PLUNDER UNDER THE GUISE OF TRANSITION
Croatia:By Igor Lasic (Dubrovnik)
Croatia has an area of 56,538 square kilometers and, according to the 1991 census, has 4.8 million inhabitants. Despite certain outside and internal plans, its territory has not been either reduced or enlarged, but a new regular census due in 2001 will show that the number of inhabitants has been reduced, mostly because of major migrations in the past decade.
Croatia's approximately five million citizens had a GDP of slightly over US$18 billion 10 years ago, which, however, was only three-quarters of the GDP of the previous year, and US$3.5 billion less than today. Still, in 1991, life in Croatia was better than today.
First of all, it should be noted that at that time when Croatia was not yet formally an independent state, but essentially was no longer a part of the former Socialist Federal Republic of Yugoslavia either, the number of unemployed people in absolute terms was twice less than today -- 170,000, compared to 360,000. Back then, Croatia's imports amounted to US$3.9 billion, and exports to US$3.3 billion, meaning that exports covered 85 percent of imports. Today's imports are worth US$8.4 billion, while the value of exports is slightly over US$4.5 billion, which is to say that this ratio has gone down to only 55 percent.
Tudjman's "economic miracle"
The secret of the "Croatian economic miracle," as president Franjo Tudjman used to refer to his economic alchemy while still alive and in power, lies in the simple fact that enormous growth in unemployment was originally created in the production sector. Meaning that less and less is being produced. Thus, for example, Croatia today imports fruit and vegetables, meet and fish, clothes and furniture, not to mention appliances and other technical products.
The industrial output physical growth index shows that in the last 10 years or so (more precisely since 1991), it has dropped 40 percent. The Croatian authorities frequently justified this as a result of war damage, but the fact is that the data mostly pertains to those regions of the country that were not occupied for several years or directly exposed to shelling.
The Croatian political and economic leadership is solely responsible for this devastating state of affairs stemming from implementing their ideas on transforming socially-owned property into state-owned property, later to be handed over to private owners. There are other economic indicators testifying to this.
Data on the former and current average salaries, or the exchange rate of the domestic currency against the German mark, would cause even greater confusion, because since 1991 three currencies have been in circulation in Croatia (the Yugoslav dinar, the Croatian dinar, and the kuna), one denomination of the Croatian dinar was carried out, hyper-inflation raged until 1993, and a doubtfully stable exchange rate between the kuna and the German mark was established at the ratio of 3.85 to 3.9 kuna for one German mark.
The average monthly salary in Croatia currently is slightly over 3,000 kuna (slightly less than DM800), and some 1,100,000 pensioners receive an average of 1,300 kuna per month (some DM340).
A prelude to the plunder began as early as 1991, with the war and the reduction of the market to two-thirds of Croatia's territory. The border towards the Federal Republic of Yugoslavia was closed, the market in Bosnia and Herzegovina fell apart as was the case with life in that country in general, and illegal foreign trade included mostly oil and grenade launchers, without abating at the time of major armed clashes in Croatia and Bosnia and Herzegovina.
In addition to objective facts -- the loss of market and setting aside enormous amounts for the country's defense -- Croatia also suffered a simultaneous purge of managers. Of the old guard of socialist managers only those ready to obediently follow orders from the new authorities survived. This was part of special preparations for the most important phase of the plunder -- the turning over of socially-owned companies to private hands.
Initially, all socially-owned property was transformed into state property and turned over for further processing to the Privatization Agency, then to the Privatization Ministry, and finally to the Croatian Privatization Fund. On the basis of their arbitrary criteria they were supposed to assess this enormous wealth before putting it up for sale, after giving workers a chance to acquire what they were entitled to.
In proportion to the number of years they spent working in companies, employees were entitled to buy shares worth up to DM20,000, to be paid over a five-year period. Part of ownership rights were transferred to the Pension and Disability Fund, and yet another to state-run banks, based on inflation reassessment of loans that were already settled. This, in addition to the purge of former managers, was the first crucial instance of plunder.
Some 600,000 employees used their right to purchase shares, driven mostly by the desire to salvage their jobs and having only a vague idea of what the future role of so-called small shareholders in managing companies would actually be. This is the time when the fist tycoons -- anonymous businessmen with capital of mysterious origin -- actually appear, purchasing larger packages of shares from the Croatian Privatization Fund. After this was accomplished in still unclear circumstances, they used their right of owners to proceed to the second stage of plunder.
By then, the managers of former socially-owned companies, which were undergoing transition, did their best to ruin the firms they were running, destroy production, and use existing company business ties to the advantage of parallel, private firms, simultaneously burdening them with enormous loans. This was a clear case of parasitism which did not end there, because the tycoons continued with their policies until the companies went bankrupt and their desperate employees were left without jobs.
The state is still a majority owner
The last stage of the tycoon takeover involved the purchase of shares from small shareholders: in the yards and corridors of the ruined companies so-called peddlers started to appear announcing they were buying shares at prices 10 times lower then their actual value. Namely, after the government concluded that the described plunder procedure was successfully accomplished, the state made an incredible move and cancelled its earlier decision stipulating how the privatized companies should be managed and their profit shared.
According to the new regulations, to participate in managing a company all would-be shareholders had to do was to sign up for purchasing shares, but the deadline was now extended to 20 years.
The state, however, still controls 70 percent of the socially-owned capital, expressed in real value. Foreign capital entered Croatia exclusively through the purchase of banks and trade companies, with an investor here and there willing to take a risk in the manufacturing sector. The financial market is not developed at all, few companies appear on it, and instead of being a serious economic factor, it mostly serves as a training arena.
No one has still been called to account for the circus with the privatization-investment funds in 1997, although many suffered losses because the vouchers were distributed to tens of thousands of war veterans and victims of war. Namely, these funds were founded under pressure from the World Bank, but the state decided to put only ailing companies, and in some cases even fictitious ones, under their jurisdiction.
Because of such enormous scheming Croatia still has not become an EU member, whereas its membership in the World Trade Organization has yet to make any mark in everyday life. Similar is the case with the new measures passed by the new Croatian government, which is slow and hesitant to a degree Croatia's citizens can no longer accept.
In 2001, industrial output growth of up to 3 percent will still be insufficient, the GDP will hardly grow that much, the unemployment rate will visibly go up, but salaries are unlikely to follow the upward trend. In other words, Croatia will be where it is right now, which even without making comparisons with Europe, means conditions will, in fact, deteriorate further.