Bosnian Serb Entity Reportedly “in Deep Recession”

Text of report by Bosnian independent weekly Slobodna Bosna, on 24 April

[Report by Asim Metiljevic: "Dodik's Purge of Jelic's Cadres"]

By abruptly dismissing Rajko Ubiparip, one of the key ministers in the Serb Republic [RS] government in charge of economy, energy and development, RS Prime Minister Milorad Dodik is trying at all costs to prevent the inevitable debunking of a myth about the stunning development and spectacular renewal of the smaller B-H entity. The myth about the “better part of B-H” was mainly based on bombastically announced investments in the RS energy sector, which, as promised by Dodik, should have received over 5 billion KM [convertible marks] in foreign investments during the past year.

Energy Projects Debacle

For example’s sake, Prime Minister Dodik had earlier announced that the CEZ [Czech power utility] was going to invest KM3 billion into the Gacko mine and thermoelectric plant, while Russia’s NeftGazinkor was expected to invest over KM2 billion in the Bosanski Brod oil refinery. Thereby Prime Minister Dodik practically gave away the Gacko mine and thermoelectric plant as well as the Bosanski Brod oil refinery to the Czech and Russian strategic partners, in return expecting them to make urgent and substantial investments. However, the investments were either not received or were much smaller than initially announced. Instead of Prime Minister Dodik, the political price for the obvious investment failure was paid by his party colleague, Rajko Ubiparip, whom Dodik forced to resign “over health reasons.” Well-informed sources, however, claim that the dismissed Minister Ubiparip is in good shape, unlike his former portfolio, which is far from being perfect.

This is evident from a slapdash, hasty agreement with the Czech company CEZ to invest KM3 billion into the Gacko mine and the thermoelectric plants Gacko I and Gacko II, signed on 3 December 2006. After the ceremony of signing held in Gacko, Prime Minister Dodik, addressing the numerous guests who came from all Hercegovina municipalities, triumphantly declared that the RS would soon get “one of the biggest thermal power plants in this part of Europe” and that the agreement envisioned “the biggest foreign investment in the RS’s history.” However, instead of the announced KM3 billion investment, Dodik’s government soon received notice of a lawsuit filed by small shareholders, who had been arrogantly bypassed and practically deprived of their ownership in the Gacko thermoelectric plant by signing the agreement with the CEZ. Besides small shareholders, Croatia has also laid claim to ownership in the Gacko thermoelectric plant. Its government argues that before the war it invested one third of its capital in the construction of this plant. The problem of the infringed ownership rights of small shareholders in the Gacko thermoelectric plant shook the Banja Luka stock market like an earthquake. Early last year, in just a few weeks it plummeted to its lowest level since its founding. Indeed, in the past year it was not all smooth sailing for other regional stock markets as well. But the Banja Luka stock market recorded its sharpest-ever fall, which is believed to be exclusively the result of the reckless deprivation of small shareholders of ownership in the Gacko thermoelectric plant. The epilogue of the CEZ’s “fabulous” investment in the Gacko thermoelectric plant is utterly miserable: the Czechs have never invested a single mark in the Gacko mine and thermoelectric plant, the RS government and small shareholders have been trading accusations, and on top of everything, there emerged an almost insoluble problem of Croatia’s pre-war investments in the Gacko plant.

Russians Are (not) Coming

With the same enthusiasm and excitement Dodik in late 2006 announced a Russian investment of around KM2 billion to modernize the Bosanski Brod oil refinery. In exchange, Russians got another two companies besides the Bosanski Brod refinery: the Modrica oil refinery and the oil distribution company Petrol. All three companies were nominally sold for 121.1 million euros. Considering that the Brod oil refinery’s earlier debts largely exceeded this sum and that the burden of repaying them fell on the state, the RS budget profited nothing from the transaction. On the contrary, it was even depleted by approximately KM30 million! The first “serious” misunderstanding between Prime Minister Dodik and then Energy Minister Ubiparip arose precisely over this transaction. Several weeks after signing the agreement, when the RS government started paying off the oil refinery’s earlier debts, Dodik and Ubiparip made completely opposite statements: the prime minister argued that the Russians had paid the whole of the promised amount (121.1 million euros), while Minister Ubiparip claimed the opposite – that the Russians had not paid a single mark, which meant that the refinery’s debts were to be paid out of the RS budget.

The agreement between the Russian company NeftGazinkor and the RS government was signed 14 months ago. Since then, the beginning of operation of the Brod refinery has been postponed on five occasions. In the first few months Dodik’s excuse was that the B-H Council of Ministers was delaying the adoption of a decision on the liquid fuels quality. Then, after the decision was finally adopted, Dodik blamed it on the transformation of the Russian state bank, which manages the investment, and the recent election in Russia. July 2008, when the gasoline production line is supposed to start operating, has been mentioned as the latest deadline for the Russians to begin operations at the Brod refinery. However, no mention has been made of the production of diesel fuel.

Illusion of Economic Growth

Since February 2006, when it took power in the Serb Republic, the Dodik government has announced a dozen major economic investments, none below 1 billion euros. At the same time, in the official document entitled “The RS Development Programme 2007-10,” Dodik’s government promised high rates of economic growth, from 8 per cent in 2007 to as much as 14 per cent in 2010.

However, the true picture of the RS economy does not correspond to Dodik’s promises. On the contrary, based on available data, one can draw a totally opposite conclusion: the Serb Republic has been in a deep economic recession for more than a year now. According to official data from Republic’s Institute of Statistics, the industrial production in the Serb Republic in 2007 grew at a negligibly low rate of 1.4 per cent, convincingly the lowest growth rate in the entire region. The whole range of industrial branches such as wood processing, food, metal, and textile industries recorded a sharp fall in production, seldom higher than 10 per cent! For example, in the B-H Federation, whose economy, too, does not paint a very bright picture, last year’s industrial growth rate was nine times higher, reaching 11.7 per cent.

For the time being, Dodik’s government manages to maintain the illusion of the Serb Republic’s economic growth by occasional injections of money earned from the sale of Telekom Srpske. However, the funds decreased steadily as the money was being spent on financing budget beneficiaries and non-productive infrastructure projects of local importance, such as repairs of water supply networks, waste dumps, and roads. Among the approved projects there is none to spur production, generate more money, and create a new value. For such a situation Dodik primarily blames the Ministry of Economy, Energy, and Development headed by Rajko Ubiparip, and the Ministry of Agriculture and Forestry headed by Radivoje Bratic. According to unofficial information, it is precisely Ubiparip and Bratic who will pay the highest price for Dodik’s “lightly promised rapid advancement.”

[Box] Dodik’s Purge of Jelic’s Cadres

In the political corridors of power, the forced resignation of Rajko Ubiparip, minister of economy, energy, and development, is believed to be Dodik’s showdown with the personnel appointed by the late RS President Milan Jelic, with whom Prime Minister Dodik had not been on good terms during the last few months of his life. Well- informed sources argue that a few days before his death Jelic had not been on talking terms with Dodik. This was being linked to rumours of a plot to remove Dodik, which had allegedly been prepared by the OHR [Office of the High Representative], in connivance with Jelic and Radmanovic [Serb member of the B-H Presidency].

After Jelic’s sudden death, Slavko Gojkovic, Jelic’s cousin from mother’s side who was recently dismissed from his post as speaker of the Modrica municipal assembly, found himself at the top of Dodik’s hit list. Shortly afterward, the same fate befell Rajko Ubiparip, Jelic’s former closest associate and friend.

Originally published by Slobodna Bosna, Sarajevo, in Bosnian/Croatian/Serbian 24 Apr 08 pp 6- 8.

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