ADDITIONAL CAPITALIZATION OR SPECULATION?!

Preparations for the Privatization in the District of Herzeg-Bosnia

AIM, LIVNO, February 21, 1998

Waiting for March 6, the day on which the Federal Law on Privatization enters into force, a silent and undeclared "economic war" of sorts is being waged in the Herzeg-Bosnia District. What is actually in question?

Rich an influential entrepreneurs, who are at the same time owners of privatized social enterprises in Croatia, have through additional capitalization, i.e. transformation of ownership structure, become majority owners of mixed enterprises and everything that had or still has the status of economic entity in the territory of the Federation under the Croatian control.

The process of additional capitalization of social enterprises in the territory of this District is almost finished and by the time the new Law on Privatization enters into force it will be completed. The experience in this field to date shows that the transformation of the ownership structure of enterprises is mostly carried with private capital from the Republic of Croatia, so that the majority of local social enterprises already has or is soon to get new owners.

The first additional capitalization in the territory of the Herzeg-Bosnia District was carried out last year in the Livno Wool Factory "Livtex" by means of establishing "an enterprise within the enterprise" and providing it with a new name and owner. That new enterprise took over from "Livtex" some fifty of its workers. The remaining workers of this enterprise, about 200 of them, are mostly waiting for work and payment of wages they haven't received for months while as rumour has it, Josip Gucic, a well known businessman from Croatia, will buy what is left of "Livtex".

Before the war "Livko", a successful factory of fashionable ready-to-wear clothes from Livno, had 260 workers, out of which 60 percent were Bosniacs. Last year, a private firm from Rijeka, "Lumik", leased a part of this enterprise's production capacities. Now, "with European standards, but African wages" this enterprise employs only some thirty workers, while the others are on the dole. Recently, the director and owner of "Lumik" said that this "private enterprise will soon become the majority owner of the factory of fashionable ready-to-wear clothes".

Late last year the Livno "Dairy", the most profitable social enterprise both in the community of Livno and on the entire District, also initiated additional capitalization. The new majority owner of this enterprise is "Sirela" from Bjelovar, property of the famous Croatian "tycoon", Luka Rajic. According to the estimates of the Agency for the Restructuring and Development of the Herzeg-Bosnia District, the total value of the Livno "Dairy" amounts to 1,365 billion DEM, while according to the signed contract Rajic will become the majority owner by investing 700 thousand DEM with 51 percent shares.

Last year the process of additional capitalization was completed in "Li-trans", "Lipek", "Cincar", "Livanjsko Polje", while the transformation of ownership structure is about to be concluded in "Li-bus", "Dinara" and the Fur Factory.

Two years ago in the territory of Drvar, transformation of ownership structure by means of fictitious additional capitalization was carried out in the largest social enterprise "Grmec" which had about three thousand workers before the war and now employs only 500, and which the well-known Croatian entrepreneur, Marijan Filipovic from Cabar, bought for a pittance in autumn 1995, after the military operations stopped, and changed its name into "Finvest". According to this same model, the mentioned gentleman became the owner of the former largest wood producing enterprise "Sator" from Glamoc, and the wood-processing capacities and other property of the "Sawmill" from Bosansko Grahovo.

Additional capitalization process in "Tomislav", passenger transportation enterprise in the commune of Tomislavgrad, is not over yet because when the workers found out who was to become the future owner and under what terms, they organized protests late last year and temporarily postponed this process by going on strike.

It is interesting that all once successful enterprises in the region of Livno, Tomislavgrad, Drvar and Glamoc were brought to the verge of economic collapse whereby their real value was greatly reduced. Although they were spared the devastations of the war they were ruined in peace time by: profiteering, corruption, nepotism, damaging leasing contracts, laying off of good workers on ethnic grounds, employment of those "obedient" and "suitable" ones without adequate skills, experience or moral scruples, by idleness, negligence, etc.

Unofficial sources claim that the transformation of social ownership into private one in the territory of this District and parts of Federation inhabited by the Croatian population, is intentionally supported by the political top echelons of the Republic of Croatia under the pretext of "the protection of national interests and struggle for the survival of the Croatian people in Bosnia and Herzegovina" and that apart from symbolic investments of "fresh money" this process is largely carried out through fictitious documents and with unrealistic evaluation of enterprises, which is not only yet another opportunity for the Croatian capitalists to illegally get rich, but also the exact copy of the unsuccessful Croatian transformation model which is being transferred to the territory of the Federation.

It should be mentioned that the evaluation of social enterprises on the territory of the Herzeg-Bosnia District is carried out by The Restructuring and Development Agency, whose members are all of the same nationality and from the same party. Namely, the Agency does not include representatives of the minorities so that Jasenko Tufekcic, President of the SDA Cantonal Board, once warned that the transformation and additional capitalization in the territory of this District could easily happen without the participation of the Bosniacs who in large numbers took part in the construction and management of economic capacities in these parts.

According to him it is impermissible and illegal for the Croatian privatized firms to be allowed to take over the B&H property through the process of ownership transformation of social enterprises, being carried out on the territory of the HB District, even before the federal Law on Privatization has been promulgated. According to him reasons for such moves were primarily of political nature because by carrying out additional capitalization and ownership transformation in disregard of the federal legal regulations, the neighbouring state wants to keep economic and political supremacy over these parts. The first man of the Livno and Cantonal SDA Boards announced the initiation of the revision procedure and annulment of the additional capitalization by means of applying federal Regulations on the Revision of Previously Performed Ownership Transformation, as soon as the Federal Minister of Finance promulgates the Instruction on the Application for and Implementation of Revision Procedure.

According to this Regulation, revision is compulsory for all enterprises which on December 31, 1991, had equity capital or share of private capital, i.e. enterprises which carried out the ownership transformation on the basis of the Law on Social Capital and Law on the Payment of Workers' Welfare and Food Allowances. The revision of the already completed ownership transformation will determine the ownership structure of the company capital, i.e. the share of state and private funds in the capital of enterprises in the period from December 31, 1991 to December 31, 1997.

Be that as it may, one thing is certain. Apart from the fact that most of the workers of social enterprises in the territory of the HB District in which the process of additional capitalization has been completed, are out of work or waiting for work, it is also true that the invested "fresh" money, if there was any, did not start the production or brought any improvement. The best proof of this is the bleak picture of the local economy.

Nedzad VREBAC

(AIM, Livno)