'We are not ready to compromise'

Serbian Prime Minister Zoran Djindjic is seen as the new regime's most pragmatic official with close connections to Europe and the United States. He speaks to Ibrahim Nafie on the future of his country's relationship with Montenegro, the rest of the Balkans and his economic priorities
What is the current situation in Serbia after Milosevic and having gotten rid of nearly 10 years of sanctions?
It is very bad. We had eight or nine years of sanctions and isolation. During this period we suffered what I can describe as criminilisation of the economy. We did not have legal trade with foreign countries; we used to deal with them through back channels. This was not only bad for the economy but bad for the society. We did not have taxes or any kind of legal system. We also suffered a very heavy bombing campaign two years ago and lost much of our capacities in very important parts of industry such as the metal industry as big plants and factories were destroyed. Our technology is also very old.
We did not renew our technology in 15 years in all sectors of our industry. As a government, we don't have financial resources to support different areas of the economy. We have some export potential that could be worth 300 Deutschemarks ($150 million). But we don't have money to finance these exports in agriculture, food industry and furniture. We have some markets and products, but we don't have the capital.
So what are your current priorities?
Our government has three priorities. First, to open financial markets for our country because we need capital and investments. So far, we are satisfied with the results we achieved over the past 100 days, working with the World Bank, the European Commission and signing bilateral financial agreements with several countries. At this level, we are doing well.
The second priority is to create a legal framework for normal business in Serbia, in the sense of privatisation, guarantees for investment and an international arbitration system. All these measures are needed to have a normal environment to do business in Serbia. The third priority is privatisation, to have management quality in the economy itself. We are not talking about micro-management of the state companies but about helping these companies to recover to be able to receive capital and investment. Of course, the most critical priority is the third because it has to do with daily life. It is most difficult to change the situation on the ground and to help these companies. But we see all three levels connected. We cannot improve our economy without being members of the World Bank, without being able to receive credit, nor without appropriate laws to attract investment. I think after 100 days, we did a lot in this regard. We might not have done as much as people hoped, but the expectations were very high, unrealistically high. They hoped that with democratic changes, there would be similar changes in the economy. But democratic changes are something in the mind while the economy is something real, and we can't change the disastrous state of the economy so quickly. But I think we are on the right track.
Following NATO's 1999 military campaign and the years of isolation Serbia suffered under former President Slobodan Milosevic, how long will it take you to renew your infrastructure?
If you are speaking about real infrastructure such as roads and telecommunications, I think we need five years. If you are speaking about export economy, we need maybe two years. Of course, we will have huge difficulties even in the future. But we will begin by focusing on the sound parts of the economy and try to provide them with support. There are some companies which will be able to survive; others won't. We must take the ones ready to survive, support them and find a solution for the rest. It is not a simple black and white picture. We also rely on regional development in our plans to develop the infrastructure, particularly in the sectors of energy and traffic. We think we should try to develop a regional Balkan concept for energy and find funds to finance regional highways and railroads. We are discussing the issue now in addition to the financing, for example, of Corridor 10 to connect Europe and the Middle East. This is important for traffic and it is, of course, very expensive. It can't be financed by one country.
As prime minister of Serbia, what are your responsibilities in the federal framework with Montenegro?
The federal government is just a facade for the republican government in Serbia. It does not have any real powers. This is a transitional period, not only for Serbia, but for the federal state. We don't know yet the outcome of this process between Serbia and Montenegro. Since 1997, the federal government was accepted only by Serbia, not Montenegro. We have a minister of finance on the federal level, a man from Montenegro, but the currency in Montenegro is the German mark. The minister is from Montenegro but his decisions are not accepted there, and no one cares about his decisions. Serbia has 17 ministries which take daily decisions about agriculture, education and the economy. But the federal government does not control all these ministries. It is designed to assure links between Yugoslavia and foreign institutions. But, of course, the World Bank and the IMF do know that Serbia is practically the substance of this federal state, and they want to discuss all these issues with our people in the Serbian government. In foreign affairs, we have some role, although we don't want that. We don't have time to receive ministers from other countries every day. Yet our visitors want to see the people who take decisions, not the people who are in charge. I hope we will resolve this situation, and know by the end of this year what the federal government is. It is too expensive not to do anything. It is too expensive to pay for 11,000 people working for the federal government who don't know what they are doing.
Do you think you will need to restructure the federation?
Yes. We need to reduce the functions of the federation and to bring transparency in financing and budgetary matters. Our goal is to reduce the federal government to three ministries: one for defence, one for foreign affairs and one for a general financial framework such as taxes and the monetary system. Just a framework, not ties between the two republics. All other issues should be resolved on a republican level. Of course, the budget should be reduced and controlled by both Serbia and Montenegro. I think we have consensus on that. The problem is the international status of this state: The Montenegrin president wants to have two states but agree to have these three functions. But we say, if there are two states, we don't see the reason for having federal ties with Montenegro. Why should we have common institutions with independent Montenegro? Why not with Hungary or Romania? We don't see any benefits for Serbia. If we have two states, we don't see any reason to have a state union with Montenegro. As two states, the international community will not see us as serious people. They will see us as a people who are unable to resolve their problems without dividing their state. If we have two states, that will be the reality, but we will see whether it is in our interest as Serbia to have a state union with 600,000 people. Right now, it does not seem attractive to us.
You say yourself that you are practically divided. Do you want to keep the official international status as one state?
Yes, they are divided. But to the world we are Yugoslavia, and that is important because of Kosovo, because of our status in the World Bank and other institutions. It will be less problematic at the moment not to have two states. But if we have two states, and if we resolve our status in all these institutions as Serbia alone, and if we resolve the status of Kosovo, why should we then negotiate with Montenegro about state union? We must protect the interests of the people in Serbia, and our interest is not to focus on the state question. But if they force us to focus on the state and waste time to solve the problems between Serbia and Montenegro, we won't have a big interest in continuing.
What do you think personally? Where are things heading?
I think Montenegro is in a bad situation. It is divided and cannot reach consensus to be either independent or be with Serbia. And it is very bad for one country to have a divided nation. They should find a compromise. The question about Yugoslavia is a question more for the people in Montenegro than for those in Serbia. If you ask people in Serbia what is their priority, nobody would say their priority is connection with Montenegro. They would say we would accept what the majority there accepts; they should find a solution. My personal suggestion to the Montenegrin president was to start discussions with his other big party, the pro-Yugoslav party. He as president must find consensus. He can't be president for 50 per cent. But as I saw in the last few days, he is not enthusiastic about the suggestion. He will build a government with the pro-independence party. This means he will organise a referendum in six months. He will most likely lose in this referendum, but his opponents won't win a huge majority. It will be around 53 per cent.
Concerning Kosovo, how will the disintegration of the federation affect it?
The international community took a very strange decision on Kosovo. It did not take a direct decision saying that Kosovo is part of Yugoslavia, not Serbia. But the UN resolution said Kosovo as part of Yugoslavia would be resolved in a certain way. In this sense, people said OK; in order not to disturb this international situation, we will say Yugoslav institutions are in charge of Kosovo. But we have teachers and courts and other people in Kosovo. They are paid by the Serbian government and we have these ministries working there. Formally, the federal government is in charge, and we appointed one person on the federal level to be a coordinator. But he coordinates with people from the Serbian government, not the federal government.
And how do you see the situation there?
It is very, very complicated, and can't be resolved in the coming few years, not in a normal, sound way. We have one very simple solution: independence of Kosovo. It seems very simple but it would create a huge crisis in the region. We already have a crisis in Macedonia. But its intensity would increase. Then, we would have a crisis inside Kosovo itself. The Serbs in northern Kosovo would not accept that. We would have a crisis in Albania. Albania is not ready to accept this Great Albania. Kosovo's independence would also destabilise Bosnia and Herzegovina. If you have a new state based on ethnic principles, why not have three new states in Bosnia? These are the reasons why the international community is very reluctant to accept an independent Kosovo, not because of us, but for regional reasons.
The second solution is to try to keep unity through regional integration, cooperation and economic development in order to decrease the importance of border and the concept of national states and try to build some kind of Balkan union, an economic and trade union. We say, OK, we don't know the status of Kosovo. But we [the Serbs] can go to Kosovo and Kosovars can go to Belgrade without problems. We can do business with these people. Kosovo should remain a region in this country but it is not clear as to its status. Meanwhile, an international presence should be kept in the next few years. During this period, we hope to develop our relationship with Albania and Macedonia. If people see that things are developing in the direction of European integration, they would accept moderate politics. If they see that the question of the state remains open, we will have problems in the years ahead. But that would hurt our situation here also. We can't expect investments here if we have a crisis in the country.
You make it sound that you don't mind the separation of Kosovo as an option
In my mind, it is not a good solution. It would not resolve the problem. I am very pragmatic, and think very pragmatically. If there is a solution, we can discuss it. But if there is no solution, and the problem continues to exist, what then? Independent Kosovo would be bad for the Serbs but it would not resolve the problems of the region. This region will be seen as one of disintegration. For this same reason, we are against the division with Montenegro. We say, maybe we can't be that normal federal state. Maybe you are right, that between small Montenegro and bigger Serbia, it is not easy to find a solution. But to be seen as a region which continues to disintegrate, that is the worst scenario. It is better to try to find a solution than to be seen in Europe as a people who are unable to find one. Our priority is to regain our credibility, to build trust and confidence among investors, to be seen as a normal and attractive part of Europe. That is our priority, not to exacerbate the situation. We should resolve our problems as a team. What is more important: resolving the problem between the players or defeat the competition. We are a team in the Balkans. We must have credibility as a whole region. Otherwise, we won't have credibility. We can't have credibility as one city and start saying that Belgrade, Niche or Novisad are bad, but we are good, so you should invest in our city. No, our credibility should be the same in Romania, Bulgaria, Macedonia, Serbia, Montenegro and Bosnia. We must try to show the world that we are capable of resolving our problems peacefully and to be seen as attractive to foreign investment. Without foreign investment, we can't survive economically.
Your foreign minister was in Albania last week. How are your ties with Tirana?
I invited the prime minister of Albania and he will come next month for a visit, the first in 50 years. I met him in Athens and I like his attitude.
How do you view ties with Arab countries?
I think we should improve these relations, first on an economic level. That is always the best way. Then we should see what has changed in all these countries. Currently, we have priorities arising from our situation. We have European countries which supported us during the difficult years. We have America as an important country we must deal with. That is a reality. And we have other countries from Europe such as Russia, from the Arab world and from South America. In the critical and very confusing times of recent years, we did not have the energy or resources to deal with these very important parts of the world. We were very, very oppressed for 10 years. What we did was build relations with neighbouring countries -- Germany, France, Italy and the United Kingdom. But now, we must design our strategy for the next 20 years, and in this strategy there are very important partners in your area. We have some ideas and we are working on them to find out how to attract investments from your countries and how to once again develop trade relations in pharmaceuticals, energy and agriculture.
What is the current status of the previous regime? Do you see any chance they might make a comeback?
For us, they are history. There is only one country in this region that is in an absolutely new situation, fully cut off from the old regime. For other countries undergoing a transition -- in Bosnia, Slovenia, Croatia, Montenegro and Bulgaria -- it was mixed. We had 10 years of real war against the opposition. Milosevic conducted war in the region. When he started the war in Bosnia, Milosevic asked us: do you support this war? When we said no, he said we were enemies and traitors. After 10 years, it is not possible to compromise. We are not ready to compromise with his faction. They are probably weak, not very well organised, and they are not important to us as a political structure. I don't think they can recover. Of course, we will have an opposition in one or two years, but not from Milosevic's party. I don't think they deserve to recover. They destroyed this country and criminalised this society and abused the bases of power. I don't think we should allow these people to return so easily to the political scene.
Al-Ahram's delegation: Dr Abdel-Moneim Said, Dr Hassan Abu Taleb, Reda Helal and Khaled Dawoud
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