UNMIK on Air

2nd December 2003

Privatization in Serbia

(By Zoran Culafic)

 

Hello and welcome to UNMIK ON AIR

 

A senior official with the UN development program, UNDP, recently praised the privatization program underway in Serbia. Kalman Mizsei, UNDP administrator and assistant to UN secretary-general Kofi Annan said Kosovo could learn from the Serbian experience, describing it as the best in Eastern Europe. Similar praise for the economic changes also came from top European and international finance officials – a recent donor’s conference in Brussels pledged 1.1 billion euro as aid to Serbia-Montenegro for 2004. This, they said, was to show support for the reforms underway as well as encouragement for the continuation of those changes, especially in the light of the fragile political situation in the country.

Belgrade is also patting itself on the back – an upbeat privatization minister, Aleksandar Vlahovic, said receipts from the privatization deals this year would reach 1.3 billion euros. Yet, with unemployment running at over 3O percent according to official statistics, concern over cronyism and corruption and fears of more job losses, not everyone shares this optimism. This was underscored during the series of demonstrations organized by labor unions a few weeks ago…and more protests have not been ruled out.

The truth, according to Belgrade based financial journalist Biljana Stepanovic, is somewhere in between.

Biljana Stepanovic: The fact is that only the biggest and most attractive companies are sold to big world companies, but the situation in this country does not stimulate more world companies to come. There are, of course some cases where questionable capital succeeded in being legalized, there were some processes not wholly transparent, but not that many and all in all I cannot say that the whole process is negative.

Some leading economists have urged the government to stay the course and not lapse into what they call economic populism – that is, adopting short term measures to appease voters instead of the necessarily painful changes demanded by the transition to a free market economy. Others are equally vociferous in opposing current policies, describing privatization as a plunder of national resources and a pretext for money laundering.

Branislav Canak is President of the independent Workers Union Nezavisnost.

Branislav Canak: Social ownership is different from all other kinds of ownership, you cannot privatize it on the same basis as you privatized state owned companies in former USSR, and that’s exactly what happened here.  And here we come to a very strange point – the state took over complete control over privatization process, socially owned enterprises become state-owned but there is no single document to prove that. It means that it was an economic putsch. They stole ownership from workers.

Biljana Stepanovic isn’t surprised by this point of view – similar sentiments were and continue to be expressed in other former communist countries that embarked on the transition to a market economy. In her view, people have to realize that there is no other alternative. However, she cautions against expecting substantial improvement in the short term, given the disastrous state of the economy.

Branislav Canak: I think that one cannot expect any positive results soon, and I think there will be more workers dismissed from their jobs, there will be more uncertainty but simply that is the price. This process is something we have to pass but I don’t expect that in 3-4 years Serbia’s economy will recover significantly

Predrag Markovic is a senior official with the G17 Plus, a party that has been campaigning strongly against government corruption. He says privatization in Serbia has gone much too fast and that the consequences will be catastrophic for the economy.

Predrag Markovic: Unfortunately, the new owners of those companies often do not fulfill the obligations they accepted while buying the companies. So out of three stages of privatization process first and third one are disputable and therefore we cannot consider it successful. Finally, the fact is that money from the privatization process is paid directly into the budget and is spent on various social programs. Yet the substance of privatization is to provide for an increase in the budget, which can be used for opening new jobs.

Accountability is another concern voiced by opponents of the manner in which the Serbian economy is being revamped. Union leader Branislav Canak thinks money laundering is rampant and that Milosevic era businessmen are continuing to profit from the current system.  

Branislav Canak: Auction privatization is ideal for such cases, so it is an ideal opportunity for a “businessmen” to “clean the money” because, who knows when they will get another chance. They cannot take the money abroad because there is strict control of its origin. All transactions above 10.000 dollars are controlled …so this is an ideal opportunity for those thieves who got rich in the Milosevic period through his war policy, through his policy of total economic control, to “clean the money”. And I think it is the last such chance for them.

Economist Predrag Markovic isn’t so worried about the lack of control mechanisms as he is about the will of the government to ensure that money raised through privatization is spent in the right way.

Predrag Markovic: It is not a question of whether or not there is a control mechanism but whether there exists the political will, and it is obvious that there is not enough political will. But I have to say that the origin of the money is not a key question here, but the way it is spent and invested – i.e is it money paid into the budget and is it being used to create new jobs.

 

Transparency in this area would go a long way in alleviating peoples’ fears, but so would political stability. With another election looming, many influential economists have expressed concern that the authorities will resort to populist measures to garner votes. Vojislav Kostunica, leader of the Democratic Party of Serbia recently said the privatization process should be reviewed. Biljana Stepanovic again.

 

Biljana Stepanovic: In case the Serbian Radical Party wins in elections then one should expect some more radical measures and steps backwards. However, if a party or coalition from the democratic corpus wins it is unlikely there will be any drastic changes. Nor one can expect a general revision of the privatization process, despite the statements from Kostunica’s Democratic Party of Serbia - DSS.

 

All in all, the stakes are high – but given the growing closeness between Serbia’s new rulers and the West, it is unlikely that Belgrade will backtrack from the economic course it is set on.

 

That does it for this edition of UNMIK ON AIR. Thanks for listening.