So far, the state has generally been a bad manager, but it should be the owner of companies where there is public interest, which have infrastructure or a monopoly, with the appointment of professional and capable management.
For each purchase of assets or companies, it is necessary to carry out detailed cost-effectiveness analyses. Many privatizations in the past years were to the detriment of the state, and now the wrong economic moves from the past should be corrected, said the interlocutors of "Vijesti" in a survey about the state's decisions and plans to increase ownership in some state-owned companies, to buy those that have already been privatized or to establishes new state-owned companies.
The government recently enabled the state-owned Elektroprivreda to buy Željezara from Nikšić for 20 million, and previously it increased the capital in Port of Bar from 54 percent to 78 percent, and began negotiations on the purchase - return to state ownership of the "Port of Adria" container terminal.
The state, through its company Morsko dobro, takes over the monopoly ferry line Kamenari-Lepetane from the private company "Pomorski sabrojka". The port of Budva and the port of Pine in Tivat were returned to the use of the municipalities, while the Meljine hospital was transferred from the private to the public health system. The government also announces the possibility of establishing a state telecommunications company.
The future depends on infrastructure projects
Minister of Finance Aleksandar Damjanović, explaining the reasons for such moves, said that majority ownership by the state in strategic branches in key companies is also a practice in serious Western European countries, which they use pragmatically to strengthen their overall economy.
"The economic future of Montenegro depends on infrastructure projects, especially in energy and transport, and in these sectors there is an unequivocal need to strengthen state ownership, primarily due to the possibility of making strategic decisions of the state. Here, above all, we mean economic giants, such as Luka Bar, Elektroprivreda, Montenegrin electric transmission system and Railway infrastructure. Providing a management control package in companies of this significance and potential would enable the Government to responsibly and transparently make strategic decisions with the aim of consolidating and unhindered development of these companies and strengthening the economic perspective of the state," said Damjanović.
The former authorities sold off the monopolies
He stated that in the previous period there were several examples of unnecessary and non-transparent privatizations of state monopolies with serious adverse consequences for the economic, security and strategic interests of the state and added that privatizations were carried out without a strategic vision, where there was no reason to initiate them.
"We have examples where lucrative jobs have been recklessly given to private companies, leaving them to manage key resources. One of them is the complete privatization of the telecommunications industry, in such a way that, after privatization, ownership in this area in Montenegro was in the hands of three state-owned companies from different countries - Serbia, Norway and Germany. The Government's current idea on the formation of a state operator is based on the principle according to which it is regulated in the European Union states", stated Damjanović.
The Minister of Finance said that the state intends to strengthen management control, contribute to business continuity and encourage all companies that have potential, are profitable and recognized as leaders in quality and competitiveness to achieve better results.
"Such is the Port of Bar, for example, when we talk about the area of port services, if we look at its huge potential and possibilities for additional investment and business expansion. Every previous investment of state money by this Government was preceded by a detailed economic and financial analysis of the profitability and justification of the investments", claims Damjanović.
United Port has a great chance
The prime minister also agrees with him Dritan Abazovic, stating that the return of the entire Port to state ownership will open the possibility for any government to talk with new global operators in order to carry out a large-scale transport of goods on the Bar - Belgrade - Budapest route in the future, pointing to the necessity of modernizing the railway and building a highway.
"The state will have the possibility of the exclusive right to choose a partner for its critical infrastructure, introduce a partner and make deals. Ports are growing in the region, 39 percent of the cargo going to Serbia goes through the port in Rijeka, nine percent of the cargo going to Bosnia and Herzegovina, some 20 percent to Hungary... And we remain like an appendix, only we are not ready to make strategic moves" , Abazović stated.
He claims that if the state completely takes ownership of the ports, it will immediately double the revenues and their value.
The steel mill is already worth 54 million
The Prime Minister also claims that a good deal was made when purchasing Željezara, because the purchase agreement is worth 20 million euros, while the factory's assets are valued at 54 million euros.
"Here I'm only talking about property, no production and no plants... I think that very soon we will be in a situation where we are hiring new people in the Ironworks in addition to the already existing 200. Just the fact that we will give the new Ironworks the opportunity to install solar power plants on their property of 10 MW, which will be owned by them, it will be enough to cover their operating costs. Only that segment, without the production of other things...", said Abazović.
Asked if some decisions were rushed and without prior analysis, Abazović claims that they were not, but that they were late because they should have been implemented by the previous governments.
In response to criticism from a section of the public that the takeover of the company will enable a new abuse of public resources and be a training ground for party employment, Abazović states that Željezara in particular has been reduced from 7.000 workers to 200.
"What kind of party employment are we talking about? All the workers who started in 2012 are still working... Our goal is to create new value... The state intervenes in matters that are critical, Abazović notes and adds that the private companies that expressed their desire to work had no restriction from the Government, pointing to recently opened private factories.
The mistakes of the past need to be corrected
Broker and investment advisor at "Bull&Bear" Alexander Jovovich, who is often a representative of small shareholders in state-owned companies, says that the desire to correct some wrong economic moves from the past and the desire of political elites to use taxpayers' funds to try their hand at business should not be equated.
"I am generally of the opinion that the state is a bad and inefficient manager, there are many examples of this, I will only mention the last ones, the Institute 'Simo Milošević', 'Plantaže', 'Crnogorska plovidba', tourism companies in majority state ownership that make negligible profits. However, someone must take responsibility to correct the wrong economic moves of the past, first of all I mean the segmentation of the Port of Bar or the establishment of two shipping companies with two ships each instead of one that will manage four ships. Given that the state, as the single largest shareholder in those companies, has the greatest economic interest in correcting those wrong moves, it is logical for it to take the initiative and act in the direction of buying the Port of Adria and merging it with the Port of Bar into a single company that would thus be united much more interesting to potential strategic partners or, for example, to take the initiative with the aim of uniting two shipping lines into one company that could be sustainable, but with better quality management and better cost management", said Jovović.
Caution with telecommunications
When it comes to buying Željezara or establishing a new telecommunications company, I think Jovović should be careful for several reasons.
"The money necessary for investment has its price, which is very high at the moment. In order for a business to be sustainable in the long term, it is necessary that the annual profit generated by that business is greater than the interest costs on invested funds. When it comes to telecommunications, huge investments in infrastructure are needed, local but also global competition is getting stronger, global players (Facebook, Viber, Netflix) offer users their services using the operator's infrastructure for free. I think that the golden era in that sector is far behind us and that the withdrawal of global players such as Telenor or Deutsche Telekom from small markets is the best proof of all that. The profit rate achieved by 'Deutsche Telecom' in Montenegro is around three percent, and at the moment if you have excess money, you can lend it to individual EU members at over four percent annual interest and not do anything," said Jovović.
The law defines the state's right to intervene
Member of the Presidency of the Movement Europe Now, Vasilije Carapić he said that in the time of the cooling of multilateralism and disrupted trade relations, the state should certainly think in the direction of ensuring the optimal use of its strategic resources, but that the fact is that the Montenegrin economy today is not based on successfully implemented privatizations.
"In this respect, the intention to preserve the key infrastructure by returning it to the state is good, and it is in line with the trend that is present in a large number of European countries", says Čarapić.
However, he points out that Montenegro lacks a clear legislative framework that would regulate the state's right to intervene in the market for the sake of public interest and protection of capital infrastructure, which would transparently define the conditions for the nationalization of strategic resources.
"Such a 'patriotic law' is necessary because the existing regulation primarily protects private interests, and gives the state very little room to act, even when it is in the best public interest (environmental protection, health care, state security), while does not expose the state budget to large compensation claims from the private owner. If there is no clear legislative framework under which nationalization is carried out, then the impression is unnecessarily created that nationalization is approached ad-hoc, without a clear strategic commitment, which politicizes the Government's decisions, polarizes the public and calls into question the overall legality of such an action, which is strongly emphasized with the nationalization of the ferry line Kamenari-Lepetane", believes Čarapić.
Analyzes are missing
On the other hand, he emphasizes that classic commercial transactions, such as the purchase of the Ironworks, the action of the Port of Bar and the announced purchase of the Port of Adria, should be separated from nationalization, which, as he states, must be carried out within the framework of the budget plan and after a detailed cost-effectiveness analysis has been carried out, with a clear defined by the strategic importance of such acquisitions.
"I believe that such analyzes are lacking, which casts doubt on the motivation behind these deals, especially considering the fact that the government simultaneously neglects some companies that are already state-owned and are important for our economy, such as the airline "Air Montenegro" or the company "Skijališta Crne Gore", said Čarapić.
He also points out that a prerequisite for the good operation of all state-owned companies is the professionalization of management and personnel who perform work in these companies, i.e. the removal of party employment, which in the previous period proved to be disastrous for the finances of state-owned companies.
"The state will be a good employer only when state-owned companies are managed by capable and professional people who, with their knowledge and skills, will be able to guarantee the stability of business, and therefore the stability of jobs for the employees who work in these companies," he concluded.
Sale of "Budvanska" if it does not improve business
In this year's government privatization plan, the hotel group "Budvanska riviera" is also mentioned, where the state currently owns about 58 percent of the shares.
Abazović said that the revenues generated by "Budvanska Riviera" are disproportionately lower than its total potential.
"The fact that something is part of the plan to be privatized does not mean that it is going to fail. If the management can raise the quality, let them do it. If not, then let him find a sales model. People are a little frustrated with the sale because they think it's like what DPS used to do, that someone installs it somewhere and that what is bought falls apart very quickly. If you enter a project, the logic is completely opposite, the goal is not to have a half-board that will cost 40 euros, but one that will cost 100 euros," said Abazović.
The Minister of Economic Development, Goran Đurović, expressed a similar position earlier, stating that the state has not proven itself to be a good owner and pointed out that it must invest more money in the "Budva Riviera", while the other option is for someone else to do it through privatization.
However, Minister Damjanović emphasized that his position is that there is currently no need to privatize that company.
"Founding a telecommunications company is the best idea"
Abazović also said that the potential establishment of a state telecommunications company is "the best idea".
"You can conclude from the number of resistances of people who work in state-owned companies, who are primarily in charge of energy, and from some of the criticisms, that we have hit a goldmine," said the Prime Minister.
There are already three operators on the already existing Montenegrin market, and Abazović said that the operators are interested in renting the state infrastructure (through CEDIS) of 500 kilometers of cable for big money.
"That's the explanation of everything... Do you think they would give that big money for nothing because they love Montenegro or do they intend to extract that money tenfold... The creation of the fourth state operator can only bring huge revenues to Montenegro, increase competitiveness and service", emphasized Abazović.
The Prime Minister emphasized that the state would have enormous annual savings if it were the only owner of mobile operators, internet providers and other services.
"Someone thought for corrupt reasons, because he couldn't for rational reasons, to sell our Telekom with the infrastructure... State companies had to build the infrastructure after the sale of Telekom. Of course, a lot of interventions would have to be done on it. We have already created a working group and will go to Slovenia to see how everything is arranged there. But if we already have the infrastructure, we look forward to all foreign operators, but someone has to think about Montenegro as well", Abazović concluded.
Inefficient state ideal competition
Jovović says that, looking from the perspective of someone in the private sector, an inefficient state is ideal competition for anyone in business.
"The best example of this is the growth of the private sector in the provision of health services in Montenegro in recent years. I think that the state's entry into business in various sectors will not negatively affect the interest of foreign investors, but an inefficient and expensive state apparatus with record public spending of about 50% of GDP is extremely disincentive for both domestic and foreign investors," he said. Jovovich.
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