316
Country reports: Europe and Central Asia
looking for a ‘strategic partner’. According to government information from August 2006, the first step was to sign a protocol with the Russian state-owned oil company Zarubezneft and the Russian state-owned bank Vneshekonombank on their intention to participate in privatisation, reconstruction and management.8 Using the method of direct selection, the RS government decided in December 2006 to sell its state-owned oil assets to the company Neftegazinkor, and the privatisation agreement was signed on 2 February 2007. There was public speculation that the selection process was highly influenced by improved relations between Serbia and Russia.9 Zarubezneft owned 40 per cent of Neftegazinkor, while three limited companies each owned 20 per cent. The owners of these three companies remained unknown publicly.10 One of the most troubling aspects of the privatisation process was that the RS government, an exclusively political body, excluded the RS Directorate for Privatisation, the agency in charge of privatisation, and conducted the process autonomously. In order to do this legally, the government amended the privatisation law in order to enable it to carry out the privatisation of certain so-called ‘strategic companies’ directly.11 Essentially, this law introduced a concept of privatisation that was completely new and radically different from the previous legislation. It gave the RS government exclusive power to search for potential buyers of state capital, negotiate with them, sign contracts and manage implementa8 9 10 11
tion of the contracts. In effect, the law retroactively legalised all the government’s previous steps in this privatisation,12 and abolished the role of the privatisation agency in privatising some of the most significant industries in the country.13 In reality, the whole privatisation process was a ‘secret operation’. The final contract between the RS government and Neftegazinkor was marked as a classified document, and even members of the RS parliament had no insight into the main part of the agreement and its annexes.14 After several months of public advocacy and a number of formal requests to the government, TI BiH in November 2007 succeeded in obtaining the main part of the agreement, though not the annexes. By May 2008 there was no reliable information about implementing contract clauses regarding the new owner’s obligations. These include starting gas production based on Russian oil; investing an additional €100 million (US$150 million) over two years and building up a railroad whose value would be €45 million (US$70 million); and maintaining employment levels (i.e. not considering redundancies) for a determined period. A final twist in the tale involved easing the burden of the company’s debts on the new owner. The RS government postponed the company’s debt payment for nine years with a four-year grace period and an additional five years free of interest. This is with over BAM 133
Ibid. See www.vreme.com/cms/view.php?id=502846. Conclusion of the BiH Concurrency Council, May 2007 Law on privatisation of the state-owned capital in enterprises (zakon o privatizaciji državnog kapitala u preduzec´ima), from 17 May 2006; law on amendments of the Law on privatisation of the state-owned capital in enterprises (zakon o izmjenama zakona o privatizaciji državnog kapitala u preduzec´ima), 11 January 2007. 12 The privatisation agreement with Neftegazinkor was signed on 2 February 2007, while the law that regulates specificities of the oil industry privatisation was adopted retroactively on 28 February 2007. 13 According to article 6 of the law, ‘Companies from the fields of production and distribution of electric power, oil industry, rail transport, telecommunication, water supply industry, mining and forestry, public media, lottery, arms and munition production, and other companies of strategic interest, shall be privatised according to specific privatisation programmes enacted by the RS Government. . .’ 14 See www.capital.ba/dodik-ugovor-o-prodaji-naftne-industrije-samo-pojedinacno-poslanicima/.