Chapter 1649 First-mover advantage

The reality is that the Kingdom of Dalmatia is surrounded by wolves. The biggest conflict is between Yugoslavia and Dalmatia. Italy also makes little secret of its ambitions toward Dalmatia. Germany has not shown any similar intentions at present, but annexing Dalmatia would obviously be very beneficial to Germany.

The conflict between Yugoslavia and Dalmatia is not surprising.

Italy, on the other hand, has its own perspective on Dalmatia from a historical standpoint. Dalmatia was an important part of the ancient Roman Empire and was also historically ruled by the Republic of Venice.

Both of these countries, Italy considers itself the rightful heir.

Similarly, Italy has ambitions for the entire eastern Adriatic coast, including regions such as Albania and Greece.

Perhaps for this reason, Germany did not have a clear aversion to Dalmatian independence. In addition, there was also the consideration of appeasing the interest groups of the former Austro-Hungarian Empire.

The current king of Dalmatia, Karl I, is a member of the Habsburg family, so Germany doesn't want to make things too ugly.

Prime Minister Yulitian said, "His Majesty's considerations are very reasonable. The greatest crisis facing the Kingdom of Dalmatia now comes from outside."

"Therefore, while developing the economy, we cannot give up military development, especially the development of the army."

"Our biggest enemy is Yugoslavia, and the territorial disputes between the two countries are irreconcilable."

"Therefore, we must strengthen our vigilance against Yugoslavia, especially in the eastern and northern border regions, and build a defense system based on the mountains."

As a nation that prioritizes its maritime economy, the Kingdom of Dalmatia now has a greater need to develop its army than its navy.

No matter how much the Dalmatian Kingdom struggles, its navy cannot play any role in the Adriatic Sea. If either Germany or Italy were to launch a war against the Dalmatian Kingdom, the Dalmatian Kingdom would have no chance of winning.

The situation was different with neighboring Yugoslavia. In the eyes of the Dalmatian Kingdom, Yugoslavia was not an invincible enemy.

King Charles I and most of his cabinet members thought so too, Charles I said.

"Although Yugoslavia's population is several times that of Dalmatia, it is not easy for them to wage war against Dalmatia."

"First, they need to consider Germany. Germany and Yugoslavia don't have a good relationship. If Yugoslavia goes to war against us, then Germany will have an excuse to deal with Yugoslavia."

"Secondly, our Dalmatian Kingdom is not to be trifled with. In terms of overall national strength, we are far behind Yugoslavia."

"But we have the advantage of terrain. If Yugoslavia launches a war against us from the land, we can knock out one of their teeth."

As two countries in the Balkans, Yugoslavia is considered a large country, while Dalmatia is a small country, especially in the fields of agriculture and population. However, in terms of industry, the gap between the two countries is not significant.

King Charles I stated, "For Dalmatia to survive in the current complex and dangerous international order, industrial development is our only option."

"At this stage, it is very necessary for us to develop our own military industry, at least to be able to produce basic weapons such as rifles and artillery, and on this basis, to master a part of high-end military industrial production."

"In this regard, I have an idea, which is to develop our aluminum industry more deeply, and ideally, to acquire the ability to process aluminum products further and obtain more fiscal revenue."

The Dalmatian Kingdom could only focus on industry, since it was already at a great disadvantage in agriculture compared to its neighboring countries. Limited by land, no matter how much it invested, it was difficult to see results.

As for industrial development, the Kingdom of Dalmatia urgently needs to develop its military industry.

However, Karl I was well aware that no matter how much Dalmatia struggled, it would be impossible for them to establish a complete military-industrial complex.

The only hope is to reduce dependence on external sources within our capabilities, and incidentally boost the development of our domestic industry.

Developing the military industry can also greatly benefit the industrial sector, such as training skilled workers. Even if the military industry ultimately fails, it won't end up in complete chaos.

Aluminum processing is arguably the only high-end manufacturing industry that Dalmatia can currently attempt to master. Germany and Italy both have an indispensable need for, and even dependence on, the Kingdom of Dalmatia's aluminum resources.

Therefore, Charles I wanted to use this opportunity to give the Dalmatian Kingdom more control over related industries, such as the production of aluminum fittings.

Prime Minister Yulitz then reminded him: "Your Majesty, if we want to expand our aluminum industry, energy is a problem that must be solved."

"The only thing we can do is to work on the electricity sector. Dalmatia has no coal resources or oil resources, and the only thing we can rely on is hydropower."

"In the past, the aluminum industry in the southern Mostar region relied on building hydroelectric power stations to provide relatively abundant and cheap electricity."

Dalmatia has relatively abundant hydropower resources, but other energy sources can only be obtained through imports.

Prime Minister Yulitz said, "Although Dalmatia is long and narrow, our terrain has a large drop and many small and medium-sized rivers originate from the mountains."

“The Naretwa River, Colka River, and Cetina River can be used to build cascade hydropower stations to improve our country’s energy self-sufficiency. At the same time, we can also directly purchase electricity from Germany or import coal.”

"Only by solving the most basic energy problem can the kingdom's industry develop."

The Dalmatian Kingdom had a Mediterranean climate, characterized by rainy winters. Therefore, while Dalmatia had relatively abundant hydroelectric resources, these resources were seasonal, with more abundant water resources in spring and winter. During summer and autumn, when rainfall was relatively scarce, the power supply might decrease.

For this reason, Prime Minister Yulitian believes that in addition to focusing on the development of hydropower, the Kingdom of Dalmatia must also follow up with thermal power to ensure a stable power supply throughout the year.

Moreover, he boldly proposed purchasing electricity directly from Germany, which would both improve relations with Germany and save some expenses.

As a major industrial power, Germany had a very abundant power supply, and after annexing Austria-Hungary, it also inherited the main power grid of the former Austro-Hungarian Empire.

In the past, some of the electricity in the Kingdom of Dalmatia was directly imported from other parts of the Austro-Hungarian Empire.

Charles I agreed with Julian's suggestion and encouraged him, saying, "Feel free to share any other ideas you may have."

"Now is a crucial period of opportunity for the development of the Kingdom of Dalmatia, especially given the relatively underdeveloped industry in the Balkans where we are located. If we can take the lead, we can accumulate more advantages."

As a core member of the Habsburg family, Karl I possessed considerable knowledge and vision.

He was well aware that the Balkans were now the most underdeveloped region in Europe, and whichever country could make progress in industry first would gain a greater advantage.

Or, to put it another way, the first-mover advantage in industry. For example, in the machine tool manufacturing industry in Europe, although it has been impacted by countries such as East Africa, the United States, and the Soviet Union in recent years, Europe as a whole still represents the highest level of the world's machine tool manufacturing industry. Other countries, taken individually, cannot compare with the entire European machine tool industry.

Besides the fact that building an industry early can yield returns as soon as possible, the trade routes formed during the expansion of this industry will also create path dependence in the future, thereby enhancing competitiveness.

Charles I emphasized: "At present, the industrial level of the Balkan countries is low. Except for Romania, the industries of other countries are not significantly different from ours."

"However, their area, resources, population and other data are much better than ours, so if we want to gain a foothold in the Balkans in the future, we need to accelerate the pace of construction in the industrial sector."

After understanding Charles I's thinking, Davies, the finance minister of the Dalmatian Kingdom, was the first to speak.

"Your Majesty, since we must race against time in industry, I believe we should pay attention to the following points."

"First, we currently lack sufficient finances and technology, so we must seek help from other countries. In this regard, we can cooperate with countries in East Africa, Germany, and other countries."

"Secondly, there are some industries we can try to build first, especially food processing and textiles. These two industries are not very difficult. Since we want to accumulate first-mover advantage, we must act faster than other countries. Otherwise, it will be difficult for us to develop when other countries in the Balkans have established their own industries."

"Third, we should accelerate economic cooperation with other countries in the Balkans, especially Yugoslavia."

"Although Yugoslavia and we have some conflicts, it is undeniable that under the current situation in Europe, they are unlikely to start a war with us for the time being."

"Moreover, Yugoslavia also needs our ports to help them transport and sell their inland agricultural products to other countries, especially the former Bosnia and Serbia."

"Fourth, based on the third point, we should make use of the resources in the Balkans. Our Dalmatian Kingdom is relatively poor in resources, so for the long-term development of industry, it would be best to make use of the resources of other countries on the peninsula."

"For example, Serbia has a very developed livestock industry. They raise a lot of sheep, and wool is an important raw material for the wool textile industry. If we can reach a stable cooperation with farmers in Serbia, we may be able to develop our wool textile industry by taking advantage of their livestock industry."

"There's also the food industry. Agricultural products like olives and grapes from the Balkans, and countries like Yugoslavia, have much larger production volumes than us because they have more arable land. We can leverage their primary agricultural products to develop primary industries such as olive oil processing and winemaking."

"We have relatively abundant fishery resources, so we can focus more on this aspect, but we will face competition from Germany and Italy."

"Finally, and fifthly, the core advantage of our Dalmatian Kingdom is still the maritime economy. Therefore, we should make the most of this advantage and become a trade transit point in the Balkans. This requires increased cooperation with countries in East Africa and other regions."

Davis, as expected of the finance minister of the Kingdom of Dalmatia, certainly had more ideas about economic development than others.

However, all of Davis's proposals revolve around one point: maintaining good relations with other countries. East Africa, Germany, and even Italy are relatively easy to deal with, but Yugoslavia is the biggest problem.

Prime Minister Juliusz began by saying, "Is it not an easy problem to improve relations with Yugoslavia?"

Karl I nodded and said, "Unless Yugoslavia abandons its territorial disputes."

Minister Davis said helplessly, "There's nothing we can do about it. After all, if we want to develop our economy with the Balkan countries, we can't avoid Yugoslavia."

"Our territory borders Yugoslavia, so if we want to develop inland markets and use raw materials for industrial development in the Balkans, we must maintain good relations with Yugoslavia."

“I think Yugoslavia is not incapable of communication, and they do have needs from us. For example, if they don’t use our ports to export goods, their costs will increase significantly, which is not cost-effective for the former Bosnia and Serbia.”

The new Yugoslav Republic had its ports concentrated on the western coast of Croatia, some distance from Bosnia and Serbia.

During the Austro-Hungarian Empire, trade between the two regions was primarily transshipped through ports in Dalmatia.

If Yugoslavia only conducted imports and exports through its own ports, it could have done so, but that would have required taking a detour.

Moreover, during the Austro-Hungarian Empire, Croatia and Bosnia, which were part of the Austro-Hungarian Empire along with Dalmatia, were the least valued regions of the empire. As a result, Yugoslavia's transportation infrastructure was just as poor as Dalmatia's.

This further increased Yugoslavia's current logistics costs.

Karl I frowned and said, "Then we can contact the Yugoslav government first. If they agree to economic cooperation between the two countries, we will not make things difficult for them."

"If they don't accept it and make excessive demands, then we can only strengthen economic ties with other countries along the Adriatic coast and in East Africa."

Undoubtedly, if Yugoslavia could temporarily set aside its conflict with the Kingdom of Dalmatia, it would be a shortcut for the Kingdom of Dalmatia's economic development.

In this way, the industrial development of the Dalmatian Kingdom could make full use of the market and resources of the Balkan Peninsula. Yugoslavia alone was a huge market for the Dalmatian Kingdom, after all, Yugoslavia had more than ten million people.

Secondly, Yugoslavia was also the best route for trade between Dalmatia and other landlocked countries and regions in the Balkans, such as Romania, Bulgaria, and the Hungarian part of Germany.

However, Karl I was not optimistic about Yugoslavia because the contradictions between the two countries were too sharp, and the extreme nationalist forces in Yugoslavia were also an insurmountable obstacle to economic cooperation between the two countries.

Therefore, Charles I and his cabinet members were prepared that if they could not persuade Yugoslavia, the Dalmatian Kingdom would have no choice but to invest its economic development resources in the Adriatic Sea region, that is, to develop trade with countries such as Germany, Italy, Albania, and Greece.

In addition, trade can be developed through the Adriatic Sea, the Mediterranean, and other countries outside the region, including East Africa, France, Bulgaria, and so on.

(End of this chapter)