Dysfunctional Phones

Those who had believed the representatives of SPS and other parties of leftist orientation, who had for many years sworn that Serbia, unlike other less fortunate Eastern European nations, shall never allow foreigners to buy large public and state owned companies "for a fist full of Dollars", must have been immensely surprised when, on the sixth page of Politika of August 18 in the column "Choice", they read the article from the London Financial Times under the nondescrepit (Politika's) headline "Towards a Speedy Restoration of Relations with the IMF". Along with the story of the Federal Republic (SR) of Yugoslavia's endeavours towards a normalization of relations with the international financial community, the conscientious financial minister, Tomica Raicevic is quoted as saying, "the country wishes to privatize Serbia's PTT system up to 30 percent in the first phase", which shall be followed by " a privatization of the main manufacturers of electrical energy and the state owned oil companies by selling off a smaller part of the stocks to the strongest investors". Alongside that, it is also stated that the distinguished English bank, National Westminster (shortened NatWest), that is, its branch NatWest Markets, has been appointed as the go-between and independant financial councellor in those dealings. This is not the company's first major deal with Serbia: Since this summer, NatWest has been the mediator in the talks between Belgrade and the London and Paris Club, the World Bank and the IMF.

Along with the story from the Financial Times and a few days prior to it, the news agency Beta announced news of a visit of NatWest high officials to Belgrade on July 24, which seemed to fit in with it. That day, according to Beta, Serbian President Slobodan Milosevic, attended a "working breakfast" with Douglas Herd (former UK minister of foreign affairs) and Paulina Neville-Jones, who, until recently, held the position of political director in the Foreign Office. The subject of the conversation was, naturally, pravatization of the above mentioned systems. Breakfast was, as stated, also attended by the two highest officials of the Yugoslav United Left (JUL), Dr Mirjana Markovic and Ljubisa Ristic. Beta attributes the key role in connecting the Belgrade regime and NatWest to Ristic, as well as in hiring the prestigious firm Lowe Bell Financial to which Serbia has recently entrusted its image (see supplement in Vreme no. 303). Ristic, who was in London last week, allegedly to elaborate the agreement with the British, has refused to confirm or deny such a role: "Nothing of importance for you and me to talk about. There is no news story in it.", he told journalists who tried to interview him. However, Ristic had, a few weeks previously, during the JUL promotion, announced the arrival of "major world banks in Belgrade". Remembering his one time statement that he shall bring the Rolling Stones to Belgrade, only a few took him seriously.

The representatives of NatWest who were contacted by Vreme's journalists in London, also seemed disinclined to offer any further details: "There are no relations between our firm and the government of Serbia outside the already achieved agreement with regards to the Yugoslav debt and PTT," they said. An apparent restraint concerning the joint Serbian-British business deal was expressed even by the UK embassy in Belgrade, whose highest representative, Sir Ivor Roberts, confirmed Mr. Herd's and Mrs. Neville-Jones's stay in Belgrade, yet firmly denied the involvement of the British government in the talks between NatWest and Milosevic. Those who are well informed, however, claim that Sir Ivory's role in organizing the above mentioned breakfast was no smaller than Ljubisa Ristic's role.

Actually, there are at least two reasons why it is in noone's interest at this moment to talk much on the subject of the forthcoming deal. The first reason is of an ideological nature, and has to do with the official stands of JUL as well as of SPS, that ownership of major systems (especially strategical ones, as PTT, EPS and NIS undoubtedly are) is a question of national sovereignity which cannot become an item of trade. The second reason is of a solely business nature, and can be reduced to the well-established rule that when dealing with business of such sort (and financial weight), the less said the better until all is completed. Especially taking into account that the Serbian government, by all indications, still hasn't reached a decision which and how big a part of the electrical and oil industry it wishes to sell.

In the case of the postal system, such a decision has been made (30 percent, according to minister Raicevic), which doesn't mean that the actual sale will be easy. Namely, according to the particulars from the first quarter of this year, PTT owes some 107 million Dinars to the suppliers and the service executioners and there is reason to believe that that debt has in the meantime become even bigger. At the same time, the postal office demands of its debtors 41 million Dinars which even the new owner will find difficult to collect. Further, debts are just a part of the problem: the equipment is so outdated that buyers should possibly be sought in technical museums, while wires are worn-out to the degree that in Serbia it is difficult to get through when it is raining, since insulation has decayed so that cables start sticking together. Besides that, prior to the sale it shall be absolutely necessary to split PTT into two companies, of which one shall exclusively deal with telecommunicational services, while the other shall take upon itself to deliver letters and packages. This seperation signifies a condition for the reintegration of telecommunications into the European Union system, in order to prevent the establishment of a monopoly. Things won't be any easier with electricity or oil: Vreme has often informed about the difficult situation in the electrical industry, so that, on this occasion, it shall suffice to mention their debt of around 580 million Dinars and the demand of around 250 million (which other major systems owe the electrical industry), so that, in order to complete the ongoing repair and maintenance works, over the following fifteen years, 500 million should be paid in annually. It shall prove difficult to find a buyer who shall be prepared to invest such funds. Similar conditions exist in the oil industry of Serbia, which is the biggest debtor of all: it owes 617 million Dinars.

Despite all that, indications exist that Milosevic has seriously decided to start selling off strategical systems in Serbia: Although they can be classified as functioning with operational losses, the three above mentioned companies are (besides the Railroad Transport Company) probably the only "giants of socialism" which can, by this way or that, start making money - for most of the others, like Ei Nis (a company which manufactures electrical appliances) or Crvena Zastava (a car manufacturing company), a serious buyer couldn't be found even among scrap merchants. The decision to, despite everything, start off the loathful privatization process was probably influenced by the fact that the foreign currency reserves of Yugoslavia have dropped to only 100 million Dollars, which means that they are practically nonexistant.

Although certain sceptics in all of this only see yet another of Milosevic's "trump cards" to quickly fill up the government strongbox, it stands to reason to believe that this is only the beginning of a long-term process. In the first place, firms such as NatWest and Lowe Bell are much too serious to take part in such business transactions with a notoriously unreliable partner without stronger guarantees. Secondly, privatization is one of the key conditions for SR Yugoslavia's reintegration into international financial institutions, which is the reason why NatWest was engaged in the first place. And thirdly, as can be seen from this story, Milosevic isn't pushed into privatization only by the new world order but also by the powerful business club which stands as a political party, and is headed by his wife.