A great mystery has been solved. “External factors” are not to blame for the situation in public companies, including EPS and, consequently, in the energy sector. Not the IMF, nor the World Bank, the European Commission, or even NATO, although it dedicatedly destroyed Serbia’s energy infrastructure in 1999, similar to what Russia is doing now in Ukraine. We are to blame, “we brought this about ourselves”, concluded Ana Brnabic a few days ago. But “we” are not “they” – Vucic’s team. The problem is that “the last large power plant in Serbia was built 31 years ago”, so the government has been asking for the past 10 years “what the previous government did to strengthen EPS”.
And a new contribution to the topic of what the current government has done to weaken EPS came in the economic report of the World Bank for the Western Balkans, published on October 24 and presented in Belgrade on November 2.
The broader picture is well known – most public companies (as well as almost the entire public sector) are managed by party henchmen, instead of experts. To make matters worse, party personnel are distributed throughout the management structure and below it, whether they are actually coming to work or just registered on the payroll. Those who were removed in order to make room for suitable employees have mostly left the companies or are covering for their incompetent (new) superiors from the shadows.
For years, local experts, organizations such as Transparency Serbia, the Fiscal Council and international organizations such as the World Bank and the International Monetary Fund have been pointing to the tip of the iceberg – managers, often without the necessary qualifications, who were appointed as acting officials even though they often did not even meet the formal legal requirements. The European Commission also started pointing out this problem in its reports on Serbia.
Vucic and his disciples heroically endured all the pressures, Ana Brnabic said that public companies would be reformed in the “upcoming period”, because they’ve had other priorities until now, and Vucic would shout from time to time about not wanting to give up the acting managers, because if they were appointed permanently, they could wrest themselves out of (party) control.
The situation finally came to a head at the end of 2020 with the energy crisis, when it was no longer possible to hide the extent of the devastation of EPS. From the Government itself (post festum we found out that it was its opposition wing embodied in Zorana Mihajlovic) we could hear for the first time how bad it can be when incompetent people whose term has expired manage public enterprises. To date, however, no one has been held accountable for the EPS collapse. Enough time has passed since then, if not to reform the public sector or investigate who was responsible for billions of euros of damage, then at least for the government to consolidate and for Ana Brnabic to conclude that the problems in public enterprises, especially in the energy sector, are our own doing and not something imported or dropped from a NATO plane.
Her vain politicking at the level of Pink’s morning program needs no further comment. None of our readers require a primer on basic manipulation methods.
Instead, let’s go back to specific and rational warnings. This year’s economic report of the World Bank for the Western Balkans, the section dedicated to Serbia, says that “the current crisis in the domestic energy sector has once again indicated the urgency of improving the management of public enterprises.”
At the presentation of the report in Belgrade, the World Bank’s chief economist for Serbia, Lazar Sestovic, said this to members of the Government: “The budget deficit this year will be 4% of GDP, mainly due to the losses of public companies that will be taken over. In addition, most of the managers of public companies are in acting state, which doesn’t secure permanent professional management that would enable the making of long-term plans”.
In the language of numbers, the situation is as follows:
Out of 34 enterprises – public or otherwise owned by the state and managed by the Law on public enterprises for management selection – eight of them have legal representatives who were selected based on a public call.
22 companies have acting managers and 18 of them have already spent more than 12 months in that status, which is the maximum allowed time. They are, as Transparency Serbia recently called it, citizens sitting illegally in managers’ offices, whose decisions could be challenged in court, but, according to the criminal law, they bear responsibility because they actually manage some of the largest and most valuable resources of this country. Or at least they were valuable resources before the party fraternity took over. In the remaining 4 cases, the new acting managers have been in those positions for less than 12 months, but they were also preceded by acting managers, and the law does not limit the duration of the acting status for one person, but in total, from the end of the mandate of one elected manager until the election of a new one, in an open call.
In three public companies, the manager’s mandate expired a long time ago, they are not in acting status, but neither are they in the legal position of elected or appointed manager. In one state-owned company, the company’s assembly elected a manager without an open call.
Viewed individually and by name, Zoran Drobnjak has been in acting position for the longest time in Putevi Srbije – his managerial mandate expired in December 2011, after which Drobnjak was appointed acting manager, and that status was last extended nine years ago in November 2013, when the legal maximum for acting status was 6 months.
Dalibor Arbutina has been acting manager of the Nuclear Facilities of Serbia since February 2014, and his status was extended (for 6 months) in August of the same year.
On the other hand, in November 2012, before the entry into force of the new Law on Public Enterprises, Dusan Bajatovic was appointed manager without an open call, his mandate expired, but his status did not change. That’s not a record. In 2009, Violeta Stamenkovic was appointed manager of JP National Park Sar planina, and since then no information about her status can be found except that she is registered as director in the Business Register Agency. But even that is not a record in the duration or mysteriousness of managerial status. Bojan Milovanovic was appointed manager of JP National Park Kopaonik in 2008, and there is no information indicating that in the meantime he or anyone else was appointed or replaced either as manager or acting manager.
In line with the story about professional management, there is also the fact that 17 out of the 34 companies, exactly half, have not had a manager selected in an open call for a single day since 2012, when the Law on Public Enterprises was adopted, which introduced the obligation of an open call.
And we’ve had a lot of open calls. To date, 18 calls announced in 2017 have not been completed. Out of these, 13 have replaced previously tendered and unfinished calls from 2013 (7), 2015 (1) and 2016 (5) without a word of explanation. A funny case is the call for manager of JP NP Sar planina, which will soon celebrate a decade of duration – it was announced in July 2013, it was not ended, nor was there a new call announced. I hope the committee makes sure to check every five years that all the registered candidates are still alive.
There are also a couple of more recent calls that were not completed – from 2020 and 2021. The fact that in the last 32 months, the Government of Serbia was in a technical mandate for almost half of the time and, by law, could not appoint managers based on open calls, but only as acting managers, is no justification for unfinished calls from five years ago. Especially when we take into account that there were several cases – probably in the companies with no political and/or economic interest – when open calls were successfully conducted – four managers were appointed in December 2021, after tenders were announced during the summer.
In 2021, we also got a document whose name should assure us that all problems are recognized, that the state cares and that a thousand roses will soon bloom: the Strategy for the Management of State Enterprises.
The strategy foresees that by 2027, public companies will cease to exist, that is, they will be transformed into AD and LLC companies, and that all 270 companies owned by the Republic of Serbia will be corporatized and their management will be centralized.
The strategy is ripe with praise for the ministries and the government for starting work on corporatization, and the current shameful situation with dozens of illegal managers is casually mentioned as “the current practice of appointing acting managers for a period of more than one year”.
Namely, it quotes the domestic legal framework and then states that “examples of good international practice show that the state does not appoint an acting manager for a period longer than 6 months, as a solution in case of urgent personnel renewal. The Assembly (in a unicameral system) or the supervisory board (in a bicameral system) are obliged to elect a new manager in a timely manner and not allow situations in which the manager’s mandate has expired or the manager can no longer perform his duties. Accordingly, it is necessary to abandon the current practice of appointing acting managers for a period longer than one year” (italics by Z.M.).
So, what do you think is the solution for this (illegal) practice?
That’s right! Adoption of a new law that will regulate corporate governance issues in all companies owned by the Republic of Serbia.
In translation, we got two new justifications to do and change nothing – we are waiting for a new law, and then we are waiting for transformation and corporatization. That is if the companies owned by the Republic of Serbia manage to survive this interim period without crumbling to dust – or being privatized.
Finally, I should also mention that this strategy was adopted on April 1, 2021. I leave it to you to decide what this means.
Translated by Marijana Simic