Privatisation in Montenegro

Reforms or - Going off Half Cock

Unannounced, on the eve of early parliamentary elections, the process of mass voucher privatisation started in Montenegro

AIM Podgorica, April 28, 2001

By the end of April, Montenegrin postmen delivered to the citizens more than 350 thousand letters sent to them by the Government and the Agency for Restructuring of the Economy and Foreign Investments. In the letters, along with technical explanation of the process of mass voucher privatisation (MVP) and a list of 225 enterprises the shares of which will be partly privatised in this way, there were three types of orders for (electronic) transfer of vouchers. Another 80 thousand such letters will be delivered in the beginning of May or they will be picked up by the owners at post offices.

At the same time all Montenegrin citizens who have come of age before January 1, 2000 and are registered residents of Montenegro for longer than 24 months have received five thousand electronic points each that have been booked on special accounts of the local payment operations service.

The distribution of vouchers by the end of May will mark the end of the first phase of Montenegrin MVP. During the following three months their owners will be able to transfer the vouchers to one of their family members or invest them into one of the private investment fund which are hastily being established in Montenegro (there are two so far). An auction sale is planned for September in which voucher owners, private persons and investment funds, will direct the received "securities" through the payment operations service into enterprises whose shares they wish to buy. What they have actually received they will know by the end of the year since the Montenegrin Council for Privatisation, the author of this project, planned a period of three months for redistribution of the shares of enterprises based on invested vouchers.

According to the opinion of experts, the September auction is the most controversial part of MVP. Although the distribution of vouchers has almost been completed it is still a mystery whether based on a sufficient number of orders for the transfer of "electronic privatisation coupons" (no matter how many of them there may be) it is possible to become a majority owner of any of 225 enterprises the shares of which will be offered for sale at the auction.

If that will not be possible, and it seems it will not because the development fund offers majority of the shares that are being privatised through MVP and it does not own the majority package of shares of any Montenegrin enterprise, there will be no essential change of the ownership model. The new shareholders will be just powerless observers with no influence on the destiny of the enterprises they will invest their vouchers in. This is especially true when one knows that the market of shares in Montenegro is in its infancy, more precisely that it still exists only in the minds of those who intend to make it come to life in the future.

It is even more problematic that in the procedure of exchange of vouchers for shares only one auction is planned. This simply turns the whole process of MVP into a specific lottery in which the decisive role will not be played by knowledge and wishes but - pure luck. Until the end of the auction nobody will know whether there are five, fifty, a thousand or all 430 thousand potential competitors who are also interested in the enterprises they are investing their vouchers in.

It is, therefore, impossible for the investment funds and small investors to estimate the profitability of their investment. This at the same time raises doubts about possible manipulations. There is fear that the "privileged" might have the opportunity to get hold of data where other people's coupons were invested and direct their own investments accordingly, since they will have information that will never be accessible to an enormous majority of share holders.

This is one of the most important but not the only reason why it still is not possible to speak about the value of the capital Montenegro will privatise in this way. It is impossible to even approximately estimate the average value of shares the citizens might get.

Slavko Drljevic, director of Hipotekarna banka (mortgage bank) and member of the Privatisation Council warns: "The mass voucher privatisation was initiated without having previously settled accounts which will get back at us like a boomerang. The essential question is that we are overestimating the enterprises because we have not settled the relations between debtors and creditors. And there can be no successful privatisation without settled accounts".

In the middle of 1998, when after the amendment of the Law on Privatisation MVP was officially accepted as one of the models of privatisation of the former socially owned property, Predrag Drecun, minister in charge of the privatisation process claimed that each and every citizen of Montenegro would get vouchers worth five thousand marks. It soon after that turned out that this estimate (promise) was far from the actual situation.

Nowadays, only the figure is left - the citizens will get five thousand "something" or, as some claim, "nothing". It turned out that the book value of the enterprises planned for MVP had been several times - overestimated.

Some of them exist only on paper, some have sold most of their property in order to pay the salaries (low as they are) to their workers, some are stifling under the burden of accumulated debts - with no chance to recover without a large capital that only foreign investors can bring. And finally there is a very small number of those about which a person can claim with great certainty that they will bring a decent profit to their future owners (by the increase of the value of shares and paid dividend). Among the latter are quite certainly Telekom CG, the electric company, AD Plantaze (Plantations) (owner of Vranac and Krstac wine trademarks), the Port of Bar.

It is assumed that majority of Montenegrin vouchers will end up in these enterprises, so the value of the distributed shares will be very small. All this indicates that the process of MVP in Montenegro will be quite unpredictable. And that is why nobody still dares forecast its success.

Additional confusion was created by the fact that the process was initiated by the government of Filip Vujanovic literally five days before the coalition of Democratic Party of Socialists and Social Democratic Party that form it had lost absolute majority.

"It might happen that one government will begin carrying out this project, and another will continue it, and yet another will be expected to complete it - which one must admit is - frivolous", believes Nebojsa Medojevic, members of G17 and director of the Blood Transition Centre in Podgorica.

None of the politicians, however, wish to discuss these problems. As if they too still do not know for sure whether and how they can make a (political) profit from the whole business.

Zoran RADULOVIC

(AIM)