Privatization in the B&H Federation

Bidding for Obedient Party Members

AIM SARAJEVO, May 15, 1998

The pre-war Vice-Prime Minister of Bosnia and Herzegovina, Muhamed Cengic, will be remembered by his bolshevik statement that "the rule of law will start functioning as of Monday". In the meantime, much time has elapsed since that Monday, but the "rule of law" has not yet been introduced in these parts.

Will such be the inexorable fate of the long-ago announced advent of capitalism in the B&H Federation, or better said of the beginning of the privatization process in this entity, no one can say with certainty. Although the set of laws relating to the privatization of flats, enterprises and banks has already been adopted by the Federal Parliament and entered into force, the legal transfer of state property into private hands has not yet begun. In the meantime, the authorities are obviously in no hurry to relieve themselves of the burden of "having to care" for the social property. A managing position has long ago become a kind of reward for "meritorious" individuals from parties in power who adequately pay back their "benefactors" for such favours. It will be quite certainly impossible to observe the deadlines prescribed by the adopted privatization laws, especially those relating to the so called "small-scale privatization", i.e. sale of enterprises employing less than 50 workers and worth below 500 thousand DEM, as well as business premises which are communal property.

Situation is more or less the same with the buy-up of state flats. The arguing of the Federal Government with representative of the international community over pre-war holders of tenancy rights whose flats have been declared deserted during the war so that the buying-up of these flats will be possible only after it is determined whether their pre-war owners intend to return or not. Although there are no problems with the majority of communal flats, for the time being it is possible to buy them up only if they are paid in cash. Such cases are rare with the existing general shortage of money. Although the law envisages the possibility of buying-up of flats with various certificates, like veterans' foreign-exchange savings books, missing household foreign-exchange savings, general claims and compensations on account of restitution, the use of these certificate is still not possible in practice because individual accounts for registering citizens' claims from the state have not yet been opened.

In addition to disregarding the deadlines envisaged for the start of the privatization process in the territory of the Federation of Bosnia and Herzegovina, there is also mention of a possibility of the postponement of the entire process for September, for "objective reasons". There is an impression that the postponement of the privatization process is in direct connection with the forthcoming September elections in B&H. The increased social tension will not be eased by the transfer of public property into private hands, especially having in mind the fact that the vast majority of discharged veterans, invalids, unemployed and pensioners with their certificates will be objectively inferior to those with "real"money in their pockets, instead of "paper".

The current federal authorities have found themselves between the devil and the deep blue sea. It is perfectly clear that there will be nothing of the promises given to veterans - that their war contribution will be adequately compensated through privatization, in other words that war profiteers and the nouveaux riches will not be privileged.

And while drafts of privatization laws passed parliamentary procedure without much debate, at the same time promises were given which had very little to do with these laws. Now, when the adopted laws should start being applied in practice, loyal subject have come to their senses.

An illustrative example are communal business premises which come under provisions on "small-scale privatization" which should have been over by late September. These premises, as well as enterprises employing less than 50 workers and worth below 500 thousand DEM, will be sold by tenders. Naturally, auctions imply that goods will go to the highest bidder, i.e. the offered amount will decide. The right to participate have all legal and natural persons, both local and foreign. The law says nothing of possible priority for second and third class veterans.

Strong reaction of the current users of these premises (especially private entrepreneurs, some of whom have been in these premises for decades) is only an introduction to a possible explosion of social unrest which might ensue after the sale of these premises to the highest bidders. In all likelihood these will not be the present users. It is clear that in that case the cutting edge of dissatisfaction would turn towards current authorities which might cost them loss of considerable votes at September elections. That is probably the true reason behind unofficial announcements about delaying privatization for autumn, i.e. after the elections.

On the other hand, representatives of the international community, who have pressured the B&H authorities into adopting privatization laws in the first place, according to the model of the World Bank and American experts, want to "rid" the state of the burden of ownership over economy as soon as possible also by making this a precondition for a significant inflow of funds for revamping production which is the only way for creating badly needed job openings. The increasingly deteriorated situation of the unemployed and pensioners also threatens with social explosion and the only "remedy" are additional resources for social funds which will be impossible to realize if there are not more tax-payers, i.e. jobs.

There is no fresh money for restarting domestic economy and there will be none as long as the state is a majority owner. For over two years now representatives of international financial institutions and donors have been repeating this sentence to the federal authorities. True, federal officials are not lacking verbal commitment to privatization and market economy, but it is obvious that their deeds and words are at odds.

Further delays of privatization might cause the "freezing of donations for reconstruction which will be hardest on the common people the majority of which, contrary to any logic, work for pittance. In either case whether privatization is launched before the elections or is postponed until after the elections, the current federal authorities can count on a "hot summer" and a realistic possibility of voters expressing their dissatisfaction by withholding their votes at the elections.

As matters stand now, it seems that the federal partners in power - the SDA and HDZ - are more inclined to face the consequences of postponing the privatization until after the elections. Only the international community may spoil their game by forcing them to observe the deadlines prescribed by the law they themselves have adopted. The fact that the national authorities have promised the moon to the people in order to ease the tensions is now threatening to backfire at them. They can blame no one for the consequences of such short-sighted policy but themselves. Or perhaps it will again turn out that "the authorities are good but the people are not".

Drazen SIMIC

(AIM Sarajevo)