/IPS DEVELOPMENT BULLETIN/ SERBIA: Privatisation, ‘SPS-Style’, Keeps The State In Control

By Vesna Peric Zimonjic Reprint | | Print |

Vesna Peric-Zimonjic

BELGRADE, Apr 5 1997 (IPS) - The introduction, from Milan Beko, head of Serbia’s new ministry for economic restructuring, was portentous enough.

“A law on privatisation is among the most important a state can introduce,” he told sceptical Serbs this month. “Most of the eastern European countries have gone through this process, so there are no great new ideas about that… we expect only the great realisation of what we want to accomplish”.

Serbian industry as squeezed dry by years of international ostracism and the sanctions applied in punishment for its part in fomenting the war in neighbouring Bosnia-Hercegovina. Privatisation is seen as a likely route to rapid recovery.

But this bill, to begin with a grand public sale of company shares, is not about privatisation, say Belgrade experts, it is about keeping the country’s riches in the hands of the ‘insiders’ — the intimate allies of Serbian president Slobodan Milosevic.

“It’s not enough to say: ‘here are the shares, buy them’.” says Milic Milovanovic, one of Serbia’s leading economists, commenting on the new bill, tabled last week.

“Ordinary people are not able to buy anything, let alone the shares. The law clearly favours the ruling elite and those who run the state controlled enterprises now, and will allow them to take them over… and it is totally unattractive for anyone abroad.”

Serbia was knocked off the path to a free market long before the sanctions came down. The process of privatisation started in 1990 with liberal laws passed by Ante Markovic, last federal prime minister of the former Yugoslavia. Then secession and war reduced Yugoslavia to Serbia and its juniorpartner Montenegro.

Milosevic’s re-styled communist Socialist Party of Serbia (SPS) neutralised or revoked Markovic’s laws to keep the state, or rather the SPS, in ownership of the national assets.

Between 1991-1994 the state reasserted its control over 44 percent of Serbia’s economy. Then it claimed to be defending the country’s industry from untrammeled free enterprise and the mega- corporation. Now the rhetoric is different, but the aim, state control, is the same.

The new law, says Serbian prime minister Mirko Marjanovic, one of Milosevic’s closest associates, is “efficient, stimulating, just, and — above all — broadly understood by the public”.

Most independent observers say exactly the opposite.

“Privatisation is not an aim in itself” says Veselin Vukotic, another recognised Belgrade economics expert. “It either is aimed at creating an efficient market-oriented economy, or at raising extra funds to keep the system going. It is obvious that the latter objective applies here.”

The new law proposes the sale of shares in a list of business concerns, with up to 70 percent discount for their employees. Half the proceeds from the sales will go to a new business development fund, the rest will be split between a pension fund and a fund to support new employment initiatives.

Employees wouldget priority in purchase with their children and the retired next in line.

Three rounds of share sales are planned, with unsold shares put onto the stock market for open trading. The government has not set a complete schedule, but independent experts say the process could take up to seven years to complete.

They also warn that the true value of the businesses could remain a mystery. There are no accurate national figures on assets or liabilities, no national agency to produce them and most problematic of all, no planned steps to resolve the issue of true ownership of property ‘nationalised’ by the communists when they took over in 1945.

The businesses, according to the bill, are divided into three main groups: state-owned enterprises “to be privatised by the decision of their founders”; pre-1980 cooperatives set up under the Tito regime, which will be privatised or not according to the cooperative members’ wish (though most are now under full state control or have collapsed); and those concerns that failed during the last five years of economic attrition, described by the bill with grim understatement as ‘problematic enterprises’.

The issue of foreign investment is not even mentioned in the bill. The state says that aspect will be covered y a separate, so- called Law on Concession, with parts to be later incorporated in the new privatisation law.

Few of observers think that the international finance community will be fooled. “It’s obvious that everything is going to fall into the hands of the state or managers who already run the businesses,” says Milan Kovacevic, another independent expert. “Any foreigner would be stupid to invest here after they took a look at the Babylon tower of ownership being built here.”

“Even the title of the law does not say ‘privatisation’,” notes Miodrag Zec of the Belgrade Institute of Economy. “It is called the ‘Law on Restructuring of Ownership’ — a clear message that privatisation is not obligatory.”

Economic affairs commentator Jovan Rankovic argues that the whole concept of the state’s selling possibly worthless shares to employees borders on cruel fraud.

“If you sell shares and get a little money for them in a long period, what is the use of selling” he asks. “It seems that the state wants to bribe the workers, telling them that they are getting something of value at bargain price. The workers should know that they will be giving up their last savings for nothing – most of the enterprises are facing bankruptcy right now.”

With eidential and parliamentary elections due this year, the opposition Zajedno alliance suspects bribery as well. “It is beyond doubt that the cash raised by these transactions will be used to buy temporary social stability over the next few months — and the SPS victory in the votes,” says spokeswoman Aleksandra Posarac.

“The workers are to be robbed once again by this state,” says Dragan Milovanovic, spokesman for the Association of Free and Independent Unions. “We demand that the government withdraws the draft law and makes a completely new, different one.”

Serbia has been rocked by social unrest, first the pro-democracy marches led by Zajedno, and then a string of strikes across the industrial spectrum. Public spending is increasing without clues as to where the funds are coming from.

An estimated 2.2 billion dollar trade deficit, a fall in average earnings to around 100 dollars a month in real terms and months of delays in payment of social benefits illustrate the real crisis that besets Serbia.

Beko and Marjanovic say the draft law will now go to “wider public debate” — for which, say the independent media here, read days of generous trumpeting on state TV ahead of a ritual rubber stamping by the Serbian parliament. State TV calls the bill “historic’; the independent media describe it as “another dangerous game with the people”.