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Serbia economy briefing: Draft Law on the Management of Public Enterprises

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According to Serbian legislation laws are passed by the National Assembly while the right of proposing is given to every Member of Parliament, the Government, the Assembly of an Autonomous Province, at least 30,000 voters, as well as the Ombudsman and the National Bank of Serbia when it comes to laws under their jurisdiction. The proposer of the law has the right to withdraw the proposed law from the procedure until the end of the consideration of the proposed law at the session of the National Assembly. Also, the President of the Republic can refuse to promulgate a law voted by the National Assembly and return it (to the National Assembly) for a new decision. In the last two years in Serbia, following public pressure, drafts/proposals of several laws were withdrawn. Most of them were withdrawn at the request of Aleksandar Vučić, the President of Serbia. The last in the series that was withdrawn from the further procedure was the Draft of the Law on the Management of Public Enterprises.


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In the existing legal framework, the state’s ability to provide a unique strategic direction and goals for public companies based on knowledge of their business management and results is very difficult. The goals of ownership management have not been clearly defined until now, but are determined on the basis of laws and strategic documents, which are often in conflict with each other.

All these problems in the supervision of public companies, monitoring their performance, as well as the lack of consistent strategic guidance and control represent significant fiscal risks, which will be overcome by centralizing ownership responsibilities and competences in one body.

The new Law on the management of state-owned enterprises has been prepared in cooperation with the International Monetary Fund (IMF) and was announced to be adopted by the Parliament by the middle of the year. According to the government’s bill, 23 public companies founded by the state will be transformed into joint stock companies (AD) or limited liability companies (DOO), with the explanation that this will “improve corporate governance in capital companies, so that they achieve better business results”. The Prime Minister of Serbia, Ms. Ana Brnabić, however, stated that “at the request” of the President of Serbia, she will withdraw the draft law on the management of public enterprises from the parliamentary procedure.

Where is the problem with the draft Law on the Management of Public Enterprises?

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The agreement with the IMF on text of the Law was aimed at the continuation of reforms, which important part represents reform in public or state-owned enterprises. What imposes as necessary is their improvement, in order to enable further professionalization and corporate management, which should lead into transformation of these enterprises to become more efficient and even the power machine of Serbian economy.

One of the provisions in the (now withdrawn) draft law on corporate governance is that a public company, whose founder is the Republic of Serbia, changes its legal form to a limited liability company (DOO) or a joint stock company (AD).

This proposal, which entered the parliamentary procedure, was criticized by some experts and the opposition, stating that it enables the privatization and sale of assets of state enterprises and resources, the media reported. Prime Minister, Ana Brnabić, denied such allegations and said that what is proposed in the law is one of the three key recommendations of the International Monetary Fund (IMF). Serbia, as can be seen from the proposal of that law, currently has ownership in 23 economic entities that have the form of public companies. The Prime Minister stated that at the initiative of the president of Serbia, who asked for “additional communication with the citizens”, the bill will be withdrawn for another round of consultations.

The Minister of Economy, Mr. Rade Basta, submitted a proposal to the Government to withdraw the law from the parliamentary procedure: “The proposal for a conclusion on the withdrawal from the parliamentary procedure was submitted for consideration and decision-making at the Government session, given that it was assessed that it is necessary to carry out additional consultations on the issues that are the subject of the regulation of this law”.

This statement is in a collision with the conclusion of the Report on the conducted public debate on the draft Law on the management of companies that are owned by the Republic of Serbia, which also was prepared by the Ministry of Economy and published on July 1. Namely, the Report ends like: “The general assessment is that the public debate was successfully conducted.”

One can fairly wonder what has changed in six days only? Does it mean that experts were right warning that the public has not been presented with convincing explanations for the transformations envisaged by the law, although the work of state-owned enterprises is one of the biggest potential hotspot of corruption? It is well known that corruption appears where the interest in it is particularly high and that is especially the case with these companies because they have huge funds at their disposal, about tens of billions of euros.

Ms. Ranka Savić, president of the Association of Free and Independent Trade Unions (ASNS), said that it is a “misconception” that unions are against the legal regulation of the functioning and management of public enterprises. The union, as she stated, absolutely supported the legal arrangement, “but not just any kind”.

According to her, the only essential objection to the withdrawn law that the trade union had was regarding the transformation of public companies into AD or DOO. The reason for the objection was not because they do not support it, but because it “was a red light” for due attention, and that the representatives of the workers asked a reasonable question: “Is this the first step in the transition of public companies to private ownership? The union is absolutely against the privatization of public companies, we are aware that with the transfer to private hands, the price of energy products, electricity, gas would be significantly increased and that would affect the standard of citizens,” Savić explained. On the other hand, the union is for directors who come through a public competition, who are experts, who know the job, as well as for labor control.

The program director of the non-governmental organization Transparency Serbia (TS), Nemanja Nenadić, said that the problem with the withdrawn Law is that it enables the sale of public companies, regardless of the claims of government representatives that they will not be privatized.He reminded that Prime Minister and the Minister of Mining and Energy have repeatedly said that there is no intention to sell these companies, but that what government representatives are saying now does not obligate someone who will perform their functions in a few months or a few years.

What stands as undeniable fact is that, at the moment when these companies are organized as public, according to the current law, sale is not possible. But, when they are organized as capital companies – then it becomes possible. The key question, if the possibility of privatization is opened, is whether part of the assets of some public companies should be sold and whether the entry of majority or minority capital should be allowed. Definitely, this dilemma requires a discussion in the public, which has not been done so far.

As Ministry announced, public consultations and presentation of the draft of the Law, as well as answers to all received questions and suggestions of interested parties, will be held on July 17.


In coordination with the International Monetary Fund, Serbian Government has prepared draft Law on the Management of Public Enterprises. Although submitted to the Parliament, the draft of the law was withdrawn at the request of the Serbian President. The reaction of the public was decisive for the withdrawal of the law, although for more than 20 years there has been talk of bringing order to public enterprises. The legislator claimed that the goal of changing the legal form is for companies to achieve better business results, as well as to work more efficiently and transparently, but there was no wider public discussion. And this is an important and difficult issue to be solved without public support.

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