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Yugoslavia: Kosovo Launches Privatization Body

The United Nations chief administrator for Kosovo, Michael Steiner, signed a regulation establishing the Kosovo Trust Agency yesterday, with the backing of the UN Security Council. The agency will oversee privatization of hundreds of state-owned enterprises. As RFE/RL reports, privatization in Kosovo is seen as a prerequisite for developing a market economy, but the task will not be easy.

Prague, 14 June 2002 (RFE/RL) -- The issue of selling public assets is complicated in Kosovo by uncertainty over who owns commercial properties.

Production facilities in communist-era Yugoslavia were owned by the state or else publicly or socially owned, which gave employees the false impression that they were the owners of the means of production.

After Belgrade strongman Slobodan Milosevic dissolved Kosovo's autonomous status in 1989, enterprises in many cases were either stripped of value, run down, or sold off to politically reliable Serbs at less than market value.

During the 1990s, the Milosevic regime barred Albanians from working at such enterprises, replacing them mainly with Serbs, many of them refugees from Bosnia and Croatia.

The 78 days of NATO airstrikes against Yugoslavia in 1999 damaged many of Kosovo's larger industrial facilities. As part of Milosevic's capitulation, Serb forces withdrew from Kosovo and at least half of the 200,000 Serb residents fled the province. The NATO-led peacekeeping force, KFOR, occupied many factories, turning them into military bases.

Since then, workers and former managers -- Serbs and Albanians -- have in some cases succeeded in gaining control over some facilities, running then down, renting them out, or selling them for personal gain.

In an effort to remedy this situation, Michael Steiner, the United Nations chief administrator for Kosovo, has established the "Kosovo Trust Agency," the KTA.

Steiner had relatively little to say at a ceremony yesterday marking the establishment of the agency. "A market economy needs privatization. We now have the framework for this," Steiner said.

Steiner also signed a related regulation establishing a special chamber of the Kosovo Supreme Court to deal with legal challenges to the privatization process.

He says he expects privatization to begin in the autumn.

Steiner has said the people of Kosovo must face the reality that, as he put it, "Most of Kosovo's socially owned enterprises are dinosaurs." The viable ones need to be restructured and need fresh capital; the bankrupt ones with no future need to have their idle assets rejuvenated and mobilized for the private sector.

UN authorities expect the new regulation will attract foreign investment, help reduce the 65 percent unemployment rate, and revive Kosovo's economy, which is largely dependent on foreign aid. Steiner has noted, however, that, "clear legal property title is the basis for both economic development and for the rule of law."

The privatization process risks causing a rise in unemployment as unprofitable enterprises are shut down.

The new agency will liquidate enterprises with idle assets, auctioning off the assets to the private sector. Where no credible investor can be found, the assets will be transferred to a new subsidiary company and shares in the company will be sold to investors.

Nevertheless, according to a recent statement by the head of the European Union mission in Kosovo, Andy Bearpark, there are many factories that employed thousands of people and are never going to make a profit and will never reopen. In Bearpark's words, "It's not a question of turning the clock back [or] just changing the factories from one form of ownership to another, it's a question of moving the economy forward" to attract private investors.

Some 350 state-owned enterprises employing some 30,000 workers and some 65 publicly owned enterprises will come under the KTA's administration, which will have the capacity to "enter into contracts, hold property, and sue and be sued in its own name."

In a report last year, the World Bank noted that, "any ownership changes since 1989 would appear to be valid only if they were done pursuant to non-discriminatory laws." The report noted that Kosovar Albanians believe "all such transactions were done under discriminatory laws or laws applied in a discriminatory manner."

The most disputed and complicated property is the Trepca lead- and zinc-mining complex near Mitrovica. Because of its economic significance, the area was the only part of Kosovo to have been occupied by Nazi Germany during World War II.

On 18 April, Steiner said in an address at Pristina University that Kosovo's "enterprises were never the gold mines some people make them [out] to be; some were even loss makers from the start." He noted that even in the 1990s, many socially owned enterprises in Kosovo were in reality dead.

The agency is to be run by a board of three international and three Kosovo officials, at least one of them a Serb. Kosovo Prime Minister Bajram Rexhepi said the government wanted a Kosovar to chair the board. Steiner rejected this but a compromise was reached that a native of Kosovo will serve as deputy chairman of the board.

Steiner ignored demands by some Kosovar Albanian lawmakers that all property contracts signed after Kosovo's autonomy was dissolved in 1989 be voided and that Yugoslavia and Serbia be denied property rights in Kosovo.

Rexhepi noted, however, that Steiner has not yet responded to a government request to ensure that all Kosovo privatization proceeds are deposited in local banks. "We asked that the privatization funds remain on deposit in Kosovo for investment in Kosovo's economy, for those factories otherwise with no prospects. There is a good chance that our proposal will be accepted. [The UN's Kosovo administration] had been preparing to freeze these funds," Rexhepi said.

In a bid to avoid extensive delays to privatization, the Trust Agency will ensure that the proceeds resulting from privatization will be held in trusteeship in cases where ownership remains unclear due to what Steiner terms "the legal chaos after 1989." This is when the Milosevic regime abolished Kosovo's autonomous status and began selling off the properties.