How to Break the Monopoly of State Officials

When Politicians Are Calling the Shots

The Government finally admitted that a combination of politics and economy had been at work in Montenegro and announced its resolve to restrict the right of state officials to be members of Management Boards of numerous state enterprises.

AIM Podgorica, July 31, 2001

At the beginning of its work, the Government of Montenegro, which is for the first time in the minority in Parliament, announced some changes in its hitherto practice. And, indeed, the first move was made in late July: “The Conclusion on the Conflict of Interests”. What is actually hiding behind this mysterious title? The idea was initiated by Rakcevic's Social-Democratic Party (SDP), which is a member of the “The Victory is Montenegro” which wanted to, at least, start revoking the privileges of state officials.

On the basis of the adopted decision, Government members and officials of administrative agencies will no longer be able to serve as Presidents or members of Management Boards of enterprises. Only in case when that is required for the sake of monitoring the realisation of public interests, a person appointed by the Government may be the President or member of only one Management Board.

To put it more precisely, if they abide by the Government's “directive”, numerous state officials will no longer be able to earn additional salaries by just sitting on or presiding over various Management Boards of Montenegrin enterprises. This is an old and well-established system of monopolies. According to a survey of the Restructuring Agency, in mid nineties numerous representatives of the ruling DPS were members of a number of Management Boards in state firms (some of them in as many as nine firms). Although, according to the Law on Enterprises a Government appointed official could not sit on more than three Management Boards of various enterprises with different type of economic activity and could preside over only one such Board, that was obviously not the case. However, time did not bring any changes. Today also, the authorities are controlling major Montenegrin enterprises, state media, health care, culture, and similar through Management Boards.

In other words, the 'scheme” according to which more than half of the management of transformed enterprises is in the hands of representatives of three state funds (the Pension and Disability Fund, the Development Fund and the Employment Fund) has been functioning perfectly for years. The front men in these Funds are appointed by the Government, while Presidents, as well as members of their Management Boards, are mostly influential people from the authorities. Thus, the authorities have a decisive say in the election of General Managers of most important enterprises. In this way, thanks to unlimited privileges, Managers, Management Board members and state officials are operating together. This combination of authority and trust did not yield positive results. But, the membership in Management Boards proved a solid source of additional income.

“During the past decade, many Ministers and state officials were members of a number of Management Boards which brought them both direct and indirect benefits. In some cases, certain officials earned three to four wages with their membership in some seven to eight Management Boards”, said Zarko Rakcevic, Vice-Premier and the SDP Vice President.

According to unofficial data, in individual enterprises compensations paid to Presidents of Management Boards were equal to the General Manager's salary, while in some other they received “only” 75 percent of his salary. These allowances were paid regularly, in contrast to salaries for which workers waited in vain for months. This additionally strained the relations between privatisation authorities, enterprise managements and workers at everybody's detriment. Sometimes, Managers paid the price, but those who had appointed them – members of Management Boards – remained beyond reach.

Despite thunderous announcements of reforms and democratic changes, the three-member coalition “For A Better Life” was not willing to voluntarily give up the inherited positions of power. Therefore, during its rule members of the Main Boards of three coalition parties were in top echelons of economic entities. It is interesting that it is impossible to obtain data on either current members of Management Boards or those who discharged that function during the times of the integral DPS. Perhaps this could be explained by the fact that the Montenegrin economy, and consequently economic power, is still mostly in the hands of people who are running the DPS today. And all this despite the evident conflict of interests.

“The situation in Montenegro is such that it requires some serious actions with a view to restoring the full confidence between the Government, political elite and citizens. During the past decade, in a great number of cases political activity represented one of the most secure, least risky and most profitable jobs,” said Zarko Rakcevic, Vice President of the Government. He pointed out that “The Conclusion on the Conflict of Interests” was provisional and that the Government decided to adopt such a binding document “pending the adoption of the Law on Conflict of Interests”.

The Director of the non-governmental Transition Centre, Nebojsa Medojevic was also supportive of the legal regulation of this issue: “Under the pressure of non-governmental organisations – the Transition Centre and a group of its partners - conditions have been created for the initiation of the adoption of the Law on the Conflict of Interests. That law will regulate the conduct of state officials – Government members, the Prime Minister, the President of the Republic, the Governor of the National Bank, judges, General Managers of public enterprises, in short all those who are appointed by the Government. It will also define situations in which a conflict of interests – private and public ones - might occur. We have finalised the draft and it is now being examined by foreign experts. In September, we shall submit it to the State Agency for Anti-Corruption Initiative”, said Medojevic.

Until this law is passed, there is the Government's conclusion on the conflict of interest, which has already given first “results”. On his own initiative, Purko Ivancevic, a SDP member, left the position of the Assistant Minister of Tourism because he was also a co-owner of a touristic firm. After his resignation, Ivancevic said: “I expect that others will follow suit with their resignations. To hell with this party and the state if I am the only one to do it”.

Until now, there have been no other voluntary resignations. And, it would be naive to expect people accustomed to monopoly to forego them of their own volition. Very few are ready to believe that the Government of Montenegro will manage to change anything substantially within a year of its term. Nevertheless, these attempts are worth noting.

Predrag Nikolic (AIM)