ECONOMY

Serbia’s uneasy progress toward transition

NOVI POPOVAC, Serbia-Montenegro – When the Swiss company Holcim Ltd bought one of Serbia’s three major state-owned cement factories in 2002, Zivota Bogic refused thousands of dollars in a buyout offer to leave the only workplace he had ever known. «Most of my comrades who left spent or drank the money away,» says Bogic, 35, wiping his brow, sweaty from the heat of the cement-burning kiln. «Today they have no job and no money. I was lucky.» But many are not in this Balkan republic, where one in every three Serbs is unemployed and the shadows of communism and the misrule of former president Slobodan Milosevic still stretch over efforts to revive the economy and privatize state-owned companies. Holcim, one of the world’s largest cement makers, spent 17 million euros ($21 million) in buyouts to reduce the work force to about 690 employees from the original 2,200. Bogic, with a three-year-old daughter, a wife and ailing parents at home, stayed on at the dilapidated plant in central Serbia. Today, his monthly salary of 22,000 dinars (260 euros, $320) – tiny by Western standards – tops Serbia’s average of 200 euros ($240). Although the pro-democracy movement that toppled Milosevic in 2000 set about introducing democratic and economic reforms, Serbia’s economy remains in shambles, with the blame still directed at mismanagement under Milosevic and international sanctions imposed for his role in the Balkan wars of the 1990s. «Not enough has been done,» said Science and Environment Minister Aleksandar Popovic. «We simply lost step with the rest of Eastern Europe.» After a 2001 law paved the way for the sale of state-owned companies, privatization began with the best and biggest companies able to catch the interest of investors and wrangle a place in the market. From breweries to dairies were sold, by tender or by auctioning off shares, including small stakes sold to workers. But the mood was one of general chaos, fueling the impression of a free-for-all grab for the country’s assets, as well as speculation that cash from the sales was ending up in the pockets of the officials in charge of privatization or their cronies. «It was the Wild West of privatization, no revisions of the process and no brakes were in place to control it,» said analyst Nebojsa Medojevic of the independent Movement for Change think-tank. The selloff that topped headlines was the 2003 purchase of Sartid, Serbia’s largest steelmaker, by Pittsburgh-based US Steel Corp. for $23 million. Police questioned six government officials over suspicions of wrongdoing in connection with the sale, but never announced what kind of «irregularities» were suspected and no charges resulted. Government statistics say 1,406 companies have been privatized so far, bringing in 1.5 billion euros ($1.8 billion) from investors. This week, the government posted a bid to hire a foreign consultant to help privatize the state oil company, NIS, one of the biggest Balkan companies, with annual production of 783,000 metric tons of oil and a 2004 profit of 2.4 billion dinars ($35 million, 28.5 million euros). But critics of Prime Minister Vojislav Kostunica’s conservative-led government say it still lacks a clear privatization strategy. President Boris Tadic, who holds a mostly ceremonial post and hails from the opposition Democratic Party, says the Cabinet has «no vision of where we are going.» «Everything is reduced to a quick fix,» Tadic said. «We’ve become masterminds at improvisation.» The privatization of NIS is a key request of the International Monetary Fund, part of a loan arrangement set in 2001 but later extended to the end of 2005, to give the Balkan state time to cope with its budget deficit and growing inflation, now set at 16.5 percent. But Parliament only last month gave the go-ahead for the oil giant’s sale, amid fears it would spur greater inflation and lead to at least half of NIS’s 17,000 workers facing layoffs. Deputy Prime Minister Miroljub Labus warned that if Serbia fails to follow through on privatization and other commitments to the IMF, it risks losing credit arrangements – which in turn would sink any economic recovery. Authorities have said they hope to do away with all state-ownership and privatize more than 7,000 companies by the end of 2006. But those that remain are the weaklings and those stifled by debt. In Novi Popovac, Holcim acquired a 70 percent stake in the cement company for 60.5 million euros ($74 million) and committed to a 85-million-euro ($103 million) five-year makeover. Beating their deadline by two years, the fully modernized factory reopened last weekend, displaying the Swiss company’s logo for the first time. Phil Gager, chief of plant operations, says the makeover was not easy, recounting the «extreme neglect» he found after working for Holcim in the Middle East, Africa and Bulgaria. «The workers were scared of something different,» said Gager, who is British. «People would disappear into these little cubicles, not to be seen for the rest of the workday. Each office was an empire in itself.» Holcim first razed the dark administration building, replacing it with a bright 1.5-million-euro ($1.8 million) operations center and laboratory. With the capacity to turn out 1.4 million metric tons of cement a year – although it produced only 760,000 tons last year – the plant could supply 32 percent of Serbia’s market, Gager said. But for the factory to succeed, big infrastructure projects have to come in, says manager Darko Krizan. «Serbia needs to start building,» Krizan said.