Bosnian Federation government faces crisis over management of state companies

By bne IntelliNews May 18, 2015

Denitsa Mukova in Sofia -


The ruling coalition in the Bosnian Federation is in crisis over a disagreement between coalition members over the management of three major state-owned companies. A collapse of the government in the Bosnian Federation, one of two entities that make up Bosnia and Herzegovina, could also threaten the stability of the national government.

The three parties that make up Bosnian Federation Prime Minister Fadil Novalic's government are at odds over the management of aluminium smelter Aluminij, energy company Elektroprivreda HZ HB and telecommunications company HT Mostar.

Marinko Cavara, deputy chairman of the hardline Croatian Democratic Union of Bosnia and Herzegovina (HDZ BiH), has accused fellow coalition members – the Party of Democratic Action (SDA) and the Democratic Front (DF) – of failing to respect agreements reached within the coalition, Bosnian daily Dnevni List reported.

HDZ BiH wants to change the management of the three companies, and has threatened to quit the coalition if the cabinet fails to reach an agreement.

Party members walked out of a government session on May 14, when a planned discussion on the future of Aluminij was cancelled. The company, which is under HDZ BiH control, could face bankruptcy over unpaid debts. “We suspect that someone is trying to strategically destroy this company,” HDZ BiH leader Dragan Čović told journalists after the May 14 government session, according to a party statement.

“I have the feeling that we have entered a serious crisis,” Čović added. “The attempt to continue communicating in the same way within the Bosnian Federation’s government as in the past four years is unacceptable, especially the fact that obviously we will deal with the appointments [of state companies’ management] in the next one, two or three years, instead of dealing with real issues.”

Previously, HDZ BiH ministers abandoned another cabinet session after Novalic removed a discussion on the situation at HT Mostar from the agenda.

Novalic commented after the session that the problem was that the companies HDZ BiH wants to control are under the management of the energy ministry, headed by the DF’s Reuf Bajrovic, Dnevni List reported. Bajrovic had offered to discuss the situation at Aluminij with government ministers, but later withdrew the topic from the agenda.

Representatives of DF now say they will not discuss the management of Aluminij or Elektroprivreda until Bosnia’s financial police have investigated what caused the companies’ poor financial situation.

The party wants the current management of the companies to remain in place at least for the time being. “We want those who are responsible for the tens and hundreds of losses to be identified. We cannot agree to name new management structures that will, under political instructions, continue to destroy the resources of all citizens of the Federation,” the party said in a statement posted on its Facebook page on May 17.

As of December 2014, Aluminij’s debts stood at BAM213.8mn (€109.3mn), including BAM120.8mn liabilities to Elektroprivreda and BAM67.3mn to financial institutions. Elektroprivreda’s debts totaled BAM190mn as of end-June 2014.

Meanwhile, HT Mostar’s net profit declined 63.5% y/y to BAM2.4mn in the first six months of 2014, according to the latest available data. HT Mostar is the smallest of the three telecoms companies in Bosnia. The other two are the country’s largest mobile operator BH Telecom and Telekom Srpske, which is controlled by Serbia's state-owned Telekom Srbija.

Party leaders are expected to discuss the ongoing crisis this week. However, Čović was quoted by Dnevni List as saying that the situation can be resolved in two ways - either the Federation’s government will meet up and reach an agreement, or the cabinet should resign.

In November, SDA, HDZ BiH and DF signed an agreement on joint action at all levels of government in Bosnia.

A crisis within the Bosnian Federation’s government could also have negative consequences for the national government under pro-EU Prime Minister Denis Zvizdic, which was approved on March 31, almost six months after the October 2014 elections. The government of the Bosnian Federation was approved on the same day.


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