Joint Ventures Between Yugoslav and Foreign Enterprises: (16 Tilburg Studies in Economics)

This study stems from a long association with Yugoslavia: two years at the World Bank and a further two and a half years with the International Investment Corporation for Yugoslavia S.A. in London when I was invol- ved in the financing of joint ventures between Yugoslav and foreign enter- prises - part of the subject matter of this study. I believe that anyone dealing with Yugoslavia has found it difficult to escape the spell of this fascinating country. There is its history, rich in struggles and achievements, its cultural heritage, the beauty of its land- scapes and, last but not least, the character and qualities of its people. But while anyone of these features (to which others could easily be added) may have its special appeal depending on one's personal inclinations, it is undoubtedly Yugoslavia's socio-economic system that arouses universal interest. For some it represents the only system that eventually can ensure a just society, while for others its theoretical foundations are utopian and its practical implementation an incoherent muddle. The debate in the West about the merits of Yugoslav socialism will continue for a long time, and if at this stage a personal comment is called for then it must be that I have been struck by two things: modesty and courage. The Yugoslavs are surprisingly modest about the achievements oftheir system. There is no missionary zeal to export their social philosophy.

Table of Contents:
1. Yugoslavia: a Labour-Managed Market Economy.- 1.1. Introduction.- 1.2. The evolution of the doctrine.- 1.2.1. The Soviet model: the centrally-planned economy.- 1.2.2. The phase of decentralisation.- 1.2.3. Self-government socialism.- 1.3. Theoretical aspects of the labour-managed market economy.- 1.3.1. Ward.- 1.3.2. Domar.- 1.3.3. Horvat.- 1.3.4. Vanek.- 1.4. Aspects of the 'real system'.- 1.4.1. The real system versus Vanek's model.- 1.4.2. Investment financing and the role of the banks.- 1.4.3. Economic policy.- 1.4.4. Regional inequities.- 1.4.5. Post-war economic growth.- 1.4.6. Self-management in practice.- 1.4.7. Development targets.- 2. The Yugoslav Enterprise.- 2.1. Introduction.- 2.2. Legal aspects.- 2.3. Self-management.- 2.3.1. The Workers' Council.- 2.3.2. The Management Board.- 2.3.3. The Director.- 2.4. Accounting principles.- 2.4.1. The income statement.- 2.4.2. The balance sheet.- 2.5. Planning.- 2.6. Determination of personal incomes.- 2.7. Financing.- 2.7.1. Need for funds.- 2.7.2. Sources of funds.- 3. Private Foreign Investment in a Developing Economy.- 3.1. Introduction.- 3.2. Private foreign investment in developing countries.- 3.2.1. The case against private foreign investment.- 3.2.1.1. The effect of PFI on the balance of payments of the host country.- 3.2.1.2. High profits.- 3.2.1.3. The effect of PFI on industrialisation strategy.- 3.2.1.4. The effect of PFI on local entrepreneurship and initiative.- 3.2.1.5. Conflicts of interest between host country and foreign investors.- 3.2.2. The advantages of private foreign investment.- 3.2.2.1. The introduction of management skills.- 3.2.2.2. The transfer of technology and know-how.- 3.2.2.3. Training of labour.- 3.2.2.4. Generation of tax revenues and creation of employment.- 3.2.2.5. Productivity spill-overs.- 3.2.2.6. Transfer of capital.- 3.2.3. Incentives for private foreign investment.- 3.3. The international joint venture in developing countries.- 3.3.1. Definition.- 3.3.2. Advantages to a developing country.- 3.3.3. Advantages to the foreign investor.- 3.3.4. Disadvantages to a developing country.- 3.3.5. Disadvantages to the foreign investor.- 3.3.6. Problem areas.- 4. Joint Ventures between Yugoslav and Foreign Enterprises: Institutional Aspects.- 4.1. Introduction.- 4.2. Legislation, rules and regulations.- 4.2.1. The first laws-basic issues.- 4.2.2. Subsequent changes.- 4.2.3. The foreign exchange and trade regime.- 4.3. The joint venture contract.- 4.3.1. The general framework of the contract.- 4.3.2. The financial plan.- 4.3.3. Organisational structure.- 4.3.4. Operations.- 4.3.5. Termination.- 4.3.6. Miscellaneous provisions.- 5. Joint Ventures between Yugoslav and Foreign Enterprises: The Experience So Far.- 5.1. Introduction.- 5.2. Joint venture agreements registered up to 31-1-1974.- 5.2.1. Registered contracts by year.- 5.2.2. Registered contracts by industrial sector.- 5.2.3. Foreign investment by size of participation.- 5.2.4. Foreign investment by Republic and Autonomous Province.- 5.2.5. Origin of foreign investment.- 5.3. A survey of foreign investors' experience.- 5.3.1. Selected data about a sample of foreign investors.- 5.3.2. Investment decision and selection of the Yugoslav partner.- 5.3.3. Financing.- 5.3.4. Secondment of foreign staff.- 5.3.5. Foreign investors' evaluation of performance.- 5.3.6. Foreign views on Yugoslav legislation and regulations concerning joint ventures.- 5.4. The International Investment Corporation for Yugoslavia S.A..- 5.4.1. Background.- 5.4.2. Capital structure.- 5.4.3. Operations.- 5.4.4. Prospects.- 6. Summary and Conclusions.- 6.1. Introduction.- 6.2. Yugoslavia: a labour-managed market economy.- 6.2.1. History.- 6.2.2. Theory.- 6.2.3. The 'real' system.- 6.3. The Yugoslav enterprise.- 6.3.1. Legal structure.- 6.3.2. Self-management.- 6.3.3. Accounting principles.- 6.3.4. Planning.- 6.3.5. Determination of personal incomes.- 6.3.6. Financing.- 6.4. Private foreign investment in a developing economy.- 6.4.1. The case against private foreign investment.- 6.4.2. Advantages of private foreign investment.- 6.4.3. Incentives for private foreign investment.- 6.4.4. The international joint venture in developing countries.- 6.5. Joint ventures between Yugoslav and foreign enterprises: institutional aspects.- 6.5.1. Legislation.- 6.5.2. The joint venture contract.- 6.6. The experience so far.- 6.7. Concluding observations.- 6.7.1. General evaluation.- 6.7.2. Problems.- 6.7.3. Prospects.- Annex.