The Balkan Booth

In a bunch of good news for the preparation of a ‘reform flight’, apart from the finally approved IMF stand by arrangement (USD 249 million), definitively partitioned ‘Basle gold’ of the former SFRY (USD 160 million) and a financial aid political support from the European Union (300 million euros) – it is good news that Prime Minister Djindjic’s office began to unfetter itself from two unpleasant affairs, the sexual one and the other involving the tobacco traffic.

As far as the sexual affair is concerned, it is important that the Anti-Corruption Board will be revitalised, while the tobacco affair seems to have brought about the Prime Minister’s acceptance of ‘cooling off’ the contacts with the former buddies, if they are really involved in dirty business. Although old friends are like old radiators – as an old Arab proverb says – so you never know what to do with them when they start leaking, Prime Minister of a new Government has no such privilege, like all ordinary people, to go on hanging around with propagators of the former regime, with former cops and mafia – ‘since he has been seeing them before’ (as Serbian Prime Minister stated to ‘Nedeljni Telegraf’ weekly!?)

It is a shame that Djindjic’s convincing statements – that he has never, either directly or indirectly, sold (or bought) a single pack of cigarettes and that he has never taken part in any such business – did not come across approval by Zarko Korac, who was allegedly appointed by the Serbian Government to negotiate with the British-American Tobacco Company (BAT) about a contract concerning the concession for the building of a new tobacco factory in Kragujevac. Korac could, of course, deny (or confirm) the rumours that the major co-coordinator in this business was the well-known entrepreneur Stanko Subotic Cane, which gave the whole thing an entirely new dimension. The man is multi-national, possesses many firms and many addresses (from Cyprus to Switzerland and St. Stefan) and a famous private jet, which was used even by some members of the Government – and who has been close to some risky operations in the international cigarette traffic. However, even if the mentioned Mr. Subotic did take part in establishing certain official contacts and inaugurating certain developing ideas – it would not be a problem to set up the negotiation of the building of a new factory on a more transparent level, even if he had to be excluded – because it is a very constructive initiative that should not be given up or realised in a wrong way at the outset.

Even the high officials of former Milosevic’s regime knew that it was a useful and profitable venture, so the English were given access to come to Serbia and decide whether they find it more profitable to purchase the shares of our local tobacco industries or put up a completely new factory. As far as my memory is concerned, they gave up the idea of buying DIN (The Tobacco Industry of Nis) in Nis when they saw what car the general director’s secretary was driving – that was an amusing illustration of corruption of the entire leadership of the factory. Subsequently, someone ordered Smiljko Kostic’s arrest, in order to recall the attention of the English (what happened to Kostic after the democratic turn of events?) The English have surveyed the tobacco industry in Vranje by that time – they liked almost everything, but the vicinity of Kosovo. Eventually, they even thought about the greenfield investment in Senta, but they abandoned that idea, since the space became too tight.

The current change of approach to the tobacco market in Serbia was due to the well-known misfortune of foreign investors after the purchase of the Zadar Tobacco Factory. Let me remind you that they have bought the factory there and were guaranteed at the same time that they would be treated as equal as domicile factories. But, the Croatian tobacco lobby was far too strong, and the factory in Zadar obtained right to only 20% of production of sale on the domestic market – that apparently embittered the English so much that they have recently decided to renounce the business, withdraw the equipment and leave Croatia. Of course, that equipment should now be re-installed somewhere, so the Government of Serbia might use this circumstance to come to an agreement concerning a favourable concession with BAT. That would, perhaps, attract another multi-national tobacco factory, for example, the one in Rovinj. In any case, the Government of Serbia should ‘clean up’ the room after an unpleasant affair and also bring in a foreign producer of higher quality cigarettes – because, Prime Minister Djindjic is absolutely right about that: it is one of the ways to set up order in a budgetarily attractive cigarette traffic. The domestic monopoly on tobacco is in no way better than the black market, and we have a confirmation for that in my favourite history of Serbian economy.

When the famous Serbian economist and leader of the Radical Party, Dr. Mihailo Vujic (1853-1913) first became Minister of Finances in Ristic’s and then in Grujic’s liberal-radical ministry in 1887, he immediately began the realisation of his old obsession – to drive out the foreigners from the most profitable sectors of Serbian economy. He was greatly affected by the degree of monopoly in the then Serbian tobacco industry, because in the course of that year the loss amounted to 1.57 million dinars, so they demanded a certain sum from the state budget to cover the deficit. Dr. Vujic went public with the information that the former government had not used a possibility, prescribed in the concession, to impose a regal tax on imported tobacco, and so he threatened the foreigners with that argument. The latter proposed to either conclude the business or be paid off by Serbia, or to remain lease-holders of the monopoly with a share of 50% given to the state. Vujic immediately decided to cover the deficit, as well as the lost profit, and pay off the shares – only to see them leaving for good. In fact, when Serbia got into debt with Bankverain (10 million dinars were signed for in the contract, only 5 million were approved), Dr. Vujic ceded the wholesale of tobacco to the company in Kragujevac, where (coincidentally) the Radicals had many friends. In that offer, Serbia enjoyed the share of only 13.75%. However, Dr. Vujic could at least say that Serbian tobacco was finally in Serbian hands.