Pardon for the Robbers of Public Enterprises
AIM Zagreb, September 24, 2000
Only ten days after the scandal with the introduction of customs duties on everything except a kilo of sugar, flour, washing powder or litre of oil, the Croatian public was once again disappointed with the economic moves of Ivica Racan's Cabinet. The decision on customs duties had to be withdrawn under dramatic circumstances because of the protests of trade unions, political parties (not only those from the opposition, but even some from the ruling coalition), as well as of citizens whom the newspapers gave a chance to complain on their front pages. That was the reason for the Finance Minister Dr Mate Crkvenac to submit his resignation, which the Prime Minister did not accept.
This time, citizens reacted with indignation and even anger to the decision on the increase of electricity rates by over 25 percent. As usual, the Prime Minister accused the journalists for writing only about the price rise, instead about the most important thing - that this was a part of major Government's action at putting some public and state enterprises in order.
Mr.Racan's disappointment is quite understandable, because this time, he expected the applause and not criticism. Only a day before the Government's session dedicated to this item, in a radio interview, Racan boasted of launching a major action for the recovery of public and state enterprises. "That will be the best answer to all those who talk gibberish that the Government is doing nothing but declaring bankruptcies", he said. The tone of that statement was perhaps more interesting than its contents. The democratic authorities which call criticism "gibberish", are obviously losing their cool.
However, the Government should have expected negative reactions to its programme of stabilising business operations of INA, Croatian Railways, five shipyards and eight agro-industrial complexes (these are once famous combines from Vrbovec, Belje, Vukovar, Osijek, Pozega, Slavonski Brod, Djakovo and Orahovica). They presently employ almost 72 thousand workers and their current losses amount to 11.5 billion kunas (nearly DM 3 billion). Namely, it turned out that the programme envisages that citizens would pay for the losses of these enterprises; wherever possible, directly through higher prices, and where not, indirectly, through the state budget. And all that at the time when retail prices have already reached 6-7 percent growth rate, which is more than at any time in the last seven years. Under conditions of rampant unemployment and widespread poverty, the public strongly reacted to the increase which was approved together with other measures. For the time being only the electricity rates have gone up by over one fourth, but other two monopoly-holders, which the Government is currently dealing with, can also count on the price rise: INA, which has been allowed to freely form the prices, and the Railways.
The Government claimed that all this was a decision of the Economic-Social Council, a body composed of representatives of the state, employers and trade unions. However, immediately after this release, the President of the largest trade union organisation - Alliance of the Independent Trade Unions of Croatia, Davor Juric, called a press conference and refuted these claims. "That problem was a topic of our discussions, but we did not go into details nor were informed about the price increase", said Juric. However, the Trade Unions of the Railway Workers hit the bull's eye by sending an open letter to the Prime Minister a day after the Government's session, warning him that the stabilisation programme for their enterprise had been prepared by those same men "who had ten years to prove to everyone that they know nothing about running the "Railways"..".
The programme envisages rationalisation of business operations and would be implemented in stages over ten-year period. The Railways' finances should be improved by means of price increase, closing down of unprofitable lines, writing-off and rescheduling of debts and, naturally, reduction of the number of employed.
The programme further envisages laying-off of 1,750 workers, while the Government has promised "social welfare assistance" to everyone who loses his job. Nothing has been said whether the management which railway workers accuse of plunder, irresponsibility and wasteful behaviour will be held responsible for that. For example, the management bought 300 passenger cars for personal use, and at the same time trains drove without brakes. Recently, the engine drivers' trade unions threatened to go on strike if the problem was not resolved, and now the railway workers have announced a possible general strike.
The Government also allowed the Electric Power Industry (EP) to increase its prices, although it was never said whether anything, apart from General Manager, has been changed in that huge system. What happened with other 74 directors below him who all had secret managerial contracts under which they received secret wages through an agency outside EP? In that way no one could find out how much they got, not what privileges they enjoyed. That could have been only guessed when they moved into six-bedroom apartments, when EP put luxury cars at their disposal, built special resorts form them equipped with a yacht and, naturally, provided unavoidable golden credit cards. Actually, they represented an unrestricted addition to their salaries. This was also available to selected cadres in other public and state enterprises.
One of such is the Croatian Radio&Television which made DM 100 million worth losses. Its management prepared a special "stabilisation" programme according to which it should save 50 million kunas (almost DM 13 million) by cutting on travel expenses, restricting the right to mobile phones, cars, etc. as well as by discontinuing the financing of Erotel (Television of Herzeg-Bosnia) and satellite broadcasts foreign countries. At the same time, it increased subscription rates by five kunas and thus secured the same amount: 50 million kunas. In this way the Television clearly showed (although unintentionally),that each subscriber had been paying five kunas a month for its swindles (including nationalistic projects, such as the financing of Erotel). But, the main item of its stabilisation programme was the request for subscription profits to be exempted from the payment of value-added tax. That would mean that the one whom the state has provided with an income under the law, would be exempted from paying taxes while he spends that money like a drunken sailor, and all others, who are doing business on the market and are fighting for their impoverished customers under conditions of harsh competition, should pay that tax.
Two years ago, when journalists managed to get hold of the annual report on business operations of nine major public enterprises (including three from the group which the Government is currently trying to "stabilise"), it became clear that this was a major plunder of enormous proportions. According to the data supplied by their management (in addition to Electric Power Industry, Railways and INA, those were the Postal Services, the Croatian Forests, the National Paper, "Plovput" (Waterways), Jadrolinija (Adriatic Lines) and HTV), these enterprises had spent 600 million kunas on expense accounts which, according to the foreign exchange rate valid at that time, was equal to nearly DM 180 million. That was much above their realised profits.
How many people were involved in this scam? Assuming that the Electric Power Industry had an average number of concluded managerial contracts, it turns out that in nine enterprises there were altogether 650 of them and that each of them cost a quarter of a million of German Marks annually. Naturally, salaries excluded.
Faced with these figures, the then HDZ Prime Minister Zlatko Matesa stated that "consumers do not care for their tennis courts, pools and resorts...". According to him that problem could have been solved only by privatisation of public enterprises, which meant that the HDZ Government did not intend to interfere with the privileges of management teams it had appointed. Hawks will not pick out hawks' eyes.
For the time being, the new authorities have only changed the frontmen, but did not revoke even managerial contracts which the managers concluded with themselves and under which some of them are retiring now with enormous severance pays. But, the majority will keep their positions. Can business operations of an enterprise be stabilised with such men? Are they the ones who will introduce a different, more rational way of doing business? The fact that their programmes (which the Croatian Government has for now accepted as its own) are based on price increases and budget funds, already raises doubts.
Milan Gavrovic
(AIM)