TUE, 17 APR 2001 22:21:26 GMT
Whole factories for Just DM 1 - and Still no one Wants Them!
AIM Sarajevo, April 7, 2001
The future is in alcohol, oil and cigarettes - and newspapers. This is
the only conclusion that can be arrived at after the results of the
first round of major privatisation in the B&H Federation have become
The transition of the poor into capitalists has started in B&H. In a
couple of years, when all is said and done, some will be capitalists.
For the time being, the citizens and privatisation investment funds
(PIFs) have shown greatest interest in shares of breweries in Sarajevo
and Tuzla, of "Energopetrol" and the Mostar Tobacco Factory. The
absolute champion was certainly the "Sarajevo Brewery" for which the
subscribed amount was 12 times higher than the original price of the
offered state capital, amounting to DM 1.3 million. In the case of
"Energopetrol" and the Mostar Tobacco Factory that ratio was 1: 10,
while the Tuzla Brewery registered a somewhat lower score of "just" one
The interest for breweries and oil refineries is quite understandable
because their products are in great demand. For, irrespective of the
crisis and poverty, people always find a mark or two for a beer and
gasoline. The greatest surprise was certainly the "second-ranked" on the
list of hot-selling enterprises. It was the printing house "Economic
Press" (Privredna stampa) from Sarajevo, whose initial price for 20
percent of its capital (the rest was already privatised during
Markovic's time) reached DM 48 thousand, while as much as DM 526
thousand was offered, which is 11 times more.
In this round, the state offered to sell "its" capital in 547
enterprises worth (at least judging by the books) slightly over DM 3
billion. This is just a half of the total number of state enterprises
which will be privatised. The state capital in the other half of
enterprises was offered for sale early this July. Four months later,
which is the duration of the first round of public subscription of
shares, the total subscribed amount was something over DM 4 billion,
mostly in certificates. State capital in 76 enterprises was successfully
sold and DM 223 million collected on that account, which is slightly
below the accounting value of this capital.
Naturally, there is no tangible money behind these millions, but only
privatisation certificates, which have been distributed to citizens as a
compensation for what state owed them on various accounts. Form missing
household foreign savings deposits, unpaid soldiers' salaries during war
in B&H, unpaid pensions and a symbolic amount of slightly over DM 2,000
on average to all citizens of age for their participation in the
creation of former social property which now belongs to the state.
The remaining unsold enterprises did not get new owners for two
reasons: either there were too many or too few interested parties.
According to the valid law of F B&H, if between 80 and 120 percent of
the initial value of state capital is paid in the first round, the
"goods" are sold, and there only remains the technical part of the deal
of determining the share of property that goes to everyone depending on
the amount of paid sum.
If the paid amount exceeds these limits, then the sale goes into the
"correctional" second round of the public offer of shares, in which the
maximum and minimum amounts are not limited. That means that the state
capital in enterprises which are favoured by citizens and have remained
unsold, will be again offered in the second round of the public offer of
shares which will last from mid April till the end of May.
On the other side of the coin are enterprises for which absolutely no
interest was shown or symbolic amounts were offered in the past first
round of the great privatisation. The most drastic is the case of the
iron mine in Vares. On paper, it is worth something over DM 72 million,
but in the first round not one pfenning was paid for it. That means that
no one showed any interest whatsoever in becoming the owner of this
mine. The same fate befell another 26 enterprises in F B&H, which means
that not even their current directors and other workers believe in their
future, not to mention other investors, such as PIFs. Among these are
the Livno Carpet Factory, "Staric" Furniture Factory from Kladanj,
"Poljopromet" from Zenica, the Mostar and Bihac Textile Factories, as
well as "Herzeg Bosnia" Railways from Mostar whose initial value of DM
14 million did not attract anyone.
The "B&H Ironworks" from Sarajevo fared somewhat better. Their value
was estimated at DM 126 million, but the only offer were the
"impressive" DM 11,900, which is the price of a second-hand car in good
repair. Similar is the situation with the Gorazde Nitrogen Plant whose
accounting value was DM 110 million, but for which only DM 18,930 were
offered. The actual situation is even more devastating if it is known
that a nominal privatisation certificate for DM 100 is sold for DM 3 in
cash on the free market.
With such results of the first round of privatisation of these
enterprises it is quite possible that the citizens will be shocked in
June, when results of the second round become known. Since there are no
limits in the second round, that means that if the initial value of an
enterprise was DM 1 million and, let's say some DM 5 million have been
paid, for each DM 500 paid (in certificates or money, all the same) the
buyer would get one "real" enterprise share nominally worth DM 100, and
thus become a shareholder, i.e. a co-owner. On the other hand, if there
is no special interest in the enterprise in a buyer has invested his
certificates and, for example, only DM 10,000 have been paid although
the initial price was DM 1 million, then for DM 500 paid in certificates
the buyer will get "real" shares which are nominally worth DM 2,500.
Consequently, it is quite possible that if the same situation happens
in the second round, anyone who pays only DM 100 in certificates (on
condition that he is the only one who has subscribed the shares) could
easily become a legitimate owner of, let's say, the Vares iron mine with
its total accounting value of DM 76 million! It should be borne in mind
that the market price of DM 100 certificate is just DM 3 in cash, i.e.
the price of one package of "Marlboro" cigarettes. Following this logic,
no matter how ruined a firm may be, there are millions of ways in which
an owner can get out of it more than DM 3 in cash, which is the real
value of his investment. If nothing else, he gets a registered firm,
while he would need at least DM 2,000 in cash just for establishing a
The hitherto results of great privatisation can consequently be used as
a good indicator of the state of mind of the general public. It is
obvious that very few people believe in production despite verbal
promises of both local and foreign officials and experts that the
production is the only chance. In vain are all assurances that without
the restart of production mere mortals cannot count on better life.
People would much rather be co-owners of breweries or gas stations, than
of something "useless" like a textile of furniture factory. This is a
lesson they have learned in five post-war years of transition: Praise
the textile, but stick to beer and oil.