No end to privatization - Decisions for state-owned companies before 31 May almost an impossible mission, who will pay the cost?

The fate of the remaining 11 state-owned companies protected from the recovery of outstanding debts: "Galenika", MSC "Bor", "Resavica", "Yumco", "Trayal", "Politika" FAP, "HIP Petrohemija Pancevo", "Ikarbus", "Cable Industry Jagodina" and "Azotara" was supposed to be decided on before 31 May, by which date they were supposed to have been sold or declared bankruptcy. The business activities of each company were being carefully considered and the optimal solution was being sought, the Minsistry of Economy kept assuring us before the elections in Serbia, with the promise that electing the new Governement would not postpone or stall this process.

Although we wanted to confirm that what had been promised would be fulfilled, we couldn`t get the answer from the Ministry of Justice, even after a whole week of eKapija`s trying to find out what the fate of these companies would be.

The most recent analysis by the Fiscal Council warned that the survival of those companies, owned by the state, would cost the budget more than 200 mil EUR, as all those companies were in the red and not paying debts. The failure to decide on the status of the 11 companies, which will lose protection from debt collectors on 1 June, and which employ about 19,000 workers, as the Fiscal Council estimates, will potentially deal the greatest blow to the public finances.

Meanwhile, the strategic partners or potential buyers of those companies are nonexistent, as far as the public knows. Only "Galenika", which was put up on sale on 1 March, has been exempt, but without success, so the tender application deadline has been extended to 27 May.

The Serbian Prime Minister Aleksandar Vucic claims that there are investors interested in buying "Galenika", but only out of bankruptcy.

- The interested investors want to buy "Galenika"`s assets for 30-40 mil EUR, while the company`s debts amount to about 220 mil EUR. Even that`s better than to let "Galenika" keep operating with losses - the Prime Minister said at the press conference on 11 May in the Serbian Government. He said there that "Galenika" was not making losses at the moment, but that it still had debts from the prior period, when it was taking out "disastrous loans".

The Minister Zeljko Sertic emphasized several times that MSC "Bor" and "Resavica" would prove to be problematic. MSC "Bor" handed over to the Commercial Court in Zajecar a Pre-Packaged Insolvency Plan (PPIP), which should secure the continued activity of that company with the protection from debt collectors in the next six months. MSC "Bor" is the only manufacturer of copper, gold and silver, metals which are stock exchange commodities, which is not to be overlooked. Also, it shouldn`t be taken lightly that MSC "Bor" employs over 4,500 workers.

(Photo: Ivana Vuksa)

Also significant for Serbia are the "Resavica" mines, whose ore deposits of coal amount to about a billion tons. This state-owned enterprise, comprising nine interconnected mines with underground mining, employs 3,845 workers.

President of City Assembly of Jagodina, Dragan Markovic Palma, said on 12 May that the state offered the PPIP to decide on the status of "Cable Industry of Jagodina", which should enable the company to survive and continue operating. It should be emphasized that the company owes a total of around 120 mil EUR, half of which they owe to the state, while the other half is owed to commercial debt collectors and workers.

PKB is another one of the state`s weak points, made weaker by the fact that it`s unrealistic to expect that all the debt collectors will require from the company to repay, before 1 June, the 70 mil EUR it owes.

The Government`s extending the deadline for deciding on the fates of the companies in debt and going through restructuring would be nothing new. Regardless of all the optimism, the remaining two weeks are an extremely short time period to solve all the piled up problems of these companies and the statuses of tens of thousands of their workers.

While the solving of these companies` fates is being waited for, the bills of some of them are piling up. "Petrohemija" owes several billion RSD for gas and electricity and they owe 23 billion RSD to NIS alone. Among the protected companies owing a lot for energy-generating products are "Azotara" and "Resavica", which owe about 40 billion RSD for gas, which is what the rest of the Serbian economy owes according to some analysts.

When asked if the privatization would be finally completed this year, Aleksandar Vlahovic, the ex-minister of privatization in the Government of Zoran Djindjic, said that "the privatization has long since been completed, and what is now in the so-called process of privatization, aside from a few big companies, is merely an expression of the lack of readiness to state clearly that those companies are in fact bankrupt".

For this reason, Vlahovic has, for the past few years, been suggesting to the creators of economic policies, especially those in charge of the process of privatization, that the right of ownership finally be determined through insolvency proceedings.

(Photo: Ivana Vuksa)

- Of course, an insolvency proceeding needs to be efficient. In the end, if there`s no one interested in buying a company without debts, or economic parts of the company, a liquidation process needs to be carried out. In this way at least a part of the property finds its way to the buyer, which means that `brownfield` investing will be used to start a new, healthy business activity - Vlahovic stated categorically.

Privatization of the media

Drawing the line didn`t escape the media either. Of the 73 media that entered the privatization process, 50 were put on sale publicly. Nino Brajovic, Secretary General of Journalists` Association of Serbia, said for "eKapija" that 34 of those had been privatized, but that the privatization of RTV Pruga from Lajkovac had been annulled in the meantime.

Twenty media were closed down, including the Tanjug news agency, 2 media have switched core business, while 16 of them will be privatized by transfer of assets without imbursement. Of the 17 media, eight have already received a Decision About the Transfer of Free Shares. Brajovic is of the opinion that RTV Pruga from Lajkovac can be privatized in two ways - by transfer of assets or a new sale. Even with the unsuccessful privatization and the failure to start the liquidation process, Radio Pozarevac has no conditions under which to transfer assets.

However, Tanjug is still the biggest issue. The situation is as such: Tanjug is officially closed down, the company doesn`t exist legally, all the workers were fired and then half of them returned to their jobs, while their fee contracts are being extended every month. They are charging for their services while signing invoices. The Ministry of Economy didn`t want to answer when and how this issue will be resolved. Meanwhile, the informed sources say that this problem will be `served` to the new Government and that the "phantom agency", as Tanjug is being called, will continue to work half-legally before its formation.

Secretary General of Journalists` Association of Serbia Nino Brajovic says that JAS hopes that Tanjug will not stop operating.

- The best solution is for the employees and ex-employees of Tanjug to be enabled to transfer their assets without imbursement, which the Law has prescribed for all media, including the national news agency. The Tanjug management didn`t launch a public call for the allotment of free shares, even though, according to us, they were obliged to do so after two failed sales - says Nino Brajovic.

(Photo: BrAt82/shutterstock.com)

Our interviewee thinks that the transfer of assets without imbursement would be a good solution. In doing this, as he says, it needs to be kept in mind that "Tanjug has been managing to stay on the market for several months with a considerably reduced number of paid contributors, working for fees exclusively". This means a better offer at the agency news market and the competition which is needed in the media market too.

Workers reach Starsbourg

Around 100,000 of ex-workers of state-owned companies, which were privatized and declared insolvent between 2001 and 2010, are still waiting for Serbia to pay them their back salaries in accordance with the decision made by the European Court of Human Rights in Strasbourg.

The debt of the state to those workers is about 300 mil EUR. Although they`re not asking for the state to pay them immediately, they expect the state to make a program and plan for the state organs to enact the Strasbourg decision.

No matter how the fate of the state-owned companies is solved, it is expected that the number of 100,000 workers, who are demanding the solution to their problem from the European Court of Human Rights, won`t be multiplied by ten.