The national anti-corruption strategy


PRIVATIZATION AND PUBLIC-PRIVATE PARTNERSHIP



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3.3. PRIVATIZATION AND PUBLIC-PRIVATE PARTNERSHIP
а) Description of the situation
The privatization process in the Republic of Serbia has proved to be one of the most hazardous fields of corruption. Namely, the Report of the Anti-Corruption Council from September 2012 states that imprecision of a series of privatization regulations and non-transparency have left room for numerous illegalities. For example, there are no provisions governing the economic essence of the restructuring process or any principles for determining the method of privatization; the issue of contents of a privatization agreement; criteria for the appointment of the director in the Privatization Agency, etc. Such vagueness of regulations has created numerous opportunities for misuse. The practice has shown that no financial statements were made prior to privatization, in accordance with the Law on Accounting and Auditing (“Official Gazette of the RS”, No. 46/06, 111/09 and 99/11 - amended by other law) and International Accounting Standards, that assets and liabilities were underestimated, or that enormous assets were excluded in order to reduce the assessment of value of a company, which would then be sold at a price significantly lower than its real value. In addition, many privatization agreements violate the equivalence of giving, which is also enabled by inadequate control, both in terms of the execution of the agreement, and in terms of the exercise of powers of the director of the Privatization Agency. Some uncertainties and imprecision in the Privatization Law (“Official Gazette of the RS”, No. 38/01, 18/03, 45/05, 123/07, 123/07 - amended by other law, 30/10 – amended by other law, 93/12 and 119/12) were eliminated with regulations and internal acts of the Privatization Agency, however, all this is not enough to ensure full transparency and legal certainty of all participants in the privatization procedure.

In addition to the privatization process, the Agency has an important role in the processes of restructuring of the companies with state and social capital, in managing the entire share capital remaining in the process of ownership transformation, the bankruptcy procedure of the companies doing business with the social capital or the companies that were sold so the contract with customers was terminated, supervision of operations of the companies whose sales agreement was terminated by appointing temporary equity representatives. Most of these processes are not precisely regulated by the law or are regulated at the expense of the state. For example, the appointment of temporary equity representatives is carried out exclusively on the basis of internal criteria set by the Privatization Agency itself. In addition, part of the Law on Bankruptcy (“Official Gazette of the RS”, No. 104/09, 99/11 - amended by other law and 71/12 - amended by the decision of the Constitutional Court), concerning the plan of reorganization, is not accurate enough, particularly in terms of the method of classification of creditors, expert’s evaluation of the property, and particularly in terms of expert’s evaluation of property units consisting of the property with and without encumbrance.

The bankruptcy procedure also contains a number of deficiencies in terms of unclear regulations and their implementation. For example, the trustee in bankruptcy has no legal obligation (only an option) to analyze operations of the bankruptcy debtor prior to the initiation of the bankruptcy procedure, to determine reasons that led to the bankruptcy and to notify creditors about this by submitting a detailed report. The Law on Bankruptcy prescribes a random selection of the trustee in bankruptcy, and the bankruptcy judge, on exceptional occasions, shall have the possibility to directly appoint the administrator. This legal provision has been mostly ignored, and the exception has become a rule, often without a reasoned decision.

The Law on Public-Private Partnership and Concessions (“Official Gazette of RS” No. 88/2011) governs the field of long-term cooperation between the public and private partners for the purposes of providing funds, construction, reconstruction, managing or maintaining infrastructural and other facilities of public importance, and providing services of public importance, which may be contractual and institutional. Effects of the new Law and the need for amendments cannot be fully perceived, therefore, it is necessary to conduct an analysis of risk of corruption in the Law and its compliance with other relevant laws, particularly in the field of usefulness of decisions on public-private partnerships.



b) Objectives

3.3.1. Change the legal framework to eliminate risks of corruption in the regulations governing the procedure and control of privatization, reorganization and bankruptcy of the companies with state and social capital.

3.3.2. Establish a system for efficient implementation and control of enforcement of positive regulations in the field of privatization, reorganization and bankruptcy.

3.2.3. Eliminate risks of corruption in the field of public-private partnerships and concessions and its consistent application.





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