Bosansko Grahovo petitions to rescind bearing factory privatization sale

The government of Bosansko Grahovo, in western Bosnia and Herzegovina, has petitioned the nearby Livno Canton Privatization Agency to rescind the sale of a former UNIS bearing factory, along with five other businesses. UNIS was set up in 1968 to integrate several state-run military equipment manufacturing operations set up in the cold war era. Several UNIS bearing factories were slightly different because they also produced some bearings for non-military rail and automotive uses. UNIS bearing manufacturing facilities, for example, until then had also produced mortars, artillery and rocket-propelled ammunition, and some auto parts. In the early 1970¡¯s, as UNIS began to shift manufacturing toward more non-military goods, SKF became a bearing business partner and adviser, sharing manufacturing know-how in exchange for better access to the region¡¯s insular but growing non-military markets. Although production and quality generally improved, the bearing factories were inhibited by lack of funds for investment, lack of raw materials or proper training, and chronic lack of foreign exchange funds to buy proper bearing steel and manufacturing equipment. In July 1991, the Bosnian conflict began. By August 1995, officials estimate 65% of the region¡¯s manufacturing operations were wiped out, and virtually all of Bosansko Grahovo¡¯s. What plants remained standing were in poor condition. Restarting manufacturing anywhere was more difficult than anticipated. Poor morale among what workers would return fed low quality output and few sales opportunities. Privatization audits also turned up the inability of what few plants could operate to think in market terms -- rather than produce what would sell, they often manufactured what was easiest, at random, with no demand, often until a particular weight had been achieved. With no knowledge or methods to measure costs or productivity, bearings and other products were sold as massive losses. Foreign aid did little to offset the increasing liquidity problems. UNIS itself was restarted, although as only a small fraction of the various manufacturing operations and facilities formerly scattered throughout the region. Most of the other manufacturing facilities have been involved in privatization efforts, in many cases funded by grants and loans from the World Bank. One bearing factory, UNIS Tok in Kalesija was a rail bearing manufacturing site. Privatization buyers saw value in its assets -- land and infrastructure -- but not in the rail bearing business. Consequently, it was outfitted to produce windows and doors while the former employees never returned to work. The buyers of the former UNIS bearing factory near the decimated town of Bosansko Grahovo reportedly agreed to a variety of capital investment obligations and employment guarantees. In its compliant, Bosansko Grahovo told the Privatization Agency that the former bearing factory, along with five other business locations, had not met a single obligation under the privatization buyout agreements. They want the agency to rescind the sales, charging the buyers only saw these as shell businesses for get-rich-quick schemes, never having any intention of running them properly or living up to the buyout agreements. They also charge Livno is continuing to run roughshod over the Bosansko Grahovo region, including making these privatization sales behind closed doors to individuals tied to the Livno government. The situation in Bosansko Grahovo is particularly grim; estimates put the destruction in the area at 95% or more, with little rebuilding in the intervening years. In 2003, a delegation from Canada reported the area looks like the war, "ended yesterday," with only a tiny fraction of the former inhabitants returning to their property. Unemployment still hovers near 100%, while key forestry, agriculture and cattle-raising efforts are unable to properly rebuild due to lack of funds and support from the government. International aid has proved important but not enough to provide more than just basic needs.