Keynote Address
The Conference On Business Opportunities In The Reconstruction Of Bosnia And Croatia.

The Honorable Milan Panic
Former Prime Minister of The Federal Republic of Yugoslavia and Chairman, President and CEO of ICN Pharmaceuticals, Inc.

Washington, D.C.
April 22, 1996

Mr. Chairman, Ladies and Gentleman:

I am deeply honored to have been asked to address this important conference, which we all hope will contribute to the compelling task of the reconstruction of the war-shattered economies of Bosnia and Croatia. I take a broader view, which I think is essential to achieve this goal.

As a native of the former Yugoslavia, as an American businessman who for several years has been actively engaged in a significant business venture in Yugoslavia, and as a former Prime Minister of Yugoslavia, who in August of 1992 articulated a comprehensive peace program, many of the elements of which were incorporated in the Dayton agreement, I strongly believe that without regional cooperation among all of the countries of Southeastern Europe, particularly in the restoration of the normal patterns of trade and commerce, we are unlikely to realize a lasting peace.

Before I develop this theme, I wish to pay tribute to the memory of a great American, who tragically lost his life in pursuit of peace I the former Yugoslavia. I had the great pleasure of meeting with Ron Brown several times during the last eighteen months. On each occasion we spoke about the need for American investment in the former communist countries of Central and Eastern Europe.

Mr. Brown was always fully informed of the opportunities and the problems and, in his own very special way, provided encouragement and support. He was a man of great charm and charisma, and unparalleled in his ability to bring people together for the common good. Americans engaged in international business have never had a better leader, a more effective spokesman, a more understanding and supportive partner. We need to honor him in a extraordinary way – because he was an extraordinary man.

Some of you may have seen the article in yesterday’s New York Times which proposed that, as a parallel to the Malcolm Baldridge National Quality Award, we establish a Ronal H. Brown award to our nation’s top exporters and most thoughtful, responsible overseas investors. I wish to express my support for this proposal. Ron Brown award for quality in international business would memorialize him appropriately and help continue to advance the goals and objectives he so effectively espoused.

While mourning the loss of Ron Brown, we can take solace in the willingness of Mickey Kantor to accept the leadership of the De4partment of Commerce. I have known Mickey Kantor for year sand believe President Clinton could not have made a better choice to carry forward Ron Brown’s agenda as Secretary of Commerce. They were close friends and professional colleagues for years and for the past three years worked together smoothly and effectively in furthering our international business interests.

Now let me share with you my views on how economic reconstruction and development can best be furthered, not only in Bosnia and Croatia, but in all of the countries of the former Yugoslavia and in the neighboring countries of Southeastern Europe, as well. Do not misunderstand me. I am not suggesting the re-establishment of Yugoslavia in any form. I am not suggesting that any of the new countries that constituted the former Yugoslavia should give up any of their national sovereignty or agree to anything which would erode their sovereignty.

The insertion of IFOR, the NATO-led implementation force, has been accomplished without serious incident. The parties of the Bosnian conflict appear to recognize that NATO means business and has the means and the will to respond with the full force of its robust firepower to any military challenge. Thus, at long last, an effective disincentive to a continuation of the war is in place. The introduction of NATO power and political will provides the essential basis for the peace process to begin, but military power cannot provide the incentives to move that process forward. We have successfully deployed NATO troops in Bosnia. Now we need to deploy economic incentives, not only in Bosnia, but in all of Southeastern Europe.

The war, the economic sanctions against Serbia, and the Greek embargo of Macedonia thoroughly disrupted the normal channels of communication and commerce throughout Southeastern Europe, causing billions of dollars in damage and associated costs to the countries of the former Yugoslavia and many of their neighbors. It has been an area-wide economic disaster. Market forces always find a way to react to political interference, and in this case they reacted with fury. In Serbia and Montenegro and in all of their neighboring countries, a large new class of sanction-busting entrepreneurs was created. Attracted by the lure of huge profits with minimal risk, tens of thousands of smugglers established a network of trade relations, which disrupted and supplanted the previously existing channels of Balkan trade. While the sanctions did create hardships for the average citizen of Serbia and thus helped pressure Milosevic’s regime into conceding enough of its earlier position to enable the Dayton peace talks to succeed, they had a seriously corrosive effect on the economic relationships among all of the countries of Southeastern Europe that has undermined the atmosphere necessary to support lasting stability and peace in the Balkans.

Area-wide programs and policies to facilitate and stimulate a return to normal, market-oriented channels of trade and commerce are badly needed. The disintegration of Yugoslavia into five independent countries has disrupted hundreds of production and marketing networks, permanently in many cases. Even with good will all-around, there would be little incentive for a return to former production and marketing patterns. And the memories of the horrors of four and a half years of brutal war argue against much good will for a long time to come. It is doubtful that nay of the former Yugoslav states will independently pursue policies of normal commercial relations with one another without external encouragement, even though they all could clearly benefit from such normal relations.

The United States and the European Community cannot impose policies and programs on the newly independent countries of the former Yugoslavia. But they can provide economic incentives to encourage an area-wide opening for market forces to lead the way to reconstruction of infrastructure and profitable economic development.
Some foreign assistance must necessarily be targeted for reconstruction in the most heavily damaged areas of Bosnia and Croatia. But the programs and policies of the United States and the European Community should be designed to promote area-wide economic cooperation. That is why we need a Southeastern European Free Trade Association. This Association would help lift the economic borders and ensure that funds are funneled directly to businesses and not through endless layers of government bureaucracy.

I do not wish to minimize the political difficulties associated with this goal. The European Community could help to overcome such political reservations by stating that membership would help facilitate membership in the European Union.

If our goal in the Balkans is to stimulate the development of democratic free market forces. We must move beyond the military monitoring of an uneasy peace by creating positive economic incentives for the countries of the former Yugoslavia and their neighbors to restore and broaden regional economic cooperation and trading patterns. This will be the most effective way to stimulate and support the positive political process, which is so needed to ensure peace and prosperity for future generations.

In addition to the need for a Southeastern European Free Trade Association, the countries of the former Yugoslavia must implement serious programs of privatization in order to attract foreign investment. The official policies of the American government and the European Community have opened a window of opportunity for Bosnia, Croatia and the other countries of the former Yugoslavia to attract much needed foreign investment. That window will stay open and investors will move though it only as long as serious opportunities for profitable foreign investment exist. With all of the goodwill in the world, and the support of official American and European Community policies, investment decision must still be defended to stockholders.

I can’t stress enough the importance of privatization in achieving long-term economic stability and democracy. ICN Galenika, our Yugoslav subsidiary located in Belgrade, is a prime example of how we can put hope in the hands of citizens, create good-paying jobs and play a major role in the economic growth of the region.

When ICN privatized Galenika in 1991, we issued shares of stock to the over 5.000 employees, making them first-time shareholders in an American company—or any company for that matter.

We taught these new shareholders about capitalism, about the stock exchange, about their new opportunity to be rewarded for their contribution to ICN Glaenika’s success. Of course, they received dividends on their shares, but those dividends could not be paid during the conflict because of the sanctions against Yugoslavia. Just last month, however, $6.5 million in cash and stock dividends—and interest—were paid to those shareholders. For them, it was a dream come true.

And for the parent company, ICN Galenika has been a tremendous success. Despite operating under circumstances that made getting raw materials difficult, ICN Galenika managed to launch more than 40 new products and increase its share of the Yugoslav market to 50 percent during the three years ending with 1995. Our 1995 sales for Eastern Europe increased 36 percent over 1994. And, now that sanctions have been suspended, we are devoting extra resources to our export business to Russia and other countries, which stood at approximately $40 million annually before the onset of sanctions. We are making tremendous progress, having received over $20 million in export orders during the first months of this year.

Southeastern Europe represents a fabulous market opportunity for American business if taken as a whole. That is why ICN is expanding in other countries, such as Czech Republic, Hungary, Russia, Belarus, and Kazakhstan – and that is also why any one sector or any one country along should not be targeted for development. Successful reconstruction of each economy in the region depends on reconstruction of all economies of the region – and Ron Brown understood this.

In addition to encouraging and supporting privatization efforts, providing incentives for regional cooperation on and economic level, and lifting the barriers to free trade, we in the West must provide leadership and management training opportunities. If these economies to grow according to Western standards, we need to offer appropriate guidance. ICN, for example, is in the process of implementing Western business practices at our new Russian company an investment tat is already paying off.

I am sure that naysayers will say that my theme of renewed and broadened economic cooperation is an impossible dream. My response is that I have always believed that man must have dreams of what he thinks is good and right.
What is good an right now in every part of the former Yugoslavia is to look forward, not backward. The Balkan people have suffered from too much history.

I believe that a vision of peace and prosperity is needed and attainable.
And I am committed to pursuing that vision.

Thank You.