Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No.:  16394
PROJECT COMPLETION NOTE
FORMER SOCIALIST FEDERAL REPUBLIC OF YUGOSLAVIA
EXPORT INDUSTRIES PROJECT
(LOAN 2980-02 YU)
December 26, 1996
Country Operations
Country Department II
Europe and Central Asia Region
This document has a restricted distribution and may be used by recipients only in the
performance of their official duties. Its contents may not be disclosed without World
Bank authorization.


CURRENCY EQUIVALENTS
Currency Unit   =    Yugoslav Dinar (Din)
Exchange US$1.00    =    1,276 Din (1988)
WEIGHTS AND MEASURES
Metric System
FISCAL YEAR OF THE FORMER SOCIALIST FEDERAL
REPUBLIC OF YUGOSLAVIA
January 1 - December 31
ABBREVIATIONS
PCN     - Project Completion Note
SFRY - Socialist Federal Republic of Yugoslavia
Note prepared by Rochelle Hilton (EC2CO), and reviewed by Ilham
Zurayk, Acting Division Chief (EC2CO) and Jean-Michel Severino,
Director (EC2).


PROJECT COMPLETION NOTE
FORMER SOCIALIST FEDERAL REPUBLIC OF YUGOSLAVIA
EXPORT INDUSTRIES PROJECT
(LOAN 2980-02 YU)
1.    This Project Completion Note (PCN) is in lieu of a Project Completion Report
for an Export Industries Project. It is based on file documents including internal Bank
memoranda and correspondence.
A. BACKGROUND
2.    The Project was appraised in October 1987 with a view to assisting the
Government increase efficiency, mobility and competition in the economy and to
improving resource mobilization and allocation. It was designed to complement and help
facilitate efforts of the former Socialist Federal Republic of Yugoslavia (SFRY) to
stabilize the economy, to strengthen the financial sector, and to achieve growth through
improved factor productivity and export competitiveness. It followed up on support
provided through the first Structural Adjustment Loan and was to complement the
program to be supported through the second Structural Adjustment Operation, which was
under preparation at the time this project was approved. The Export Industries Project
was an integral part of the Bank's development strategy for the industrial and banking
sectors.
B. PROJECT OBJECTIVES AND DESCRIPTION
3.    The objectives of the Project were to: (a) expedite growth of efficient exporting
from the SFRY; and (b) strengthen the banks to enhance their effectiveness in resource
allocation and in promoting financing discipline in the economy. The project aimed to
achieve these goals through: (a) improvements in the export administration and export
finance systems and in export marketing; (b) the strengthening of key financial
institutions; and (c) the careful selection and financing of high return export projects in
sound enterprises.
4.    The overall loan totaling US$120 million comprised of three loans of US$40
million each to each of the three following banks: Jugobanka-United Bank Beograd,
Ljubljanska Banka and Associated Bank-Udruzena Beogradska Banka Beograd. It was
guaranteed by the SFRY.
5.    The Project included: (a) a line of credit (US$119.2 million) for on-lending to
export-oriented manufacturing industries to improve product quality and international
competitiveness, and to expand or develop new competitive capacity. The funds were to
be used to finance capital investments and incremental foreign exchange working capital


for sub-projects in over fifteen industrial subsectors; and (b) technical assistance (US$0.8
million) to support the institutional development of the banks by providing assistance and
training for sub-project appraisal, supervision and portfolio management; and for
strengthening financial management.
C. MAJOR FACTORS
6.    The Loan was approved by the Board on June 29, 1988, but was never signed.
Following an exchange of correspondence with the proposed borrowers and the
guarantor, the Bank notified them, by telex dated August 25, 1989, that it had withdrawn
its offer to enter into the respective loans. The delay in signing and the eventual
withdrawal of this offer was linked to the evolution of economic policies and
circumstances in the former SFRY. High interest rates (in the context of the stabilization
program) and expected changes in the structure of the banking and enterprise sectors led
to a marked slackening in demand for investment credits. In these circumstances, the
banks, although they maintained a strong interest in the project, were not prepared to
enter into further commitments.
D. LESSONS LEARNED
7.    The evolution of economic policies and circumstances in the former SFRY, which
led to the decision by the borrowers not to proceed with the project, could not have been
anticipated at the time of project approval.





IMAGING
Report No.:        16394
Type:     PCN