NEW CLASS VS. IMPOVERISHED CITIZENS
Privatization in B&H
AIM Sarajevo, 21 October, 1996
The past four-year war in B&H postponed the inevitable process of privatization for happier postwar times. Nevertheless, the war was no obstacle for the state to formally transform the social property, by a "decree" in 1994, into state-owned, under the pretext of the need to protect it from plunder and abuse. This formal takeover of the property, was used by the state, as the "new" owner, as a pretext to appoint new directors who suit it. In fact, the condition to becime a director was membership in the ruling Party of Democratic Action.
This refers to the part of the Federation controlled by the Army of B&H. In the remaining part of the Federation controlled by the Croat Defence Council (HVO), the state structure personified in "Herzeg-Bosnia", did not abide by the decision of the republican agencies, but formally maintained social ownership which was the concern of the Agency for Reconstruction and Development. In this way, nowadays on the territtory of the Federation, there are formally both social and state ownership.
When peace came and significant increase of financial resources for reconstruction of B&H were announced, privatization got priority again. All international financial institutions, starting from the World Bank, the International Monetary Fund, all the way to foreign companies interested in investing into devastated B&H economy, agree about one thing - they do not want the state to be their business partner.
More due to the pressure of the international community than due to their wish to fulfill prewar promises on transition to market economy and privatization, federal authorities finally started dealing with this seriously. Although representatives of international financial institutions had expected that the privatization laws would have been prepared much earlier, draft laws on privatiztation of enterprises, buying housing units by their tenants and the law on restitution, went into federal parliament procedure only past August.
Adoption of the law on the Privatization Agency can be considered as a predecessor of privatization, since it defined the key institution for future transition of state (social) property into private hands. Pursuant the Law on Privatization Agency, it shall be formed on the federal level, but every canton will also have its own agency. The federal Agency is competent for privatization of enterprises which have branches in more than one canton, it will monitor and supervise operation of cantonal agencies, and it will be the arbitrator in case of disputes among cantonal agencies. The most important of all will be establishment of the initial balance sheet which will at the same time be the price of the enterprise which is in the competence of cantonal agencies.
What is the current actual value of state-owned property which will sooner or later be sold by auction, noone can claim for sure. In view of the fact that at the moment only 10 per cent of prewar industrial facilities operate, and that economic giants such as Unis, Energoinvest and others are down on their knees, it will by no means be an easy job to determine their market price. In the end of 1991, total value of fixed capital in the territory of B&H was about 56 billion German marks. Evaluations of experts say that at this moment the value of social capital in the territory of the Federation is about 15 billion marks.
Bosnian concept of privatization which was, along with domestic, elaborated by foreign experts, is based on quick and total privatization. Therefore, in the first circle of privatization would be enterprises which have less than 50 employees and whose value is below half a million marks. Enterprises from this group would be sold by auction just three months after official adoption of the law on privatization enterprises. Immediately after that privatization of all other enterprises should follow suit. The only exception is prescribed for public enterprises, such as the post, telephone and telegraph company, electric company, waterworks, mines, and enterprises in the sphere of public information (media), gambling and armament industries. These enterprises will be the last to be privatized, and when this will occur depends on the decision of the federal government, while the list of such enterprises will be made by the federal parliament.
Enterprises which will not be sold in the first round at the price determined by the inital balance sheet, can be sold in the second round by direct agreement between purchasers and the competent agency for privatization. All domestic and foreign legal and physical entities can appear as buyers, except the remaining domestic state-owned enterprises. In any case, a purchaser must pay at least 35 per cent of the agreed price in cash. Money provided by selling enterprises will partly be used for covering expenses of the agency, and the rest would be employed to meet the needs of the cantons and municipalities on the territory of which the enterprises are located.
As a deposit for privatization, every citizen of age who was a citizen of B&H on 31 March 1991 and at the moment the law is adopted has a permanent residence on the territory of the Federation B&H will be issued a certificate with which he/she will be able to buy shares of an enterprise or buy the housing unit they have been living in. How much this certificate will be worth is still not known since the drafter of this law left this to the deputies of the federal parliament to decide. Unofficially, the amount of 5,000 German marks per individual is mentioned most frequently. The debt of the state to the citizens based on foreign currency savings in the former state will also be transformed into certificates, as well as obligations of the state to former owners of property which was nationalized and which should be returned now. Of course, it will be possible to buy shares and housing units with cash too, but there are few of those who will have extra money for purchasing them. That is why it is realistic to expect that the largest portion of the purchase will be paid by certificates.
Despite everything, it is still a mystery what will become of army foreign currency accounts which were distributed to members of the Army of B&H instead of salaries which they did not receive during the war. The height of the amount on these accounts depends on the time spent in the Army of B&H, so the combatants will receive 400 marks per month, and disabled veterans and families of killed combatants will receive 500 and of 600 German marks, respectively. Whether these accounts will be considered as certificates, as claimed by republican officials, or whether they will become that only if the federal parliament makes them official, as claimed by Dr Stijepo Andrijic, head of the expert team for privatization, will become clear only when the law is finally adopted.
As prescribed, every citizen of age will have an account with the Payment Operations Office which will be in his/her name and all certificates he/she is entitled to will be registered on this account. Certificates will be transferable and citizens will be able to freely dispose of them, that is, they will be able to sell and buy them.
Former internal shares which the workers bought just before the war will become "real" shares under the condition that the whole amount had been paid for. Since one of the fundamental principles of market economy is inviolability of private ownership, owners of these prewar shares will keep their ownership regardless of where they are now.
Privatization of the economy imposed the need for settlement accounts between the state and the citizens who it had previously deprived of property with a symbolic or no compensation at all for the sake of "high causes". The draft law on restitution left the key question unresolved - whether only those who were deprived of their property by the "people's authorities" after 1945 are the only ones who are entitled to compensation or return of property, or the right to restitution should also be given to those who were deprived of their property in the period between 1919 and 1945. The federal government has not succeeded to reach an agreement concerning these two stances, so the final decision will have to be reached by deputies.
The part of the privatization laws which certainly attracts the greatest attention is the law which gives the possibility to tenants to buy housing units they live in. The Government of the Federation as the drafter, determined the initial price of the square metre of housing at 600 German marks. Depreciation rate is subtracted from this amount - one per cent of the value for each year of the housing unit (60 per cent at the most). For each year of working experience of the holder of the tenancy right he gets a discount of one per cent, and for every month spent in armed forces of the Federation, additional discount of 0.25 per cent is calculated, and for the working obligation during the war, this rate is 0.12 per cent a month. Special discounts are prescribed for disabled veterans and families of killed soldiers ranging from 25 to 100 per cent of the price. rate
The right to buy the housing unit is given to the holder of the tenancy right and members of his immediate family who live in a joint household. It is possible to buy the housing unit either at once or in installments within the maximum time limit of 25 years. Payment facilities, apart from cash, can be foreign currency savings, certificates received on account of restitution and other certificates, like those planned for all citizens of age in the Federation for participation in the process of privatization and army foreign currency savings accounts.
When the privatization laws will finally be adopted will depend primarily on deputies of the federal parliament. It is quite certain that it will not be able to postpone it for ever, and it was planned that the whole process of privatization begin on 1 January, 1997. With or without the law on privatization, we are witnessing primitive accumulation of capital for quite some time now. Therefore, there should be no illusions that by privatization alone this will become the land of milk and hoeny. A new class of rich has already practically formed, and their interest is to take the economy off the hands of the state and take this unpleasant obligation in its hands. Ordinary citizens, completely impoverished, have nothing else to hope for but that they will get crumbs of the privatization cake.
DRAZEN SIMIC