United Nations

A/51/356


General Assembly

Distr. GENERAL  

13 September 1996

ORIGINAL:
ENGLISH


                                                        A/51/356


General Assembly
Fifty-first session
Item 21 (b) of the provisional agenda*

*    A/51/150.


          STRENGTHENING OF THE COORDINATION OF HUMANITARIAN AND DISASTER
          RELIEF ASSISTANCE OF THE UNITED NATIONS, INCLUDING SPECIAL
          ECONOMIC ASSISTANCE:  SPECIAL ECONOMIC ASSISTANCE TO INDIVIDUAL
                             COUNTRIES OR REGIONS

          Economic assistance to States affected by the implementation of
          the Security Council resolutions imposing sanctions against the
            Federal Republic of Yugoslavia (Serbia and Montenegro)

                        Report of the Secretary-General


                                   CONTENTS

                                                              Paragraphs Page

 I.   INTRODUCTION ..........................................    1 - 3     3

II.   RECENT ACTION TAKEN BY THE SECURITY COUNCIL ...........    4 - 14    4

      A. Action taken by the Security Council ..............     5 - 8     4

      B. Action taken by the Security Council Committee
         established pursuant to resolution 724 (1991)
         concerning Yugoslavia .............................     9 - 14    5

III.  INFORMATION REGARDING ECONOMIC ASSISTANCE TO THE
      AFFECTED STATES .......................................   15 - 58    7

      A. Communications received from States ...............    16 - 31    7

      B. Response of the United Nations system .............    32 - 54   12

      C. Follow-up to regional initiatives and assistance
         arrangements ......................................    55 - 58   17

IV.   PARTICIPATION BY THE AFFECTED STATES IN REHABILITATION
      AND RECONSTRUCTION OF THE CRISIS-STRICKEN AREAS IN THE
      FORMER YUGOSLAVIA .....................................   59 - 70   18

      A. Involvement in rendering humanitarian assistance ..    60 - 62   18

      B. Access to material and food supply for the United
         Nations peacekeeping contingents ..................    63 - 65   19

      C. Contribution to reconstruction and development
         efforts ...........................................    66 - 70   20

 V.   CONCLUSIONS ...........................................   71 - 76   22


                               I.  INTRODUCTION


1.   In its resolution 50/58 E of 12 December 1995, the General
Assembly expressed concern at the persisting special economic problems
confronting States, in particular the States that border the Federal
Republic of Yugoslavia (Serbia and Montenegro), the other Danube
riparian States and all other States adversely affected by the
severance of their economic relations with the Federal Republic and
the disruption of traditional transport and communications links in
that part of Europe.  At the same time, the Assembly reaffirmed the
urgent need of a concerted response from the international community
to deal in a more effective manner with the special economic problems
of the affected States in view of their magnitude and the adverse
impact of the sanctions on those States.

2.   Also in that resolution, the General Assembly renewed its
invitation to the international financial institutions to continue to
pay special attention to the economic problems of the affected States
and their adverse social impact and to consider ways and means for
mobilizing and providing resources on appropriate terms for mitigating
the continuing negative impact of the sanctions on those States.  The
Assembly renewed its request to the competent organs, programmes and
specialized agencies of the United Nations system to take into
consideration, in programming their development activities, the
special needs of the affected States and to consider providing
assistance to them from their special programme resources, and renewed
its appeal to all States, on an urgent basis, to provide technical,
financial and material assistance to the affected States to mitigate
the adverse impact of the sanctions on their economies.  The Assembly
encouraged the States of the region affected by the sanctions to
continue, inter alia, to cooperate actively on a regional basis in
such fields as cross-border infrastructure projects or promotion of
trade, thus alleviating the adverse impact of the sanctions.

3.   Moreover, the General Assembly, in the same resolution, urged the
organizations and specialized agencies of the United Nations system
rendering humanitarian assistance to Bosnia and Herzegovina and the
Federal Republic of Yugoslavia, including material and food supply for
the United Nations peacekeeping contingents, to take appropriate steps
to broaden access for suppliers, particularly from the States affected
by the sanctions.  The Assembly requested the Secretary-General to
take all appropriate measures to increase the opportunity for the
affected countries to participate actively in the post-conflict
reconstruction and rehabilitation of the crisis-stricken areas of the
former Yugoslavia after the achievement of a peaceful, lasting and
just political solution of the conflict in the Balkans.  The Assembly
also requested the Secretary-General to continue to seek on a regular
basis information from States and regional organizations and the
concerned organs and agencies of the United Nations system on action
taken to alleviate the special economic problems of the affected
States and to report thereon to the Security Council, as well as to
submit a report on the implementation of the resolution to the
Assembly at its fifty-first session.  The present report was prepared
in response to that request.


               II.  RECENT ACTION TAKEN BY THE SECURITY COUNCIL

4.   The 1994 report of the Secretary-General on the subject (A/49/356)
provided background information (sect. II) on the initial actions
taken by the Security Council and its subsidiary bodies in response to
requests for assistance, under the provisions of Article 50 of the
Charter of the United Nations, received from eight States (Albania,
Bulgaria, Hungary, Romania, Slovakia, the former Yugoslav Republic of
Macedonia, Uganda and Ukraine) affected by the implementation of
sanctions against the Federal Republic of Yugoslavia.  The subsequent
report (A/50/423) reviewed the decisions adopted by the Security
Council and its Committee established pursuant to resolution 724
(1991) concerning Yugoslavia during the period from August 1994 to
August 1995 with regard to the sanctions regime, particularly those
measures that had a direct or indirect bearing on the neighbouring and
other affected countries.  An update of further pertinent steps taken
by the Council and the Committee from September 1995 to August 1996 is
given below.


                   A.  Action taken by the Security Council

5.   During the period under review, the Security Council significantly
modified the regime of the mandatory measures in question, following
the initialling on 21 November 1995, at Dayton, Ohio, of the General
Framework Agreement for Peace in Bosnia and Herzegovina and the
annexes thereto (collectively the Peace Agreement) (see
A/50/790-S/1995/999) by the Republic of Bosnia and Herzegovina, the
Republic of Croatia and the Federal Republic of Yugoslavia.  By
resolution 1022 (1995) of 22 November 1995, the Council suspended
indefinitely, with immediate effect and subject to certain provisions
stipulated in the resolution, the sanctions against the Federal
Republic of Yugoslavia.  1/  In addition, by resolution 1021
(1995) of the same date, the Council stipulated the terms and timing
for terminating the embargo on deliveries of weapons and military
equipment to all the countries of the former Yugoslavia.  By a note
verbale dated 11 December 1995, the Chairman of the Security Council
Committee established pursuant to resolution 724 (1991) concerning
Yugoslavia apprised all States of the action taken by the Committee to
amend the guidelines for the conduct of its work in the light of
resolutions 1021 (1995) and 1022 (1995).

6.   On 26 February 1996, the Security Council was informed, through
the appropriate political authorities, that, in the assessment of the
commander of the Implementation Force in Bosnia and Herzegovina,
Bosnian Serb forces had withdrawn from the zones of separation
established in the Dayton Peace Agreement.  Therefore, in accordance
with the provisions of paragraph 2 of Security Council resolution 1022
(1995), the measures imposed on the Bosnian Serb party were also
suspended indefinitely, starting on 27 February 1996.  By a note
verbale dated 27 February 1996, the Chairman of the Committee informed
all States of the suspension of the corresponding provisions in the
Committee's guidelines for the conduct of its work.  At the same time,
the embargo on deliveries of weapons and military equipment to all
constituent republics of the former Socialist Federal Republic of
Yugoslavia remained in force, in accordance with Security Council
resolution 1021 (1995).

7.   In a note verbale of 14 March 1996 addressed to all States, the
Chairman of the Security Council Committee recalled that, on 14
December 1995, the Secretary-General had submitted to the Council a
report stating that the Republic of Bosnia and Herzegovina, the
Republic of Croatia and the Federal Republic of Yugoslavia had
formally signed the Peace Agreement in Paris on the same date. 
Therefore, in accordance with the provisions of paragraph 1 of
Security Council resolution 1021 (1995), 13 March 1996 would be the
date of termination of all provisions of the embargo on deliveries of
weapons and military equipment imposed by resolution 713 (1991),
except those related to the delivery of heavy weapons (as defined in
the Peace Agreement), ammunition therefor, mines, military aircraft
and helicopters.

8.   On 18 June 1996, the Chairman of the Security Council Committee
informed all States that the members of the Council had received
several reports by the Secretary-General on the implementation of
annex 1-B (Agreement on Regional Stabilization) of the Dayton Peace
Agreement.  By a letter dated 13 June 1996 (S/1996/433), the
Secretary-General transmitted a communication from the representative
of the Chairman-in-Office of the Organization for Security and
Cooperation in Europe (OSCE), describing progress achieved in
implementing the confidence- and security-building measures in Bosnia
and Herzegovina stipulated in article II of the Agreement on Regional
Stabilization.  By a letter dated 17 June 1996 (S/1996/442), the
Secretary-General transmitted further communications from the
representative of the Chairman-in-Office of OSCE, informing the
Council of the implementation of the measures for subregional arms
control envisaged in article IV of the Agreement on Regional
Stabilization and as agreed by the parties on 14 June 1996 at
Florence, Italy.  Therefore, in accordance with subparagraph 1 (c) of
Security Council resolution 1021 (1995), all provisions of the embargo
on deliveries of weapons and military equipment imposed by resolution
713 (1991) have been terminated.


          B.  Action taken by the Security Council Committee established
              pursuant to resolution 724 (1991) concerning Yugoslavia

9.   During the reporting period and until the suspension of the
sanctions described above, the Security Council Committee continued to
deal, in accordance with the revised consolidated guidelines for the
conduct of its work, with a wide range of issues, including those of
particular importance to the countries negatively affected by the
implementation of the measures in question.  In response to specific
requests from several States experiencing special economic problems as
a result of the sanctions, the Committee authorized, as limited
exemptions from the sanctions regime under exceptional circumstances,
designated transactions or services of crucial importance to those
States.  For example, the Committee decided to approve:

     (a) A request from Albania for the transit passage of electric
energy through the electric power grid of the Federal Republic of
Yugoslavia from third countries for an initial period of three months
from 26 October 1995, on condition that Albania and the countries
concerned would inform the Committee, on a monthly basis, of the
quantities of electricity transferred through the Federal Republic of
Yugoslavia and received in Albania;

     (b) A request from Romania to export certain petroleum products
to the Federal Republic of Yugoslavia, which were urgently needed for
the maintenance of the Iron Gates I hydroelectric and navigation
system on the right-hand bank of the Danube (500 metric tons of diesel
oil and 2 metric tons of motor oil for ice-breakers, as well as 1,500
metric tons of fuel for heating premises and equipment used for
breaking ice by vibration).

10.  On the basis of a report by the Executive Director of the Danube
Commission, the Committee notified the President of the Security
Council that a further period of 60 days was required for completion
of the necessary repairs to the locks of the Iron Gates I system. 
Accordingly, the Committee conveyed its understanding that Council
resolution 992 (1995), which provided a temporary exemption from the
provisions of paragraph 16 of resolution 820 (1993) regarding
restrictions on navigation on the Danube, should remain in force until
19 December 1996.  The Committee also approved a request from Romania
to provide the Federal Republic of Yugoslavia with certain supplies
essential to the repair of the locks of the Iron Gates I system, in
accordance with resolution 992 (1995).

11.  Starting in September 1995, the Committee issued, under its
streamlined rules and procedures, nine blanket authorizations for
specified shipping companies to trans-ship unlimited quantities of
certain materials through the Federal Republic of Yugoslavia along the
Danube.  The short period of time between the issuance of the blanket
authorizations and the suspension of the sanctions under Security
Council resolution 1022 (1995) prevented the Committee from
considering suggestions by Hungary and Ukraine that the list of goods
covered by blanket authorizations be expanded and include, for
example, bulk agricultural commodities such as wheat and corn.

12.  By a letter dated 10 May 1996, the representative of Hungary
presented to the Chairman of the Committee a summary of the damages
and losses accrued in 1995 by Hungary as a result of the economic
sanctions against the Federal Republic of Yugoslavia.  The summary
indicates the damages and losses due to the restriction on
Hungarian-Serbian bilateral economic relations, estimated at
$195 million, and the ban on transit through the Federal Republic of
Yugoslavia, amounting to $39 million, as well as the shortfall of
incomes and extra expenses for the budget, social insurance and local
governments, totalling $130 million.  The cumulative size of Hungary's
losses generated from June 1992 to November 1995 is estimated at $2.3
billion.  The Committee considered the communication and took note of
the information contained therein.

13.  Pursuant to the notes by the President of the Security Council
dated 29 March and 31 May 1995 and 24 January 1996 (S/1995/234,
S/1995/438 and S/1996/54), the Committee implemented a number of
measures aimed at making its procedures more transparent.  These
include the practice of issuing press releases on matters of
importance discussed in the Committee and making available to the
delegations concerned lists of its major decisions prepared on a
regular basis, as well as periodic oral briefings by the Chairman of
the Committee for interested States Members of the United Nations
following the meetings of the Committee.

14.  It will be also recalled that in his letter of 31 May 1995
addressed to the Secretary-General (S/1995/440), the President of the
Security Council stated that the members welcomed the increase in
staff to support the sanctions committees and looked forward to a
report in due course on whether that increase had decreased the
backlog in processing applications to those committees.  Subsequently,
in November 1995, the Secretary-General informed the President of the
Security Council that the backlog in processing humanitarian
applications submitted to the relevant sanctions committees had been
eliminated.  In addition to having reinforced the relevant unit in the
Department of Political Affairs of the Secretariat, a process of
streamlining of the working practices of the secretariats of the
sanctions committees was initiated so as to ensure that humanitarian
applications were processed at an ever faster pace, thus allowing
supplies to reach needy civilian populations without delay.


                III.  INFORMATION REGARDING ECONOMIC ASSISTANCE TO
                      THE AFFECTED STATES

15.  Pursuant to General Assembly resolution 50/58 E, a note verbale
from the Secretary-General was circulated to Governments on 22
February 1996, inviting them to communicate information on the matter. 
In addition, by a series of letters dated 16 April 1996, the Under-
Secretary-General for Economic and Social Information and Policy
Analysis, on behalf of the Secretary-General, requested the competent
organs, programmes and specialized agencies of the United Nations
system, including the international financial institutions, as well as
the regional organizations concerned, to provide him with updated
information on the activities undertaken by them in response to the
relevant provisions of the resolution.  The replies received are
summarized below.


                    A.  Communications received from States

16.  As at 1 September 1996, the Secretary-General had received replies
to the note verbale from six States, namely, Germany, the Russian
Federation, the Syrian Arab Republic, Thailand, the United Kingdom of
Great Britain and Northern Ireland and the United States of America. 
In addition, two affected countries - Bulgaria and Ukraine - addressed
special communications to the Secretary-General regarding the issues
referred to in General Assembly resolution 50/58 E, as outlined below.


                            1.  Affected countries

17.  By a letter dated 23 July 1996 (A/51/226-S/1996/595), the
representative of Ukraine transmitted to the Secretary-General an
aide-me'moire on the position of Ukraine on the problems of
implementation of the economic sanctions imposed by the Security
Council, in which it is stated, inter alia, that Ukraine has paid a
high price for strict and consistent implementation of the sanctions. 
The impact of the sanctions has been tangible on the mining,
metallurgical, machine-building and electrotechnical industries, which
traditionally had close links with the Balkan region.  The biggest
shipping company of Ukraine, UDASCO, which operates more than 1,000
vessels and employs about 25,000 workers depending completely on
trans-shipment via the Danube, has also suffered great losses. 
According to its estimates, Ukraine has incurred around $4.5 billion
in direct losses during the period of implementation of the relevant
Security Council resolutions.

18.  In its aide-me'moire, Ukraine puts forward a number of ideas and
proposals for alleviating the negative impact of sanctions on third
States.  In view of the sanctions' long-lasting effect, Ukraine is of
the opinion that the United Nations system, including the
international financial institutions, regional organizations and
Member States should continue to pay special attention to the economic
problems of the affected States and their adverse social impact.  For
this purpose, consideration should be given to ways and means of
improving procedures for consultations to maintain a constructive
dialogue with such States, including through regular and frequent
meetings as well as special meetings between the affected third States
and the donor community.  Among economic measures, Ukraine proposes
for consideration (a) the opening of special credit lines by
international financial institutions to render direct financial
assistance to third countries to support technical projects carried
out in those countries; (b) the introduction by the donor countries,
on a bilateral and multilateral basis, of trade preferences for third
countries, including promotion of their exports; and (c) donor country
support, on a bilateral and multilateral basis, of investments in the
economies of third countries, special preference being given to the
sectors that sustain direct losses from the sanctions.

19.  Ukraine also deems it important that, as partial compensation for
losses, a special regime of participation in the post-conflict
reconstruction and development should be considered for third States
affected by the implementation of sanctions.  Moreover, Ukraine
suggests that the international community might study the possibility
of introducing a mechanism to determine procedures for levying special
taxes on States that are benefiting from the imposition of sanctions
regimes (e.g., as a special contribution to the regional development
banks), thus creating the funds that could be used to finance projects
in the affected third States.  Furthermore, reference is made to such
other proposals as creating a special compensatory mechanism,
including a compensation fund; reducing the contribution of affected
countries to the financing of peacekeeping operations by their total
sanctions-related losses, to be calculated according to United Nations
methodology; establishing a standing Security Council sanctions
committee charged with several functions regarding collateral damage
caused by sanctions; and further improvements in the working methods
of sanctions committees.

20.  By a note verbale dated 30 August 1996 (A/51/330-S/1996/721 and
Corr.1), the representative of Bulgaria transmitted to the Secretary-
General a national communication on the implementation of General
Assembly resolution 50/58 E, in which it is pointed out, inter alia,
that, by virtue of its geographic location and the outward nature of
its economy, Bulgaria has been extremely vulnerable to the negative
side effects of the sanctions imposed on the Federal Republic of
Yugoslavia.  The bulk of trade losses incurred by Bulgaria was due to
the disruption of traditional commercial routes for its exports to
countries in central and western Europe, which resulted in substantial
scaling down of economic relations with those countries.  Estimates of
the direct losses incurred by Bulgaria in 1992-1995, prepared in
consultation with United Nations Development Programme, amount to $1.6
billion.  Bulgaria's direct and indirect losses and costs for the same
period total $8 billion.

21.  In its communication, Bulgaria expresses the view that the
international community was not fully prepared to respond in an
adequate manner to the difficulties and unforeseen negative
consequences of the sanctions for the neighbouring States.  Following
the suspension of the sanctions regime, Bulgaria proposes that
assistance be provided by (a) easing the access of companies from the
interested affected States to orders for humanitarian assistance to
Bosnia and Herzegovina and the Federal Republic of Yugoslavia; (b)
participation of companies from the affected States in post-conflict
reconstruction and rehabilitation of the crisis-stricken areas in the
former Yugoslavia; and (c) improvement of the regional infrastructure,
in particular the priority transport corridors crossing the territory
of Bulgaria, as defined by the Pan-European Conference of Ministers of
Transport, held in Crete in March 1994.  Special attention is drawn to
the need for enhancing regional and subregional cooperation,
particularly in the light of the Sofia Declaration on Good-Neighbourly
Relations, Stability, Security and Cooperation in the Balkans, adopted
at the meeting of the Ministers for Foreign Affairs of the Countries
of South-Eastern Europe, held at Sofia on 6 and 7 July 1996 (see
A/51/211- S/1996/551).

22.  With regard to the implementation of provisions of the Charter
related to assistance to third States affected by the carrying out of
sanctions, Bulgaria reaffirms the importance it attaches to setting up
a mechanism for the effective application of Article 50.  In its view,
such a mechanism should be based on the understanding that the
application of sanctions is a collective endeavour and that the
hardship for the affected third countries should be equitably shared
among all Member States; reference is made to several proposals and
suggestions aimed at minimizing the collateral effect of sanctions on
third States.  As for economic assistance, special attention is drawn
to the following suggestions:  (a) exploring the possibility of
establishing a trust fund to provide assistance to third States
affected by the imposition of sanctions; (b) economic assistance by
international financial institutions, including debt relief and
emergency loans on highly concessional terms; and (c) consideration of
all other forms of support, including direct assistance in cash or in
kind, provision of alternative sources of supply and alternative
markets, specific commodity purchase agreements, compensatory
adjustments of international tariffs, assistance for the promotion of
investments and technical cooperation with the affected countries.


                              2.  Donor countries

23.  The donor and other countries that replied to the Secretary-
General's note verbale shared, in general, the concern about the
persisting special economic problems of States adversely affected by
the severance of their economic relations with the Federal Republic of
Yugoslavia and the disruption of traditional links in the region. 
Most of the countries recognized, in principle, the need to provide
assistance to the affected States.  Several States (Germany, the
Russian Federation, Thailand, the United Kingdom and the United
States) provided specific information on their financial, technical or
humanitarian assistance to the countries in question.  In addition,
some countries, such as the Syrian Arab Republic, expressed the view
that the suspension of the sanctions should help in alleviating the
special economic problems confronting the affected States.  Other
countries, for example, Germany, encouraged the affected States to
participate actively in the regional cooperation projects and
international efforts for the reconstruction and rehabilitation of the
conflict-stricken areas of the former Yugoslavia.

24.  As a Danube riparian State, Germany has reaffirmed that it has
been adversely affected by the economic sanctions against the Federal
Republic of Yugoslavia.  From 1990 to 1994, German trade with Serbia
and Montenegro declined from DM 4 billion to DM 90 million, followed
by an increase to DM 132 million in 1995.  Nonetheless, Germany has
provided comprehensive assistance to other countries economically
affected by the sanctions, in particular to the neighbouring countries
of the Federal Republic of Yugoslavia.  At the bilateral level, the
German Transform Programme encompasses technical cooperation and
advisory services in such areas as privatization, social policy, small
and medium-sized businesses, promotion and reorientation of trade
towards the European Union, and alternative infrastructure
development.  For example, for the extension of the railway tunnel
between the former Yugoslav Republic of Macedonia and Bulgaria,
Germany contributed DM 5 million by the end of 1995 and has earmarked
an additional DM 30 million for 1996.

25.  Germany has reported aggregated data on its bilateral technical
assistance, in 1993-1995, to the following affected countries: 
Albania (DM 9.7 million in 1995), Bulgaria (DM 50 million), Hungary
(DM 57 million), the Republic of Moldova (DM 12.2 million), Romania
(DM 28 million in 1994-1995), the former Yugoslav Republic of
Macedonia (DM 24 million) and Ukraine (DM 82.2 million).  In addition,
Germany has participated in the European Union's assistance programmes
such as PHARE (Pologne-Hongrie:  Assistance a` la restructuration
e'conomique) and TACIS (Technical Assistance for the Commonwealth of
Independent States).  In 1990-1995, the German contributions to the
PHARE programme included 480 million European currency units (ECU) for
Bulgaria, ECU 580 million for Hungary and ECU 540 million for Romania. 
Under the TACIS programme, ECU 48.2 million were committed, in
1991-1995, for the Republic of Moldova and ECU 500 million were
earmarked for 1996-1999 for Ukraine.

26.  Germany has also reported various costs incurred by it as a result
of the conflict in the former Yugoslavia, as well as its contribution
to international peacemaking, peacekeeping and peace-building efforts
in the region.  Since 1992, Germany has spent DM 14 billion (DM 3.6
billion per year) for refugees and displaced persons from the former
Yugoslavia; and its official humanitarian assistance since the
outbreak of the conflict totals DM 1.1 billion.  The German share in
providing material and personnel for the international monitoring of
sanctions included DM 10 million for the sanctions assistance missions
from October 1992 to May 1996; DM 3 million for the Western European
Union (WEU) police and customs assistance on the Danube from May 1993
to May 1996; and DM 27 million for the NATO-WEU Operation Sharp Guard
in 1996.  Moreover, the German financial contribution for the
reconstruction of the conflict-stricken areas totals DM 175 million in
1996 and is projected to reach DM 600 million in 1999.

27.  The Russian Federation has reported the following measures taken
with regard to Ukraine, Romania, Hungary and Bulgaria.  On 20 March
1995, agreements were signed with Ukraine on the restructuring of its
debt in respect of government credits, and on principles for settling
its debt in respect of the natural gas supplied in 1994 and on current
payments for the supply of natural gas in 1995; under those
agreements, payments of $2.5 billion were deferred.  In
September 1994, Romania was included among the countries benefiting
from the Russian Federation's scheme of preferences, resulting in a
50 per cent reduction (as at 15 May 1996, a 25 per cent reduction) in
customs tariffs on Romanian goods entering the Russian Federation. 
Pursuant to an April 1994 agreement, almost half of the former Soviet
Union's debt to Hungary ($1.7 billion) was repaid in 1993-1994 through
the supply of machinery and equipment, while the implementation of a
number of contracts on the repayment of the balance of the debt ($950
million, including interest) is now under way.  In accordance with a
March 1995 agreement, the Russian Federation's $100 million debt to
Bulgaria will be repaid through deliveries of industrial equipment,
machinery and spare parts.

28.  Thailand has informed the Secretariat that its Government
contributed $10,000 in September 1995, through the International
Committee of the Red Cross (ICRC), for the local hospital at Bihac,
Bosnia and Herzegovina, and, later, another $20,000 towards ICRC field
activities.

29.  The United Kingdom of Great Britain and Northern Ireland has
provided detailed data on its assistance to Albania, Bulgaria,
Hungary, Romania, the former Yugoslav Republic of Macedonia and
Ukraine.  At the bilateral level, budget allocations to the Know-how
Fund for 1996-1997 are as follows:  1 million for Albania, 2.7
million for Bulgaria, 4.5 million for Hungary, 4.3 million for
Romania, 800,000 for the former Yugoslav Republic of Macedonia and
7 million (1995-1996) for Ukraine.  Further, more than 800,000 has
been allocated to those six countries in 1995-1996 for scholarships,
and their aggregate share for the same period in the British Council
and BBC World Service allocations amounted to 7 million and 6.1
million, respectively.

30.  At the multilateral level, the United Kingdom has been
participating in the assistance programmes of the European Union and
operations of the European Bank for Reconstruction and Development
(EBRD), as well as in International Monetary Fund and World Bank
lending to the affected countries.  The United Kingdom's contribution
(16 per cent of the budget) to the PHARE programme totals
276.9 million committed in 1990-1995 for Albania, Bulgaria, Hungary,
Romania and the former Yugoslav Republic of Macedonia, and 41.3
million allocated for 1996 for those countries.  As for Ukraine,
assistance has been provided through the TACIS programme in the amount
of 32.7 million committed for 1990-1995 (plus 18.8 million for
1996).

31.  The Government of the United States of America provided
approximately $11 million during the period of economic sanctions in
technical assistance to the affected States.  About $6 million was
spent to help create alternative routes around the Federal Republic of
Yugoslavia.  The remainder was spent on equipment and training for the
border control authorities of the "front-line" States.


                   B.  Response of the United Nations system

32.  As at 1 September 1996, a total of 12 organizations of the United
Nations system had provided updated information on their assistance
activities in the affected States.  Replies were received from the
following specialized agencies:  the International Labour Organization
(ILO), the Food and Agriculture Organization of the United Nations
(FAO), the World Health Organization (WHO), the World Bank, the
International Monetary Fund (IMF) and the United Nations Industrial
Development Organization (UNIDO).  Several United Nations programmes
and funds, including the United Nations Children's Fund (UNICEF), the
United Nations Conference on Trade and Development (UNCTAD), the
United Nations Development Programme (UNDP), the World Food Programme
(WFP), the Office of the United Nations High Commissioner for Refugees
(UNHCR) and the Economic Commission for Europe (ECE) also responded. 
The replies received from these components of the United Nations
system indicate that all of them have continued to provide development
support to the affected countries.  Such activities have contributed
to economic and social well-being in the recipient countries and have
thus indirectly offset some of the special economic problems resulting
from the sanctions.  However, in many instances, the activities were
not directly related to the immediate consequences of the sanctions
and, for this reason, are not fully reflected in the following section
of the report.  The section focuses primarily on balance-of-payments
support, transport and infrastructure development and assistance in
trade and investment promotion provided to the neighbouring and other
affected countries, regardless of whether they formally invoked
Article 50 of the Charter or not.


                                1.  World Bank

33.  The World Bank has been implementing wide-ranging programmes of
support to countries of central and eastern Europe affected by the
sanctions against the Federal Republic of Yugoslavia.  Such assistance
includes balance-of-payments support, project financing and technical
cooperation.  In view of the appeals for special economic assistance,
these programmes have been reviewed, on a case-by-case basis, to make
them as responsive as possible to the particular needs of the affected
countries.

34.  In Albania, the Bank is financing a first transport project aimed
at rehabilitating road sections on the East-West transport corridor
and a rural roads project for improving access to markets, as well as
a power loss reduction project and a power transmission and
distribution project for improving infrastructure and reducing losses,
thus minimizing reliance on the temporary import of electricity from
neighbouring countries.  In the near future, negotiations are expected
on a national roads project, to be followed shortly by a second
transport project, which would finance rehabilitation and improvements
in the port of Durre"s, Albania, and along additional road sections of
the East-West corridor.

35.  Bosnia and Herzegovina became a member of the World Bank Group on
1 April 1996, retroactive as from 25 February 1993.  The Bank's
objectives in the country are to support a broad-based rehabilitation
of infrastructure and the social sector that should jump-start
economic recovery and create jobs; to strengthen and rebuild
institutions; and to support, in parallel, the transition to a market-
based economy.  The Bank's resources have been used as concessional
"seed capital" to finance - combined with other donor resources -
projects across a broad range of sectors.  As a first step, the Bank
established a $150 million trust fund financed from its surplus to
quickly support emergency operations in the country.  A first group of
seven emergency projects, approved in February-May 1996, includes a
recovery project ($15 million grant, $30 million credit); a farm
reconstruction project ($20 million credit); a water, sanitation and
solid waste urgent works project ($20 million credit); a transport
reconstruction project ($35 million credit); a war victims
rehabilitation project ($5 million grant); an education reconstruction
project ($5 million grant); and a district heating reconstruction
project ($20 million credit).  In July 1996, the Bank approved credits
from the International Development Association (IDA) totalling $75.6
million for a second group of five emergency operations in landmine
clearing ($7.5 million), housing repairs ($15 million), electric power
reconstruction ($35.6 million), public works and employment ($10
million), and the demobilization and reintegration of former
combatants ($7.5 million).  Disbursement of funds for priority
reconstruction activities on the ground has already begun.  In
addition, a transition assistance credit, under standard IDA lending,
will provide balance-of-payments and fiscal support to the efforts of
the State and Federation Governments in economic reintegration,
institution-building and economic recovery.

36.  In Bulgaria, Bank assistance in the past year focused on the
infrastructure and social sectors.  A $95 million railway
rehabilitation project and a $26 million health sector restructuring
project were approved.  A Bank team is currently working with the
Government to develop a State enterprise reform programme.

37.  For Croatia, the Bank approved, in May 1996, new loans for the
following projects:  (a) a $9.5 million capital market development
project directed at supporting private sector investment through the
development of capital markets; (b) a $5 million technical assistance
project to support the privatization of public enterprises and finance
pricing studies in the telecommunications and energy sectors; and
(c) a $17 million farmer support project to help provide private
sector services in agriculture.  Well advanced in preparation is the
key $80 million enterprise and financial sector adjustment project,
which will be supported by an investment recovery loan to help finance
a new cycle of private investment.  A second reconstruction project is
being designed to repair war-damaged regional transport and power and
water systems.  Discussions have also taken place with the Government
on a possible emergency reconstruction project for Eastern Slavonia
following demilitarization.  In addition, the Bank has a pipeline of
possible projects aimed at upgrading water and sewerage systems,
improving port infrastructure, supporting urban improvements in
Zagreb, and upgrading railways.

38.  In Hungary, the Bank has provided balance-of-payments support with
five adjustment and programme loans.  Two additional major adjustment
operations - an enterprise and financial sector loan and a public
finance adjustment loan - are currently in preparation.  Investment
lending covers a considerable range of sectors (industrial
restructuring, energy and environment, roads and urban transport and
the social sectors) and aims at supporting private sector development
via projects that can help remove bottlenecks, and at improving the
efficiency of public sector investments.  Further investment projects
in power, municipal utilities and the environment are in preparation.

39.  In Romania, Bank assistance has focused on providing balance-of-
payments support to the Government's stabilization and structural
reform programme, particularly through a $280 million enterprise and
financial sector adjustment loan approved in January 1996.  The loan
is complemented by several other Bank-financed projects, including a
power sector rehabilitation project for $110 million; a railway
rehabilitation project for $120 million; and an employment and social
protection project for $55.4 million.

40.  In Slovenia, because of its relatively high per capita income,
Bank support has focused on selective high priorities.  Currently,
four new projects are being prepared in the areas of environmental
management and control, investment recovery and development of
irrigation facilities.

41.  In the former Yugoslav Republic of Macedonia, the Bank has
strongly supported the Government's efforts to upgrade essential
infrastructure.  In April 1995, the Bank approved a $24 million
transit facilitation project to upgrade portions of the East-West
corridor, and improve the country's border crossings with Albania and
Bulgaria.  In addition, two operations totalling $99 million (all on
soft IDA terms) were approved in May 1995 to support the Government's
programme of reform in the enterprise, banking and social sectors.  An
exceptionally high level of IDA resources was made available in
recognition of the country's special circumstances, including the
adverse effects of the sanctions.  Additional financial and technical
assistance resources were mobilized in September 1995 at the second
Consultative Group meeting organized by the Bank.  Through May 1996,
two operations for $20 million were approved and two others, including
a structural adjustment loan/credit ($42 million), were submitted to
the Board.


                        2.  International Monetary Fund

42.  As at the beginning of 1995, all eight countries invoking
Article 50 of the Charter in connection with the sanctions against the
Federal Republic of Yugoslavia - Albania, Bulgaria, Hungary, Romania,
Slovakia, the former Yugoslav Republic of Macedonia, Uganda and
Ukraine - had made use of IMF resources during the period of
application of the sanctions, in support of programmes aimed at
addressing their balance-of-payments difficulties.  From June 1995 to
May 1996, the Fund approved additional financial assistance for
Hungary, Romania and Ukraine totalling $1.7 billion, which includes a
new standby arrangement for Hungary (total access $381.4 million); an
extension and augmentation of the standby arrangement for Romania
(from $190.7 million to $463.2 million); and a new standby arrangement
for Ukraine ($864.6 million).

43.  From May 1992 to May 1996, total Fund disbursements to the eight
affected countries amounted to more than $3 billion, an increase of
$710 million during the past year.  All the affected countries except
Uganda made drawings under standby arrangements, and most of them were
eligible for disbursements or purchases under special Fund facilities,
such as the Enhanced Structural Adjustment Facility (Albania ($44.9
million) and Uganda ($145.3 million)); and the Systemic Transformation
Facility (Bulgaria ($168 million), the former Yugoslav Republic of
Macedonia ($35.8 million), Romania ($272.5 million), Slovakia ($186
million) and Ukraine ($720.7 million)).  Moreover, a total of
$1.6 billion in additional or remaining amounts has already been
approved by the Fund's Executive Board, and can be disbursed when the
timetable and conditions specified under the arrangements have been
met.

44.  In providing financial assistance to the affected countries, the
Fund has taken into account, inter alia, the strength of their
economic policies and their balance-of-payments needs, including
estimates of the adverse effects of the sanctions.  As with all its
members, the Fund continues to assist the affected countries through
policy advice and technical assistance, as appropriate, to help them
overcome remaining economic difficulties.


                   3.  United Nations Development Programme

45.  In follow-up to its activities during the previous reporting
period (see A/50/423, paras. 54-57), UNDP has proceeded with its
regional project providing assistance to improve alternative land
routes around the Federal Republic of Yugoslavia, thus helping
minimize the adverse impact of sanctions on neighbouring countries. 
Civil works have been completed at several border crossings in
Albania, Bulgaria, Romania and the former Yugoslav Republic of
Macedonia.  As a result, the potential of the East-West transport
corridor crossing the Balkan region has been significantly enhanced.

46.  In Bosnia and Herzegovina, a major UNDP-sponsored inter-agency
programming mission identified, in March 1996, a group of 46 projects
at a total cost of $112 million.  In May 1996, UNDP opened its
resident representative's office, and approved a first phase of
assistance (totalling $12.4 million) under a rehabilitation and
development programme, to be financed by $1.4 million from the special
programme resources, and the rest from the UNDP indicative planning
figure, and cost-sharing or trust fund contributions from interested
countries.  First contributions were received from Austria ($200,000),
Italy ($700,000), Japan ($30.8 million) and Spain ($950,000).  Initial
operations for support to three area development programmes, based at
Livno, Bihac and Banja Luka, have already started.

47.  In Croatia, UNDP has recently undertaken a multisectoral needs
assessment mission for reconstruction and rehabilitation, with special
emphasis on the long-term needs of refugees and displaced persons.  In
addition, a project has recently been identified to prepare an area
development programme for the county of Sibenek, which would create a
physical and economic environment for the reintegration of conflict-
affected and displaced people.

48.  UNDP support for Slovenia has given priority to human resources
development, privatization and public sector reform, and the promotion
of small and medium-sized enterprises.

49.  In the former Yugoslav Republic of Macedonia, UNDP and the
Department for Development Support and Management Services of the
Secretariat are currently assisting the Government in the preparation
of a national development strategy.  A number of project proposals
related, inter alia, to investment promotion, environmental
management, and marble and granite production are under review.


4.  United Nations Conference on Trade and Development

50.  In the context of its technical assistance programme, UNCTAD
assisted, in 1995-1996, the Government of Albania in organizing study
tours and training courses in Belgium, Ireland, Italy, Hungary and
Poland for senior government officials and staff of the Albanian
Centre for Foreign Investment Promotion.  UNCTAD also assisted the
Centre in computerizing its investment registration and monitoring
system and in carrying out financial analysis studies of 16 investment
projects in Albania.  In addition, support was provided for high-level
government officials to undertake investment promotion missions in
Austria, Italy and Switzerland.

51.  The UNCTAD Automated System for Customs Data is being implemented
in Hungary, Romania, Slovakia, the former Yugoslav Republic of
Macedonia and Uganda.  Albania has decided to adopt the System and
final negotiations are currently under way.


5.  Economic Commission for Europe

52.  The Economic Commission for Europe, in cooperation with the
Organisation for Economic Cooperation and Development, the Central
European Initiative and Black Sea Economic Cooperation, has supported
the efforts of its member States in coping with the side effects of
sanctions.  Most recently, ECE took part in the Black Sea Business
Forum, held at Bucharest in May 1996, where ECE chaired a high-level
meeting on the reconstruction process in the former Yugoslavia,
including participation therein of the affected countries.

53.  In January 1996, the ECE Inland Transport Committee welcomed the
progress in restoring the freedom of navigation on the Danube after
the suspension of sanctions against the Federal Republic of Yugoslavia
and expressed its concern with regard to the continued taxation by
Yugoslav authorities of vessels in transit across the territory of the
Federal Republic via the Danube.  It considered that the practice of
taxation was unacceptable and detrimental to the regime of freedom of
navigation on that international artery and, therefore, should cease
immediately.

54.  ECE is the executing agency for the Trans-European Motorway and
Trans-European Railway projects that cover central and eastern
European countries affected by the sanctions.  Both projects have been
contributing to the expansion and upgrading of road and rail
infrastructure, thereby helping the countries concerned to overcome
the effects of the sanctions.


C.  Follow-up to regional initiatives and assistance arrangements

55.  The Special Ad Hoc Meeting of Senior Officials, convened by the
Conference on Security and Cooperation in Europe at Vienna early in
1994, resulted in a viable approach to supporting, at the bilateral
and multilateral levels, several important infrastructure projects in
the affected countries and integrating them into a longer-term
regional perspective of economic development (see A/49/356,
paras. 68-75).  Updated information on the implementation of the donor
commitments made at the Vienna meeting and its follow-up, provided by
the European Union and EBRD, is summarized below.


1.  European Union

56.  The European Union continues to support, mainly through the PHARE
budget, the activities related to border-crossing infrastructure and
customs facilitation in the Balkan region.  Budget allocation for 1995
(ECU 83.5 million) for border-crossing infrastructure projects in the
region is somewhat lower than it was in 1994 (ECU 98.4 million). 
However, this should be seen in the light of the improved situation in
the region in terms of reduced waiting hours at the most important
border crossings.  On the average, waiting time has decreased from 12
to 3 hours, which clearly indicates that the previous infrastructural
investments have had positive results.  Indeed, most recent figures
have confirmed that the trend of reduced waiting time at border
crossings continues.  Infrastructure projects financed under the 1995
budget are, to a large extent, a continuation of projects initiated in
previous years for road rehabilitation and upgrading, border-crossing
modernization and supply of customs control and communication
equipment in Albania, Bulgaria, Hungary and Romania (see A/50/423,
para. 64).  Some of the projects have already been implemented, while
the rest will be completed by the end of 1996.

57.  On the customs side, the European Commission organized several
meetings during the past year, between donors and the 11 countries
involved (Albania, Austria, Bulgaria, Greece, Hungary, Romania,
Slovakia, Slovenia, the former Yugoslav Republic of Macedonia, Turkey
and Ukraine) in order to review the functioning of the two priority
Balkan customs corridors created to ease the border crossing
bottlenecks caused by the disruption of transit traffic through the
former Yugoslavia (see A/50/423, para. 66).  As a result of the
review, a short-term action plan for the implementation of the
corridors was adopted.  It has been agreed to enlarge both the first
and the second customs corridors, to apply the International
Convention on the Harmonization of Frontier Controls of Goods, and to
organize informal local committees composed of corresponding
authorities at the border-crossing posts situated on the corridors, to
help find common solutions to practical problems.  It has also been
agreed that the implementation of these measures could be financed
through the PHARE Transit Facilitation and Customs Modernization
Programme, which has a total budget of ECU 91 million for the period
1995-1999.  By the end of 1995, customs equipment worth around ECU 2
million was delivered to several countries involved in the support of
the two Balkan customs corridors.


             2.  European Bank for Reconstruction and Development

58.  The European Bank for Reconstruction and Development has recently
approved a number of infrastructure development and trade finance
projects in several countries affected by the sanctions against the
Federal Republic of Yugoslavia.  These include a power transmission
and distribution project for Albania (total cost ECU 90 million; a
railway restructuring project for Bulgaria (ECU 234.7 million); a
motorway project for Hungary (ECU 368.2 million); a railway
rehabilitation project for Romania (ECU 321.7 million); a Skopje
airport rehabilitation project for the former Yugoslav Republic of
Macedonia (ECU 12 million); and the Yuzhny Fertilizer Terminal
(ECU 25.5 million) and Ukrrichflot (ECU 25.7 million) projects for
Ukraine.  The total cost of 15 relevant projects and programmes
approved by the Bank for these six countries amounts to more than
ECU 2.1 billion.  Several new projects for the countries of the region
are currently under consideration.


           IV.  PARTICIPATION BY THE AFFECTED STATES IN REHABILITATION
                AND RECONSTRUCTION OF THE CRISIS-STRICKEN AREAS
                IN THE FORMER YUGOSLAVIA

59.  The General Assembly in its resolution 50/58 E called upon the
United Nations system to promote the participation of suppliers from
the affected countries in the post-conflict rehabilitation and
reconstruction effort in the former Yugoslavia, particularly in three
ways, namely:  broader involvement in the provision of humanitarian
assistance; supply for the United Nations peacekeeping contingents;
and support for economic recovery programmes.  In this regard,
information was received from the World Bank, UNHCR and WFP, as well
as from the Department of Peacekeeping Operations and the Department
of Humanitarian Affairs of the Secretariat.


A.  Involvement in rendering humanitarian assistance

60.  The humanitarian assistance programme for the former Yugoslavia is
an important part of the United Nations contribution to the
implementation of the peace process in the region.  In the most recent
United Nations consolidated inter-agency appeal, covering the period
from January to December 1996, $825.7 million is being sought for
humanitarian assistance in the former Yugoslav republics, over $500
million of this amount being targeted for Bosnia and Herzegovina.  The
United Nations humanitarian agencies continue to focus on assistance
to war-affected populations, while promoting the return and
reintegration of refugees and displaced persons.  Many projects
address the recovery and rehabilitation needs of war-damaged societies
through transitional activities, including local capacity-building and
longer-term support programmes.  Of the total requirements identified
in the appeal, $347.3 million were available for the operation as at
the end of July 1996, leaving a shortfall of $478.4 million.  The
success of the operation will depend largely on the availability of
funding from all sources to enable the United Nations humanitarian
agencies directly involved (UNHCR, WFP, WHO and UNICEF) and other
parties active in the process to ensure, in a coordinated manner, the
effective and efficient delivery of the programme, including, as
appropriate, through broadening access for supplies particularly from
the affected countries.


1.  Office of the United Nations High Commissioner for Refugees

61.  For its relief operations in the former Yugoslavia, UNHCR has
procured both products and services from the neighbouring countries
affected by the sanctions, particularly as direct procurement by its
Supply and Transport Section at Geneva and by the Regional Purchasing
Unit at Zagreb and other local offices.  For the period from 1993 to
April 1996, the total UNHCR expenditure on procurement from nine
surrounding countries amounted to $19.3 million, which includes
humanitarian supplies from Austria ($537,584); bedsheets from Belarus
($1.1 million); diesel fuel from Bulgaria ($3 million); coal and other
supplies from the Czech Republic ($2.9 million); foodstuffs, heating
fuel and tyres from Hungary ($2.7 million); yeast and bedsheets/towels
from the former Yugoslav Republic of Macedonia ($471,519); blankets
from Poland ($4.2 million); various items and transport services from
Slovenia ($427,733); and yeast from Turkey ($3.9 million).  The 1996
UNHCR budget for the region totals $353 million, including $109
million for shelter, water and sanitation, $92 million for supplies to
returnees, $36 million for logistics and transport, etc., providing,
subject to funding, broader opportunities for supplies from the
neighbouring countries.


2.  World Food Programme

62.  The World Food Programme has purchased foodstuffs from eastern
Europe for its emergency feeding operations, particularly in the
former Yugoslavia.  To the extent that donors made cash resources
available, WFP purchased, during 1995 and the first half of 1996,
51,240 metric tons of various food commodities, at an estimated total
cost (including transport) of $15.3 million from four affected
countries, namely, Bulgaria ($742,500), Hungary ($6.8 million),
Romania ($7.3 million) and Slovakia ($458,156).  Additionally, through
the use of the ports of Bourgas in Bulgaria and Bar in Montenegro, WFP
has been making payments for stevedoring, handling and transport fees. 
By channelling about 45,000 tons of food through these ports, WFP
contributed over $2 million to local economies.  WFP is currently
looking into additional possibilities for purchases from the region
for food aid requirements for the remainder of 1996.


          B.  Access to material and food supply for the United Nations
              peacekeeping contingents

63.  The role of the United Nations peacekeeping operations in the
former Yugoslavia evolved considerably over the past year, especially
with the conclusion of the Dayton/Paris Peace Agreement in
November/December 1995.  As a result, the military responsibilities of
the United Nations Protection Force (UNPROFOR) and the United Nations
Peace Forces were transferred to NATO and the Implementation Force
(IFOR) in Bosnia and Herzegovina.  Simultaneously, the United Nations
Mission in Bosnia and Herzegovina (UNMIBH) was established to carry
out or coordinate some of the civilian functions called for in the
Peace Agreement.  The United Nations Confidence Restoration Operation
in Croatia (UNCRO) was succeeded by the United Nations Transitional
Administration for Eastern Slavonia, Baranja and Western Sirmium
(UNTAES), whose basic objective is the peaceful reintegration of the
region into the Republic of Croatia.  The United Nations Preventive
Deployment Force (UNPREDEP) in the former Yugoslav Republic of
Macedonia became a fully independent mission.  The United Nations
Mission of Observers in Prevlaka (UNMOP) continued to monitor
conditions on the peninsula.

64.  Within the framework described above and in accordance with the
delegation of authority to contract for purchase, rental or sale of
services, supplies, equipment or other requirements, all European
countries were included, already in 1992, in the local area of
procurement for UNPROFOR.  That was an innovation compared to
delegations of authority which had been issued for other peacekeeping
missions before 1992, authorizing local procurement only from a
limited number of countries from the particular geographical region. 
For that reason, the United Nations peacekeeping missions in the
former Yugoslavia have been able to issue tenders for their
requirements to prospective vendors in all European countries,
including those affected by the sanctions.  During the period from
September 1995 to June 1996, such local commercial procurement was
made, inter alia, from Austria (47 purchase orders totalling
$604,764), Slovakia (1 order of $8,700) and the former Yugoslav
Republic of Macedonia (33 orders totalling $924,036).

65.  Two other sources of access for supplies from the affected
countries to the United Nations peacekeeping operations in the former
Yugoslavia are commercial procurement and letters of assist to
Governments through United Nations Headquarters.  From September to
December 1995, commercial Headquarters procurement was made, inter
alia, from Bulgaria (1 purchase order of $324,500) and Ukraine (3
orders totalling $2,198,740).  Under letters of assist from
September 1995 to June 1996, the distribution of requisitions included
four to the Czech Republic ($67,400), one to Slovakia ($2,400), four
to Turkey ($166,000) and three to Ukraine ($29,000).  Further possible
supplies from the affected countries to peacekeeping contingents in
the region can be foreseen.


C.  Contribution to reconstruction and development efforts

66.  Reconstruction and economic recovery are crucial elements of the
international effort to restore peace and stability in the former
Yugoslavia.  The Priority Reconstruction and Recovery Programme for
Bosnia and Herzegovina, developed by the Government jointly with EBRD,
the European Commission and the World Bank, provides the framework for
international support in the required amount of $5.1 billion for the
defined and prioritized needs over the next three to four years
(1996-1999).  The multisectoral programme includes support for
employment generation and the restart of production, particularly in
small and medium-sized enterprises; vital reconstruction in all
infrastructure sectors, especially transport, energy, water and waste
management, as well as landmine clearing; national
institution-building and strengthening of the implementation
capacities of government and its agencies at all levels, including
some backup reserves for the new central bank; and the social sectors
such as health and education, as well as recurrent costs, such as
salaries, and a social fund for the most vulnerable members of
society.

67.  The European Commission, jointly with the World Bank, assumed the
lead role in coordinating donor support and providing finance for the
reconstruction effort.  At two donor conferences co-hosted by the
Commission and the Bank at Brussels, in December 1995 and April 1996,
representatives of 50 countries and 30 international organizations
pledged more than $1.8 billion in total commitments to meet the
external financing requirements for 1996 of rebuilding Bosnia and
Herzegovina.  Besides its contribution of around $100 million
committed for the first quarter of 1996, the Commission pledged
additional $260 million for the remainder of the year.  For the same
period, the total commitments by the World Bank from IDA were
$310 million-$350 million and pledges by EBRD amounted to $100
million.  Disbursement of funds has begun.

68.  In the process, the European Commission and the World Bank have
put in place accelerated procurement procedures to respond to the
emergency nature of the operation.  These simplified and streamlined
procedures include higher limits for the different procurement methods
(e.g., international competitive bidding) and a faster turn-around
time between different stages of the procurement process (e.g.,
between issuing notices and tendering bids).  Other donors are
encouraged to use similar procedures and to ensure that the principles
of economy, efficiency and transparency are observed.  Alternatively,
joint co-financing with multilateral institutions can also help ensure
transparency in procurement, including procurement from the
neighbouring and other affected countries in the region.

69.  All countries of the region, including all the successor republics
of the former Yugoslavia and other countries affected by the
sanctions, took part in the conferences at the invitation of the
sponsors.  Among bilateral donors, contributions were pledged, inter
alia, by Austria ($11.5 million), Bulgaria ($10,000), Croatia
($500,000), the Czech Republic ($6 million), Germany ($39.3 million),
Greece ($7 million), Hungary ($1 million), Romania ($210,000),
Slovakia ($1.5 million), Slovenia ($2.9 million), the former Yugoslav
Republic of Macedonia ($10,000) and Turkey ($26.5 million).  The
nature of the contributions was broadly consistent with the priority
programme, although there may be some adjustments reflecting the
interests and priorities of participating donors.  The quality and the
quantity of donor commitments were also noted, the concessionality and
flexibility of assistance being of crucial importance.  With the
objectives of increasing domestic demand, jump-starting economic
growth, and cementing peace through job creation, all donors were
urged to be as accommodating as possible in funding recurrent and
local costs by employing local companies and personnel to the maximum
extent.  Similarly, some neighbouring and other affected countries
would like their enterprises to be considered, on a priority basis,
for procurement of products and services.  It was agreed that the
assistance effort should facilitate the integration and cooperation
between entities and communities in Bosnia and Herzegovina, as well as
developing good-neighbourly relations in the Balkan region as a whole.

70.  At a conference held at Florence, Italy, in June 1996, the Peace
Implementation Council conducted a mid-term review of progress in the
implementation of the Peace Agreement for Bosnia and Herzegovina,
including in the area of economic reconstruction (see S/1996/446,
paras. 40-52).  In the Chairman's conclusions, it is noted, inter
alia, that complementary action in Bosnia and Herzegovina and the
donor community is indispensable for the second half of 1996.  While
the rapid disbursement of funds pledged by donors remains a top
priority, the speed of action depends to a large extent on cooperation
shown by the parties themselves and their willingness to bring about
the political and administrative conditions in which project
implementation can take place rapidly.


V.  CONCLUSIONS

71.  Following the conclusion of the Dayton Peace Agreement, the
Security Council took a series of steps resulting in the suspension of
economic sanctions against the Federal Republic of Yugoslavia (as from
November 1995) and the Bosnian Serb party (as from February 1996), and
the termination of the embargo on deliveries of weapons and military
equipment to all the countries of the former Yugoslavia (in June
1996).  Accordingly, the Security Council Committee established
pursuant to resolution 724 (1991) concerning Yugoslavia regularly
informed all States of the corresponding revisions to the consolidated
guidelines for the conduct of its work.  The suspension of the
sanctions regime has opened the way for the gradual resumption of
economic relations with and especially transit traffic through the
Federal Republic of Yugoslavia, thus considerably easing the burden on
the neighbouring and other States of the region that have been
adversely affected by the implementation of the economic sanctions
during the last three and a half years.

72.  In their communications to the Secretary-General or the Chairman
of the sanctions committee, three affected States (Bulgaria, Hungary
and Ukraine) have asserted that they have incurred significant
economic losses and costs as a result of the severance of economic
relations with the Federal Republic of Yugoslavia, particularly the
disruption of traditional transport links in the region.  In view of
the long-term impact of the sanctions on their overall economic and
social situation, these States call upon the international community
to continue to pay special attention to the persisting problems of the
affected countries.  Seeking support to alleviate the negative side
effects of the sanctions, two States have presented specific and
conceptual proposals addressed to the international community at
large.  Following the suspension of the sanctions regime, particular
importance is assigned to the need for enhancing regional economic
cooperation, especially in the transport and infrastructure sectors,
as well as facilitating the participation of the affected countries in
the reconstruction effort in the former Yugoslavia.

73.  Because of the limited number of replies received by the
Secretary-General from the donor States, it is not possible to assess
fully the level of bilateral economic assistance provided to the
affected countries.  While several communications identify
specifically the amount of assistance directly intended to address the
special economic problems arising from the implementation of
sanctions, some other reports refer to the ongoing assistance
activities by donors in support of the transition process in the
affected countries and do not indicate a supplement of funds to
compensate for the losses and costs incurred by those countries as a
result of the sanctions.  Although many reported projects had not been
intended exclusively as special assistance measures directly aimed at
mitigating the negative side effects of the sanctions regime, they
should have had an indirect positive effect on the countries
concerned.  Moreover, the active donor support for the reconstruction
process in the former Yugoslavia and other regional cooperation
programmes should ultimately benefit all the countries of the region.

74.  The relevant components of the United Nations system, particularly
the international financial institutions, continue to implement,
within their respective mandates, existing facilities and available
resources, substantial programmes of financial and technical
assistance in the affected countries.  In response to the renewed
appeals for special economic assistance, these programmes have been
reviewed, as appropriate, in order to make them as responsive as
possible to the particular problems of the countries concerned. 
Within the priorities of the investment programmes in the affected
countries, the World Bank has examined possibilities for redesigning
the relevant projects, reallocating funds under existing loans and
credits and expanding lending, taking into account sanctions-related
concerns.  In view of the adverse impact of sanctions on the balance
of payments, IMF has ensured that the affected countries, when
eligible, have access to its resources, receive the approval of new
financing and make drawings from special facilities.  However, new and
additional financial resources from all potential funding sources,
especially at the bilateral and regional levels, are needed to address
a variety of persisting economic problems of the affected States, in
particular the long-term effects of sanctions on their economies.

75.  Specific concerns of the affected countries in the areas of
transport and infrastructure development, and in trade and investment
promotion, have been pursued through special regional initiatives and
assistance arrangements under the auspices of OCSE, the European Union
and EBRD and in cooperation with other regional organizations.  The
European Union's PHARE and TACIS programmes have been crucial in
unlocking funds for a series of short-term projects for road
rehabilitation and upgrading, border-crossing modernization and supply
of customs control and communication equipment in the affected
neighbouring countries.  However, substantial additional resources are
needed to carry out longer-term transport and infrastructure projects
that are particularly important for the functioning of the priority
transport and customs corridors in the region.  Within regional
priorities, continued bilateral donor support, participation of
regional development and investment banks and private-sector
involvement would be essential for developing cross-border
cooperation, upgrading infrastructure and promoting trade and
investment in the Balkans.

76.  The neighbouring and other affected countries should be encouraged
to participate more actively in international support for the
rehabilitation, reconstruction and development efforts in the former
Yugoslavia.  As the focus of the United Nations humanitarian
assistance programme in former Yugoslavia is now shifting from a
four-year-old emergency relief operation to providing for the return
of millions of refugees and displaced persons, the longer-term support
projects open new possibilities for suppliers from the neighbouring
and other affected countries.  Moreover, the recent evolution of the
United Nations peacekeeping operations in the region may be
beneficial, through commercial procurement and government service, to
all European countries.  In implementation of the economic
reconstruction programme for Bosnia and Herzegovina, co-financing of
projects under the auspices of multilateral institutions, such as the
World Bank or EBRD, should facilitate and increase transparency in the
procurement of products and services, including procurement from
neighbouring countries (e.g., on the basis of simplified and
streamlined guidelines for emergency lending) and in the use of funds
for investment and recurrent costs in the region.  As rehabilitation
and reconstruction is a medium-term process, the international
community should ensure good donor coordination in line with the
agreed priorities and should accelerate, to the extent possible,
disbursement of funds on flexible and concessional terms.  In turn,
this will help restore and promote further economic cooperation with
and among all the States of the former Yugoslavia and other countries
in south-eastern Europe as an important contribution to stability and
prosperity in the Balkan region.


                                     -----

                                     Notes

1/       Specifically, the suspension relates to the measures that
were imposed by or reaffirmed in Security Council resolutions 757
(1992), 787 (1992), 820 (1993), 942 (1994), 943 (1994), 988 (1995),
992 (1995), 1003 (1995) and 1015 (1995).

 

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Date last posted: 28 December 1999 17:35:10
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