PRESIDENT TUDJMAN SPEAKS AT 2ND ANNIVERSARY GOVERNMENT SESSION ( Editorial: --> 9115 )

( Editorial: --> 9115 ) ZAGREB, Nov 7 (Hina) - Croatian President Franjo Tudjman on Friday congratulated government members on the second anniversary of their work under the chairmanship of Prime Minister Zlatko Matesa, and especially on fulfilling tasks which he had assigned them, as head of state, a year ago. Tudjman stressed that the main characteristics of the government's work so far were a stable social and political situation, economic stability and the consolidation of Croatia's international position. Tudjman said that the Constitution had to follow Croatia's positive constitutional tradition, mark the return to the European, and in part, north American constitutional tradition, and overall, to be the reflection of the fulfillment of historical aspirations of the Croatian people. The 1990 Constitution, Tudjman stressed, was a legal and political basis for the referendum on sovereignty, the constitutional decision on the independence of the Croatian state, and the constitutional decision on severing all constitutional ties with the former Yugoslavia. He stressed that in changing the constitution, those terms which were the remainders of the former system, in the formal, legal, value and even linguistic sense, had to be changed. Tudjman expressed his belief that a constitutional ban should be signed on the initiation of a procedure of associating Croatia into state alliances with other states, in which the alliance would or could result in the restoration of a Yugoslav state union, or some Balkan state associations in any form. Tudjman said that we could be satisfied with the 6% growth of industrial production during the past two years, and a 7% growth of Gross Domestic Product, as well as with the stability of the kuna and a small inflation rate, that is, only a 3.3% growth in retain prices. We could also be satisfied with the continuous growth of foreign exchange reserves, and the country's improved credit rating. This, Tudjman stressed, enabled government bonds to be sold abroad under relatively favourable conditions and the inflow of capital for the financing of infrastructural and other types of investment programmes. Tudjman described as encouraging the dynamic growth of foreign exchange savings, and domestic currency savings. He said that an efficient managing of the large public companies sector was becoming an ever more serious economic problem. Tudjman stressed that the average net salary this August, in relation to last August, had increased by about 15 percent nominally, and about 11% in real terms. In the past period, pensions were also increased by about 20% in relation to 1996. Tudjman described the trend of accelerated growth in the deficit of trade balance and on the foreign currency account as a warning, adding that the cause of that was also an insufficient export competition. The registered high unemployment rate was a normal side effect of economy transition, that is, a high rate of hidden unemployment which we inherited from the former system, Tudjman said, adding the government must find ways of reduction. He said that there had to be an non-defferable selective and partial privatisation of public companies (20 to 30% of the equity). He also stressed the need to secure an effective introduction of the Value Added Tax and reduce the tax burden on economy. Tudjman stressed the need of taking steps towards signing an agreement with the European Union, accessing CEFTA and the World Trade Organisation. The many-sided economic cooperation between Croatia and the Bosnian Federation would be especially stimulated, Tudjman said. In tourism, one of the most important branches of the economy, the approach to privatisation had to be more determined, he said. The government needed to prepare a draft of an integral and long- term strategy for Croatia's development, in line with national and state interests, Tudjman stressed. Croatia's independence and its role in resolving the crisis in this region, especially in Bosnia-Herzegovina, said Tudjman, have, alongside world globalization projects, resulted in the presence of various intelligence and similar "non-government" and other "free society" networks throughout Croatia. Tudjman said he had urged all security services and the judiciary to start a resolute battle against organized and economic crime, hush money and corruption in particular. The government, he stressed, must focus on completing the peaceful reintegration of the Danube river region. In relation to proposals for a part of the international police to remain in that area, Tudjman said Croatia could agree to international police officers staying as monitors, but not as a continuation of the UNTAES mandate. Special attention must be dedicated to the police and its responsibility to provide safety for all residents of the Danube river region. In cooperation with the UNTAES, Croatia had provided all conditions for a successful termination of the UNTAES mandate, the President said, to which the activity of the National Committee for the restoration of trust had also contributed. It could be stated with pleasure that Croatia's foreign policy is and will be aimed at strengthening Croatia's position as a Central European and Mediterranean country, said the President. He recalled a draft agreement on special relations between Croatia and the Bosnian Federation and an agreement on the establishment of a committee between Croatia and Bosnia-Herzegovina. It was necessary to ensure overall ties with the Bosnian Federation, Tudjman said, primarily to ensure the survival of Croathood in BH, the protection of Croatia's borders and Croatia's strategic interests. The Croatian President recalled Croatia's interest to implement the Washington and Dayton peace agreements. A successful realization of the draft agreement on special relations with the Bosnian Federation would require long and strenuous negotiations, the President said. It would require not only a preparation of the Croatian government and the whole Croatian population, but also the support of and cooperation with significant international factors, he stressed. What we are proposing for the Federation should in no case be taken to refer to the whole Bosnia-Herzegovina, Tudjman stressed, which, he added, would link Croatia with Yugoslavia and the Balkans. We must take care to avoid that at all levels, he said. The model used in drafting the agreement on special relations with the Federation were the special relations among the Benelux countries, Tudjman said. The normalization of relations with Yugoslavia had undoubtedly contributed to the peaceful reintegration of the Danube river region of eastern Croatia, the Croatian President said, adding that the normalization of relations must continue. (hina) lm ha mm 072040 MET nov 97