Problems with Privatisation in the RS

AIM Banja Luka, October 28, 2001

Privatisation of state capital in the Republic of Srpska is facing serious problems so that it is highly unlikely that it will bring any economic and social stability to this Bosnian-Herzegovinian entity in the foreseeable future. For quite some time it has been burdened by two grave problems: the first is open political pressure exerted in order to postpone the process of ownership transformation, and the second is the lack of bidders' interest to invest live capital in what they have been offered.

Simultaneously with the change of power, every election conducted in the Republic of Srpska also meant the change of management in the economic sector. In this local political environment these positions were distributed as a "reward" for electoral victory, which was used for paying "party debts", but also for replenishing the funds for the party's financing. Instead of honouring his promises on accelerated privatisation and expertise, which should replace the existing politicisation of economic trends, RS Prime Minister Mladen Ivanic had to engage in the ruthless fight for the control of healthy state firms. The resignation of Ivanic's Privatisation Counsellor Damir Miljevic was the first serious signal that a part of the ruling structure had serious intentions of slowing down the privatisation process.

Prime Minister himself admitted this rather unwillingly, but even after Miljevic's resignation, which was followed by the resignation of Rajko Latinovic, Minister of Agriculture, no concrete moves have been made. Instead, newspapers were filled with stories about the attempted take-over of the Modrica Refinery, which is just one of many firms over which the former and present ruling elites are fighting. Chief of the World Bank's Mission in B&H, Joseph Ingram warned that these elites also have a name and laid the greatest blame for the slowing-down of privatisation on the Serbian Democratic Party.

By careful observation of reports on tenders it is possible to reach a disappointing conclusion that interested buyers never participate in them. October figures for Banjaluka alone show that there was no single interested bidder at two repeated tenders for 9 enterprises offered for sale. Although the RS Directorate for Privatisation announced the preparation of an analysis of reasons for the lack of bidders' interest everything ended with rather short information that "none of the interested bidders had submitted the full documentation".

In our discussions with trade union representatives and workers of some of the mentioned enterprises ("Konzum", "Prvi maj") we learned that they were not much surprised by such developments. Nedeljko Sarenac, trade union representative of "Konzum" explained that this firm had been sold already during the war. "Business premises, which were our property, were sold, or better said given to cousins and best friends. Now, no one will be able to sort things out. Even those who are willing to invest their money can only buy debts and people who had not received wages for years", explained Sarenac.

Workers of the construction firm "Prvi Maj" (May 1st) told us that the firm was unable to compete anywhere even when it could work because its war-time managers had taken away all its tools and machines. A telling example is a footwear factory "Bosnia". Although the privatisation of this firm was concluded some time ago, workers have nothing to hope for, especially in view of the fact that almost 80 percent of them have been on waiting lists for months. "Bosnia" Directors, who took turns in the last three years with lightning speed, competed who would ruin it more. It would suffice to recall the scandal with the "renting" of its department store in the centre of Banjaluka, which has been the talk of the town for the last two years, but has not been resolved yet. Similar was the destiny of its business premises in Bihac, Travnik, etc.

However, there is a "but" in that part of privatisation that in Directorate's opinion is progressing in a satisfactory way. According to information from the Privatisation Directorate's September Newsletter on 166 enterprises offered for direct sale or at tenders, 90 percent were paid with missing foreign exchange saving deposits. "The Law on the purchase of state-owned flats includes a provision which limits the possibility of buy-up with missing foreign exchange saving deposits which is understandable because this devalues the funds for new housing construction. But, it is incomprehensible that such a clause does not apply to the purchase of state enterprises" said Biljana Rodic-Obradovic, Vice-President of the Socialist Party. According to her, workers who will become jobless cannot be taken care of nor new job openings created without "fresh money".

However, Prime Minister Ivanic said that enterprises offered for sale in the RS have been overvalued which was why buyers showed little interest in them. He explained this with the fact that over the last couple of years both facilities and installations were destroyed, became obsolete, while their debts often exceeded their value. However, people from the World Bank's Mission for B&H said that workers, rather than debts, were the real problem. Namely, people who come from abroad have never met with the problem of "waiting" workers, who were greater burden than debts.

In the meantime, Cedo Volas, President of the Association of Trade Unions of RS warned that 40 thousand workers would lose their jobs. This was said at the session of the Social-Economic Council of the RS Government which, nevertheless, has not yet prepared a welfare programme for them.

Gordana Katana

(AIM)