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Serbia seeks buyers for hundreds of loss-making state firms
August 15, 2014 / 9:26 AM / in 3 years

Serbia seeks buyers for hundreds of loss-making state firms

* Bidders have one month to express interest in 502 companies

* State firms a huge drain on public coffers

BELGRADE, Aug 15 (Reuters) - Serbia’s privatisation agency put hundreds of loss-making state-owned firms, including one of Europe’s biggest copper mines, up for sale on Friday as part of government efforts to rein in borrowing.

Under pressure to avert a national debt crisis, the government of Prime Minister Aleksandar Vucic is trying to curb a deficit seen reaching 8.3 percent of national output and cap a public debt level forecast to reach 73 percent.

The privatisation agency set a Sept. 14 deadline for potential investors to submit letters of interest for 502 firms, including drugmaker Galenika, fertiliser maker HIP Azotara, the Bor copper mine, one of Europe’s largest, as well as the furniture maker Simpo.

The agency said it will propose a model of privatisation for each company attracting interest within 45 days and pass it to the Economy Ministry for a final decision.

“In a month we’ll have a better idea what we can do with these companies,” a spokesman for the agency told Reuters.

“For some companies, we will find strategic partners, some companies will go bankrupt, and some will have only their property sold,” he said, adding that tenders for specific companies would be issued later in the year.

Lawmakers in early August approved new legislation on privatisation, clearing a path to the asset sale of state-owned companies that for years have been a huge drain on public coffers. The law sets a deadline of Dec. 31, 2015 to complete the privatisation process.

To speed up the procedure, the legislation introduced debt write-offs for state-owned entities and enables the conversion of debt to equity. The law was a pre-condition for the release of a $250 million budget support loan from the World Bank.

Subsidies to state-owned companies, which employ some 90,000 people, and a lack of tax revenues from loss-making firms cost the country 1 billion euros ($1.34 billion) a year, according to estimates from the government’s top advisory body, the Fiscal Council. This equates to nearly 3 percent of national output.

Last month, the council warned that any further financing of loss-making companies would “bring Serbia’s finances to collapse”.

Successive governments since the fall of strongman Slobodan Milosevic 14 years ago have ducked cutting subsidies to loss-making companies, fearing the political fallout from job losses.

Serbia’s economy is forecast to contract by 0.5 percent this year, hindered by devastating floods in May, and unemployment in the second quarter stood at 20 percent.

The government is expected to present a detailed plan for fiscal consolidation next month when parliament votes on a revised 2014 budget.

To reassure investors, the European Union candidate country is looking to seal a three-year standby loan arrangement with the International Monetary Fund, with talks expected to begin after the budget revision. (Reporting by Ivana Sekularac and Maja Zuvela; Editing by Matt Robinson)

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