Serbs reap the benefits of handing over their dictator

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Serbia's gold rush began this weekend. With the ink barely dry on a £1.28bn aid package for Serbia's reconstruction from the wars of the 1990s, the sharp-suited businessmen who stand to make fortunes out of the bombed-out country have already rolled into town.

In the marble lobby of the glittering Hyatt hotel in Belgrade, men in expensive grey suits clutch leather briefcases and huddle in small groups among the ornate pillars. They are the first wave of carpetbaggers descending on the country, representing the international banks, consultancy firms and organisations hoping to capitalise on the investment to come.

The handover of former president Slobodan Milosevic to the international war crimes tribunal has immediately opened the purses of foreign governments attending a donors' conference in Brussels. Now the men in suits are coming to tell the Serbs how to spend it.

The facilitator of this bonanza is another man in a sharp suit: the Serbian Prime Minister, Zoran Djindjic, who organised the extradition of Mr Milosevic to the Hague on Thursday. A new kind of Serbian strongman, Mr Djindjic rode roughshod over legal niceties and issued a decree when he could not get an extradition law passed by parliament. In the process he defied the pro-Milosevic constitutional court which had ordered that the handover be delayed.

The fallout has plunged Yugoslavia into political turmoil, triggering the resignation of its federal government, though this wields only nominal authority in a federation now reduced to only two republics, Serbia and Montenegro. After the Montenegrin ministers quit the federal cabinet in protest at the extradition, Yugoslavia faces the threat of fresh elections.

The country desperately needs money, which is why Mr Djindjic acted when he did. Two years after Nato airstrikes, Belgrade is still littered with bombed-out ruins. Bridges lie in the river, and at the CK Building, a skyscraper bombed in 1999 and never repaired, concrete hangs like drapery, with twisted steel reinforcing rods sprawling out like a giant spider's web.

A country that was once of the wealthiest in the communist bloc is falling apart. In the 1980s, the Zastava car complex turned out almost 200,000 cars a year. This year it has made 220.

There are continual power black-outs, the roads are pot-holed and the railway system is a shambles. For those unfortunate enough to travel on the filthy trains that crawl into Belgrade's decrepit railway station from the provinces, journeys take more than twice as long as they would by car.

Children are suffering too, now that the education system – once the pride of Yugoslavia – has fallen apart and Serbia now one of the highest illiteracy rates in Europe. At the same time, unemployment stands at 50 per cent, the foreign debt has climbed to $12bn and annual inflation rate is running at 150 per cent.

Although most sanctions imposed on Serbia in the early 1990s were partly lifted after the 1995 Dayton peace deal on Bosnia, "outer wall" sanctions remained in force, barring membership of any international financial institutions, include the World Bank and the IMF. With his country in such a terrible financial plight, Mr Djindjic was not about to let more than $1bn go begging by delaying Mr Milosevic's extradition.

Educated in Germany, he is at home among the consultants and bankers checking in to Belgrade's top hotels, yetbehind the façade of the man routinely described as "Serbia's pro-Western Prime Minister" lurks a stealthy opportunist.

A snapshot from Mr Djinjdic's past, shows him in April 1995 standing side by side with Radovan Karadzic, the Bosnian Serb leader soon to be indicted by The Hague tribunal on war crimes. At the time, Nato was threatening air strikes against the Bosnian Serbs and Mr Djindjic flew to Pale to give his support. They roasted a whole ox on a spit for him in the main square.

A man with no popular following before last October's revolution deposed Mr Milosevic, he rose to power on the coat tails of Mr Milosevic's successor, President Vojislav Kostunica. He won the power struggle with the new president months ago.

Under the projects Serbia submitted to the Brussels donors' conference, $650m will be spent on the roads, the telephone network, electricity, water, health and education. Another $319m will be spent on the social sector, to ease massive unemployment.

Already there are signs that the country is about to undergo significant changes. Serbian newspapers are full of new adverts seeking English-speaking local staff to work for investment companies with names such as Opportunity International.

It is not so long ago that the Serb warlord Zeljko Raznatovic, known as Arkan, was assassinated in the Hyatt Hotel – indeed, the bullet-holes are still visible behind the plush reception desk. The men in grey suits there, however, are sure to want their share of the incoming Western investment. As in so many countries that are on their knees, the iron law of consultancy is that much of this kind of "aid" ends up in the coffers of the foreign businesses who secure the contracts.