Volume 16 (1998)

The Regional Problem and the Break-Up of the State:
The Case of Yugoslavia
Časlav Ocić

The Nature and the Scope of the Regional Problem
Regional Policies and Changes in the Institutional Framework
Regional Development Levels: Grouping of Regions
Structural Change: Shift-Share Analysis
Efficiency: Shift-Share Analysis
Interregional Relations: Autarky
Some Other Results of the Regions' Development
Regional Development Costs: Ratios of Investment
Interregional Income (Re)distribution
Regional Convergence or Divergence?
Equality: The Failure of the Positive Discrimination Model
"The National Question" and Nationalism
Separatism: Economic and Political
A Long Journey from Utopia to Dystopia
Selected Bibliography
Data Sources & Documents
Appendix  (1)  (2)

Regional Development Costs: Ratios of Investment

The ratio of investment to GNP is taken as a synthetic (and simplified) representation of regional development costs. Over the 1952-1990 period the share of investment in GNP (the investment rate) varied considerably both by subperiod and by region, ranging from 86.2% in Montenegro in the 1952-1960 subperiod to 17.4% in Vojvodina in the 1983-1990 subperiod. The investment rate by year ranged from 117.0% in Montenegro in 1954 to 16.6% in Vojvodina in 1990.
For the whole period the average rate of investment in Yugoslavia amounted to 20.4%. In other words, an average one fifth of the GNP was spent on investment throughout the period. Above-average investment rates were achieved in Bosnia-Herzegovina, Montenegro, central Serbia and Kosovo-Metohia. The highest was the 29.7% investment rate of Kosovo-Metohia, and the lowest was the 18.0% investment rate of Vojvodina. The average investment rate was calculated cumulatively on the basis of GNP and investment in current prices. Although theoretically this is the best method of calculating average investment rates, in the case of Yugoslavia it considerably distorts the picture of the actual situation. The reason for this are extremely high inflation rates in the last decade of the observed period, which resulted in disproportionately greater weights being assigned to GNP in these years than in the previous ones. On the other hand, the last years were also characterized by a sharp decline in investment. Given all this, the average investment rate was low in proportion to the rates achieved before 1979.
In some regions the investment rate exceeded the upper limit that determines the so-called absorptive capacity of the economy. The maximum absorptive capacity is 40% of the investment in GNP. Particularly characteristic here are the cases of Montenegro and Kosovo-Metohia. The rate of investment for Montenegro exceeded the upper limit in all subperiods, except the last one, while that of Kosovo-Metohia fell below the limit only in the first and the last subperiods. In two years (1953 and 1954) investment in Montenegro even exceeded the GNP, while in 30 out of 37 years, more than 40% of GNP was spent on investment. The investment rate was above 40% in Kosovo-Metohia in 26 years, in Macedonia in 12 years, and in Bosnia-Herzegovina in 10 years. In central Serbia investment exceeded this limit in one year (1961). In other regions (Croatia, Slovenia and Vojvodina) in no year did the investment rate exceed 40% of the GNP.
The investment rate figures and trends by region clearly show the method by which regional policy was to achieve the declared objective: a rapid development of "the material base for productive forces"of all regions, along with a faster development of that of underdeveloped regions. Because of the inefficiency of investments, the investment boom under "soft budget constraints"(and universal arbitrariness), which peaked in the late 1970s, resulted first in the collapse of the economy, and then of the state.