Competition revitalizes private sector
SERBIA'S RECONSTRUCTION REMAINS HEAVILY RELIANT ON FOREIGN INVESTMENT, A FACT RECOGNIZED BY THE GOVERNMENT IN ITS RECENTLY-INTRODUCED PROGRAM TO FREE 4,500 COMPANIES FROM STATE CONTROL

Privatization is a key ingredient in the Serbian government’s economic reforms and one which is seen as playing a fundamental role in creating conditions for the operation of a competitive and open market.
As well as generating much-needed capital for the government, the privatization program is aimed at stimulating foreign investment and reinvigorating business activity in general, which in turn, will help to lower levels of unemployment and improve the citizens’ standard of living.

TURNING A NEW PAGE Serbs are set to benefit directly from the transformation of the economy as shares become available.

After consultations with managers, trade unions and external agencies, new privatization laws were passed by the Serbian parliament in June. These laws set up a comprehensive program designed to regulate the privatization of 4,500 socially-owned and state-owned enterprises in the country.
In line with procedures agreed upon with the World Bank, three distinct methods will be used to implement the program. In the first instance, international tenders will be used to sell off controlling stakes in key enterprises that are likely to be of interest to strategic investors.

Secondly, a limited number of large loss-making enterprises will be restructured so that viable business lines and assets can be sold. Thirdly, the remaining companies, which comprise the great majority, will be sold through public auctions.
Forecasts for privatization receipts for 2001 have been revised downwards from $10 billion to $3 billion following
delays in the sale of a large cement company under previous legislation. However, substantially higher proceeds are expected by early 2002 as the program takes off.
In parallel with the privatization process, new laws are being drafted that will help facilitate private enterprise operation and encourage foreign investors to become fully involved.
The laws will give foreign investors the same rights as local businessmen to invest, make payments, convert dinars into foreign currency and to repatriate money freely. Proposed labor legislation is aiming to increase market flexibility and reduce the financial burden on companies.

Aleksandar Vlahovic Minister of Economy and Privatization

While launching the new program, Aleksandar Vlahovic, Minister of Economy and Privatization, explained how the new program improved the privatization process. “The old law was slow and cumbersome and focused almost exclusively on the transfer of ownership to employees,” he says. “The new strategy enables the market to determine eventual ownership, and will result in a mixture of enterprises with different ownership structures, which will be decided according to the needs of investors and enterprises alike.”
A proportion of shares will be destined for employees, and a package will be reserved for Serb citizens in order to allow them to benefit directly from the transformation of the economy.
Mr. Vlahovic says that the government has had the benefit of learning from the experience of other countries who have undergone a similar privatization process and that the government’s program was only finalized following consultations with Poland, Hungary and Estonia.

He stresses that the privatization program provides the perfect chance for the foreign investor to gain a foothold in southeastern Europe. “Here in Serbia they will find a good base for the whole Balkan region and also for Russia, with whom we have special trade relations. We are doing our best to create an attractive environment for the foreign investor and I think this will be of particular appeal to businessmen from the United States,” he says.