The view on Serbia state owned companies and gov subsidies, pillars of national economy against the reality and EU state subs rules

23. April 2013. / Mining

Losses of public companies in the last ten years cost taxpayers around 4,2 billion EUR- Employers’ Union claims.

Are public companies that are 100% owned by state our family treasure, potential locomotives of our economy development, factor of stability and independence of the country- or meeting place of wastefulness? Expert opinions are different but they agree about one thing- these companies are inefficient and they cost a lot to taxpayers.

Serbian Employers’ Union and other industrial associations warn that private sector cannot cover losses of public companies anymore. Their minus has cost 4,2 billion EUR to taxpayers in the last 20 years.

-If development of successful private societies was credited with this money within Developmental Bank that Serbia still doesn’t have, Serbia would make a profit of 12,6 billion EUR in the next ten years- it is said in Employers’ Union.

According to their calculation, 4,2 billion EUR were invested in development of private firms with interest of 1% on condition that company employs one more redundant from state company on every 20.000 EUR of approved credit, Serbian industry would be more strong, state incomes from taxes and contributions would be increased and deficits for indebtedness of future generations would be decreased.

There are around 1.300 companies under state control after 13 years of transition in Serbia- Milojko Arsic, Professor from Belgrade’s Economy University indicates. His high participation in gross domestic products, social wealth and employment negatively influence economy efficiency, it stimulates financial indiscipline and corruption. Losses of state, social and public companies in 2010 amounted around billion EUR i.e. around 3,5% of GDP. They employ 280.000 people in non-privatized companies that are in so called reconstruction without an end, the engage around 5 billion EUR of social wealth.

Arsic stresses that their results are extremely bad because they make only 1,5% of GDP, and annual losses are around 400 million EUR. Next to that, their unresolved obligations toward state and public companies amount around 1,5 billion EUR. The company in reconstruction status should be resolved by mid-2014, as it is stated in fiscal strategy of Finance Ministry. Strategic partner supposes to be found by this deadline or they will go bankrupt.

It was written in the last year’s proposal of Fiscal consolidation written by Fiscal Council that companies under state control get significant budget subsidies and so contribute the increase of public consumption and deficit of state’s cash register.

Was anything done in the meantime?

-It wasn’t done much- Milojko Arsic says- Their way of the leadership wasn’t improved. There are no changes in their services prices and there is no business without real prices. The reason for it is that many measures are unpopular in conditions of political uncertainty. For example, the electricity price should be increased and workers’ surplus should be fired and elections are staying on hold.

Political elites are not ready to change their relation toward public companies- it was said on the yesterday’s meeting “Uvodjenje korporativnog upravljanja u javna preduzeca” (Introduction of corporative leadership in public companies) in organization of Corporative Directors of Serbia, National Alliance for Local Economy Development (NALED) and University of Economy, Finance and Administration (FEFA).

They are mining industry and market

National help to companies in Serbia amounts around 3% of gross domestic product which is 6 times more than in EU and such a high amount of subsidies is undermining the industry and market it is said on presentation “Drzavna pomoc EU u Srbiji” (National help of EU in Serbia), Tanjug reports. National help in Serbia is mostly directed to certain sectors or companies like “Zeleznica”, “Jat”, metal sector- Director Miroslav Prokopijevic said.

Typical example is “Fiat”- he stated and stressed that EU national help or subsidy is almost completely forbidden to some firms and sectors.

EU is national help in structure 80% horizontal, it can be used by several industry branches and it is moving toward activities that help development, research, employment and protection of environment- he explained. National help in Serbia is only 20% horizontal and it is still related to activities that have losses and is used for their covering or hiding.

Professor Ljubomir Madzar estimated that state has very get into direct communication with certain companies and it mustn’t do that because it takes from one to give another and it is not a real function of a state.

Madzar criticized issuing subsidies for opening of new work places explaining that if some work place is profitable, employer will open it without any special stimulation. “There is a row of activities that are politically payable, but economically damaging”, he pointed and reminded that ignition of one blast furnace i.e. launching production in “Zelezara Smederevo” won’t cover expenses so the assets from the budget will be asked.


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