Privatization Halted

UNMIK chief Holkeri pauses Kosovo’s privatization process amid contradictory claims by Pristina and Belgrade. 13 October 2003 BELGRADE, Serbia and Montenegro--The United Nations mission in Kosovo (UNMIK) paused the process of privatization in Kosovo last week, after a series of complaints by Belgrade regarding unclear legal frameworks governing the process.

On 7 October, UNMIK announced it had "cancelled the third wave of tenders that started on 10 September due to the need for legal clarification," but said the process would continue as soon as these questions are resolved.

The move angered Kosovo Prime Minister Bajram Rexhepi, who immediately wrote in a protest letter to UNMIK that his government would “not accept the stopping of the privatization process, not even for a day."

In Belgrade, Serbian authorities welcomed the UN decision as a "normal" and "expected" outcome of their continuous protests.

The government said in a statement that the UNMIK decision "successfully ended the illegal privatization in Kosovo, which is a direct consequence of all well-argued pressures that the government of Serbia had sent in the last two years to the UN, the World Bank and the International Monetary Fund (IMF).”

Serbian Privatization Minister Aleksandar Vlahovic told Tanjug news agency that the UN move was "not at all surprising" given that the privatization model "did not reflect basic economic rules."

"We have never been against privatization in Kosovo, but we have called for the respect of elementary economic rules," Vlahovic said.

Vlahovic argued that the move made by the administration of new UNMIK chief Harri Holkeri meant the "end of the stubborn policy of his predecessor" Michael Steiner, who started the process in 2002 despite protests and warnings from Belgrade.

The Serbian authorities objected to the privatization process initiated by Steiner, arguing that it completely left out creditors and owners of firms in Kosovo, who according to them were mostly major companies from Serbia proper.

Furthermore, Belgrade argued that large portions of land in Kosovo were nationalized by communists after World War II, and--in an expected process of denationalization--had to be returned to their primary owners, who are in many cases Serbs. The Serbian Orthodox Church (SPC) used to own large pieces of land in western Kosovo, or the Metohija region.

Finally, Belgrade argued it was a nonsense to have UNMIK collecting money from the privatization of Kosovo companies, while Serbian authorities have to repay the debts of those companies to the IMF.

Nenad Vasic, a Belgrade-based expert on Kosovo's economy, said that out of $1.8 billion of Belgrade debt to the World Bank, some $450 million were coming from credits given to Kosovo firms. Thus, Belgrade should do its best "to transfer the debt of Kosovo companies to UNMIK," he argues.

Vasic said companies from Serbia proper claim property in 1,348 Kosovo firms, whether as partial or full owners. From 1956 to 1992, companies and tax-payers from Serbia proper invested some $17.5 billion in Kosovo, the Belgrade daily Glas javnosti recently reported.

The UNMIK privatization list contains 415 public companies, currently employing some 30,000 people.

Up to now, the Kosovo Trust Agency (KTA), in charge of privatization, has put tenders on some 44 companies. Only two have been sold to date, Energoinvest and Kosovo Montaza.

Goran Bogdanovic, the Serb member of the KTA, told the daily Vecernje novosti on 13 October that privatization in Kosovo was stopped at the last moment.

He said the Albanian side "tried to sell 30 companies per month by breaking rules," and completely left out representatives of Serb unions from talks.

Milena Vasic, head of the economic sector of the Belgrade Coordination Center for Kosovo, also complained of ethnic discrimination in the privatization process.

"It is symptomatic that when lists of employees in Energoinvest and Kosovo Montaza appeared on tender, no Serb names showed up,” Vasic told Vecernje novosti.

“This is a discrimination against displaced Serbs."

Vlahovic said the fact that only two companies have sold under the current privatization process was "good news" and meant that "everything done in this sector should now be revised." He said his ministry would closely work with the UN and international financial institutions on the matter.

The Belgrade weekly Ekonomist said on 13 October that the lack of rule of law and security in Kosovo made foreign investors avoid the province.

According to Ekonomist, unemployment in Kosovo is 49 percent, but "what really worries is that unemployment among the youth aged 16 to 24 is 71.6 percent."

The weekly said that, according to latest polls, some 66 percent of Albanians and 84.8 percent of Serbs in Kosovo were unsatisfied with the economic situation in the province, while only 10.3 percent of Albanians and 2.3 percent of Serbs said the economy was well off.

--by Sasha Grubanovic