NewsMontenegro now has more than 50 strategically important state-owned companies

Montenegro now has more than 50 strategically important state-owned companies

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Contrary to the economic transition, during the mandate of the Technical Government of Montenegro, Dritan Abazović, once state-owned and then private companies, once again become state-owned, or under state administration.

According to one, Montenegro is making a departure from the market economy, and according to others, it is defending what can be defended. The list of companies that have experienced such a fate is expanding in the meantime.

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Nikšić Ironworks is again in the hands of the state
On February 14, the State Electricity Company of Montenegro paid the Turkish company Tosijali Holding the last tranche of money for the purchase of the Nikšić Railway Company. Thus, after a series of privatizations in the last 20 years, the state returned ownership of the factory.

In August, the government gave the “green light” to the state energy company to buy Željezara, and the “heavy” 20 million euro sales contract was signed at the end of December.

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Port of Bar: State increased ownership to over 75 percent
Although the state already had majority ownership in the Port of Bar last December, the government bought the shares of minority shareholders on the stock market for 12 million euros. It thus became the owner of more than three-quarters of the Port in order to have the necessary majority to decide on the restructuring of the Port of Bar.

The government also announced the purchase of the second part of the port, Port of Adria, which is being negotiated with the current owner, the Turkish “Global Ports Holding”. In question is the former state takeover of Container Terminals Luka, 62 percent of whose shares were sold to a Turkish company through privatization in 2013, for eight million euros. The company’s debts are more than 35 million euros.

Meljina Hospital
By decision of the Government, in December 2022, the state took over the “Meljine” Herzegovinian hospital, which for the past 12 years was owned by the “Atlas Group”, the fugitive businessman Duško Knežević. This is how this institution became part of public health.

Institute in Igalo
The government has announced several times that it intends to save the “Simo Milošević” Institute in Igalo, which is threatened with bankruptcy. That health center is majority-owned by the state, but the government, due to the previously announced and canceled privatization, is obliged to renegotiate the sale of 56 percent of the shares. The sale is opposed by the trade union and the management of the Institute.
In several cases, the Government has taken over the management of companies, until, as they stated, tenders for the award of concessions, stating that the state has been damaged by the previous arrangements in all these cases for millions of dollars.

Maritime traffic
On February 9, the government ended the two-decade monopoly of the private company “Pomorski sabrojka”, which, based on the conclusion of the DPS Government from 2019, managed the Kamerani Lepetane ferry line, which connects the two shores of the Boka Kotor Bay, without a concession contract.

The government tasked the state company Morsko dobro, which manages the coast, to temporarily take over the management of the ferry line within 45 days until the selection of a concessionaire.

Port of Budva
The government returned the Port of Budva to the local authority for use until tenders are announced and concessionaires for the management of the port are selected. Until February 9, the Port of Budva was managed by the American Stratex Group, which announced that it would seek court protection.

Establishment of a state enterprise for forests
After they assessed that the state has been damaged tens of millions of euros by the current policy of issuing concessions for forest cutting, the government announced the formation of a state company that would manage the forests of Montenegro. They expect it to be realized by the end of the year.

Establishment of a state telecommunications operator?
In February, the government commissioned a working group to examine the possibility of establishing a state telecommunications operator. The government has two options, to issue telecommunication resources to current operators for 10-20 years or to create its own company.

Experts: The state is a bad manager
For Marko Sošić from the Institute, the alternative of taking over companies under state administration is rather multiplying problems than solving them. The Government’s decisions, he says, were rushed and made without prior analysis. This does not mean that they will necessarily bring money to the state coffers.
“Increasing state ownership does not necessarily mean prosperity either for the state or for these companies. Not for companies, because the state has proven countless times so far to be a bad manager, which does not make them make a profit. And for the state, it does not necessarily mean that it will reap profits.” , says Sošić for RSE.

And economic analyst Mirza Mulešković for RSE points out that the decisions were made quickly, that the public is not familiar with the calculations and business plans of those companies, citing the last case of the ferry line, where the government terminated the contract with a private company and transferred management to the state:

“The contract was terminated, and on the other hand, we did not provide a quality solution and we are still looking for a bidder.”

Namely, the state-owned Maritime Administration terminated the contract with Maritime Transport, which maintained a very frequent line connecting the two sides of the Bay of Kotor with six ferries in the summer, providing only one old ferry with minimal capacity, which brought that part of the coast to the brink of traffic collapse in recent days. .
“The experience we have from Montenegro has shown that it is the companies that are privately owned that function much better than those that are owned by the state,” says Mulešković.

Sošić states that the Institute is particularly concerned about the way in which the state currently manages the companies it owns and in which the management system has not been reformed:

“The state generally does not know what is happening there and does not have the ability to influence the decisions that are made there. And with that, this expansion may, at first glance, sound like good news, but basically if you scratch beneath the surface, you will see that they are new opportunities for politicization, party recruitment and misuse of public resources.”

Mulešković points to the same problem, stressing that it is up to the state to provide the conditions for the private sector to work and raise the level of economic activity in Montenegro:

“That these companies are not used for additional employment, but that they are viewed, as from the point of view of the private sector, to be the backbone of the development of every country.”

Soškić believes that the state does not have a sustainable strategy for managing public enterprises:

“So increasing state ownership, by increasing the number of state enterprises, which was the main decision of this Government and the previous one, is certainly not good news.”

Why does the Minister of Finance state that earlier mistakes are being corrected?
On the other hand, Minister of Finance Aleksandar Damjanović believes that the Government is working in the best interest of Montenegro with such decisions:

“While respecting all opinions, it is absolutely incorrect to state that we are supporting the economy. Therefore, state property is taken into account here, and unlike previous governments that “gave away” property and state enterprises, this government is doing the opposite, and in the interest state and citizens.

He points out that the decision to buy Željezara is justified because of the valuable property of the factory, which, he says, was alienated by a bad contract of the former government.

He also considers the acquisition of shares, as in the case of Port of Bar, where he was the majority owner, to be in the state’s interest, in order to create the conditions for making strategic decisions about the fate of the company.

In the case of taking over the ferry, Damjanović says that the concessionaire did not comply with the contract, which is why it was terminated. He also explains that the organization of this work is a sovereign decision of the Government.

“I don’t see that it is an activity that requires specific knowledge and that would be given to a concession because the government cannot do that work. I think that it can be solved very easily and that the income that went into the pocket of the concessionaire should go to the state .”

Damjanović says that the Government’s thoughts on the eventual establishment of a state operator for telecommunications are aimed at correcting the wrong moves of previous governments that handed over “lucrative jobs” to private companies:

“At one point in Montenegro, we had three state companies, the states: Serbia, Norway and Germany. State companies of other countries bought our state company and privatized it – which was a strategically wrong decision.”
The Government’s thinking about possibly forming a fourth operator is against the background of the way it is regulated in the countries of the European Union, concluded Damjanović.

Why do the unions believe that it is better with the state?
The President of the Tourism and Hospitality Trade Union, Musa Milić, points out that the experience of privatization has taught them that it is much better for the owner to have the state than a private employer.

“Privatization in tourism, and it also applies to other branches of industry, has shown that a lot of employees have lost their jobs, social programs, the right to severance pay, or they are left to the labor market, to look for work illegally, or they cannot exercise their right to a pension. “

He points out that It is incomprehensible to the trade union that an investor who bought a company from the state during privatization could bring that company to bankruptcy.
And Ivan Vujović, president of the Nikšić Ironworks Union, which was recently bought by the state, says that in their case the private owner did not prove to be a good employer.

“Since 2002, the steel plant has had five privatizations, each one worse than the other and each one unsuccessful. As for the workers, we believe that it is better for the state-owned company to be our employer.”

As an example, he cites the last one, an employer from Turkey, which, Vujović says, “destroyed Željezara” and planned to leave 229 workers without work.

“We worked 15-16 hours a day, we didn’t have a collective agreement, the employer didn’t respect workers’ rights. Before the first privatization, Željezara had almost 5,000 workers. Maybe the state didn’t bring in the right investors,” Vujović told RFE/RL.

As of February 16, says Vujović, the factory is again state-owned and he expects the workers to return to work by September 1.

From the Brussels office of the European Commission, RSE did not receive a comment on the trend of returning property under the auspices of the state of Montenegro and resource management. Montenegro has more than 50 strategically important state-owned companies.

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