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Monday, 7 May, 2001, 15:04 GMT 16:04 UK
Serbia plans state sell-offs
Bomb-damaged infrastructure in Serbia
Cement firms will have a key role in reconstruction efforts
Serbia expects to raise about 330m Deutschmarks ($150.3m; 104.4m) by selling off the country's most valuable state-owned assets, the government has said.

"Within weeks, five or six companies coming from different sectors will be offered for sale via tenders. Total expected privatisation receipts in 2001 are around 330m marks," Privatisation Minister Aleksandar Vlahovic said.

JAT aircraft
The well-regarded national airline is also on the auction block
The government wants to use the cash raised to pay-off the companies' foreign debts and compensate the pre-1945 owners.

Trade unions have condemned the new privatisation legislation, which has been redrafted to favour foreign investors by cutting share offers to employees.

For sale

First on the auction block will be three Serbian cement plants - part of an industry set to have a key role in rebuilding of infrastructure destroyed in bombing by Nato forces in 1999.

One of the plants, the Beocin cement factory was promised to French construction group Lafarge last September and negotiations are said to be in the "final phase".

Cement plants in Kosjeric and Novi Popovac will also be tendered.

Oil refinery burns in Novi Sad
Nato bombing destroyed much of Serbia's infrastructure
But the key sale will be of Zastava, one of Eastern Europe's largest arms manufacturers and maker of the Yugo car, and the national airline JAT which has a good reputation, modern planes and well-trained pilots.

Also under review is the sale of Serbian Telecom to Telecom Italia in 1997 for $1bn, which some said was too low a price.

Privatisation law

The new Serbian government, which took over in January after defeating Slobodan Milosevic's leftist bloc in elections, has redrafted the privatisation law.

Under the new law, effective from 1 June, 70% of a privatised company will be sold to Serbian and foreign investors, with just 15% for the workers and 15% for citizens.

This abolishes the 1997 privisation law introduced under the Milosevic government which allocated 60% of shares to workers.

The government hopes this will encourage foreign investors, by allowing them to take majority stakes and overall control of companies.

Yugoslavia became one of the most successful communist countries with a system of "social ownership" under which equity was split between the workers and the state.

Most companies are still controlled by employees and the management committees.

The new law will try to tempt employees to opt for privatisation, with greater equity stakes in the company being offered the sooner the company is sold.

The 4,500 companies are expected to be sold through tenders or auctions.

Serbian economy

With gross domestic product (GDP) of barely $8bn and foreign debt of $12.2bn, Serbia is struggling to finance debt repayments. The budget gap in 2001 is expected to be about $300m.

The government has presented the restructuring plans to donor countries that it hopes will lend it money. The World Bank is expected to re-admit Yugoslavia to its programmes on Tuesday, paving the way for $1.2bn in new loans.

But with more than 27% of the workforce unemployed and large redundancies expected as a result of privatisation, government coffers will be further strained.

The Confederation of Trade Unions of Serbia (CTUS) has condemned the privatisation plans as the final act of disenfranchising Serbia's workers after Nato bombing destroyed the manufacturing base.

According to Serbian government figures, 372 industrial facilities were destroyed by Nato leaving 500,000 people jobless.

The CTUS claims Nato attacks only targetted state-owned factories.

Foreign investors

Last year, the whole of south east Europe, which covers most of the Balkans, attracted only $3.2bn of foreign investment but this is expected to increase now that economic sanctions have been lifted from Yugoslavia.

Serbia is at the crossroads of the region and has a well educated population of 10 million who, after years of sanctions and war, are eager for consumer goods.

Companies that have reported interest in investing include US engineering concern Foster Wheeler, telecoms groups Ericsson of Sweden and OTE of Greece, and Russian oil company Lukoil.

One UK bank has already profited from the privatisation programme. NatWest acted as the intermediary for the privatisation of Serbian Telecom, receiving a fee of 10m for its work.

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See also:

17 Feb 01 | Business
Telecom Italia to probe Serbian deal
06 Oct 00 | Business
The cost of rebuilding Yugoslavia
20 Dec 00 | Europe
Serbia's long road to recovery
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