The war over, Kosovo effectively lost and Serbia devastated, Yugoslav President Slobodan Milosevic is telling Serbs that, so long as they pull together, they can rebuild their country. But the truth may not be so promising.

On a visit to Yugoslavia's second largest city, Novi Sad, Milosevic promised this week that the bridges across the Danube, which had been early casualties of the NATO bombing, would be rebuilt within 40 days. Wider reconstruction would follow and so too, Serbia's re-entry into the international community.

The message is exactly what Milosevic's long-suffering countrymen want to hear. But it is also what he has been promising since he came to power more than a decade ago.

In many respects, the most costly aspect of the NATO bombing to Serbia is not the physical destruction -- estimated at between $20 billion and $100 billion -- but the fact that it failed to dislodge Milosevic.

This is because the Yugoslav President stands as the primary obstacle to both the kind of reforms needed to put the economy right and to lifting the sanctions which have dried up foreign investment in the eight years since they were first imposed.

The peace agreement ending the war, which was ratified by the Serbian parliament on June 3, suggested that, under certain conditions, Yugoslavia would not be excluded from "comprehensive access to the economic development and the stabilization of the crisis region."

The U.N. Security Council resolution of June 10 authorizing international deployment in Kosovo was more specific and promised reconstruction assistance to the southern Serbian province. However, there was no mention of aid to the rest of the country, which, without fundamental political change, seems highly unlikely. Both Washington and London have made it clear that no money would be allocated for Serbia's reconstruction while Milosevic remains in power.

Given the terms of the peace agreement, any assessment of the economic cost of having Milosevic as president must factor in the loss of Kosovo. This involves writing off about 11 percent of Yugoslavia's territory, some 15 percent of its population and 5 percent of gross domestic product (GDP). Add to that the direct costs of Serbia's two-and-a-half month war with NATO, and Yugoslavia's GDP could be halved.

At the official exchange rate, of just more than 11 dinars to the U.S. dollar, this would mean a GDP of $14.3 billion, but using the popular black market exchange rate (about 18 dinars to the US dollar) this year's GDP could easily drop below $9 billion. Last year's GDP was more than $18 billion.

For comparison, before the break-up of Yugoslavia and Milosevic's rise to power, the combined GDP for Serbia and Montenegro in 1989 was close to $25 billion. By 1998 it was less than one third of that.

Mladjen Dinkic of Group 17, a amalgamation of Serbia's independent economists, has calculated that Yugoslavia would need 16 years to reach the productivity level enjoyed prior to the launch of the NATO campaign and an entire generation to attain the level of 10 years ago.

Other economists are not so pessimistic. Former National Bank governor Dragoslav Avramovic, views the destruction caused by the bombing as an "opportunity." He believes that much of what has been destroyed, in particular the military industry, were not productive and served only as drains on the rest of the economy. Nevertheless, Avramovic fears the winter, because of the damage to oil refineries and power plants from NATO bombs, as well as the oil and trade embargoes.

The damage to the country's two oil refineries is so great that more than $100 million new investment would be required simply to process the 1 million tons of domestic crude oil Yugoslavia currently possesses. And with its foreign currency reserves exhausted, the country can no longer afford to pay for to import such necessities, even if the oil embargo were to be lifted.

The electricity-generating plants in Obrenovac, Kostolac, and Drmno, as well as the high-voltage power lines from the Djerdap hydroelectric power plant on the Danube were destroyed in the war. Moreover, since Serbia can no longer count on electricity from Kosovo, the country's supply has been reduced by a third.

Of some 30 billion kilowatt hours of electrical energy produced each year, one third is consumed by industry, and two thirds by the public. It is more than likely that the short-fall this winter will fall on average citizens.