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The Government of the Republic of Serbia

In the service of citizens

18 large enterprises to be offered at tenders

Belgrade, 21 July 2005

Serbian Minister of Economy Predrag Bubalo today spoke to the daily Blic about the results of privatisation, state assistance to large industrial enterprises, RTB from Bor and Zastava from Kragujevac, and the announced acceleration of the privatisation process in Serbia. The Serbian government’s official website brings excerpts from this interview.

Predrag Bubalo

Possibility of additional incentives or other assistance to large industrial enterprises:

Large enterprises need assistance on a daily basis in order to survive because piled up old debts have virtually immobilised them. The state is trying to provide maximum assistance to these companies – because they have a market value only if they are operational. If they have no money to procure energy or raw materials, or if their employees are on strike, they become heaps of scrap iron. The status of the so-called large systems had not been decently addressed until last September, when we privatised some of them through restructuring. I believe, however, that recently adopted changes to the law will allow us to tackle this work more seriously. We will call tenders to privatise another 18 large enterprises.

How many jobs will be lost after their privatisation:

I do not expect any dramatic layoffs because a majority of these enterprises applied their social welfare programmes already in 2002 and 2003. I am not trying to say that everything was resolved perfectly but the truth is that most of the problems were solved in an earlier period.

RTB Bor’s and Zastava’s prospects of finding strategic partners:

RTB will be tested in the market by the end of the year. According to the Action Plan, a tender to sell the company should be called in December. The procedure to choose a privatisation is under way right now. All the company’s non-core businesses are being prepared for sell offs so that RTB Bor can focus on its core activity – copper mining and processing. Also, privatisations of 26 Zastava’s spin-offs are under way, including truck maker Zastava Kamioni. Some of them have already been sold, such as foundry Livnica in Topola and toolmaker Alatnica in Kragujevac. We do not have an interested buyer at the moment for automobile unit Zastava Automobili, but talks are under way on assembling Italian Fiat’s cars in the Kragujevac plant.

The fate of Zastava depends on repaying a €11.5 million debt to Fiat by the end of the year:

This debt must be repaid or else all plans will be ruined. If the debt of €11.5 million is not repaid by the end of the year, it will grow to €42 million and it will be impossible to repay. The money will be sought through the sale of Zastava’s assets.

Speeding up the privatisation:

At present, 14 tenders are under way, eight of which have been called this year. During the first six months of 2005, we have offered 208 companies at auctions, and 119 have been sold off under an agreement with the IMF, which envisages the privatisation of 300 firms. At the stock exchange, the Share Fund has offered shares of 155 companies, selling stock in 120 of them. According to the agreement with the IMF, we are obliged to offer 20 companies for sale every month. I believe that it is in our best interest to end the agony of firms with socially-owned equity. It is realistic to expect that the privatisation process will experience a fresh acceleration although there are still some obstacles to that.

About the effects of the privatisation:

In this year’s privatisations, auction sales alone have pushed revenues €60 million above the expectations, and we have already reached the level of full 2004 with the sales of firms in the real sector. And I am convinced that privatised companies will fuel economic growth, because we need GDP to grow at least seven percent per year in the next two years. After that period, growth can slow down and stabilise at just above five percent.