Privatization in Montenegro

Largest Montenegrin Enterprises Sold

By invitation for tenders for privatization of a few most significant enterprises, the government of Montenegro has brought Montenegrin privatization closer to the line which separates political and ideological "restructuring", "transformation" and similar superficial alterations and cosmetic changes from fundamental, efficient and true ownership changes and market concept of business operation

AIM Podgorica, 9 January, 1998

On 15 December last year, the government of Montenegro, through its Agency for restructuring of the economy and foreign investments, invited international tenders in order to nominate consultants (advisors) for privatization.

Finally - some would say. And really - nine years after partial privatization of limited proportions and modest results in which concepts of reform and demands for fundamental and real ownership transformation, for reasons known to everybody, were rejected, that is slowed down - a serious effort has been made to subject privatization of the most significant Montenegrin enterprises to criteria and methods known to the world market.

Montenegro has, of course, already paid for the damage of delayed privatization. False (where it was a propaganda floscula of the ruling/pre/war oligarchies) and futile (in case of sincere followers of the illusion of "associated labour") effort to "preserve social ownership" and "what the workers had created for years" inflicted invaluable damage.

The list of enterprises for the privatization of which foreign expert aid was demanded really "weighs" a lot: the aluminium combine, the tobacco combine, Upper Ibar from Rozaje, UTIP Montenegro, Budva riviera hotel enterprise and the Institute Dr Simo Milosevic in Igalo.

The invitation for participation in the tender, following the suggestion of the British Know-How Fund, was sent to twenty five addresses - investment banks and corporations, consulting firms, and embassies in Belgrade - met with more than a good response in view of the overall Montenegrin circumstances and those in the region: twelve consulting companies and banks applied, some independently and some in so-called consortia (groups), expressing interest for offering consulting and mediating services in privatization of two or more offered enterprises.

In the invitation letter, the Agency defined the desirable contents of the tender: information about previous participation of the applicants in privatization in Central and Eastern Europe, data on participation in privatization projects in relevant branches of the economy (aluminium, tobacco, wood production, and tourism), analysis of prospects (possibilities of successful privatization of enterprises), recommendation about the manner in which it could best be effectuated. It was also demanded from the possible consultants to define and propose their role in listed activities and procedures, as well as to state their expert teams, give their references, suggest deadlines and conditions for privatization projects, and to indicate the price of their services, along with a model of contract to be signed with the government of Montenegro which would regulate everything.

The list of the applicants is witout exaggeration, impressive. Names such as Merrill Lynch, Deloitte & Touche, Banque National de Paris (BNP), Credit Commericial de Framce (CCF), EPIC, Hong Kong Shangia Bank... show that despite everything, Montenegrin production and touristic enterprises can be an interesting and prifitable business for sale in the world market.

The seven-member commission (among which, along with domestic officials and experts, has two foreign experts - Robert Stone and Alan Hodgson of the Know-How Fund) is entrusted with the task to choose the most convenient offers. The equally important criteria are - previous experience, qualification of the members of the team, quality of the application (especially of the analysis and recommendation of models and methods of privatization) and - proposal of compensation for the job done.

The choice of the candidates will be made in two phases. Preliminary consideration of the received offers has already been completed and candidates were invited to Podgorica for additional interviews which will take place between 12 and 19 January. After these final consultations, the names will be known of the firms or teams who will, based on contracts with the Montenegriin government, that is its Agency, start the responsible and complex work of selling the listed enterprises.

From reactions which followed in Montenegrin public after opening of envelopes with the offers, both of government and independent experts, as well as that of the managers of enterprises which are to be privatized, it could be concluded that there is an almost undivided opinion about the significance and usefulness of this method of sale of significant Montenegrin production and touristic enterprises. People from the Agency rightfully stress that this was a logical and necessary move - after the experience with the sale of Trebjesa from Niksic - to subject the foreign specialist support to a test of competition in order to get a consultant who will best perform the task in a correct and public manner.

The managers (at least publicly) agree. Their position should be understood: transition from "difficult" problems with funds and everyday difficulties with workers to a transparent relation with the international market and its rules is not always pleasant.

One thing is for sure: publication of results of the international invitation for tenders will mark turning of a new page in Montenegrin privatization. Time of ideological disputes whether privatization was an urgent need or an ominous product of imperialistic conspiracy has (hopefully) passed.

Specific projects (new tenders, creation of a liberal infrastructure for foreign investments and general conditions for business operation, as well as long expected voucher privatization) should give the answer to one, one could say, very practical problem. The mixture of political turmoil and general economic inertia is threatening for some time now to endanger foundations of fundamental social and overall stability in Montenegro, so that quick and efficient privatization with fresh money and ideas and world criteria of business operation appears as a means to avoid escalation of the crisis - both political and social.

This is, therefore, a race with time, which Montenegro is entering with a historical delay.

Whether good moves of the Montenegrin government, such as the international invitation for tenders, have come too late or in the minute to twelve - will be clear in the days which lay ahead.

Miodrag VLAHOVIC

(AIM Podgorica)