Privileged Forest Buyers

The Rub is in Politics

AIM Drvar, April 11, 2001

This is the second time the management of the firm "Finvest" from Drvar is trying to maintain its status of the most favoured buyer of wood products from the public enterprise "Herzeg-Bosnian Forests" (PE "HB Forests"). Exactly a year ago, it succeeded to precisely that primarily thanks to the intervention of two highest HDZ B&H officials - the recently removed member of the Bosnian & Herzegovinian Presidency and President of the HDZ B&H, Ante Jelavic and HDZ B&H Vice-President and until recent Finance Minister of the Federation B&H, Dragan Covic, who in April 2000 used their political power to convince the Government of the Herzeg-Bosnia District to abandon its intention and "disturb the relations". According to realistic assessments in the last five years the firm "Finvest" exported from the territory of HB District over 130 thousand square metres of timber, for which between 40 and 50 thousand best quality coniferous and deciduous trees (pine trees, fir-trees, spruce and beech) had been cut.

According to the classic monopolistic model, "Finvest" exports from these parts mostly unprocessed wood, which is prohibited, for example, in Croatia. On the other hand, it does not carry out any compulsory afforestation of bare ground, which over long-term period can have disastrous environmental consequences in these parts.

Early this March, everything went on according to the same old scenario of the "Finvest" management, which reacted to the announced 30 percent increase of prices of saw logs from these forests, by suspending the production and sending 550 workers from its Drvar and Glamoc saw mills on forced vacations. The workers reacted stormily - these are mostly Croatian exiles that have been "humanely settled" in these municipalities according to the HDZ's ethnic engineering back in 1996. They protested, not because of politics, but rather for reasons of bare survival, which are reflected in the very fact that Finvest feeds some two thousand members of their families. A "crisis command for the defence of jobs" was established and a peaceful protest organised in the centre of Drvar, which workers of other wood-processing enterprises in Drvar and all Croatian exiles joined.

An ultimatum was presented to the management of "Herzeg-Bosnian Forests" and the Government of HB District: either they will find a compromise solution and allow the delivery of logs to "Finvest" saw mills in Drvar and Glamoc so that the workers can get back to work, or they will all come to Livno with their families and block the District Government building and stay there until their demands are met.

An agreement was reached to fulfil only the first demand - to immediately continue the delivery of logs to Drvar and Glamoc saw mills, but according to the new price list under which a cubic metre of round wood costs 30 percent more. This practically deprived "Finvest" of the years long status of most favoured buyer and equalised it with all other "HB Forests" buyers. Already the following day, after two weeks of forced vacation, the woodcutters went back to the forests and all workers returned to work. Observed from the view of this political-economic monopolistic enterprise, the problem was thus resolved only in part. For, apart from the fact that the management of "Finvest" refuses to accept the price increase (they will accept 6.5 percent rise at maximum), their relations with the EP "HB Forests" and District authorities are also burdened by several million DM worth past debts.

Chairman of the Management Board of the PE "HB Forests" Ivica Marijan and Vice-President Nedo Pokrajcic say that by pressures, suspension of production and workers' protests the "Finvest" management is trying to exact the extension of a privileged position which they had obtained in the past without this firm's knowledge and on the basis of an annex to the contract arbitrarily concluded and signed by Ivica Cobanac, the then Director of PE "HB Forests", with "Finvest" management. According to that contract, in contrast to all other buyers, "Finvest" got an unrealistically high deduction, i.e. 30 percent discount on all purchases of round wood and thus made a profit of some DM 3 million a year. In addition, last year alone, it exported over nine thousand cubic metres of round wood more than contracted. According to the new price list, "Finvest" has been put in the same position with other buyers as regards prices and other terms, which means that it will get "merely" one million German Marks in deductions annually.

How did "Finvest" happen to become the absolute master of the forest resources of Drvar, Bosansko Grahovo, Glamoc and Kupres, municipalities which according to the Dayton Peace Agreement became a part of the Livno Canton, i.e. Herzeg-Bosnian District. This firm is a Bosnian & Herzegovinian branch office of a corporation with the same name from Cabar in Croatia, whose majority owner and Director is Marijan Filipovic, well-known businessman born in Novi Travnik. When HDZ came to power in 1990, he became the Mayor of Cabar and assembly delegate and was known in Zagreb political circles as a man with close political links with the Herzegovinian lobby within HDZ and a particularly close friend of late Croatian Defence Minister, Gojko Susak. Thanks to such connection, immediately after the end of military operations for the "liberation" of Drvar, Bosansko Grahovo and Glamoc he bought for a pittance the pre-war B&H wood-processing giants which had some 7 thousand workers without any trouble. By becoming the owner of "Grmec" and "Sator" enterprises, "Finvest" secured the absolute monopoly over the forest resources, which would naturally be impossible to achieve without the services of PE "HB Forests", with headquarters in Mostar, which until last year was the only firm authorised to supervise and exploit the forests in municipalities with the Croatian majority population.

Wanting to get the control over the income from the major natural resource, which are measured by millions of DM annually, last year the District authorities established a new enterprise: "The Herzeg-Bosnian Forests", located in Kupres.

Incidentally, the Drvar "Finvest" was founded by a joint venture of the then Agency for the Reconstruction and Development of Herzeg-Bosnia, which existed at the times of the so-called Croatian Republic of Herzeg-Bosnia. According to well-placed sources, "Finvest" bought "Grmec" together with all its stock of raw material and finished furniture. Its overall capacities, including those of wood processing industry "Sator" from Glamoc and all accompanying facilities and equipment, were assessed at mere DM 5 million (!?), i.e. some three to four times below its actual value. The entire transaction was carried out according to the model of fictitious capital inflow used in Croatia during the HDZ's rule. The enterprise "Sator" from Glamoc, which was reconstructed before the war and had a labour force of some 3 thousand workers, had the latest wood-processing technology, which was destroyed during the war, same as that of "Grmec" from Drvar.

At the time these enterprises were being bought, the agreement was that "Finvest" would invest a part of its founding capital in wood-processing capacities in cash and a part in equipment. With the agreement and consent of those responsible in the then Agency for the Reconstruction and Development of the so called Herzeg-Bosnia, the value of imported equipment was presented at least ten times above its actual value, i.e. several million DM were thus "saved".

In the territory of HB District, in addition to timber industry, "Finvest" Corporation owns the Peat and Fertilizer Factory "Zdralovac" which is located in the municipality of Bosansko Grahovo. After the war, the Factory was sold(there are rumours that it was paid mere DM 30 thousand) at a public tender, but the results, as well as the number of bidders were never made disclosed. It is known for certain that one of them was Livnjak, who has been living and working abroad for years and who gave an exceptionally favourable offer with a complete development plan, but that his offer was refused. "Finvest" and the tycoon Marijan Filipovic also own "Bastasica" Motel some 10 kms from Drvar, as well as a gas station in Drvar.

His sawmills in Drvar and Glamoc employ some 550 people, out of which one half allegedly works as seasonal workers, i.e. are "moonlighting". And while "Finvest" enjoys a privileged status as a buyer and a monopolistic status as the only wood-processing capacity in these parts, the firm "Cincar" from Livno that used to employ 400 workers before the war, has been buried long ago because it refused to become just another piece of Finvest's property. Just like this whole story and many similar ones in Herzeg-Bosnia District this is more a political than an economic problem.

Nedzad Vrebac

(AIM Drvar)