Why are the Pension and Health Insurance Funds Empty?

AIM Banja Luka, July 7, 2000

When Nedeljko Nedic's little daughter Sanja, practically a baby, fell ill he couldn't have imagined the amount of humiliation, insults and bitterness he would have to endure. His troubles started the moment he wanted to register his medical care card for her regular treatment. He was unable to do it because his firm "Incel" from Banjaluka, in which he has been employed for years, simply stopped paying health and pension insurance contributions. Thus, Nedeljko Nedic was unable to get the discharge papers for his daughter and continue her further treatment because he did not have 600 KM for the advance payment for the treatment she had already received.

The gravity of the problem forced Director General of the Public Fund for Pension and Disability Insurance of Republika Srpska (JFPIO), Svetozar Mihajlovic, also Vice-President of the Serbian National Council

• a party which is a member of the ruling coalition "Sloga" (Unity) - to speak about this openly. "The RS Government must introduce restrictive measures for those enterprises which regularly pay the wages, but fail to honour their obligations to the state", clearly explained Mihajlovic harshly, at the same time reproaching Djuradj Banjac, Vice-President of the Government, who advised trade union representatives to pay contributions only for workers who were retiring.

There are about 240 thousand permanently employed (but not necessarily actually working) persons and about 171,200 pensioners in Republika Srpska. For some 50 thousand of them health and pension insurance contributions are paid irregularly, over shorter or longer periods.

Before the war in B&H, there was one pensioner per every three employed persons. Today, that number in Republika Srpska has reached the ratio one to one. In view of the fact that a large number of the employed only pay contributions for the lowest guaranteed price of labour of 80 KM, the picture gets worse.

Vojo Trtic, financial manager in the Banja Luka branch office of the Public Fund for Pension and Disability Insurance, which covers the PIO activity in 12 communes of Republika Srpska, said that there are 96 thousand employees and 56,542 pensioners in this area alone. Some 40 percent of enterprises do not pay contributions, although this is economically the strongest part of RS. Some of them do not pay contributions for months, while others have stopped doing it years ago. The greatest debtors are the biggest enterprises, with a large number of workers, which are now faced with the greatest problems: "Incel", "Cajavec", "Vrbas", "Jelsingrad", "Univerzal", agricultural estate "Mladen Stojanovic" from Gradiska, "Itris" from Srbac, "Svila" from Celinci and practically the entire economy of Knezevo.

Apart from enterprises, some communal assemblies (except for Banja Luka, which is a positive example), as well as other institutions are also highly indebted. This phenomenon has acquired such proportions that it has become more a rule than an exception. Also, there are 2,962 registered private firms in this region, although some 50 percent of these are not working at all. There are 17,600 registered workers in private sector, which does not make a significant share in the total number. According to the number of the employed, the commune of Laktasi ranks first, accounting for as much as 40 percent of employed.

Trtic points out that despite their wish to pay contributions, enterprises have failed to do so simply because they cannot afford them. "When the economy is not working, they have no money for contributions and pay only as much as they can and what they have to", says Trtic. The exception is "Banjalucka Pivara" (the Banja Luka Brewery) which is performing excellently and regularly pays contributions for its workers. Trtic claims that a paradoxical situation has been created in which wages are practically lower than pensions.

When the time for payment comes, the average March pension will amount to 140 KM. Although contribution rates have been reduced to 18 percent, the people in the Fund for Pension Insurance do not know how to provide the money for pensions. "If we could at least reach the ratio of two workers per one pensioner, the situation would be much better, but that is still hardly possible in view of the state of the economy", says Trtic.

Trtic warns of the fact that the number of pensioners will be increased by those RS nationals, who until now got their pensions in Croatia. For the time being, pension-disability and health insurance contributions are paid by the Army, police, educational and financial sector and state institutions.

Boro Janjetovic, Deputy Director of the Health Fund of RS, shares the same view of this problem. Experiences of this Fund absolutely coincide with those of the PIO Fund. Janjetovic thinks that this problem cannot be solved by exerting greater pressure on citizens and by placing an additional burden on them. "The problem must be solved at the highest, state level, if it can be resolved at all in view of the non-functioning economy. In other words, the key is in the economy and its revitalisation which would ensure that the workers are paid adequately for their work and in which labour legislation would be respected", thinks Janjetovic.

We have tried in vain to find out from the RS Financial Police why is the state tolerating the non-payment of contributions. The only person authorised to speak for the press is its Director, who couldn't be reached because of his busy schedule. According to the law, this inspection is obliged to file criminal charges against all directors of enterprises which do not pay contributions with the public prosecutor's office, because failure to pay legally regulated dues is a criminal act of the abuse of economic powers.

In May, the Financial Police of Republika Srpska – regional centre of Bijeljina - carried out a control of 69 legal persons, 66 private and three state enterprises and established that they have committed a number of financial improprieties in regard to the payment of public dues in the total amount of 4,621,060 KM, stated the Chief of Centre, Nedeljko Vujic. Vujic told us that in the same period the outstanding debt in the amount of 538,661 KM was collected, while the debt collected for previous months amounted was 618,716 KM.

Financial policemen say that there is nothing they can do when it comes to large state enterprises. They can file charges, which doesn't mean a thing, because accounts of illiquid enterprises are already blocked. And in order to avoid provoking social unrest, bankruptcy proceedings are not instituted and that is where the circle is closed.

Moving the age limit for old-age pensions to 65 years is being mentioned as one of the global solutions to this problem. In this way the number of new pensioners would be reduced and so would be the pressure exerted on funds. Such a solution was adopted in the B&H Federation, while in RS that law is still under preparation.

This would, however, be only a temporary solution. Economic experts say that the key to the problem lies in the economic and legal system of Republika Srpska. They warn that a way out of the donators' economy must be found and that without a normal economy and real contribution rates and wages, there could be no solution to the state of general collapse.

Mladen Mirosavljevic

(AIM)