The promise that “plundering” privatizations will also be investigated was one of the most significant promises within the election campaign of Serbian Progressive Party (SNS) in 2012. The campaign was successful; Tomislav Nikolić won at the presidential elections, which, with adequate results at the parliamentary elections, enabled SNS to form the Government.
Fight against corruption became one of the most frequent topics of new authorities, embodies at the then first Deputy Prime Minister, Minister of defense, and Head of the Bureau for coordination of security services Aleksandar Vučić. “Zero tolerance” to corruption was proclaimed and investigations and arrests for different malversations, including privatization, were announced.
In mid-2012, the Working Group of the Ministry of the interior (MUP) was established with engagement of about 100 members of law enforcement in charge of investigation of the 24 cases which were denoted as troublesome. The public remained deprived of details on establishment and members of the Working Group. Center for Investigative Journalism of Serbia (CINS) made attempts at collecting this data, but MUP says they do not have it.
Results of the work of the Working Group were presented at the media conference in December 2013. The media conference was chaired by Aleksandar Vučić who described into detail the results of each of the cases, i.e. the manner in which they were “solved”. The Group established that the disputable operations incurred the state the damage larger than 80 million EUR.
By that time, the idea that the 24 cases were resolved had emerged in the public, while CINS journalists checked the extent to which this was true within a several-month long research.
A half of the cases reached court proceedings, but only four of them resulted in final verdicts: the Institute of Veterinary Medicine, Keramika Kanjiža, Šinvoz, and two individual cases of disputable export of sugar into the European Union countries (EU). In a half of the cases, investigations had started, and had partially been completed prior to coming of SNS in power.
In four of the remaining cases investigations still last, while in as many as ten cases the Prosecutor’s Office concluded that there were no elements of a criminal offence. Šinvoz and export of sugar into the EU had two types of epilogues – an acquittal and a verdict of abandonment. In the case of Keramika Kanjiža, both guilty and not guilty verdicts were passed.
This practically means that nobody is responsible for the developments in privatization of C Market or Trudbenik, granting of concessions for the motorway Horgos - Požega, granting of land in New Belgrade to company Delreal 1, export of sugar into the EU, work of Nacionalna štedionica, leasing out of premises of the Accounting and Payment Bureau, and establishment and work of Mobtel.
Not only that no one is responsible, but, according to prosecution – not a single law was breached in all these developments.
Modern accumulation of capital
The so-called property transformation was initiated back in the 1990s, although most companies were privatized in the first decade of the 2000s, following the toppling of Slobodan Milošević and coming of the coalition of the Democratic Opposition of Serbia (DOS) in power.
Identification of the situation in companies prior to privatization was an important issue, as well as a source of potential problems. Having in mind that the 1990s brought lawlessness in domestic economy – as well as in all other spheres in the state - and suspended control of business operations of privileged managers, it was difficult to determine the real financial situation into detail in many of such companies.
A telling example for this is C Market, in which order was not introduced even after the changes as of 2000; thus, no Meeting session was held between 2003 and 2005. Therefore, shareholders themselves were also not familiar with the condition of the company they owned.
What is certain is that the companies were employing hundreds of people, some of whom not only received salaries, but also lived in premises owned by the company, thus being existentially tied to it.
One of DOS’s promises for the elections in 2000 was mandatory privatization, in the process which had to be “transparent”, and which would “stimulate development of the capital market”.
The process which, as the coming years indicated, did not really “have to” be transparent, left Serbia with a new picture of its political elite: former ministers, socialist directors, but also emerging businessmen became successful businessmen, bankers, and, finally - investors.
Monopoly capital
In the first democratic Government of Serbia, headed by Zoran Đinđić, the position of Minister of economy and privatization was assigned to Aleksandar Vlahović; most companies were privatized in the course of his mandate. By the end of 2005, as many as 1,400 companies were privatized.
By 2010, as many as 550 contracts on privatization were terminated. About one fourth of all contracts signed by the end of 2005 were terminated.
Although privatization is mostly understood as transfer of ownership over companies from state hands into hands of individuals or private companies – which was also a promise made by DOS – important companies in Serbia entered the year of 2000 as shareholding companies in which most shares were owned by individuals – employees. These were companies such as Luka Beograd, Novosti, and C Market.
Importantly, the institute of “takeover bids”, which is used when someone wants to obtain more than 25% of shares in a company, which exists as an option in trade of shares, was almost a rule in the process of privatization in Serbia. This means that in such cases individuals obtained the majority package of shares or control over the company at once.
It is also important to remember the atmosphere in which the state passed the decision to sell its shares to potentially questionable companies, such as the case of Luka Beograd. One of potential problems was the fact that the shares were purchased by company Worldfin from Luxembourg, which had only 31,000 of EUR of founders’ capital, but which managed to pay almost 40 million EUR for the shares.
Companies were also sold by the Privatization Agency, which would sell the state stake at an auction or tender, to control implementation of the contract for several following years.
In numerous cases, behaviour of authorities and institutions was contradictory: when companies were to be sold, they were treated as something owned by the state, but when it was to be established whether there were any illegitimate elements in the process of privatization, the message would be that this was about independent decisions of private owners of shares. Issues also existed in terms of control – beside the usual absence of competences, the legally prescribed and defined control was missing in some cases. This could be also observed in the course of sale, but especially after the sale, as the buyers had obligations they needed to meet.
Besides the full payment of the sale price, buyers had to make investments over a defined period of time, observe social programmes and rights of employees, and were not to pledge or sell company property. All these obligations were valid for several years, but breaches were already evident in the first years upon sale.
In the procedure of sale, i.e. takeover of shares, it was the Securities Commission that stalled the matter, while it was the Privatization Agency and the Shareholders’ Fund which stalled the process of sale of state stakes and control.
At that time, the Anti-Corruption Council was the only institution which kept issuing warnings about drastic law breaches in the process of privatization. The Council was an advisory body of Serbian Government, established in 2001, which was to “observe activities in fight against corruption” and propose measures for more efficient fight against corruption to the Government.
In the end of 2003, at the period following the murder of Zoran Đinđić when the Government of Zoran Živković, also from DS, was in power, the Council published the first report on issues in privatization. This was about the export of sugar into the EU countries, and, before it, privatization of sugar factories in Vojvodina.
Privatization of sugar factories “for one euro” was one of the major scandals which marked the first years of rule of democratic authorities in Serbia: in October 2002, company MK Commerce purchased three sugar factories at the total price of 549 dinars, which at that time amounted to nine EUR. MK Commerce is owned by Miodrag Kostić, businessman.
Following this, in March 2004 the Council published the second part of the report on the sugar export in which data on produced, imported, and exported amounts of sugar did not match; the report also mentioned the absence of reaction against warnings from Brussels on part of state bodies.
The Council suspected that the companies were earning double profits by importing sugar from the EU at subsidized prices, repacking it, marking it with fraudulent declarations, and exporting it back into the EU at preferential duty-free tariffs. In May 2003, the EU suspended the right to export sugar at preferential prices, while the suspension was prolonged until August 2004. Till the present date, nobody has been held accountable for the sugar scandal.
Although premises of the Anti-Corruption Council are located within the building of the Serbian Government, the Government failed to react upon these reports. Practice would show – they would not react to any of the following ones too.
Progressive political capital
In the following years, the Council published reports in which it marked cases of privatization of Luka Beograd, C Market, Trudbenik gradnja, Šinvoz, Prosveta, Jugoremedija, and several more companies as very disputable. Besides privatization in narrow sense, the Council also treated the establishment of Mobtel, business operations of Pančevo-based Azotara, obtaining of permits for laying of optic cables, and hidden impact on media.
For citizens, this was, for a long time, the only source of information on the connections between politics and potentially significant breaches of laws, shareholders’ rights, and rights of employees. The information was published by innumerous, though at the time very strong independent media outlets; thus, in time, the term “disputable privatizations” came into everyday use.
However, even though there were no significant reactions on part of the state – though there were some investigations and criminal proceedings, including some cases which the Council did not include in its reports – the reaction came from the outside.
The reports of the Council arrived in Brussels as “Questions which remained unanswered”, following which the EU addressed Serbia. In June 2011, media published that Serbian authorities received a letter from Brussels requesting investigation of more than 20 cases of privatization.
Ivica Dačić, who was the Minister of the interior at the moment, said that the letter arrived at the Ministry of justice, that it was already delivered to competent state bodies, and that the “list did not mention anything new which had not been wither in public, or subject to control”.
In October of the same year, the opinion of the European Commission on Serbia’s application for membership into the EU stated concern in relation to supervision of privatizations
Five months later, the resolution of the European Parliament on Serbia’s Euro-integrations was considerably more concrete:
“An appeal to authorities in Serbia to investigate controversial cases of privatization and sale of 24 companies at once, having in mind that the European Commission expressed serious concern for their legality, including the cases of Sartid, Jugoremedija, Mobtel, C Market, and ATP Vojvodina”.
Shortly afterwards, state officials, such as the Republic Prosecutor Zagorka Dolovac, started giving statements, informing the public that these cases are being tackled.
By the selection of cases pointed to by the European Union, it was clear that this was not only about privatizations as the sale of state-owned stakes, but also – as pointed out by the Council – about different kinds of possible malversations in economy which were supported by the authorities and which potentially incurred damage to the budget and citizens.
In parallel with all this, significant political changes took place in Serbia; thus, citizens experienced the electoral year of 2012 with the new-old opposition: Serbian Progressive Party (SNS), i.e. the coalition around the party – which would take over power in Serbia in the course of the year. The party emerged in 2008 by separation of Tomislav Nikolić and Aleksandar Vučić from Serbian Radical Party, in which they had been for the previous 15 or so years, under the leadership of Vojislav Šešelj, later a convicted war criminal.
The epilogue
Six years as of coming of SNS into power and establishment of the Working Group for the 24 privatizations, Aleksandar Vučić became the President of Serbia.
Out of 21 companies, or the number of companies in the 24 cases, one third was closed, while one third are in bankruptcy proceedings.
Former Minister of environmental protection Oliver Dulić was convicted to a prison sentence, but the Appellate Court annulled the verdict. At the same time, he is the only top official convicted in the 24 cases of privatization. Beside him, Dragan Đurić, owner of Zekstra, was also found guilty and convicted to one year of house arrest.
Another minister, Predrag Bubalo, was acquitted of charges. Trial to Saša Dragin is still pending.
Employees of Trudbenik are still fighting for their flats; employees of C Market lost all lawsuits launched about their shares; employees of Jugoremedija have been fighting for the company’s survival for ten years already; while employees of Srbolek lost their jobs because of bankruptcy, with the company owing them both salaries and contributions.
Authorities in Serbia continue to privatize important and large companies, far from the eye of the public.
