Re: Re: Milosevic and privatization

[Louis Proyect <lnp3@xxxxxxxxx>]

>So how did Slovenia resist the neolib virus? Social democratic
>parties? Strong unions? A developed welfare state?
>
>-- Dennis

Actually, the latest Z Magazine has an article by Michael Parenti that
describes the stubborn refusal of the Slovenes to go whole hog with "shock
therapy". Apparently this has led to some resentment from western banks.
Who knows, Slovenia might be the next to get on Nato and IMF's shit-list
unless they straighten up and fly right. Although the Parenti article is
not online, this might provide some background:

Financial Times (London), July 11, 2000, Tuesday Surveys SLV1

SLOVENIA : PREPARING FOR THE EU: For an economy that is flourishing, the
country still has a large number of controls that need dismantling

By ROBERT WRIGHT

When managers suggest job cuts at companies where Joze Mencinger is a
supervisory board member, he asks them to reconsider. Why, asks the
professor of economics at Ljubljana University, should they sack excess
labour to improve profits? In Slovenia, after all, the owners probably
never even had to pay for their shares.

Mr Mencinger's attitude says a lot about Slovenia's economy. Much remains
consensually managed, often for the benefit of producers, employees and the
state, rather than consumers, shareholders or voters.

Employees and management at many private companies hold large shareholdings
in their employers, a legacy of the old Yugoslav workers' self-management
system. Generous wages and maintained staffing levels tend to take
precedence over performance.

In stock exchange-listed companies, meanwhile, large shareholdings are
often held by small private investors who bought their shares with free
privatisation vouchers. Many believe corporate accountability to these
shareholders is not good.

Big blocks of shares are also often held by the state, either through its
social security funds or the fund to repay citizens for their losses from
communist confiscations. Many state-owned companies, such as utilities and
some financial companies, still await privatisation.

"We're in the second phase of transition," says Neven Borak, a leading
economist. "The first (phase) was simply that of changing the (socialist)
social system into something else. The second phase is to change this into
a system which fits the requirements of the EU.

Yet conservatism - and fear of dominance by outsiders - keep the brakes on
opening up more to foreign investors and other liberalising moves.

"I would not boast about having foreign investors (in the country)," says
Mr Mencinger, reflecting a view expressed, in milder form, by many
Slovenians.

"To me, foreign investment is an emergency solution and nothing else. If
you cannot manage your own resources as well as foreigners can, you need
foreigners."

Slovenia is doing well, however, despite its divergences from the
liberalising path of other successful post-communist economies.

Gross domestic product has grown steadily ever since the end of the
economic disruption caused by independence, building on the strong
manufacturing and export base Slovenia built up in 1980s Yugo-slavia.

Growth was 4.9 per cent last year, taking GDP per head to more than Dollars
10,000 a year. In purchasing power, the country's GDP per person has been
ahead of Greece's in many recent years.

Expansion continued last year despite falling demand in the country's main
export markets, and tourism receipts down because of the Kosovo war. Mainly
because of a rush to buy and import products before the introduction last
year of value added tax, the current account deficit shot up to 2.9 per
cent of GDP, from a negligible amount before. It is expected, however, to
fall back this year. Inflation, despite the introduction of VAT, was only
6.1 per cent.

GDP this year is expected to rise around 4 per cent, with inflation
remaining low. Productiivity is rising.

Yet liberalised, fast-growing neighbours such as Hungary are gaining ground
on Slovenia. Many business people hope to see Slovenia regain the
initiative through liberalisation. Politicians, meanwhile, stay stubbornly
cautious.

"We're satisfied (with the economy), but we also think that it's a pity
we've lost the advantage over other countries from the eastern region,"
says Igor Stemberger, chairman of Ilirika, a Ljubljana-based stockbrokers.
"Economic growth could be faster and more productive than it is."

Metod Dragonja, a former economics minister and now head of Lek, one of
Slovenia's two big pharmaceutical companies, agrees. Some laws, such as
that on labour, are still virtually unchanged from the socialist era, he
complains.

"People are sometimes not aware (of the need for change)," Mr Dragonja
says. "Businesses are very much aware."

Some are concerned that state companies are distorting the market and
keeping up some prices.

"The structure of the economy right now has some problems with monopolies,
especially in the insurance sector and telecommunications," says Samo
Hribar Milic, vice-president of Slovenia's chamber of commerce and industry
(GZS).

Yet Marjan Senjur, minister for economic relations, plays down the
importance of selling stakes in state-owned companies quickly, as many
business people would prefer.

"We are not in any hurry to sell because we're not in such a bad position
that we urgently need foreign money," says Mr Senjur. "So we can privatise
(companies) when the price is the best. Perhaps we can do this gradually."

There is a similar debate over the need for foreign direct investment.
Potential investors still face rules which require them to make an offer
for a company's whole share capital if they buy as little as 25 per cent.
In big companies, workers' representatives have to be given half the board
seats.

Politicians, however, mostly seem unworried by the continued low levels of
foreign investment, preferring to trumpet how well Slovenia has done
without foreign help.

Foreign-owned companies, however, have higher productivity and higher
investment levels than Slovenian-owned privatised ones. Some business
people believe that more foreign capital and expertise could mean improved
economic efficiency.

"There are quite a lot of companies which desperately need foreign
investment, not only because of the money, but also because of the new
ideas," says Mr Milic of the GZS.

It is not even clear how far politicians are prepared to change the present
system to achieve their central goal of joining the European Union.

Some believe that EU criticism, possibly in this autumn's annual report on
accession progress, may finally prompt more decisive change. Others,
however, see the Slovenes as dragging their feet on liberalisation.
Slovenia, they suspect, may be betting that its relative prosperity makes
it impossible to excluded from EU enlargement.

"I have no doubt about one thing - that the Slovenian elite is determined
to get into the EU," says Stan Rudcenko, chief economist for central and
eastern Europe at SG Securities in London. "Things will get sorted out."

"They are trying to move as slowly as possible," retorts one international
observer. "They don't want to make radical changes."

Yet, ironically, failure to open up now could end up later harming the
economic stability prized by Slovenian politicians. The cosy world of the
Slovenian economy, after all, is one day bound to feel the cold blast of
outside economic pressures.

"Slovenia is playing a dangerous game now," says Mili Kus, director of
EBrokers, a Ljubljana-based internet stockbrokers. "We have enough
experiences where accession candidates to the EU attract foreign capital
flows before their entry. What Slovenia is doing is delaying that point of
convergence - but at the same time creating a much higher pent-up demand
(from foreign investors)."


Louis Proyect
Marxism mailing list: http://www.marxmail.org