Bosnia and Herzegovina
million (US$106 million) being owed to the state budget, and social and pension funds.15 The price for 65 per cent of state-owned capital in the RS oil industry was approximately €110 million (US$172 million), plus bank guarantee costs of €20 million as a security for executing the contract’s obligations.16 Independent experts17 evaluating the privatisation contract concluded that it is not positive for, and is perhaps even harmful to, the RS budget and further development of the oil industry. They found that there is no balance between the contract price and the government’s obligations: in effect, the two cancel each other out, since the government covers all the refinery’s commercial debts, amounting to about €72 million (US$98.5 million). Moreover, the buyer of the oil industry lacks credibility in the current business environment (the company’s estimated value was between BAM 3 and 6 million (US$2.4 and 4.8 million),18 while the amount of all obligations originating from the main agreement exceeded €300 million (US$410 million), which is fifty times more than the company’s value. Finally, it is considered that the contract may violate domestic rules on concessions, taxes, expropriations and competition by allowing a monopoly.19 Considering all the agreement’s imperfections, including delays by the Russian partner in fulfilling its obligations and the RS government’s unwillingness to justify all aspects of the agreement in a transparent manner, it is difficult to see how the economic interests of RS citizens
are being served. The extent of the damage remains immeasurable and the object of intense concern.
Political lobbies create concern The company Aluminium Mostar is the biggest exporter in BiH. During the country’s civil war in the 1990s the company was occupied by Bosnian Croat forces, and all Serb and Bosniak workers were fired. Since then the company has been under the control of Bosnian Croat interest groups and politicians.20 Immediately following the war, the company was privatised. The Croatian company TML invested in the company and became a 12 per cent owner (about €10 million or US$13.7 million), while the other 88 per cent remained state-owned.21 After the adoption of privatisation laws in the Federation of BiH (the Bosniak- and Croatdominated entity within BiH),22 tough political negotiations commenced between politicians on how to divide the economic and political influence over the company. It was clear that it would be hard to satisfy Bosniaks’ and Croats’ interests by following the law’s privatisation rules. Aluminium Mostar was granted preferential status by the FBiH government, which meant that the privatisation law was not applied to the company. As a result, the privatisation commenced (and is still in progress) based on a clear political consensus between two political parties and two dominant entities in FBiH.
15 Article 5 of the law on conditions for selling stocks of the companies from the Republika Srpska oil industry (zakon o uslovima prodaje akcija preduzec´a iz oblasti naftne industrije republike Srpske), Official Gazette of the Republika Srpska, no. 20/07. 16 Article 3.1 of the RS oil industry privatisation agreement, 2 February 2007. 17 I.e. Svetlana Cenic, former RS minister of finance. 18 Decision of the BiH Competition Council, May 2007. 19 TI BiH, ‘Analysis of Privatization Contract of the RS Oil Industry’, www.ti-bih.org. 20 See http://ceemarketwatch.com/search.html?q=smelter&search_country=BA. 21 Tender provisions for the selling of 88 per cent of the state-owned capital in the aluminum company: FBiH Privatisation Agency and Aluminium JSC, March 2007, www.apf.com.ba/aktuelna-prod/tenderi/dokumentacija/ aluminij/Pravila_tendera_Aluminij_Konacna_020307.pdf. 22 Official Gazette of Federation BiH, nos. 27/97, 8/99, 32/00, 45/00, 54/00, 61/01, 27/02, 33/02, 28/04, 44/04, 42/06.
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