Serbia privatization slackens

BELGRADE – The World Bank has said local politics and Europe’s economic downturn were bound to slow down company privatizations in Serbia in 2003. «The political situation definitely slows things down,» Rory O’Sullivan, the head of the World Bank’s mission in Serbia and Montenegro, told Reuters in an interview. He spoke only days before the Parliament of the state union of Serbia and Montenegro was due to meet to ratify zero-interest loans totaling $191 million for social, health, financial and enterprise reforms in Serbia, the larger of the two republics. Following the murder of Serbia’s prime minister in March, widening cracks within the ruling DOS bloc have hampered the work of Parliament, which has failed to ratify the loans since they were approved on April 22. Under World Bank rules, a loan should be ratified within 60 days. Serbia stands to pay fines and possibly lose out on future aid if parliamentarians fail to ratify the loans by June 22. «The delay so far means that reforms are not taking place or it means that the budget is being terribly squeezed because budget funds are not being made available,» O’Sullivan said. Weak economy Privatization remains a key pillar of Serbia’s reforms to its post-communist economy, recovering from a decade of wars and sanctions under autocrat Slobodan Milosevic. But an adverse European economic climate could spoil some of the plans. «Whereas tender privatization started off very well… I would think that the external economic situation is having an effect and probably is going to slow down privatizations in Serbia,» O’Sullivan said. Serbia plans to put on sale majority stakes in Novosadska Banka, Jubanka and Continental Banka by the year end. «Certainly, we expect progress for the three banks. Privatizations will be launched, there’s a lot of interest still in getting into the Serbian market… but the enterprise sector is more complex and we see some weakness in demand,» he said. O’Sullivan said tobacco factories, the Beopetrol fuel chain and Telekom Srbija, planned for sale in 2003, were all big firms requiring serious money to make them viable. «Here we’re more up against market sentiment and market sentiment in Europe at the moment is really not very good because of the economic downturn in Germany and France and elsewhere and increasing unemployment, so investors are being much more careful before they jump,» O’Sullivan said. He said Serbia would have to rethink demands on foreign investors to guarantee jobs to workers. «There’s a question mark on the financial viability of continuing like that.» The World Bank official said Serbia was expected to work hard at restructuring inefficient conglomerates that had to be broken into smaller units, with profitable bits sold. In the meantime, the government should move onto administrative and civil service reform. It was advised to subject laws to a public debate because «in the longer term, people buy into the process.» «That’s the way things happen in a democracy and a market economy,» O’Sullivan said. (Reuters)

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