Privatisation - The Major Stumbling Block So Far

The sudden rush about extraditing the former president Milosevic to the Hague Tribunal seems to have given another tumult to the political situation in Serbia. Its political, rhetorical, historical and (pseudo) patriotic consequences have unfortunately out-powered the real reason for the last-minute act: we need (a lot of) money, and we need it badly.
The present economic situation in the country is, speaking in terms of European standards, catastrophic. The first thing a foreign visitor would notice upon entering Serbia are the vehicles on the road - the average age of a Serbian car is 15 years. Scarce new Audis and BMWs are there just to remind us we are actually not in the eighties, and that there is a small minority who did quite well during the former regime. Black-market clothing, toiletries with fake labels, unreasonably cheap food and electricity and pirated property (software, movies, music etc.) have kept the population from bursting out in anger for years. However, in the changed conditions after October 2000, the intention to join the European integration processes means we will be forced to accept two principles: the rule of law and market economy. As for the first principle, courts are regaining their authority pretty slowly, although there is substantial consent within the population that they should pay taxes, respect regulations and cease with any illegal or semi-legal activities which helped them survive during the former period. Market economy, however, begins with privatisation.

Privatisation law is currently being discussed in the parliament. It looks like a compromise between what is called here "shock therapy" (meaning - fire everybody you have to, sell state property quickly and then think what to do once you have the money) and status quo from the Milosevic era, known as "buddy privatisation" (meaning - restricted for the 'buddies', i.e. the chosen loyal businessmen who would split up all the property and snatch the profit). As all the Milosevic trademarks, "buddy privatisation" was accompanied by a seductive cover story: no factories would become majority owned by foreigners, which means 51% (or more) would become the property of the workers, since they would all get the initial equal share of the stocks once the privatisation process began. Many ill-informed workers, and even some trade unions, bought this story, which reminded them of the nostalgic years of the former Yugoslavia when the property was 'common' (as they believed, theirs). Of course, the story was just a fairy tale: in reality, most companies were not privatised at all, since Milosevic's cronies were waiting for them to deteriorate as much as possible so that they could be bought off at ridiculous prices in the end. Those that got privatised were in most cases bought by their former state-appointed executives and their next of kin. True, many workers were given stocks - but hardly any of them knew what those pieces of paper actually meant, and they were often willing to sell them to their 'kind' executives at the prices which to them seemed gigantic (a couple of grand) at the time their monthly salaries equalled 20 DEM or even less. Now it is too late to ask for the stocks back.
The new Government has therefore decided to stop this process and initiate a new type of privatisation - tender-based sell-out to foreign companies (up to 70% of the firms privatised). Their main argument is, paradoxically, historical: since Serbia is ten years late compared with the rest of the transition countries, it can at least take advantage of the historical perspective and not repeat the mistakes associated with some of those countries. One of the mistakes, as claimed by the Cabinet, is giving out free stocks to the workers.
Since the opposition has been using this fact to accuse the government of unfairness and even open brutality to the workers' rights, finance minister Djelic and privatisation minister Vlahovic have been at pains lately to explain to Serbian workers that it would be much better for them to become ordinary, but well-paid labour force in foreign-owned stable factories than 'owners' of non-existent property or, even worse, shareholders of factories up to their ears in debt. But the rhetoric of the opposition in the parliament seems to have alarmed the workers of their rights, and many trade unions are unwilling to comply with the total sell-out of the factories to foreign investors.
There is yet another problem behind the grain. Foreign businessmen care about profit, and profit only, regardless of their mild rhetoric assuring the workers they will all be taken care of. This means many will have to be fired. Large industrial complexes, based mostly in Nis (Electronic and Machine Industries, with smaller factories almost 40,000 workers altogether - with their families almost a half of the city population) and in Kragujevac (with Zastava automobile plant, hosting 11,500 workers). With no investment over the last 10 years, with no former Yugoslav or Soviet markets, these plants have been decaying for years. Their workers have got used to the minimal wages, amounting to 10-30 DEM a month, fictitious job positions (since they don't really work at all) and spending most of their spare time either selling smuggled clothing garments at the local flea market or ploughing their village estate and selling food in town. Their official salaries are indeed humiliating, but they believe they are at least socially secure, since they are officially employed, so no one can deny them their pension. Those who work hardly do what they are qualified for - the horrid reality has made the Machine Industry in Nis use one of its formerly most distinguished facilities for growing mushrooms! Similar stories are heard all over the country.

The Government has been trying to convince the workers that "reducing the labour force" does not mean that they are all automatically fired, but that there would be pre-qualification programmes and guaranteed social aid for the expenses. But the figures are unforgiving: out of 11,500 people, only 4,500 will be kept in the Zastava automobile plant. The rest will not be officially fired, but "pre-qualified" - though no one really knows how frightening this word sounds to a 55-year-old worker who has been assembling cars for the last 35 years. No wonder the trade unions of the factory yesterday (25 june) announced a new strike, although they seemed to have reached an agreement with the Government only five days before. On the other hand, the Government is rushing to extradite Milosevic and others, hoping it would get about $1 billion at the Donor's Conference Friday, and use the money obtained primarily for stifling expected social blows during the autumn.

Finally, some blows have come already. Although "shock therapy" is too tough a phrase, the Government has already carried out some unpopular decisions, such as allowing the prices of food, petrol and electricity to go up. The remaining unpleasant pill to be swallowed is the price of stable and mobile telephony, which was to rise for 60%, but the figure allowed by the Government yesterday stopped at 35%. Finance minister Djelic said earlier this was an important step for many reasons: first, this convinced the IMF that we were serious about the reform, including its less popular sides, such as allowing reasonable prices of basic articles and services; second, these prices have reached their limit for this year, and they cannot go any higher, whereas salaries are expected to continue (?) growing throughout the year, which means truly better standard of the population.
But the population is anxious. Along with these, other prices are also going up, and average monthly salaries of 150 DEM, even though twice higher than those of the previous year, are simply too low to cover even the most basic expenses.
The Serbian Government is therefore in a very delicate position. The latest polls have shown about 50% of the population still firmly in favour of the reform and the new cabinet. But the underlying message was: "do something that will make us feel at least small benefits of what you are doing, and do it quickly, or else..." Premiere Djindjic and his staff know this, and this is why they are rushing towards the Donor's Conference in Brussels and privatisation law.

The sudden rush about extraditing the former president Milosevic to the Hague Tribunal seems to have given another tumult to the political situation in Serbia. Its political, rhetorical, historical and (pseudo) patriotic consequences have unfortunately out-powered the real reason for the last-minute act: we need (a lot of) money, and we need it badly.
The present economic situation in the country is, speaking in terms of European standards, catastrophic. The first thing a foreign visitor would notice upon entering Serbia are the vehicles on the road - the average age of a Serbian car is 15 years. Scarce new Audis and BMWs are there just to remind us we are actually not in the eighties, and that there is a small minority who did quite well during the former regime. Black-market clothing, toiletries with fake labels, unreasonably cheap food and electricity and pirated property (software, movies, music etc.) have kept the population from bursting out in anger for years. However, in the changed conditions after October 2000, the intention to join the European integration processes means we will be forced to accept two principles: the rule of law and market economy. As for the first principle, courts are regaining their authority pretty slowly, although there is substantial consent within the population that they should pay taxes, respect regulations and cease with any illegal or semi-legal activities which helped them survive during the former period. Market economy, however, begins with privatisation.

Privatisation law is currently being discussed in the parliament. It looks like a compromise between what is called here "shock therapy" (meaning - fire everybody you have to, sell state property quickly and then think what to do once you have the money) and status quo from the Milosevic era, known as "buddy privatisation" (meaning - restricted for the 'buddies', i.e. the chosen loyal businessmen who would split up all the property and snatch the profit). As all the Milosevic trademarks, "buddy privatisation" was accompanied by a seductive cover story: no factories would become majority owned by foreigners, which means 51% (or more) would become the property of the workers, since they would all get the initial equal share of the stocks once the privatisation process began. Many ill-informed workers, and even some trade unions, bought this story, which reminded them of the nostalgic years of the former Yugoslavia when the property was 'common' (as they believed, theirs). Of course, the story was just a fairy tale: in reality, most companies were not privatised at all, since Milosevic's cronies were waiting for them to deteriorate as much as possible so that they could be bought off at ridiculous prices in the end. Those that got privatised were in most cases bought by their former state-appointed executives and their next of kin. True, many workers were given stocks - but hardly any of them knew what those pieces of paper actually meant, and they were often willing to sell them to their 'kind' executives at the prices which to them seemed gigantic (a couple of grand) at the time their monthly salaries equalled 20 DEM or even less. Now it is too late to ask for the stocks back.
The new Government has therefore decided to stop this process and initiate a new type of privatisation - tender-based sell-out to foreign companies (up to 70% of the firms privatised). Their main argument is, paradoxically, historical: since Serbia is ten years late compared with the rest of the transition countries, it can at least take advantage of the historical perspective and not repeat the mistakes associated with some of those countries. One of the mistakes, as claimed by the Cabinet, is giving out free stocks to the workers.
Since the opposition has been using this fact to accuse the government of unfairness and even open brutality to the workers' rights, finance minister Djelic and privatisation minister Vlahovic have been at pains lately to explain to Serbian workers that it would be much better for them to become ordinary, but well-paid labour force in foreign-owned stable factories than 'owners' of non-existent property or, even worse, shareholders of factories up to their ears in debt. But the rhetoric of the opposition in the parliament seems to have alarmed the workers of their rights, and many trade unions are unwilling to comply with the total sell-out of the factories to foreign investors.
There is yet another problem behind the grain. Foreign businessmen care about profit, and profit only, regardless of their mild rhetoric assuring the workers they will all be taken care of. This means many will have to be fired. Large industrial complexes, based mostly in Nis (Electronic and Machine Industries, with smaller factories almost 40,000 workers altogether - with their families almost a half of the city population) and in Kragujevac (with Zastava automobile plant, hosting 11,500 workers). With no investment over the last 10 years, with no former Yugoslav or Soviet markets, these plants have been decaying for years. Their workers have got used to the minimal wages, amounting to 10-30 DEM a month, fictitious job positions (since they don't really work at all) and spending most of their spare time either selling smuggled clothing garments at the local flea market or ploughing their village estate and selling food in town. Their official salaries are indeed humiliating, but they believe they are at least socially secure, since they are officially employed, so no one can deny them their pension. Those who work hardly do what they are qualified for - the horrid reality has made the Machine Industry in Nis use one of its formerly most distinguished facilities for growing mushrooms! Similar stories are heard all over the country.

The Government has been trying to convince the workers that "reducing the labour force" does not mean that they are all automatically fired, but that there would be pre-qualification programmes and guaranteed social aid for the expenses. But the figures are unforgiving: out of 11,500 people, only 4,500 will be kept in the Zastava automobile plant. The rest will not be officially fired, but "pre-qualified" - though no one really knows how frightening this word sounds to a 55-year-old worker who has been assembling cars for the last 35 years. No wonder the trade unions of the factory yesterday (25 june) announced a new strike, although they seemed to have reached an agreement with the Government only five days before. On the other hand, the Government is rushing to extradite Milosevic and others, hoping it would get about $1 billion at the Donor's Conference Friday, and use the money obtained primarily for stifling expected social blows during the autumn.

Finally, some blows have come already. Although "shock therapy" is too tough a phrase, the Government has already carried out some unpopular decisions, such as allowing the prices of food, petrol and electricity to go up. The remaining unpleasant pill to be swallowed is the price of stable and mobile telephony, which was to rise for 60%, but the figure allowed by the Government yesterday stopped at 35%. Finance minister Djelic said earlier this was an important step for many reasons: first, this convinced the IMF that we were serious about the reform, including its less popular sides, such as allowing reasonable prices of basic articles and services; second, these prices have reached their limit for this year, and they cannot go any higher, whereas salaries are expected to continue (?) growing throughout the year, which means truly better standard of the population.
But the population is anxious. Along with these, other prices are also going up, and average monthly salaries of 150 DEM, even though twice higher than those of the previous year, are simply too low to cover even the most basic expenses.
The Serbian Government is therefore in a very delicate position. The latest polls have shown about 50% of the population still firmly in favour of the reform and the new cabinet. But the underlying message was: "do something that will make us feel at least small benefits of what you are doing, and do it quickly, or else..." Premiere Djindjic and his staff know this, and this is why they are rushing towards the Donor's Conference in Brussels and privatisation law.