Serbia - 7-State-Owned Enterprises Serbia - State-Owned Enterprise
The Law on Public Enterprises, adopted in February 2016, defines a public enterprise as “an enterprise pursuing an activity of common interest, founded by the State or Autonomous Province or a local government unit.” The law also defines “strategically important companies” as those in which the state has at least a 25 percent ownership share.
The law aimed to introduce responsible corporate management in public companies and strengthen supervision over public companies’ management. The law required that directors of public companies be selected through a public application procedure and that they not hold any political party positions while serving. The law also requires that a portion of public companies profits must be paid directly to the state, provincial, or local government budget.
State-owned enterprises (SOEs) dominate many sectors of the economy, including energy, transportation, utilities, telecommunications, infrastructure, mining, and natural resource extraction. According to the Ministry of Economy, Serbia has 727 SOEs, which employ more than 250,000 people, or approximately 15 percent of the formal workforce. A list of all public enterprises is available at the Ministry of Economy’s website. In addition to these companies, there are around 165 companies with around 40,000 employees that were not yet resolved by the now disbanded Privatization Agency. The Ministry of Economy is preparing all 165 of these companies for divestiture (see Privatization Program).
The quasi-governmental watchdog agency, the Fiscal Council, estimated that SOEs generated losses of around three percent of GDP or $1.1 billion in 2014 – both directly and indirectly, through arrears. In December 2016, the Serbian government committed to the IMF to significantly reduce the fiscal cost of SOEs by curtailing direct and indirect subsidies, strictly limiting the issuance of new guarantees, and enhancing accountability, transparency, and monitoring of SOEs. The IMF said the focus was on restructuring and reducing state aid to major companies in the electricity, mining, gas distribution, and transportation sectors.
In principle, SOEs are treated the same as private sector competitors. SOEs can purchase goods from the private sector and foreign firms under the Public Procurement Law, which was amended in July 2015. For example, foreign companies regularly win public tenders for the construction of roads and other infrastructure projects. Under the Public Procurement Law, a buyer must select a domestic supplier if the domestic supplier’s price is no more than five percent higher than a foreign supplier’s price. The Public Procurement Office (PPO) is an independent state body that supervises implementation of the Law on Public Procurement. Private enterprises have the same access to financing, land, and raw materials as SOEs, as well as the same tax burden and rebate policies. However, the IMF estimated that in 2014, SOEs enjoyed benefits amounting to approximately two percent of GDP. The government committed to cease these practices as a key pillar of its ongoing three-year IMF Stand-by Arrangement.
Serbia is not a party to the WTO’s Government Procurement Agreement (GPA).
Privatization Program
From 2001-2015, the Serbian government privatized 3,047 SOEs. The government cancelled 646 of these privatizations, alleging that investors did not meet contractual obligations related to employment and investment. According to the Privatization Law, the deadline for the privatization of the 646 companies in the Privatization Agency’s portfolio was December 31, 2015. However, 165 companies were still unresolved at the end as of December 2016. The 165 companies include 11 spas, which all have unresolved property issues; 19 companies in Kosovo; 15 veterinary stations which were transferred to local municipalities; and 19 companies that employ disabled persons.
Most significantly, the Ministry of Economy must resolve 17 large, strategically important SOEs. These include copper mining company RTB Bor, the Resavica coal mine, pharmaceutical company Galenika, agriculture firm PKB, several petrochemical companies, and others. In many cases, closing these companies would mean leaving whole regions of Serbia destitute, since these companies are drivers of local economies. The Serbian government continues to engage foreign investors in the privatization process, inviting them to submit bids, participate in auctions, and purchase company shares. Invitations for privatization and bidding are published on the Ministry of Economy website.
The state telecommunications company Telekom Srbija has garnered investor interest, but the Serbian government has twice canceled its privatization, most recently in December 2015. In February 2017, the government invited bids for a concession to manage Belgrade’s Nikola Tesla airport. The government is also preparing to privatize the second largest bank in the country, Komercijalna Banka.
Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.