Monopolies in B&H

Public enterprises money in the hands of SDA and HDZ.

Drazen SIMIC

THU, 27 JAN 2000

SARAJEVO, January 20, 2000 - The power that current B&H political elites have over the destiny of the country which, rule together with its subjects, they rule over is not founded on the instruments of the state, laws and political decision-making capabilities, but on the control over monetary flow and especially over the parallel "grey-black" funds.

No one can say with certainty how much money is really under the direct or indirect control of power-holders from the national ruling parties, where that money comes from and where it finally ends.

During four years of war, millions went in and, at the same time, out of B&H. Millions of exiles and fleeing citizens were going out of the country, while millions of dollars, marks and other hard currencies kept flowing into the country. Since "higher national interests" were in question, neither the financiers, and even less, the domestic public asked anything about the use of that money nor cared much for receipts.

Even four years after the war, accounts have not yet been settled and most probably will never be. Occasionally, individual pieces of information reach the public giving it some idea about the amounts that changed hands in B&H during the war.

It so happened that in his last year's interview published by the Zagreb "Nacional", Alija Izetbegovic, Member of the B&H Presidency and the sacrosanct Bosniac leader, stated that "the defence of B&H cost some DEM 10 billion". This in other words means that so much money, arms, food and other equipment arrived from abroad, mostly Islamic countries. How much was effectively spent no one knows, at least not officially. Bearing in mind the mentioned sums, even a "symbolic provision" of one to two percent for "current expenditures" to those who were in charge of that money, amounted to several hundreds millions of German marks.

HVO (Croatian Defence Council) also received generous financial injection from its Zagreb mentors so that it is estimated that during the war, together with the funds received by the Army of the Republic of Bosnia and Herzegovina, that sum reached about three million German marks daily. Since the conflict was in full swing from May 1993 till March 1994, meaning eight months, we come up with the sum of some DEM 750 million for "additional costs". However, in this case too, no "balance sheet" was prepared nor anyone asked for it.

The situation is the same with the Army of the Republic of Srpska, whose logistic support came from Belgrade. Money, fuel, arms, ammunition, kept coming in huge quantities over the Drina river and frequently, on their way, before reaching their final destination, changed form and turned from goods into a bundle of German and American bank notes. When Biljana Plavsic assumed power in the Republic of Srpska, she unmasked only some shady dealings through which the then elite made provisions not only for themselves, but also for several generations of their descendants. Naturally, all in the interest of the "sacred Serbian land".

A common feature in all three cases is that the fate of money was decided by a narrow circle of people gathered around political leaders, who have developed a habit of disposing with other people's money as they pleased.

And habits as habits were hard to break, even when peace finally came. The end of war, arrival of NATO forces and the omnipresent international community were reasons because of which generous financial assistance from abroad started drastically to decrease. In the meantime it became necessary to financially "repay" all political followers deserving credit and buy social peace.

It is unclear why hadn't the international community brought the promised USD 5 million for the reconstruction of Bosnia and Herzegovina in a suitcase and left it to proven local financial experts, personified in the national leaders and their entourages, to freely dispose with it. On the contrary, it kept close eye on this money so that its transfer to private hands did not go quite so smoothly.

The triumvirate of national parties interpreted its victory at the 1996 elections as an unrestricted mandate to freely dispose with everything on their territory - from factories, flats, goods to people's private money - as they thought fit.

After realising that palms of power machine need to be greased with money, the B&H authorities started looking for new sources of finance. Since it is state owned, the national economy is still on its knees and mostly lacking fresh capital. Consequently, the only remaining source is the money left in private hands.

The post, especially the telephone sector, power industry, gas, cigarettes, and oil proved to be stable sources of finance for various party and para-party needs. At the same time, since there is no market competition, particularly not for PTT services and electrical power industry, citizens had no alternative but to pay the bill. The problem does not lie in the bill, but rates charged for these services, which are practically above average levels in the West, while wages and living standards are on the level of Burundi, Mongolia and similar "great economic powers" and prosperous states. Living standards of the Czech Republic, Poland and Hungary, once local synonyms for misery and poverty, today seem beyond reach.

Although the Dayton Agreement recognises Bosnia and Herzegovina as an integral state with two entities, in practice there are still three miniature states: the Republic of Srpska, as an entity, and a region of the Federation of Bosnia and Herzegovina, which is still divided into one part under Bosniac and the other under Croatian control.

When inexperienced foreigners realise for the first time that there are three phone operators in Bosnia and Herzegovina and equal number of power generating enterprises, their first reaction is: "Great, that means that there is competition"! The naively believe that, as Bosnia and Herzegovina is an integral state with single market, its citizens can enjoy the advantages of market competition in these sectors.

Unfortunately, there is no competition at all, as each of these three public enterprises hold an inviolable monopoly on its territory, while their cooperation is at the level of that existing between electric power industries of Belarus and Costa Rica. This is best illustrated by the state of the "Electric Power Industry of Bosnia&Herzegovina" and of the "Electric Power Industry of Herzeg-Bosnia". Both operate in the same entity - Federation of B&H - and are, theoretically, under jurisdiction of the same Government and Minister. However, the "Electric Power Industry of HB" supplies to the "Electric Power Industry of B&H" electricity for the "Aluminium Combine" in Mostar, which its "national" producer is unable to provide, but through a middleman - a German firm which makes a profit in the process. That means that the end-user pays more and the seller gets less than they would had they made that deal directly.

Accounting sheets of both power industries in B&H Federation register losses, but in practice huge sums of cash go through their cashier offices which places them among financially strongest enterprises.

Judging by the sums it turns over, telecommunication sector is the only competition to power industry. In that part of F B&H which is under Bosniac control, telephone system is still integral part of the public enterprise PTT B&H. Situation is somewhat different in the part controlled by the Croats, where "Telekom" is a separate enterprise. Basically, the only difference is that HDZ manages the funds of enterprises in the Croatian part of the Federation, and SDA in the Bosniac.

Since both PTT and power industry always have money and their Governing Boards and management are responsive to "requests" and "suggestions" of the ruling party leaderships, through sponsorship, donations and advertising campaigns they "spill over" funds, i.e. finance various activities, projects and institutions which are "close to the heart" of the ruling political establishment.

Although many international officials broke their backs explaining that, in view of the quality of their services, there is no reason for electricity and PTT rates to be so high, also demanding the full transparency of their business operations, the ruling top echelons are fiercely struggling to keep things as they are. Aware that, sooner or later, they will have to give up their sovereign rule over these public enterprises, they are trying to at least postpone that moment as much as possible, doing everything that is in their power to find a way of keeping control over these "laying hens" even after the inevitable privatisation and loss of power.

The announcements of international officials that within the framework of transition of B&H to market economy "these sectors will also be privatised" ring hollow to citizens resigned to their own fate. Most of them are simply unable to imagine being able to, for example, choose between two telephone companies or two electricity suppliers, not to mention full responsibility to the public for the collected funds and their use.

Apart from securing fresh money for indirect financing of their own political objectives, with their monopolistic position on the market, public enterprises represent a kind of "gold reserve" of the ruling establishment. When all other sources of finance, like foreign donations and credits, dry up selling shares in these enterprises to foreign investors, even below the price if need be, can ensure the money necessary for securing social peace and additional time in power. This is best confirmed by the experiences of the neighbouring countries - FRY and Croatia - which used this recipe.

True, in Croatia this did not save HDZ from being beaten hollow at the elections and losing power, but several years ago, in FRY, in this way Milosevic managed to buy additional time and prolong his rule.

In other words, chances for this experiment to succeed in B&H are even, so that there should be no doubts that the ruling structures will use it if they get an opportunity.

According to adopted regulations, deadline for privatisation of the PTT and Electrical Power Industry expires on February 8, next year, but as matters stand now, that deadline will be extended unless the international community gives the political leaders "a rap on the knuckles" and makes them "unload" the heavy burden of managing these public enterprises.

Globally, power generation and telecommunications are strategic sectors so that it is no wonder that a merciless fight, even between factions within ruling national parties, is waged in B&H for securing control over these two sectors. This partly explains a showdown between political leaders, especially within the SDA, which is presented as the struggle against corruption, crime or incompetence, while the true reason seems to be the struggle for winning control over funds which power sources (electricity, oil and gas), as well as PTT services yield.

By definition, a monopoly implies lack of competition. It is illusory to expect from people who consider their current political power to be their exclusive and for ever given right and who reject any competition even in their own party, to sincerely advocate the elimination of monopoly that public enterprises have on the market as long as it gives them the necessary financial power. That is why a model of a "party state", accepted in the war, in which a membership card of the ruling party is a decisive precondition for any position, and which is still in force in the entire B&H, is the greatest obstacle to the establishment of a normal state of the citizens' choosing and not according to the ruling oligarchy, as democracy and economic prosperity on the one hand, and a "party state" on the other, are mutually exclusive.

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