Programmed Privatization

There are thousand reasons for freezing Milosevic’s law on property transformation which his old political establishment is holding onto these days in the hope of retaining control of ownership over the Serbian economy in the place of lost political influence.  However, I am constantly bothered by the question whether the sum of these thousand reasons is not “stronger” than the long-term damage which could result from the seemingly simple and even popular measures Djindjic is proposing.

The Serbian Prime Minister and his new Minister for Industry and Privatization Aleksandar Vlahovic are admittedly promising that the new law on privatization will be more “liberal for the population” and will be tabled in two months.  But it seems to me that the new administration is not aware of the responsibility which it took on with putting its hands on the already far gone process of division of capital of a significant number of large and medium sized enterprises which, under the protection of the regime, managed to keep up a “rhythm of development.”  For this abnormally large control over the transitional process will not last merely two months, because it appears that a new law is being drafted which will make privatization conditional on the basis of government agreement through the institution of “agreement with the plan for privatization.”

Namely, as far as I managed to figure out from several statements given by Minister Vlahovic, he will not impose any model of privatization with this law, with everything being liberal, combined (system of sale, free of charge redistribution, bankruptcy, capital investment – whatever whoever likes better and what suits them best), access to capital will be made possible to the entire population, and not only to the employed, etc., while that entire “liberation” will be regulated in the “plan for privatization” which will be approved by the Ministry.  Liberty and the economy are expected to follow immediately after “approval” of the plan for privatization.  Probably feeling that in this formula the Government’s “gigantic pretension” for directing a complicated process such as privatization is not even masked, Vlahovic reminds us sheepishly that a “similar level of control” was present in the law thus far, where the conductors baton was in the hands of the famous Institute of Certification of Capital Assessments.  Supposedly, now the value of that capital will be determined by the market, assuming of course that the Ministry approves “free privatization.”

Of course, it is unseemly to hold to account Minister Vlahovic even before the new law comes out and to make an Orwellian monster out of the “Ministry approval” which will give control over future privatization to DOS.  I am certain that this “approval” will get nicer legal wording with many pro-European, shimmering colors, but I fear that our people, which is otherwise suspicious of politicians, will conclude that the new authorities are no different than the old in drafting a law that will permit them to get the best pick of public enterprises from the long dead corpse of public property.

What I consider realistic in Vlahovic’s statements is that large industrial enterprises must be privatized according to selection of strategic partners and on the basis of a model of sale.  I do not question the fact that the Serbian Government must be consulted in such matters.  However I keep asking myself constantly what the expression “financial and technological consolidation” which is being articulated by many experts, excluding Minister Vlahovic, means in suggesting that large firms must undergo this process prior to being sold, in order that a reasonable price can be gotten for them.

In the simplest terms, this is the old story of selling an old car which you fix up before putting it up for sale, because in this a higher overall price will return all the invested money in repairs.  However, conditions in Serbia are presently such that this nice story does not fit in at all with the efforts of our financial debtors.  Such investment in a better future, that is to say in creating reasonable conditions for sale of infrastructural systems is something that we cannot afford.  That is why the Serbian Government should not wait and must take on the responsibility of being “the Government which sold the Serbian market,” so that we will have electricity tomorrow, so that we can buy gasoline, so that we can fly, so that we can put our miners to work, as well as our auto industry.  Economics is a strange science and it requires sometimes that “the boat abandons the mice.”  Even if Djindjic decides on “selling” the Serbian market – that will not go quite so smoothly, because where laws of profit are in force, it is not easy not only to privatize, but even to nationalize an enterprise if there is no investment capital.