Privatization in “Private” Serbia

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Author: Aleksandar Plavšin, Ph.D. student at the European Center for Peace and Development
University for Peace established by the United Nations
aleksandarftn@gmail.com
062/ 23 – 83 – 06

The process of transformation of state and public property into private ownership is a key process of economic transition in post-communist societies. The privatization process is a very complex process because while it stimulates one interest group, automatically discourages other stakeholders. In that way, it includes not only economic but also the social aspect of the state. The main goal of any privatization is that it is economically efficient and socially desirable. The main advantage of privatization is that private ownership encourages the rational management of the property. In other words, the loss can not be socialized, which was one of the most common practices of Serbian state and public enterprises. If the concept of privatization is considered in a broader sense it could be said that it is not a goal by itself but a mean to reach the goals such are increasing productivity, effectiveness, efficiency and transparency.

Such policy creates an environment for new investments, which should further boost employment, production, exports and competitiveness as key growth indicators of the country. About the importance of observation of privatization in a broader context speaks Priority areas 8 (eight) of the EU Strategy for the Danube Region. The basic idea of ​​mentioned area is to support the strengthening of the competitiveness of enterprises, including cluster development. Considering previously mentioned, it is clear that privatization which is carried out on the “properly” is important not only for inner development of country, but also for regional cooperation. Serbia must work on the raise of its attractiveness with the aim to become “attractive” partner for cooperation and build capacity to implement regional strategies.

Milton Friedman is on a lecture, which he delivered at the time of the start of transition (1991), expressed his attitude that the best programme for Eastern Europe may be summarized in just three words: privatization, privatization and privatization.1

The basic logic of productive privatization2 is based on the concept that each company should be sold under the condition that the resulting resources are invested in economic activity which brings greater current and future profits in comparison with the profit which company brings before it is sold. Effective methodology of privatization process includes the following phases:

  1. What is the minimum price at which the company may be sold?
  2. How and when the received resources will be spent?
  3. Whether and when will such invested resources of all Serbian citizens, bring more profit than it now brings?
  4. Who, when and how will all that publicly scrutinize and publish the results?

If Serbia were consistent with these “steps” of privatization, economic “picture” of the state would be much “nicer”. At the same time the citizens of Serbia would feel like active participants of transparent privatization, not as dumb observers of various manipulations at their expenses.

Period in Serbia before the transition process (war, crisis, sanctions) was not in favour of proves of privatization. All mentioned events have lowered the rating of Serbia for potential investors. This reduced the “profitability” of the state and society that gained during the process of privatization. Such political climate at the start cancelled comparative advantage of Serbia considering other countries in transition.

On the necessity of privatization process speaks the following illustration:

At the end of 1994, the state sector disposed with 26.1%, social with 34.5%, mixed 27.9%, cooperative with 2%, and private with only 9.5% of total economic activity. At the same time, 200,000 private companies (90% of all companies), possessing only 9.5% of assets, created almost a third (32.2%) of the gross domestic product.3

The effects of privatization are very negative. During the last decade (2000-2010) nearly half million people lost their jobs. According to the data of Agency for privatization, the privatized companies have reduced the number of employees by 60%, while the non-privatized laid off 54% of the workforce. This data suggests that privatization by itself is not the cause of so much unemployment. Technological obsolescence, incompetent management and uncompetitive products have led to a “poor” economy in Serbia. However, this does not justify the claim that the privatization was carried out in an unprofessional manner using the method of “improvisation”. A quarter of contracts of sale from the privatization process was formally cancelled and a number of not-so-successful company privatization is much higher. Thus, the high unemployment rate put into question the viability of the overall fiscal policy of the state. The number of pensioners in relation to the number of employees is 1:1,03.4 The mentioned data confirms difficult sustainability of fiscal system. Taking into account the fact that human lifespan is growing globally, on intellectuals is a challenge of finding solutions to this problem.

If the level of satisfaction of all persons, who have in some way been involved in the privatization process, is analysed, it can be concluded that the workers are very unsatisfied, believing that the process of privatization enabled profit just to state officials and the new owners of capitals. On the other hand the new capital owners often complain that they were manipulated by political officials, arguing that with the privatization process they dit not get what they bought, because the information in the prospectus does not correspond to the real situation.

Summarizing the process of transition in Serbia, it seems that through the period of transition passed a “private company”, not a sovereign state. Insight into the process of privatization and benefit from the privatization process had only politicians, “large shareholders” and other “stakeholders of Serbia company”. Most of “regular” workers, as if they never have worked and invested in these state-owned enterprises, have become unusable resources without a long-term and sustainable plan for their employment after privatization process. An environment in which the citizens awareness that each state-owned enterprises is partially their is annulled, has led to their complete passivity. Through the mentioned comparison it is possible to conclude that the biggest profiteers of privatization are: those who had access to “fresh” information, those who had the money and knew people at the source of information and foreign companies that have taken advantage of political and economic situation, and at relatively low prices attain enterprises and attractive locations.


  1. Stojanović, B. (2005) Tranzicija u Srbiji – privredno lutanje. Beograd, Institut za evropske studije, p. 36 

  2. Jovanović, M. (2011) Šta bi seljak rekao kao savetnik za prodaju Telekoma? Nova srpska politička misao [Internet], Februar 2. http://www.nspm.rs/ekonomska-politika/sta-bi-rekao-seljak-kao-savetnik-za-prodaju-telekoma-q.html Accesed on 10 April 2012 

  3. Institute of Economics 1996, 62 indicated by Stojiljković, Z. (2011) Srbija u lavirintima tranzicije – ogledi iz političke sociologije savremenog društva. Beograd, Službeni glasnik, p. 333 

  4. Veljović, S. (2012) U Srbiji više ljudi prima penziju nego platu. Blic online [Internet], Maj 29, http://www.blic.rs/Vesti/Ekonomija/325761/U-Srbiji-vise-ljudi-prima-penziju-nego-platu Accessed on 30 May 2012 

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