THE WEST DEMANDS THE PROMISED REFORMS
Privatization Leads to a Privately-Owned State
AIM Podgorica, 7 September, 1998
Three months after the election victory, Milo Djukanovic received the first warnings of the West, which strongly supported his stands on Kosovo and the announced democratization of the society. Complaints refer to the process of privatization which is less and less public and transparent and which does not proceed at the accepted rate and according to the determined procedure. Ambassador of Great Britain, Brian Donnelli and US charge d'affaires, Richard Miles, even found the time at the height of the red-hot developments in Kosovo to visit the Montenegrin president in Sveti Stefan and talk to him about it.
Reasons for concern should be sought in the initial moves of the new Vujanovic's cabinet. Privatization of large enterprises is not proceeding according to the determined procedure, there have been no international calls for tenders and control. The relevant ministry and the commission for privatization were abolished in the new coalition government, which had been founded by recommendation of the advisors in the Montenegrin government - experts of the British Know-How Fund and American USAID - in the previous Vujanovic's government. This had been insisted on in order to organize privatization better, to accelerate it and keep it under control. After the elections, another thing was forgotten - to constitute an assembly comission which would supervise this capital project of transition, which the previous authorities, at a moment of weakness, had taken upon themselves to do by signing an agreement with the opposition last year.
The first serious error was made by Montenegrin authorities in the midst of the election campaign. Simo Milosevic Institute was sold without an international call for tenders to the American businessman and friend of the local business elite, Milan Panic. This was the immediate cause for the first warning from Britain in writing. In this letter, Montenegrin authorities were warned not to make similar mistakes any more because they were risking to be left without support of the British government. This support is expressed through very significant technical cooperation most of which is directed towards professional assistance in the process of privatization, especially in organization of the calls for tenders. It was explained to the methodical British that the deal with Panic was correct because just one third of the Institute was sold to him, and that the remaining, majority package of shares would be sold through a call for tenders. This hastily signed contract with Milan Panic might have been tolerated because it took place at the height of the election campaign.
However, after the elections, it seems that there are attempts to sell large Montenegrin enterprises in the same manner - without international calls for tenders, as prescribed by law and the plan of privatization of the government of Montenegro. The whole business is carried out by the so-called negotiating teams which are formed of nobody knows who and which are responsible to nobody knows who.
One such negotiating team, headed by Mihailo Banjevic, influential official of the Democratic Party of Socialists (DPS), is already well under way with direct negotiations with Swiss company Glenkor about privatization of the aluminium combine in Podgorica (KAP). This is the leading Montenegrin enterprise on the operation of which practically an entire economic chain in the Republic depends - bauxite mines, the electric company, the railway and the port of Bar. Negotiations are conducted with one company alone, without the desirable competition and without a call for tenders. Pretext for avoiding the procedure is sought in the poor financial situation of the enterprise, which should be improved as soon as possible. Glenkor is presented as the only possible savior interested to put the stumbling giant back on its feet. Chance is not given to the others any more. And just a few months ago, the press was thunderously announcing that leading world companies in the branch were interested in KAP.
Concealed games about privatization of large systems also caused disapproval in the ruling coalition. Zarko Rakcevic, president of the Social Democratic Party (SDP), reacted in an interview to the weekly Monitor: "It appears that the process of transition is taking place far from the eyes of the public, without international calls for tenders, without approval of the authorized consultant (Credit Commercial Bank of France), without abiding by the strict rules of privatization in making of which the British Know-How Fund and USAID participated". Rakcevic demands that the process "come out in the open from the shadow and become public" and says that there can be no democratic infrastructure with a monopoly, with ownership of largest enterprises in Montenegro privatized through a closed network... If five, or six large enterprises in Montenegro are privatized without public control, calls for tenders and established procedure, it can very well become a privately-owned state, property of a few families, Rakcevic claims.
Does danger of the largest Montenegrin enterprises ending up in the hands of the privileged political elite and persons close to them really exist? It is an open secret that the Swiss company Glenkor is a business partner of Vektra from Podgorica, owned by Dragan Brkovic who is close to the leadership of the DPS. Brkovic is highly interested in the destiny of KAP since he is its leading trading partner and creditor.
"Information that we have started negotiations with the Swiss company about selling KAP are not true. We are negotiating only about management", says Montenegrin prime minister Filip Vujanovic in an interview in Monitor. He claims that the intention to sell this enterprise via an international call for tenders has not been abandoned. "KAP is in an exceptionally difficult financial position, it is undergoing the initial phase of privatization and it would be good to make a contract on management. Later on, when the new management improves the economic position of the Combine, privatization could proceed through tenders", says Vujanovic.
The prime minister, however, does not explain why an international call for tenders would not be published concerning management as well. It is a large business deal which not only revival of this enterprise depends on, but also a big share of Montenegrin economy. On the other hand, regardless of its poor economic state at the moment, according to the opinion of foreign experts, KAP is an attractive venture for foreign partners. This is confirmed also by the fact that six leading world investment banks have applied at the international public competition for advisors for privatization of KAP at the end of 1997. Apart from the Credit Commercial Bank of France which got the job in the end, tenders were offered by Meril Linz, Hong Kong Shangai Bank, Paris National Bank... Before applying for the job, these banks must have consulted their clients and established that an interest existed on the world market for the Montenegrin aluminium factory. That is why they applied for the job in the first place.
"The Combine is in a difficult situation and perhaps it would be embarassing to publish an international call for tenders", says Predrag Drecun, minister in Vujanovic's government and vice-president of the National Party, third member of the coalition. Contrary to the SDP, members of the National Party are highly involved in these deals. Drecun himself was in charge of privatization in former Vujanovic's cabinet, as the vice prime minister. Now he is "only" the minister of labour and social policy, but obviously is not satisfied with the post and publicly nominates himself for the head of the project of mass voucher privatization. He is also very actively engaged in defence of the strategy of direct negotiations. It is interesting that he was the one who participated in making the arrangement with Milan Panic during the sale of the Institute in Igalo. Another prominent member of the National Party, businessman and advisor of the prime minister, Vojin Lazarevic, did his best in the past few days to convince the public that everything was in perfect order and that warnings of western representatives addressed to Montenegrin authorities were invented!
"Reforms in Montenegro are now on the level of tall talk. Milo Djukanovic has six months at the most to do something serious. If Montenegrin reforms end with the attempts of privatization without creating an adequate macro-economic ambience which would support the process of privatization, Djukanovic could lose popularity", says Mladen Dinkic. It is interesting that this well informed economist also notes that "inside the same Montenegrin coalition there are people who do not see the wood for the trees, since their personal interest is privatization of individual enterprises". Anybody who carefully reads Montenegrin press could see, however, that after the meeting of Djukanovic with Miles, there were numerous vows that the established rules of privatization would not be abandoned and that the whole process would be transparent. And the leader of SDP, Zarko Rakcevic, confirms that in the talks with ambassador Donnelli it was established that certain business deals did not proceed according to procedure prescribed by law.
If personal interests prevail, the long lasting sinking of Montenegrin society will continue. Survival of the ruling coalition may even be questioned, because in the SDP they claim that they do not wish to participate in dubious business deals. Djukanovic as the leader of the victorious coalition which promised reforms has not much time and must quickly show that he "really means it". On the contrary, he will put at stake not only stability of the ruling coalition, but also support of the international community. Trade unions and workers are already announcing a hot autumn and social unrest. In a pessimistic variant, it could be an introduction into an inglorious end of the story about the promised Montenegro's road to Europe.
Milka TADIC
AIM Podgorica