Serbia Urges Asset Sale Law in Search for New InvestorsGordana Filipovic
Serbia’s government asked lawmakers to urgently adopt asset sale and bankruptcy laws designed to save the budget more than $800 million a year before deciding on public wage and pension cuts needed to streamline finances.
With the economy facing a third recession in five years and one in four people unemployed, Premier Aleksandar Vucic’s three-month old government is stepping up effort to upgrade business conditions for investments and growth.
At least 584 companies with 92,000 workers and 6.6 billion euros ($8.9 billion) in liabilities “cannot move on” without the new laws, Dusan Vujovic, the Economy Minister and acting Finance Minister, told lawmakers today.
“The laws will help these companies find investors or seek solution through bankruptcy,” he said. Workers whose companies fail will get redundancy payments “for a fresh start.”
The asset sale law allows for the transfer of ownership to strategic investors or sale through public tenders or auctions. There’s also the possibility of debt forgiveness and debt-for-equity swaps, Vujovic said. The bankruptcy law will accelerate bankruptcy procedures from an average three to four years and increase the protection of creditors, who so far have managed to collect an average 23 percent to 30 percent of their claims from insolvent companies.
Vucic, whose Progressive Party won absolute majority in March 16 general elections, is rushing through parliament a series of laws, including a new labor code and pension law earlier this month, hoping to qualify for a $250 million loan from the World Bank. The government also plans to cut public wages and pensions by 10 percent to narrow the deficit.
Adopting the laws will allow the government to resolve many of the state-owned companies that have failed to find buyers over the past 15 years and cost $800 million a year to maintain. It will help Serbia narrow its deficit, which is expected to top 8 percent of economic output this year. Serbia needs a leaner gap to qualify for a new International Monetary Fund loan by October.
The new laws are setting a Dec. 31, 2015 deadline to sell or close all the companies now the Privatization Agency’s portfolio. In case of zero or negative capital, the government will be selling company assets.