PRIVATIZATION AS A SOCIAL PROGRAM

Serb Law on Ownership Transformation

Pressured by insurmountable economic problems and the political crisis, the Serbian leadership had finally decided to initiate the process of privatization in order to win this year's election by means of the illusion of ownership democratization

AIM Belgrade, 26 March, 1997

As expected after Milosevic's new year's announcement of "the year of reform", Serbian leadership has finally promoted the "working version" of its own law on privatization (24 March) and set out on not an economic, but political offensive. At the very promotion of the project of privatization it was strikingly obvious that the main aim of the operation was to "occupy" discontented workers and employees in Serbia in this election year with destribution of (allegedly) about 70 billion marks worth of socially-owned property which has remained after almost a decade of general property destruction and war chaos.

This political aim is visible primarily from the chosen privatization model which favours those who are already dealing with socially-owned capital, by distributing among them free of charge 20 per cent of the shares they subscribe to, and they are also entitled to a discount of 1 per cent for every year of service (with a limit that each individual cannot have a discount which exceeds the value of 20 thousand German marks). Only 30 per cent of the value of the enterprise is reserved for sale at full price and practically only that part of issued shares will appear on the security market (at the stock exchange). In fact, foreigners will also be able to get involved only by buying that third of the value of the capital in Serbia, because the shares the employees subscribe to will not be transferable in the next year and a half (which is the deadline for subscription). The beginning of privatization was indirectly scheduled to take place on 4 July this year (therefore, on "Combatant's Day"), because by that time about 1500 socially-owned enterprises are obliged to officially evaluate their socially-owned capital (another 500 enterprises have already instigated court proceedings because of such evaluation made by the state Agency for Restructuring Social Capital).

The part of social and state property which fails to be sold during subscription, will be sold at the stock exchange for another year and a half, and if it fails to be sold even after that, the shares of that part of the capital will become part of a new Stock Fund on the level of the Republic. The income made in the sales will go to the Pension Fund (50 per cent), Disability Fund (25 per cent) and the Employment Fund (25 per cent). The main part of the process should, therefore, be completed in three years.

When one looks into this privatization model more closely, it can be seen that priority is given to satisfying interests of all major social interests. Some would acquire property, some a more stable income (pensioners), and some jobs. This aim of relieving social tensions by means of privatization was not concealed by high state officials of Serbia when they promoted the draft law on property transformation. Mirko Marjanovic, Prime Minister of Serbia, for instance, said on the occasion that adoption of the proposed project on privatization was a "precondition of establishment lasting economic and social stability", that "property transformation is the interest of all employees", etc. He explained such direction of action by a thesis that "priority in property transformation must be given to those who have created this social property, but also to all the employees, former and current, who have contributed to normal operation of the economy and society through development of non-productive branches of the economy and activities of the state". All the others, like the new vice-prime minister in the federal government Danko Djunic, also spoke in favour of the "strong social component" in the proposed privatization model.

This prominent social dimension of an economic process which in normal circumstances quite contrary - is primarily aimed at improvement of efficiency of operation of enterprises and as such exerts pressure on mass social strata - is understandable in Serbia for several reasons. First, the ruling left parties must present privatization in this light in order to prevent unfavourable political consequences of the previous propaganda against transition and in order to make it ideologically somehow "digestible". On the other hand, normal privatization in Serbia is coming too late, so there is no free capital which would fill operating funds of the completely illiquid economy.

Not less important is that the long-awaited lifting of the UN sanctions which would draw major financial investors from abroad into the process of privatization in Serbia has been a big disappointment. The "outer wall" of sanctions persists, and it is even becoming higher every day, because the regime of Serbian socialists has continued to pursue internal policy contrary to world standards and basic democratic principles. That is why it had to give up the economic function of privatization and offer the model which is primarily intended to pacify the voters at home, on the eve of this year's republican and presidential elections in Serbia.

There is yet another political aim of the Serbian top echelons, and primarily of the Serbian President Slobodan Milosevic, which should not be neglected in analyzing the beginning of privatization in the republic whose Constitution indeed does not permit abolition of social ownership. This is a specific instrument of pacification of Montenegro which has initiated privatization a few years ago and from where criticism has been constantly heard against Serbian practice and where a part of the highest authorities (Prime Minister Djukanovic) has strengthened the anti-Milosevic lobby, prepared even to separation from the hopelessly outdated and conservative centre of power in Belgrade. Now, when privatization has been announced in Serbia, according to a model similar to the Montenegrin, Milosevic's supporters in Podgorica may square accounts with all those who are preventing Milosevic to move to the head of the federal state and they can explain strengthening of the federal authorities, because allegedly, the differences between the two republics concerning transition have disappeared.

After all, Milosevic's Socialists and supporters of his wife from YUL have a very practical reason to start privatization in Serbia. It is much better for them to regulate and control this process while they are still in power than, possibly after the republican elections, be forced to let another political group take hold of the Serbian assembly and adapt this important process to its own interests.

Beginning of privatization is also one of the conditions of the international community in order to return FRY to the international economic institutions, so that now Milosevic will be able to fight with more arguments for access to fresh world capital, the flow of which is influenced by the International Monetary Fund and the states which are domineering in it (the USA primarily).

Of course, Milosevic's prospects to achieve this sum of political aims which finally made him decide in favour of privatization should not be overestimated. First, privatization for the benefit of employees can quickly turn out to be privatization for the benefit of socialist top management in enterprises. The poor workers who manage to get hold of the 20 per cent of free shares in their enterprises will not immediately see any benefit from having become "factory-owners" and from having obtained securities instead of decent salaries. It is also very difficult to expect any sudden economic zeal, because experience shows that privatization does not immediately have favourable social effects - even when it is undertaken in the form which allegedly satisfies the broadest social strata. It may also happen that 30 per cent of the social capital planned to be promptly sold - remains without a buyer, because those who have the money are in no hurry to invest it in the country with so much legal and political uncertainty.

Dimitrije Boarov