The Root Cause of the Rebellion: Top Ten Privatisation Plunders in BH

The Root Cause of the Rebellion: Top Ten Privatization Plunders in Bosnia and Herzegovina

We’re reminding you of the research into the top 10 privatization plunders that Zurnal published via the ACCOUNT network in May 2013. This is one of the many causes of protests, in case somebody forgot.

By: Nermina Šunj

Bad privatization or unjustified postponement of sale in just 10 cases: Birač, Oil industry in Republic of Srpska, Hidrogradnja, Zenica Ironworks, Krivaja, Polihem, Aluminij, Soko, Bosnaplod, and Kladušnica, has already produced (or is expected to produce) a loss of 3 billion KM in state capital. More than seven thousand jobs are at stake!

We are talking about the ten enterprises most likely to maintain production and save the jobs, either because of the nature of their production or the current state of the market.

Value assessments for these enterprises benefited the buyers, in return for promised investments, re-starting production, and employment.

The Unions of Bosnia and Herzegovinia do not have exact data on the number of workers who have lost their jobs since the start of privatization. But they do know that, for that reason, just in the last year, 43,000 people were added to the unemployment rolls!

The Republic of Srpska Union says that bad privatization has costs them more than 60,000 jobs.


Birač in Zvornik: The alumina plant was sold for 10 million KM to Ukio Investment Group in 2001. They promised to invest another 50 million and keep all the workers. However, the money has dried up and the losses have gone up beyond 730 million KM. In April, Birač declared bankruptcy. Approximately 1,000 jobs are at stake.

Oil Industry RS: Stocks of three oil enterprises: Oil Refinery AD Bosnanski Brod, Petrol AD Banja Luka, and Oil Refinery Modriča, were sold in 2007 to the Russian Neftgazinkor for 220 million KM. The Republic of Srpska government is proud of this deal, even though this has been one of the least transparent privatizations in Bosnia and Herzegovina. The contract foresees layoffs.

Hidrogradnja in Sarajevo: Since 2002, the Federal Agency for Privatization (AFP) has been trying to sell the 67% state capital in this company without success. The total nominal value is 70 million KM. The last unsuccessful attempt was in December 2012, or rather, March 2013. Eight hundred and eleven workers at Hidrogradnja are in this very difficult and precarious position.

Krivaja in Zavidovići: Bankruptcy was declared in July 2011, when the losses amounted to more than the total value of capital (from the assessment in 2005, the value was at 317.8 million KM). Due to the millions in debts, Krivaja is being threatened with liquidation of assets. Ferimpex (Zavidovići) bought Krivaja in 2005 in a direct sale for 5 million KM. However, Ferimpex never lived up to the responsibilities outlined in the contract. 160 workers were laid off and the remaining 1,000 face lay offs as well.

Željezara [Ironworks] in Zenica: The remaining non-privatized part of Zenica’s Ironworks that was of no interest to the Kuwaiti investor who was to become the owner of the company now known as Arcelor Mittal, is drowning in debts, for a total of more than 23 million KM. The Ironworks’ capital lost 515 million KM in value from 1999 to 2005. Allegedly, out of the remaining 700 workers, approximately 300 are no longer needed.

Polihem in Tuzla: Polish company “Organic Trade” bought this once-upon-a-time leader of chemical industry in Bosnia and Herzegovina for a total of 10.7 million KM. They promised jobs and 70 million KM of additional investments. However, Polihem has entered bankruptcy proceedings; some 614 former workers have been left out in the cold, and the company properties are being sold as scrap metal.

Aluminij in Mostar: Federal Agency for Privatization is once again planning to sell the 88% of state capital in Aluminij. It is believed that the asking price could be even higher than 460 million KM that the Glenkor/Feral-Široki Brijeg/Dalekovodi Croatia Consortium offered once upon a time. The structure of ownership, established by the post-war “national concept” of division, led to 900 Serb and Bosniak workers being laid off.

Soko in Mostar: Merely traces are left of this former Yugoslav military industry core. Instead of some 6,000 workers, only 400 are still left, fighting for their jobs. No formal proof exists as to the role of the consulting agencies that mediated the sale of parts of this company in 1999, nor whether they had any connection to Dragan Čović – the last director of Soko before privatization occured.

Kladušnica in Velika Kladuša: Even though 61% of this tourist-hotel company with properties in very attractive locations, belonged to the workers and pensioners after the first round of the 1990s Marković-privatizations (the value being some 20.4 million Yugoslav dinars at the time), the Agency for Privatizations of the Una-Sana Canton in 1998. sold all of Kladušnica’s properties, and the majority of stocks ended up with those close to the directorship of the company at the time!

Bosnaplod in Brčko: Debts of this once promising Brčko-based plant for fruit processing amount to 20 million KM and have surpassed the total value of the company. Nedžad Lević bought Bosnaplod in 2003 for a total of 56,000 KM, having received it “on the cheap” in return for further investment and preservation of 80 jobs. In March of 2013, Bosnaplod entered bankruptcy proceedings.


Birač was privatized in 2001 under a special government program. Ukio Investment Group, owned by Vladimir Romanov, bought the factory for 10 million KM. They agreed to invest additional 50 million KM and to keep the workers.

After the bankruptcy proceedings began in April 2013, the property of Birač lost some 730 million KM in value, and it is once again owned by the RS government. Around 300 workers have lost their jobs and another 1,000 workers in the factory and sister companies are facing an unknown future.

The events in this once the biggest manufacturing export company in all of former Yugoslavia, once again go to prove what an economic expert Svetlana Cenić has been claiming for years, namely, that this contract with the Lithuanians has been an unbelievable privatization plunder.

However, the damage has already been done.

This end result was probably avoidable had the people in the RS government took the findings of the auditing company Diloit from three years ago a little bit more seriously. At that time, the losses had gone up by 730 million KM, and were over 110 million KM more than the total value of Birač property.

At the time, Svetlana Cenić was threatened and pressured like never before because of her claims about Birač, as well as discoveries about the Russian-Lithuanian buyer and the possible links between the RS government and the new owners, whose total property value was assessed to be more than a billion KM.

Professor Cenić claims that even when Romanov arrived to Republic of Srpska to threaten her because she spoke out about the criminal activities, he came in a private jet, and the expenses were paid by the host government.

But she was issuing warnings about this harmful contract that was practically giving away public property to this buyer, while protecting him from all eventualities, thereby transferring all risk to the Republic of Srpska budget.

“We were aware of all this, and still the government continued helping Birač. They declared bankruptcy only once the owner’s assets abroad were frozen and once the Lithuanian bank lost its operating license for money laundering. This way the owner will be free of all responsibilities while the debt is taken over by the Republic of Srpska,” says Cenić.

Professor Cenić claims that, up to this point, all the capital taken from Birač amounts to around $800 million USD!

At the time, however, no one was concerned that the consultant who prepared the privatization was subsequently one of the potential buyers, nor that the remaining two offers were deemed invalid and the tender cancelled, but the Lithuanians were, nonetheless, awarded the contract.

After the sale of Birač, in an equally non-transparent privatization process, the remaining most important oil companies in Republic of Srpska were sold.

The government of this smaller entity is proud of this supposedly successful sale of the oil industry, but Transparency International (TI) contradicted them with their analysis of the sale contracts, in which their team of experts found at least 44 questionable points in the contract.

Russian Neftgazinkor bought the shares of three oil industry companies in Republic of Srpska for a total of 220 million KM.

“The contract for the sale of Oil Refinery AD shares in Bosanski Brod, “Petrol AD” in Banja Luka, and “Oil Refinery Modriča AD” in Modriča was signed on February 2, 2007, while the Law on Sale of Oil Industry Shares was signed on February 28, 2007, and was enacted on March 8, 2007, which shows that the Law was adjusted to an already concluded sale,” says Srđan Blagovčanin, the executive director of TI in Bosnia and Herzegovina.

Transparency warned at the time that the buyer’s legal status was unclear. Nor were the documents regarding the buyer’s capital structure included in the contract as required. Publicly traded company Zarubezneft (fully owned by the Russian Federation) is today the legal owner of 50% of the Neftkazinkor, while the remaining 50% belongs to as of yet unknown group of owners.

The contract includes the option for lay offs. The Oil industry in RS employs over 2,000 workers.


Hidrogradnja, a company that was once a contractor constructing the most important projects from Sarajevo to Iraq, might have a chance only if the current situation is not, once again, a well-known scenario of “undervaluation.”

Because the initial sale was unsuccessful, or rather, because this process was postponed repeatedly, it is believed that the market value of Hidrogradnja shares fell by 100 million KM.

According to official information from APF, Hidrogradnja today employs 811 workers. Most of them have sued the company for about 20 million KM.

First attempt at a tender for sale of 67% of government ownership of Hidrogradnja capital was in 2002. The total value was 47 million KM and was declared unsuccessful. Public trade of shares of the remaining 33% (about 20 million KM) has them in private ownership, although some of that ownership is to be contested in court in a case between the owners and the Federation of BH government.

Another attempt at a sale in a direct contract sale at the end of 2006 was cancelled at the government’s request, as the best offer for the 14.7 million KM in investment requirements, was only 9 million KM.

The latest attempt at a sale by APF in December 2012, or rather, March 2013 was also unsuccessful.

According the official information from the Agency, the nominal value of state capital in Hidrogradnja as of December 31, 2012, was 66.1 million KM.

The company is less and less attractive to potential buyers on account of its increasing debts.

The company continues to be plundered daily, in unexplained “losses of entire tractor trailers of concrete” but also in situations like the one when Ismet Hožbo almost lost his job. He is recently retired, but at the time he was almost fired because he publicly posted the personal utility bills of the former director Semin Mašić as they were arriving to and being paid by the company.

“That was a shock for me, because I spoke up about what Mašić was doing. And the first thing he did when he took over, after the death of his predecessor Mehmed Drina, was to lay off around 300 workers. And what about a number of other plunders, like the sale of the stone quarry in Ilijaš?”

Institutions that hold jurisdiction over Hidrogradnja’s management were not really “unaccomodating” in this kind of business, as proven once again in the following story:

When the acting director, Džemaludin Peljto, sued workers over the last year’s strike in the Municipal Court in Sarajevo, the very second day of the trial, the court had ruled the strike illegal, and as Hožbo claims, the verdict was signed by a judge who was officially on vacation?!

One of the most torturous stories of privatization in BH is the privatization of Zavidović’s Krivaja.

Krivaja’s capital, according to APF, in December of 2012, amounted to 0 KM! The losses were higher than the total value of the company.

The unwritten rule that bankruptcy is but one step from complete downfall is being proven yet again in Krivaja. The bankruptcy manager in Krivaja, even if he wanted to act, does not have many options as the debtors are seeking over 110 million KM.

Bankruptcy proceedings began in July 2011, and even though no one dares utter the prognosis, it would not be surprising if Krivaja’s assets were simply liquidated!

At one point, this company fed all of Zavidovići, as it employed almost 4,000 workers.

In the “small privatization,” nine separate entities of the enterprise were sold, 6 million KM was collected, and 365 workers were kept.

Federal Agency for Privatization declared the attempt at a tender-based sale of the remaining elements of the company unsuccessful in 2005. The same year, Krivaja’s assets are valued at 317.8 million KM, while that same year, Krivaja was bought in a direct sale by Ferimpex for 5 million KM. Ferimpex is owned by the brothers Mujanović from Zavidovići.

However, the owners never lived up to the contract. They never even succeeded in registering the new company, while the government of FBH invested in Krivaja over 14.5 million KM.

160 workers were laid off, and the remaining 1,000 workers face an uncertain fate on account of the bankruptcy proceedings and the extremely difficult financial situation of the company.


Zenica today has Arcerol Mittal, the largest steel manufacturer in the world. The company is owned by some of the richest people in the world. However, the still not privatized part of the Ironworks Zenica, that held no interest for the Kuwaiti investor, is drowning in debts. The amount is 23 million KM.

The Ironworks has lost over 515 million KM in capital from 1999 to 2005, on account of ownership transfer to the BH Steel Ironworks Zenica and because of losses in everyday operations (some 360 million KM).

Today, the Ironworks employs some 700 workers, and allegedly 300 of them are to be laid off.

In September 1998, a joint company BH Steel LLC Zenica is created by the merger of the Ironworks and the Kuwaiti Investment Agency (KIA).

In 2004, the company is joined by LNM Mittal Group who promise to restart production, invest $135 million USD and hire 4,150 workers.

Selma Džihanović – Gratz, in her research “The Form of Corruption in BH in the Processes of Ownership Transfer,” in 2010, studied each section of the contract, or rather, each step of the privatization of Zenica’s Ironworks.

She warned that the process by which the ownership of the Ironworks’ property was transferred to the new owner lacked transparency; she warned about the failure to live up to the contract when it came to investment obligations, the size of production, environmental protection, new jobs, and respect for labor law.

The first step was for Bosnia and Herzegovina to repay its debt to Kuwait with the Ironworks’ property. After that, KIA sold its share to the LNM Mittal Group for 120 million KM. The Federation BH government, without any logical or economic justification, sold its remaining shares in the company for the nominal $1 USD!

After the Mittal and Arcelor merger, the Zenica company became a member of the Arcelor Mittal Group in 2006.

“Despite the evident plunder of state property in this highly non-transparent, illegal, and completely unclear privatization process, the Federation BH government is doing nothing to ensure the contract is lived up to, nor to protect the laws of Bosnia and Herzegovina, nor the Federation BH property. Once again, we are talking about private interests of the politically powerful, who are perfectly happy with this situation,” Džihanović-Gratz concludes in her research.

There are few positive prognoses for Tuzla’s Polihem as well. The once-upon-a-time leader in the domestic chemical industry is in bankruptcy; the gates of the factory are closed; and the bankruptcy manager has only kept 62 of the 614 workers.

Many are likely to blame the federal government for Polihem’s downfall, because even 11 years ago there were no attempts to find a solution to the debt Polihem did not repay to the BH Electric Industry.

New hope rose for Polihem at the end of 2004, when the Polish company “Organic Trade” showed some interest in Polihem. They paid 10.7 million KM and agreed to invest 70 million KM. They also agreed to create new jobs.

Shortly thereafter, however, new lay offs began and soon production was completely halted on account of allegedly unsatisfactory trends in the world markets.

Entire parts of the factory were literally cut up and sold as scrap metal. The BH subsidiary company of the Polish “Organic Trade,” supposedly took out loans, using Polihem property as collateral.

Kata Iveljić, the president of the Chemical and Non-Metal Workers Union in BH, even though Polihem workers do not belong to her union, says that even before privatization took place, there needed to be measures to protect these workers, since the unemployment benefits are not enough to live on, and since the benefits last only 6 to 24 months following lay-offs.

“What will the worker do after 24 months? That worker becomes a welfare case. We shouldn’t have started privatization without first enacting a law for social care of workers who are laid off due to privatizations, bankruptcy, or asset liquidation…”

Today there are no precise indicators as to the value of Polihem.


Arguments over Mostar’s Aluminij, lasting over a decade and a half, are only the results of badly set up theories no one wants to touch any longer. And surely, there are enough doubts about the legality of the post-war registration of Aluminij properties.

The Review of Assets, initiated at the time by Aluminij’s director Mijo Brajković in preparation for privatization, would serve later as the basis for negotiations for the sale of this aluminum factory.

Aluminij’s value, at the time assessed at 1.4 billion Deutsche marks, was by god knows what methods brought down to 310 million DM.

As the Factory of Non-Heavy Metals (TLM) from Šibenik credited Aluminij with 8.8 million DM in 1997, Brajković later gave TLM 12% of the ownership in Aluminij.

The company also assessed that it owed in undisbursed paychecks during the war over 97 million DM. The leadership transferred this debt into 65% ownership. However, the shares went only to the Croat workers, not the 900 Serb and Bosniak workers.

The ownership structure in Aluminij will later become the topic of a number of negotiations between the federal government and the leadership of the company; it would become a hot political problem, arbitrated from 2002 to 2005 by the High Representative, with no particular success.

The agreement regarding the ownership structure with the government of FBH was reached in 2006, even though there are still some disagreements regarding this issue. The government was awarded only 44% of the ownership.

According to the 2013 plan by APF, Aluminij is once again being privatized, even though the ownership structure is still undefined and is a result of a political agreement rather than real assessment of value.

Mostar today could have been the center of once-upon-a-time Yugoslav military industry. However, Soko, a company whose properties included 450,000 square meter headquarters in Mostar, as well as factories in Grude, Ljubuški, Nevesinje, and Čitluk, is today completely in ruins.

Once upon a time, Soko employed 6,000 workers, but in today’s numerous subsidiaries operating in the former Soko locations, only some 400 workers are employed, struggling to realize their rights guaranteed by labor law.

Dragan Čović’s responsibility for Soko’s fate has not been proven, for the time when he was head of the company, or when the agency Euroconsulting negotiated the sale of Soko’s locations.

Čović was Soko’s director up until 1998, while he was the Finance Minister in the Federation government up until 2001, but also remaining on Soko’s executive board.

By 2003, in small privatization, some nineteen people purchased 33% of Soko, with a contractual agreement to hire 138 new workers and to invest 1.5 million KM. However, all of this was “dead letter” by law.

One time director, Roko Markovina, remembers Čović’s arrival to Soko at the beginning of the war, and how, at the time, they expected him to join a group of enthusiastic people gathering in the plant to guard it.

“A day or two after we began gathering in ‘Soko,’ he came in a military uniform, having arrived in a greenish ‘Renault 5’ vehicle; Dragan Čović, up to that point, one of the most trusted men of the then director Novica Ðurica, who had already escaped. He had the Croatian Military Defense document, signed by the now deceased Mate Boban, ordering him to be appointed the new director of the Aircraft Industry ‘Soko,’ inclusive of all executive rights” as Markovina says.

Company management was completely taken over by a “crew” of people close to Čović, or rather, close to the political centers that had named Čović to the leading post in Soko.

Markovina will later lose his apartment in Mostar, as another family moved into the apartment, personally approved by Čović.

“In each of the court cases against Mostar’s politicians, especially those who destroyed ‘Soko’ and ‘sold off’ its property, including our own shares of the company, there were not only indications, but hard evidence against the accused, enough for them to be rigorously punished. That could be done even now, if there was any will to do so. It would be enough to merely honestly and persistently investigate the source of their assets…and how much the state was able to collect in taxes for all those assets.”

A one time professional in Soko, Roko Markovina lives in Split with his family, where he also teaches at the Faculty of Electrical, Mechanical, and Shipyard Engineering.

The latest suspects in the criminal privatization of Mostar’s SokoValerija Čuljak, Branko Kolobarić from the Office of Institutional Revision of the Federation BH, and Mila Gadžić, a one time director of the Agency for Privatization of the Herzegovina-Neretva Canton – were completely acquitted by the Supreme Court of the Federation BH in early 2012. They were accused of business crimes and illegal privatization of some parts of Soko.

The fourth suspect in this case – Josip Gojak – was beyond the reach of the justice system as he escaped to Croatia.


One of the most illustrative examples of how individuals obtained worker-shareholder assets in a highly suspect manner is the case of Kladušnica Company from Velika Kladuša.

In privatization of the 1990s, the majority of assets of this once tourist-hotel company, some 61% was to belong to the workers and pensioners of Kladušnica, as documents in possession of the Organization for Shareholder Protection prove. These documents were also sent to the Court for Human Rights in Strasburg.

 And yet, the government of the Una-Sana Canton sells Kladušnica in 1998, as if the company were in full state ownership. And this was done in a public sale of shares, even though the Agency for Privatization of the Una-Sana Canton, had previously established that a tender or auction is the only means of such sale. Properties worth millions, located in many attractive locations, ended up in the hands of new owners, and all of that, in exchange for “certificates” [of ownership]. To the former workers, the rightful owners of Kladušnica, the new “bosses” were well known characters.

Sead Šabanagić, the president of the Organization for Protection of Kladušnica Shareholders, says: “In the municipal court of Velika Kladuša, Jasmina Miljković is a judge. She is a sister of one of the biggest ‘new buyers’ of this company and a close cousin of the second biggest ‘new buyer.” Judge Miljković is also herself one of the ‘new shareholders’ of the Kladušnica company, listed in the registration papers under number 18, as Jasmina (Zaim) Babić. Judge Miljković’s husband, Nurija Miljković was the president of the Management Board of Kladušnica, during the privatization process.”

Šabanagić has been representing 97 former employees before the European Court for Human Rights in Strasburg, since September 2012, when their suit was filed.

The workers of Brčko Bosnaplod did not have their property and assets taken away, but their rights to work and previously earned paychecks have been taken away; the money is simply not there. The promising fruit processing company has been in a financial crisis some 20 million KM deep, about as much as the company is worth!

Nedžad Lević bought Bosnaplod in 2003 for 56,000 KM and in return obtained a company worth millions, only because he promised to invest in production and keep the 80 workers employed. However, debt began accumulating very quickly, and as of March 2013, this company had entered bankruptcy.

The workers found out that the money was not there during their strike within the plant. The former director and majority owner of Bosnaplod, Nedžad Lević, simply told them in November 2012 that “there is no money and I will recommend bankruptcy.”

After this statement, Lević attempted to leave in his expensive Mercedes, but the indignant workers would not let him.

Bankruptcy manager, Stojan Jović, was charged with saving what he could in this regionally well known plant. Jović says that Bosnaplod is one of the very few examples of companies that are healthy in terms of its IT, technology, and infrastructure.

“A relatively small investment would make it possible to restart production,” says Jović.

A significant potential that has not been used in the past for who knows what reasons, says Jović, includes cherry and apple orchards on 10 hectares of land. The bankruptcy manager believes that renting parts of the company could be one of the ways to continue operations.

“The thing that led to the collapse of Bosnaplod, in the financial sense, was over-indebtedness. The company has 13 millions of long-term debt and another 2 million of short-term debt,” says Jović

Jović claims that the potential is still there, but that the first thing to be done is to repair the damage already done.


Prof. Anto Domazet: Four billion KM lost in the Federation!

In the Federation of Bosnia and Herzegovina, some 1,079 companies have been sold from 1999 until 2011, while 94 other companies were partially privatized. A total of 9,027 billion KM was collected 8.4 billion in the form of ‘certificates of ownership,’ while 542 million KM was collected in cash.

At the same time, due to not having fulfilled the terms of the contract, 80 contracts have been cancelled!

In Republic of Srpska, 716 companies have been privatized to date, while their sale brought in 1,725 billion KM.

However, according to the Unions of RS, 67% of all privatized companies are no longer operating!

The Office for Privatization of the Government of Brčko District recently finalized the privatization process. Due to the court process, only one company, out of the total of 27, still remains to be privatized.

According to the Economic Institute expert in Sarajevo, professor Ante Domazet, more than four billion KM of state capital was lost in the process, just in the Federation!

Domazet considers the creation of a more proper legal framework for privatization, as well as strengthening the institutions, and supervision of their functioning to be the top priorities at the moment. It is necessary that we also consider new models, such as selling shares to the workers directly, or to select, serious, and vetted investors, Domazet says.

“Corruption in the privatization process has led to losses in state ownership and capital, allocated as either advantages to the buyer or as losses in market competition. Before the privatization process is finalized, we need to improve the regulation as well as the methods by which we sell state capital, especially in cases of bankruptcy. In these conditions of continuing economic crisis, with the drop of interest in investment, we must seek new ways of privatizing companies. It is necessary to finalize the revision of privatization processes so that we could clearly distinguish between legal and illegal privatizations, and thus undertake measure to protect the integrity of state ownership and capital and to secure the dignity of the entire process of privatization,” says professor Domazet.

Even though the results of privatizations to date are catastrophic, there is no political will to revise them. Still, as economist Svetlana Cenić says, she is skeptical about the achievements of the revision process. There were no spectacular results from the Commission for Revision of Privatization in Republic of Srpska.

The Federation has adopted the Law [for Revision] but resolving key questions will fall under acts under this law, or in other words, when the Agency responsible for revision is formed.

The bill that would end the legal statue of limitations for criminal privatizations within the Federation in currently in parliamentary procedure.

Professor Svetlana Cenić also considers that the time has come to analyze who are the people who are in charge of our values and valuables.


Ismet Bajramović: Selling companies in exchange for certificates was a clear case of legal plunder!

The president of the Union of Independent Unions of Bosnia and Herzegovina, Ismet Bajramović, says that privatization was mostly done badly and at the expense of the workers and the state.

“The worst form of privatization in terms of the value that the state was supposed to obtain was the public sale of shares.  Certificates were being bought and sold on the black market for 4% of their face value, while their purchase value in the sale of state properties was 100% of the face value. We could say that this is a clear case of fraud, and yet completely legal” says Bajramović.

Without any real assessment of capital that would come to be up for grabs after the war, the citizens were issued 16 million KM in certificates [of ownership]. Afterwards, black market buyers bought them at usury prices, only to use them in privatization funds for purchase of state properties.

Bajramović says that there is an urgent need to do an “inventory of privatization” in the Federation of Bosnia and Herzegovina. He sees the main culprits in the legislative and executive branches of government from the time when the laws for privatization were passed and privatization began.

“It is well known how much political choices were important at that time. There were even better laws and privatization methods proposed than the ones accepted at the time. First of all, we would have to assess the past origins of capital in BH because the workers gave funds from their own salaries to finance the means of production; they repaid the development loans for the company, and that was, in Marković’s words, the basis of division of shares among them. But politicians at the time were afraid of some new form of “self-management,” and they were helped by various international lobbies and their interests. Unfortunately, despite good models of privatization that should have been followed, like, for example, in Slovenia, politicians at the time chose the worst possible option, like the Russian scenario. The Unions of Bosnia and Herzegovina lost their financial resources during the war, but had we had the resources, we would have sued the government for the theft and scramble for workers property at the time,” says Bajramović.


PROVEN THAT IT COULD HAVE BEEN BETTER: ACCOUNT presents ten examples of privatizations that could be called successful; production has continued, jobs were saved.

Cement Plant Kakanj is the leading domestic producer of cement. Since 2000, as a pilot program of the large privatization, Heidelberg Cement Group becomes the majority shareholder, having bought the Cement Plant for 55 million KM. Heidelbert CG is a market leader in production of construction materials globally. In all of their subsidiaries, they employ 52,000 workers. They were obligated to invest 95.5 million KM by end of 2010, but they have already invested in the Cement plant and related production more than 170 million KM!

MANN+HUMMEL.BA in Tešanj employs 488 workers. The company was formed in 2005, following the privatization of Tešanj’s “Unico Filter.” They produce filters and components for auto industry. The German MANN+HUMMEL is the leading producer of filters in the world and has invested 24 million KM into the Tešanj plant.

Bimal in Brčko is the only producer of cooking oil in Bosnia and Herzegovina. The Austrian production-distribution holding STUDEN&CO Holding and VFI Industry joined to form SEED Olil Holdings in Vienna in 2002, and they privatized the Brčko Bimal that same year. Seed Olil Holdings took over 97% of Bimal shares, and to date, they have invested over 60 million KM. The company employs 214 workers.

Construction Company Put is a member of the Croatian Nex Group, the business network of some 30 companies in Croatia, Serbia, and Bosnia and Herzegovina.

Developed out of Našicement company, Nex Group purchased 49.95% of GP Put shares for 3.45 million KM on the Sarajevo stock exchange in 2002. Today, GP Put employs 870 workers and they are conducting business at numerous projects in Bosnia and the world.

Lime Mine Vijenac in Lukavac is one of the most successful privatizations. In 2010, Cement Plant Lukavac and Koncern Plant Sisecam bought the mine for 8 million KM. They have invested about 14 million KM into production and some 220 workers have remained employed.

According to the official reports of the Agency for Privatization FBH, the Long-Distance Power Transmission Tower Plant DD Sarajevo has been successful privatized in 2006. The plant was bought by the Consortium (40 members of the consortium are workers and management of the company) for 0.5 million KM. The nominal value of the state capital of 67% shares came to 7.1 million KM, but the buyer got the company for the said price in return for investing 1.5 million KM into the company and keeping all employees. Both obligations had been met by 2009.

Even though Krivaja is usually mentioned in a negative light, the IT-technological component “Metal Industry” has been successfully sold, according to the benchmarks of the Agency for Privatization, and following the execution of the contracts.

Seting and Sliško Consortium from Žepče and Matrix from Zavidovići bought the company for 950,000 KM in 2007, having promised to employ 71 workers and to invest 900,000 KM. According to APF reports, all contractual obligations have been met by 2009.

Prior to the war, Natron had been the largest producer of natron paper and packaging in the Balkans and one of the leading producers in Europe. The Turkish company Kastamonu Entegre is the member of the Hayat group. They bought 70% of the shares of Natron in Maglaj in 2005, and have invested more than 200 million KM into production. They employ 900 workers.

Agency for Privatization FBH sold 67% of HEPOK Mostar shares, valued at 2.7 million KM, to the Partner Group Amko Komerc from Sarajevo and the Serbian company Vino Župa from Aleksandrovac. The buyers are obligated to invest 25 million KM.

MIRA, a Prijedor copmany, is the leading candy producer in Bosnia and Herzegovina, even though they sell only 18% of their production on the domestic market. Since 2001, they have been operating as a shareholders company, while Kraš d.d. Zagreb became the majority owner in 2003 with 75.67% of shares capital.

ACCOUNT POLL: Corruption in Privatization Processes is Most Significant

What do they say about the privatization process, legislation, and recommendations for more efficient privatization at the Agency for Privatization of the Federation of Bosnia and Herzegovina (APF), Investment Development Bank (IRB) of Republic of Srpska (IRB had taken over jurisdiction over privatization from the Direction for Privatization RS), in the Office of Privatization in the Brčko District Government, cantonal agencies for privatization, and managers of 35 privatized and 35 non-privatized companies?

One hundred forty one companies and agencies participated in the research providing recommendations to improve the process, or rather, to mark the shortcomings. The general problem indicated is the inadequate supervision of contracts, insufficient preparation for the sale of companies, and insufficient mechanism for protection of workers.

          Of those polled, 75% believe that corruption in the privatization processes is the most influential element.

          Within the Federation, only four privatization cases have been given a negative review by the appropriate agencies. In Republic of Srpska, the process is considered a success, while the Brčko District Office gave a negative review to its privatization.

          Of those polled who operate in non-privatized companies, 75% believe that privatization would not improve their companies’ operations.

          Of those polled who operate in privatized companies, key disruptions in operations following privatizations are: corruption in government offices, shareholders’ lack of interest in the success of the company, the manner in which real estate property shares were registered, complex bureaucratic apparatus, politicians not doing their job, complex political situation in the country, and high taxes.

In Brčko, none of the company managers wanted to participate in the poll.

          Of those polled who operate in privatized companies, 79.3% say that the legislation regarding privatization process to date is bad.

          Sources of bad privatization were identified to be: [ir]responsibility of agencies, badly written contracts, inadequate supervision of contract obligations, irresponsible individuals.

          According to the sources from this poll, not one agency responsible for privatization processes is in possession of the number of over-registered or closed privatized companies.

          Key recommendations by the agencies responsible for privatizations are: changing the business law, changing the ordinance regarding control of contract obligations.

          Both those from privatized and non-privatized companies generally consider that investment and employment obligations by the buyer need to be better enforced.


Published February 10, 2014 at

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