Posted on 06/20/2002 2:23:51 PM PDT by bob808
BELGRADE, Yugoslavia (Reuters) - Milan Popovic of Yugoslav weapons producer Krusik is desperately seeking an investor ready to help to revive and transform his company.
"Our production is almost at a standstill," said Popovic, marketing manager at what was once the country's main manufacturer of 60-120 mm caliber ammunition and rockets.
"Army orders are dwindling. The rocket line has been halted. Exports have been slashed tenfold from over $100 million a decade ago," he told Reuters.
In the 1980s, Yugoslavia's arms exports averaged over $400 million a year and sometimes much more. Figures from the military trading firm Jugoimport SDPR show the industry earned $12 billion from 1981 to 1990.
Yugoslavia exported $2 billion worth of weapons to Iraq during its 1980s war with Iran and made big sales to Libya.
Those glory days are over. But Krusik still has 3,500 workers and their families to support, Popovic said. Ten years ago it employed more than 10,000.
Located in Valjevo in western Serbia, Krusik mirrors the poor state of the once mighty industry, which made the M84 tank, used by allied forces in the 1991 Gulf War ( news - web sites). This was the crown jewel of its production until the break-up of the old Yugoslav federation in the 1990s.
With $100 million annual investment in research programs, the industry was also known for multiple rocket launchers, anti-tank and anti-aircraft missiles, fighter bombers, gunboats and submarines.
But disinvestment and U.N. sanctions, including a total arms embargo imposed under Slobodan Milosevic ( news - web sites) for Belgrade's role in regional wars, have ruined the industry.
BIG JOB CUTS NEEDED
Krusik, grouping 12 firms, now focuses on infantry weapons and ammunition. It also makes suspensions, batteries, tools, faucets and other commercial goods. Military production accounts for 70 percent of the business.
Yugoslav law now allows private companies to buy more than 51 percent in some military facilities. Restructuring of the company is under way to make military units independent and thereby ease sales to potential investors.
Popovic sees further conversion to civilian production as the only way out for the idle sector. He listed electronic detonators and air-bag inflaters as possible future products.
"But we lack funds to make all the changes alone. We need partners to invest in our projects," he said.
NATO ( news - web sites) air raids in 1999 to punish Belgrade for repression in Kosovo dealt a final blow to the battered sector, destroying large parts of its facilities and inflicting damage of $947 million, according to official estimates.
Popovic said NATO bombs had destroyed 95 percent of Krusik's capacity. Its plant in Lucani near Kosovo, producing explosives and propellants for all calibers of rockets, was worst hit. So far only half of the facilities have been rebuilt.
Milan Sunjevaric of the Defense Ministry said 70 percent of the industry had to be converted. "This means labor cuts to 15,000 from 60,000 currently employed."
He said recent wars had already initiated the change by ending production of aircraft, tanks and rocket systems, which engaged thousands of subcontractors from across old Yugoslavia.
NATO also aided the process by bombing some plants which would never be replaced, said Sunjevaric, of the ministry's department for research, development and production of weaponry.
RESTRUCTURING BILL OF $250 MILLION
Outdated technologies and the incapability of domestic plants to make sophisticated weaponry to fight terrorism, now seen as the major threat to peace, were further disadvantages.
"Restructuring, including conversion, requires huge funds which our impoverished economy cannot afford," said Sunjevaric.
The entire army budget in 2001 stood at around 500 million euros, three percent of which had been used for development. "For conversion alone we need 250 to 300 million euros," he said.
Medical, pharmaceutical and telecommunications equipment, household appliances, car industry components, agricultural and training planes are some civil lines that could be introduced in the military facilities, Sunjevaric added.
He said civil programs for 19 plants worth about $140 million had been submitted to foreign organizations, but with no response so far.
Producers suffering from lack of demand at home and unable to collect over $1 billion owed for past deliveries say they need a cash injection from exports.
"The industry just needs to secure a third of the exports it had in the 1980s to become profitable again," said Sunjevaric.
"But markets are difficult to reach. The West is not interested in buying. And those countries willing to buy from us are politically undesirable," he said, mentioning no names.
The arms producers are also eyeing Yugoslavia's future membership in NATO's Partnership for Peace scheme, hoping the old foe could aid a revival of the crippled sector.
But Popovic was skeptical: "If they are not buying now, they won't do it in the future. I fear they want us to close down our plants and force us to buy new weapons from them." ($1=1.056 Euros)
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