Company for a Dinar

- Mr. Mihailovic, which are the institutional prerequisites essential for the acceleration of privatization in Montenegro?

It is essential that, according to our Law, there is no such thing as public ownership. We chose the system of company evaluation from the aspects of both expenditures and profit. A company chooses from quite a wide variety of transformation models. When the decision is made, the homogenous ownership or non-ownership ceases to exist and is divided between several partners. The workers get 10 percent free of charge (each individual is limited to 3,000 ECUs), they get a discount to buy another 30 percent on installments over 12 years, an individual's part may not exceed 10,000 ECUs. The rest goes to the Fund for Development (60 percent), Pension Fund (30 percent) and Employment Fund (10 percent).

All companies go through this phase of transformation, but a company can be sold right at the beginning either partially or completely. This means that a company does not have to go through the shareholding phase. The transformation obligation is indirect. With small companies this had to be completed by August this year, while middle and large companies will have to do so by August next year.

- What crucial changes have been made?

There have been some serious, painful changes. The major problem is that people have no money. Besides, I think that our companies are a little over-estimated. The public opinion still does not realize that privatization is a rational thing to do, so the people who assess the value of a company are afraid they might be accused of under-estimating public capital. In fact, they believe there will be fewer objections if the price is higher.

The first shares in the Fund for Development showed that companies were over-estimated. This is why I insisted that the offer be drawn up in accordance with the official exchange rate of 1 Dinar = 1 German Mark, so as to start with lower prices. However, the opinion prevailed that the basic evaluation be corrected in accordance with the commercial exchange rates. So what happened with coefficient 2.5? It proved to be too high, so from the total 10 million Dinars worth of shares we sold only one million.

This teaches us that we have to go down, step by step. To start from the real 100 percent and drop by 20 percent after each failure in order to stop at say 60 percent.

- Montenegro laws enable businessmen to take over a company's managerial rights for only 35 percent of the value. Are you using that option, too?

The Fund does not want to run 400 companies. It is not our ambition to do so and we do not want to cover up some kind of state-controlled economy in the name of privatization. The state is not a better boss than those who used to manage public property; we want every company to get a real owner. This is why we chose to give managerial rights to those who would guarantee a dividend to the Fund, say 10 percent of the capital value. They are expected to make some 20 percent profit. With the 10 percent, after they pay the dividend, they could still be able to buy shares.

- Do you have any radical plans?

We are thinking of starting a really radical action 'Company for a Dinar'. What companies would those be? We would select small and middle companies which are in a bad situation and open up the competition to sell them at one Dinar each. Of course, we shall set certain conditions. First, we shall ask the competitors to offer a project of new organization, to see how many employees each of them would keep in the company. Secondly, we shall ask the competitor to guarantee certain production, which we believe is important now that only 30 percent of capacities are being used. Thirdly, we have to find ways to protect ourselves, to protect that capital through some kind of mortgage in case the company starts producing losses again. There is also the unused possibility of taking over the managerial rights for 35 percent of the value. Practice has shown that this did not work, although banks could have given loans. However, banks were not interested because they themselves had not been transformed. The Fund, too, could give such credits, but it would first have to get capital through the sale of shares.

The Fund's permanent problem is not to vulgarize the privatization process on the one hand, and on the other, not to let it stop.