4) if it fails to submit a financial statement, record of settlement, or

record of the final settlement of outstanding financial and material accounts

and if it fails to so notify the federal administrative organ responsible

for foreign trade affairs in accordance with article 28 of this law;

157
5) if it fails to file an application for the registration of an agreement

on the investment of assets in a foreign enterprise in the registry of agreements on the investment of assets in foreign enterprises or if it fails to

notify the federal administrative organ responsible for foreign trade affairs

of amendments made in documents of record or of changes in relevant fact

situations (article 55, paragraph 1 and article 56).

6) if it allows a commercial entity which has been established by a whollyowned enterprise, bank or other financial institution, insurance or reinsurance

organization located in a foreign country to open for business prior to its

registration in the registry specified in article 65 of this law;

7) if it fails to notify the federal administrative organ responsible for

foreign trade affairs of amendments made in the documents of record or of

changes in the relevant fact situations specified in article 68 of this law;

8) if it fails to file an application for registration in the registry of

labor entities in foreign countries (article 101);

9) if it fails to abide by regulations enacted pursuant to article 105,

paragraph 3 of this law.

Any person in an organization of associated labor or other self-management

organization or community who is found to be responsible for any of the actions

specified under paragraph 1 of this article will be assessed a monetary fine

of from 1,500 to 20,000 dinars.

2. Misdemeanors

Article 112

An organization of associated labor or other self-management organization or

community will be assessed a monetary fine of from 5,000 to 100,000 dinars

for a misdemeanor;

1) if it fails to act in accordance with article 69, paragraph 2 of this law;

2) if it fails to notify the federal administrative organ responsible for

foreign trade affairs of the establishment of a commercial entity as specified

in article 71, paragraph 3, article 74, paragraph 3, and article 76, paragraph 3 of this law;

3) if it fails to act in accordance with article 92 of this law;

4) if it fails to advise the Economic Chamber of Yugoslavia that it has

entered in an agreement under the terms of which it delegates responsibility

for the conduct of business activities in foreign countries to foreign firms

(article 98, paragraph 1);

5) if it fails to notify the federal administrative organ responsible for

foreign trade affairs of amendments made in documents of record or of changes

in relevant fact situations (article 102);

158
6) if it fails to notify the Economic Chamber of Yugoslavia and the federal

administrative organ responsible for foreign trade affairs of the closure of

a labor entity (article 103);

7) if it fails to serve notice of a ruling in accordance with article 104,

paragraph 2 of this law.

Any person in an organization of associated labor or other selfmanagement

organization or community who is found to be responsible for any of the

actions specified under paragraph 1 of this article will be assessed a monetary fine of from 500 to 15,000 dinars.

Article 113

In addition to or apart from a monetary fine, any person in an organization

of associated labor or other self-management organization or community who

is found guilty of a misdemeanor as specified in article 112 of this law may

be declared subject to a penalty of a preventive sanction banning said person

for a period of from 6 months to 1 year from conducting business transactions

which require special authorizations and responsibilities or from performing

other professional duties related to the conduct of business activities in

foreign countries.

The term of the sanction imposed in accordance with paragraph 1 of this

article starts running as of the date on which the ruling on the commission

of a misdemeanor becomes legally valid.

Article 114

Misdemeanor court proceedings dealing with the misdemeanors specified under

this law are conducted in the first instance by the Federal Foreign Exchange

Inspectorate.

An appeal against a ruling of the Federal Foreign Exchange Inspectorate is

heard by the Federal Secretariat for Finance.

3. Legal Consequences of Adjudication

Article 115

Any person who is found guilty and convicted of an economic offense as specified in article 110, paragraph 1, items 1, 2, 3, 4, 5, 6, 8, 9, 10, 11, 12,

13, 14, 15, 16, 20, 25, and 26 of this law may not conduct business transactions which require special authorizations and responsibilities nor perform

other professional duties related to the conduct of business activities in a

foreign country and the conduct of foreign trade transactions in Yugoslavia.

159
The ban specified in paragraph 1 of this article may be imposed for a period

of up to 3 years.

Any person who is found guilty and convicted of an economic offense as specified in article 110, paragraph 1, items 7, 17, 18, 21, 22, and 23 and in

article 111, paragraph 1, items 1, 2, 5, 6, 7, and 9 of this law may not

conduct business transactions which require special authorizations and responsibilities nor perform other professional duties related to the conduct

of business activities in foreign countries or the conduct of foreign trade

transactions in Yugoslavia for a period of 1 year after the date on which

such a verdict becomes legally valid.

Trasitional and Concluding Provisions

Article 116

Organizations of associated labor which have founded an enterprise in a

foreign country and organizations of associated labor whose enterprise in a

foreign country has founded another enterprise in a foreign country, banks

authorized to conduct business transactions with foreign countries which have

founded a bank in a foreign country, and property and personal insurance companies which have founded an insurance association in a foreign country, all

of which are registered in the registry of enterprises in foreign countries

as of the date on which this law goes into effect, are required, acting within

a period of 1 year after the date on which this law goes into effect and through

the competent official organ of a republic or autonomous province, to notify

the federal administrative organ responsible for foreign trade affairs as to

whether the enterprises, banks, and insurance associations founded in foreign

countries will continue to operate and to subjoin to such notification the

documentary proof required pursuant to the provisions of articles 2, 5, and

16 of this law, a record of the decision to continue to operate an enterprise,

bank, or insurance association founded in a foreign country as rendered by an

appropriate management organ in accordance with article 15, paragraph 2, item

1, and the documents specified in article 15, paragraph 2, items 6 and 7 of

this law.

The provision contained in paragraph 1 of this article also applies to organizations of associated labor, banks authorized to conduct business transactions

with foreign countries, and property and personal insurance companies which

have founded joint venture enterprises, banking consortiums, or joint insurance associations in foreign countries and to organizations of associated

labor, banks authorized to conduct business transactions, and property and

personal insurance companies whose enterprises, banks, or insurance associations in foreign countries have founded other joint venture enterprises,

banking consortiums, or joint insurance associations, all of which are required,

in addition to the document specified in paragraph 1 of this article, to subjoin to such notification the documents specified in article 15, paragraph 3

of this law.

160
The federal administrative organ responsible for foreign trade affairs, after

having previously obtained the opinion of the official organ specified in

article 14 of this law, will grant authorization for the continued operation

of an enterprise, bank, or insurance association founded in a foreign country insofar as the conditions specified in article 17, paragraph 1 of this

law have been complied with.

Insofar as an organization of associated labor, a bank authorized to conduct

business transactions with foreign countries, or a property and personal insurance company fails to act in accordance with the provisions of paragraphs

1 and 2 of this article, an enterprise, bank, or insurance association founded

by them in a foreign country will be deleted from the registry of enterprises

in foreign countries on the authority of a decree issued by the federal administrative organ responsible for foreign trade affairs.

Insofar as an enterprise, bank, or insurance association founded in a foreign

country may be deleted from the registry of enterprises in foreign countries,

organizations of associated labor, banks authorized to conduct business transactions with foreign countries, and property and personal insurance companies

are required to act in accordance with article 26, paragraph 4 and articles

28 through 30 of this law.

Article 117

Organizations of associated labor, banks authorized to conduct business transactions with foreign countries, and property and personal insurance companies

which have founded commercial entities in foreign countries and which as of

the date on which this law goes into effect are registered in the registry of

commercial entities in foreign countries are required, acting within a period

of 1 year after the date on which this law goes into effect and through the

competent organ of a republic or autonomous province, to notify the federal

administrative organ responsible for foreign trade affairs as to whether a

commercial entity established in a foreign country will continue to operate

and to subjoin to such notification the documentary proof specified in articles

2 and 5 and in article 65, paragraph 3 of this law.

The federal administrative organ responsible for foreign trade affairs will

issue a ruling on the registration of a commercial entity in the registry

of commercial entities in foreign countries and on the continued operation

of a commercial entity established in a foreign country insofar as the

conditions specified in article 66 of this law are complied with.

Insofar as organizations of associated labor, banks authorized to conduct

business transactions with foreign countries, and property and personal insurance companies fail to act in accordance with the provision contained in

paragraph 1 of this article, a commercial entity established in a foreign

country will be deleted from the registry of commercial entities in foreign

countries on the authority of a ruling issued by the federal administrative

organ responsible for foreign trade affairs.

161
Article 118

Organizations of associated labor, banks authorized to conduct business

transactions with foreign countries, and property and personal insurance

companies whose wholly-owned enterprises, wholly-owned banks, or whollyowned insurance associations founded in foreign countries have established

commercial entities as of the date on which this law goes into effect are

required, acting within a period of 1 year after the date on which this law

goes into effect, to notify the federal administrative organ responsible

for foreign trade affairs as to whether such commercial entities established

in foreign countries will continue to operate and to subjoin to such notification the documentary proof specified in article 65, paragraph 3 of this

law.

The federal administrative organ responsible for foreign trade affairs will

issue a ruling on the registration of a commercial entity in the registry of

commercial entities in foreign countries and on the continued operation of a

commercial entity established in a foreign country insofar as the conditions

specified in article 66 of this law are complied with.

Article 119

Organizations of associated labor, banks authorized to conduct business

transactions with foreign countries, and property and personal insurance

companies whose joint venture enterprises, banking consortiums, or joint

insurance associations founded in a foreign country have established commercial entities in a foreign country are required, acting within a period of

1 year after the date on which this law goes into effect, to notify the

federal administrative organ responsible for foreign trade affairs of the

commercial entities which they have established in foreign countries so that

they may be duly recorded in the appropriate registry.

Article 120

Organizations of associated labor which as of the date on which this law

goes into effect have established labor entities in foreign countries (plants,

building sites, and so on) are required, acting within a period of 6 months

after the date on which this law goes into effect, to notify the federal

administrative organ responsible for foreign trade affairs as to whether

such a labor entity will continue to operate and to subjoin to such notification the documentary proof specified in article 101 of this law.

The federal administrative organ responsible for foreign trade affairs will

issue a ruling on the registration in the registry of labor entities in foreign countries and on the continued operation of such a labor entity insofar

as the conditions specified in article 101 of this law are complied with.

162
Article 121

Insofar as the federal administrative organ responsible for foreign trade

affairs determines that organizations of associated labor, banks authorized

to conduct business transactions with foreign countries, or property and

personal insurance companies have founded an enterprise, bank, insurance association, or commercial entity in a foreign country which is not registered in

the registry of enterprises in foreign countries or in the registry of permanent commercial entities in foreign countries, it will issue a ruling by means

of which it will order the closure of such an enterprise, bank, insurance

association, or commercial entity in a foreign country.

In the event that the circumstances specified in paragraph 1 of this article

obtain, organizations of associated labor and other self-management organizations and communities are required to initiate liquidation proceedings and

to transfer to Yugoslavia in cash or in kind all of the assets which have

accrued to them at the conclusion of such proceedings, doing so within a

period of 30 days after the date on which such proceedings are concluded.

Article 122

Banks authorized to conduct business transactions with foreign countries which,

pursuant to article 2 of the Law on the Founding of Enterprises in Foreign

Countries (SLUZBENI LIST SFRJ No 39/72 and No 13/73), have founded an enterprise in a foreign country are required, acting within a period of 1 year after

the date on which this law goes into effect, to initiate proceedings for the

liquidation of an enterprise founded in a foreign country and to transfer to

Yugoslavia in cash or in kind all assets which have accrued to them at the

conclusion of such proceedings, doing so within a period of 30 days after the

date on which such proceedings are concluded.

Banks authorized to conduct business transactions with foreign countries which,

pursuant to article 2 of the Law on the Founding of Enterprises in Foreign

Countries, have collaborated with organizations of associated labor or foreign

legal or physical persons in the founding of enterprises in foreign countries

are required, acting within a period of 1 year after the date on which this

law goes into effect, to reach a final settlement to close outstanding commercial accounts with an enterprise in a foreign country and to transfer to

Yugoslavia in cash or in kind all assets which have accrued to them on the

basis of such a final settlement of accounts, doing so within a period of

90 days after the date on which such a final settlement is reached.

Article 123

The Law on the Founding of Enterprises in Foreign Countries (SLUZBENI LIST

SFRJ Nos 39/72 and 13/73) and the Decree on the Establishment and Operation

of Commercial Entities and Other Business Institutions in Foreign Countries

(SLUZBENI LIST SFRJ No 9/73) will be rendered null and void as of the date on

which this law goes into effect.

Article 124

This law goes into effect on the eighth day after the date of its publication

in SLUZBENI LIST SFRJ.

11813 l63

CSO: 2800
YUGOSLAVIA

INTERACTION OF BUSINESS EFFICIENCY, PRODUCTIVITY AND EMPLOYMENT SURVEYED

Belgrade EKONOMSKA POLITIKA in Serbo-Croatian 1 May 77 pp 23-24

[Unsigned article: "Economic Development: Efficiency and New Jobs"]

[Text] In the period between 1965 and 1970 the social product rose 32 percent, while employment in the economy rose only 4 percent; over the next 5

years (up to 1975) the social product rose 33 percent, but the accompanying

growth of the labor force in the economy was all of 19 percent. Last year

marks the continuation of the relations from the previous 5-year period--

the social product increased 4 percent in real terms, and that was approximately the size of the growth of employment in the economy of the socialized sector as well. The growth of the social product in the period between 1965 and 1970 was derived almost exclusively from higher labor productivity; in the following 5-year period more than 60 percent of the

growth of the social product was derived from augmenting the work force.

The total growth of the social product between 1965 and 1975 (in permanent

prices) was 76 percent. Taking into account the 5-percent growth in 1976,

the total increase of the real social product has been about 83 percent

over the last 11 years. This corresponds to an annual growth rate between

5 and 6 percent. If we make a comparison with the economies of other countries this kind of growth rate can be looked upon favorably. The only flaw

lies in the fact that in the last 6 years the growth has not resulted from

higher business efficiency and labor productivity, but more from increased

employment.

When we take into account the economic structure, the problem of employment,

and the natural movement of manpower between agriculture and nonfarm activities, the growth of employment is just as important as higher business efficiency and labor productivity. The main problem lies in the fact that under

our conditions these two categories usually move in opposite directions. In

the economies of the advanced countries higher employment brings about a rise

in labor productivity and more rational use of the means of production. It

also brings about a growth of capital formation, larger investments and

greater total demand. The movement in the opposite direction in our economy

is partly the consequence of hiring which is motivated by noneconomic

l6k
considerations, a consequence of the faster growth rate of employment in

noneconomic activities, whose financial capabilities usually allow this,

and also of the faster growth rate of employment in joint staff and administrative services in work organizations and basic organizations of associated labor.

Structural Changes

The relatively dynamic economic development we have had in the last 11

years (since 1965) has also brought about changes in the structure of the

economy. The most significant change has occurred in agriculture. Its

share in the social product (we are talking about total agricultural output

of the socialized and private sectors) dropped from 20.4 percent in 1965 to

15.9 percent in 1975.

Structure of the Economy in Terms of the Social Product, in 1972 prices

Sectors of the Economy 1965 1970 1975

Economy as a whole 100.0 100.0 100.0

Industry and mining 34.3 33.6 36.8

Agriculture 20.4 18.0 15.9

Forestry 1.6 1.2 1.0

Construction 10.3 11.4 10.4

Transportation 7.4 8.1 8.3

Trade and hostelry 19.8 21.8 21.5

Crafts and trades 5.7 5.4 5.6

Housing and municipal utilities and services 0.5 0.5 0.5

Along with agriculture, forestry also experienced a considerable reduction

in its share: from 1.6 percent in 1965 to 1 percent in 1975. The share of

industry and transportation has been increasing steadily. Trade and hostelry also increased their share in formation of the country's social product, but since 1975 their share has tended to stay at the same level, which

is a result of the policy governing economic development and the policy

governing distribution of net income, that is, the policy of more rapid development of productive activities and of improving their position in the

process of reproduction.

Changes in economic structure are a consequence of investment policy. In

the period between 1966 and 1975 there were essential changes in the relative standing of economic sectors in terms of investments in fixed assets.

The share of investments in industry increased from 56.3 percent, its level

in 1966, and from 45 percent in 1970 to 58.7 percent in 1975. The share of

investments in trade and hostelry has not been stable. In 1966 it was 8.5

percent, in 1970 it was 20.2 percent, and then in 1975 it again dropped to

9.8 percent. These changes in the rates and relative volumes of investments result not only from the financial capabilities and development programs of organizations of associated labor in the various economic activities,

165
but also from national policy governing development and from differences in

the rate of completion and funding of capital investment projects from one

year to the next.

Business Efficiency

It is not only labor productivity that has held to the same level over the

last 5 years. Efficiency in the use of socialized means of production has

also stayed at the same level in this period or indeed declined. Whereas

the social product increased 76 percent between 1965 and 1975, the fixed

assets of the economy (in permanent prices) rose 117 percent. Between 1965

and 1970 the social product increased 32 percent, while the value of fixed

assets of basic organizations of associated labor in the economy increased

46 percent. Over the following 5 years the social product rose 33 percent,

while the value of fixed assets rose 49 percent. Declining efficiency in

the use of fixed assets was also evident in the period between 1965 and

1970, but it was more marked in the 5-year period that followed.

Social Product Per 100 Dinars of Value of Fixed Assets.

Year Economy

1965 43.5

1966 42.7

1967 41.1

1968 40.6

1969 40,9

1970 41.0

1971 41.0

1972 40.3

1973 38.9

1974 39.7

1975 38.2

Nor had the efficiency of utilization of socialized means of production increased in 1976. This was indicated by the growth rate of the social product, which was about 4 percent, and the \/ery intensive growth of investments in the economy's fixed assets. The drop from 43.5 to 38.2 dinars of

social product per 100 dinars of the value of fixed assets, which occurred

in 1975, is not to be disregarded. It contributed to the decline of the

growth rate of labor productivity in the economy. We should take note in

this connection that the more modern equipment and technology which result

from the relatively high gross investments in fixed assets (the average

growth rate of gross investments in the economy has been about 30 percent

over the last 10 years) has made for a rise in productivity even if the

organization of work remains unchanged. Since the growth rate of productivity in the period between 1970 and 1975 was about 2 percent, it follows

that the level of applied organization of work and the effective output of

workers at their job stations made no contribution whatsoever to the rise

166

in 1966 prices

Industry

35,3

34,3

32.5

32.3

33.2

33.9

33.8

33.6

32.7

33.8

33.0
r

in productivity. One might even frame a conclusion to the contrary. This

is indication that we should not seek the reason for the decline in the

growth of labor productivity so much in the adequacy of the equipment and

technology of organizations of associated labor as in the way the technological process is organized, the degree to which production is adapted to

the demands of the market, and the level of application of the individual

worker at his work station. These reasons encourage the conclusion that

organizations of associated labor and individual workers are not sufficiently motivated to conduct their business efficiently and rationally,

that is, it would seem to be a necessity that economic incentives be established so that economic entities and workers are motivated to maximize

income, that is, to maximize personal income and community consumption on

a permanent basis.

Distribution

Problems related to the distribution of income are most frequently cited

as the reason for the decline in reproductive and accumulative capacity

and indeed for the decline in the operating efficiency of the economy.

Emphasis is put on the steady increase in the share of sociopolitical communities and special-interest communities in the income of organizations

of associated labor. The growth of these obligations not only directly

diminishes the surplus which the economy has created, but acts as a disincentive on the basic organizations of associated labor with respect to augmenting its income.

However, if we look at the overall figures on the use of the social product,

this conclusion can be refuted.

Use of the Social Product

1965 1970 1975

100.0 100.0 100.0

56.6 55.5 54.7

8.9 9.3 9.9

28.3 30.9 32.5

Social product

Personal consumption

Community consumption and general (public)

expenditures

Gross investments in fixed assets

The overall use of the social product, then, has not essentially changed in

the last 10 years. The share of personal consumption, to be sure, has

dropped slightly--from 56.6 percent in 1965 to 54.7 percent in 1975. The

share of community consumption and public expenditures has increased one

percentage point over 1965. The largest increase was the share of gross

investments in fixed assets—from 28.3 percent in 1965 to 32.5 percent in

1975. Though we do not have figures on use of the social product in 1976,

on the basis of the general economic indices we can conclude that last year

the share of personal consumption increased slightly in the social product

and approximated the relative level recorded in 1965.

167
r

It is a fact that the share of public expenditures, that is, the revenues

of sociopolitical communities, in the net income of the economy has been

increasing in recent years. But this is not so much a consequence of a

growth of budget expenditures relative to the national income as of changes

resulting from amendments of fiscal instruments. This observation is also

confirmed by figures on the share of funds carried over to the budgets of

sociopolitical communities in the total national income. In 1966 the share

of funds carried over into budgets amounted to 17.9 percent of the national

income; in 1970 this share increased to 20.3 percent, and then it dropped

to 16.5 percent in 1974, and then rose to 17.4 percent in 1975, but this is

still slightly below the 1966 level.

The economy has been carrying a heavier burden, and in quantitative terms

more income has been alienated from its creators, when we look at the community consumption. Community consumption has experienced a particular

growth in recent years. The growth in 1976 was 26 percent, which is twice

as high as the growth of the economy's net income. This leads to the conclusion that steps must be taken right away to alter considerably the way

in which self-managed special-interest communities are financed. Not only

is it a question of greater influence and more direct decisionmaking on the

part of the economy with respect to the rates of the various contributions,

but even more of passing on a part of the financial burden for community

needs to direct users. This is not only a financial necessity, but also a

precondition for more rational development of those activities and for exercise of control by those who actually use those services.

7045

CSO: 2800 END

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