Dissolution of the Payment Transaction Directorate of B&H

Liquidation Awaits 10 Thousand Enterprises

AIM Sarajevo, November 29, 2000

The first day of the year 2001 should be the "D" day for the final settlement of accounts in the B&H economy. Directorates for Payment Transactions(ZPPs), successors of the former Social Accounting Service will cease to exist as of January 1, when all internal payment transaction activities will be transferred to business banks, according to the model of the Western market economy.

This radical change will have its price, rather high and painful, in the form of the liquidation of over 10 thousand enterprises in the Federation of B&H alone, which have over 200 thousand workers on their payroll, which represents one half of all currently employed persons in this B&H entity. Because, under the law, enterprises with blocked accounts will not be able to transfer them to business banks, not will the banks be willing to take them over, so that for them liquidation will be the only solution.

Consequently, some thirty days before the expiry of the legal term for the dissolution of ZPPs, the temperature started rising in business circles which are now screaming at the top of their voice for the extension of the deadline for the dissolution of ZPPs. Representatives of the Chamber of Commerce and Industry of B&H are the loudest. They ask for an urgent introduction of multilateral compensation and provisional deblocking of accounts of those firms who were behind repayment schedule for their loans to the banks. It is symptomatic that it has been known for two years now that the payment transactions directorates will cease to exist on December 31, 2000, but it seems that everyone became aware of the consequences this will entail "at the eleventh hour", i.e. everybody was convinced, as is typical of the local mentality, that "this will never come to pass". The disappearance of ZPPs is one of the conclusions of the Madrid Declaration of the Peace Implementation Council for B&H, adopted in late 1998. The reason why the international community defined this question as one of its priorities is its intention to create such an economic environment in B&H which would be compatible with that in market economies in which ZPPs as a "socialist dinosaurs" have no place.

In any case, foreign investors have often mentioned the very existence of such ZPPs as one of the reason for avoiding B&H. The other, probably more important, one is the fact that representatives of the international community have recognised ZPPs as one of the most powerful levers by means of which politics exerted significant influence on the economy.

Probably due to their awareness that the disappearance of ZPPs will represent a veritable revolution, the majority of local power-holders have understood the set deadline more or less seriously believing that, same as numerous other deadlines established by the international community, this will too "remain a dead letter". In this way the entire 1999 was lost without any serious preparations being made.

Things started to develop more quickly somewhere around the beginning of this year when it became clear that ZPPs will truly be eliminated, and not because of the suddenly awakened awareness of the domestic protagonists, but rather because of the increased pressure of representatives of the international community, who practically took control of the whole affair.

In the meantime, the domestic economy started suffocating under the burden of internal debts. In the territory of B&H Federation alone the amount of unpaid internal debts exceeded the sum of DM half a billion, including mutual uncovered claims between enterprises, as well as debts to the state for unpaid taxes, customs and contributions. It is this closed circle of debts that is now threatening to "massacre" the national economy. The dissolution of ZPPs and transfer of internal payment transactions to commercial banks is just a matter of technique and doesn't mean by itself the liquidation of a thousand of enterprises. However, the banks want for their clients only those firms which have clean accounts and it would be insane to expect bankers, especially private ones, to take over accounts of enterprises whose debts several times exceed their total assets. And under the valid laws, these enterprises were ripe for liquidation, but the current authorities "closed their eyes" when it came to state enterprises with thousands of employees and thus bought social peace.

Thus, among over ten thousand enterprises with blocked accounts, less than 10 percent are production facilities, although they employ more than 50 percent of the total number of employed of B&H Federation. Other "candidates" for liquidation are mostly private trade and service firms among which there is a large number of "phantom" firms, i.e. enterprises for "one-time use". Their owners established them in order to appear as importers or wholesale buyers of goods in high demand - alcohol, coffee or oil for which they always "forgot" to pay dues to the state. Naturally, the goods were immediately sold on the black market, the money would end up in the pocket of a "skilful" businessman and instead of money for taxes, customs, contributions and delivered goods, as a consolation, the state and suppliers would get firms whose entire property were the fictitious address and an account with some hundred DM.

Current authorities did not take seriously enough the warnings that the rising internal debts were threatening to cause the collapse of the national economy. Because that would reveal that the major part of that debt was owed to the state for unpaid taxes, customs, contributions on wages and would raise the question who had, to whom and in which way enabled the non-payment of these liabilities, i.e. that all available legal means for collecting these outstanding claims were not resorted to.

Naturally, it was impossible to "sweep problems under the carpet" for ever and sooner or later the settling of accounts became inevitable. In B&H that moment was the dissolution of ZPPs and it is obvious that the bill will be much higher then it would have been had the necessary cuts been made at the right time, some two or three years ago. Now the only question is whether deadlines for the disappearance of ZPPs will be consistently observed or a "break" will be made. Formally, the decision is up to the local authorities.

The question is whether in the vacuum between state elections and the establishment of new authorities, the present Government has the legitimacy to bring such major decisions. There are also representatives of the international community without whose approval it would be impossible to bring radical decision such as the extension of deadlines for the dissolution of ZPPs. For the time being neither the Government of B&H Federation nor international officials have remained silent.

In case the dissolution of ZPPs is postponed for several months, the overall situation would not change much, and sooner or later the authorities and their subjects would have to face the liquidation of thousands of enterprises which have no future and the laying off of their workers. No matter how painful, this move cannot be avoided and the inevitable facing the reality will reveal the actual state of the national economy which in the last five post-war years only served as a polygon for pre-privatisation plunder, "devil-may-care" reasoning, without a long-term vision and readiness of the authorities to give up running state enterprises as they liked and according to their personal interests. Naturally, for the good of their subjects and in order to keep their grip on power.

Drazen SIMIC

(AIM Sarajevo)