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THE PENSION AND DISABILITY INSURANCE FUND OF THE REPUBLIC MADE A DECISION ON THE ACTIONS TO BE TAKEN FOR REGULATING THE OBLIGATIONS THAT HAVE BECOME DUE, NAMELY, FOR PAYMENT OF CONTRIBUTIONS TO THE FUND

IMPROVED STATUS OF COMPANIES READY FOR PRIVATIZATION




Belgrade, May 15, 2007
A majority of economic entities with greater portion of public capital commenced preparations for privatization in compliance with the Privatization Law, burdened with earlier debts to banks, state, commercial creditors, employees, low capacity utilization level and a very large number of employees relative to optimum required, insufficient receipts and lack of working capital. Many actions were taken for preparing the economic entities, i.e., companies, for a successful privatization, which is the priority in the process of carrying out reforms. The actions especially refer to abatement of obligations undertaken by capital buyer.

To that end, it has been prescribed that debts to state creditors, incurred by December 31, 2004, with unsettled interest, should be paid out from the funds obtained from sale of capital of a company to be privatized. Also, it was made possible for companies that the economic-social status of employees, lacking own funds for severance pay in compliance with the Labor Law, could be regulated by payment of single pecuniary compensation from the budgetary funds of the Republic of Serbia. However, all of these actions are inadequate in order to provide continuous operation of companies to be privatized and regular settlement of obligations that have become due to the state, employees and other creditors, due to impossibility to provide working assets from external sources. In the stated circumstances, due to insufficient income, the entities to be privatized do not, in most cases, discharge the obligations referring to payment of earnings. The consequences of the above stated are unlinked employees’ years of service, employees’ charges brought against a company for not linking years of service, jeopardizing the existence of a privatization entity due to debt enforcement in conformity with the Tax Procedure and Tax Administration Law, applying sanctions due to non-payment of taxes in compliance with the same Law, difficulties in the implementation of social programs in the privatization entities, as well as complicated privatization, because of high amount of debts that can be enforced. The companies engaged in training of disabled persons for work have faced the same problems.




In the previous period, the obligations that have become due, relating to payment of contributions for pension and disability insurance of employees, were discharged by undertaking the obligation for payment of the debt of Employee Pension and Disability Insurance Fund of the Republic with the Fund for Development of the Rep. of Serbia (under Foreign Exchange Credit Contract of June 13, 1997) by the privatization entity, and in accordance with the corresponding Government's resolutions.




However, as the Employee Pension and Disability Insurance Fund of the Republic has no further obligations to the Fund for Development of the Rep. of Serbia, in order to avoid the stated consequences for privatization entities (debt enforcement relating to unpaid contributions through legal action or by the Tax Procedure and Tax Administration Law, applying sanctions – infringement and criminal charges and fines under the same Law), consequences for employees (unlinked years of service and impossibility of exercising the rights originating from pension and disability insurance) and for the state (failure to carry out the privatization plan and increased number of privatization entities for which bankruptcy proceedings are instituted), the Employee Pension and Disability Insurance Fund of the Republic suggested that from subsidies of the Rep. of Serbia, being within the budgetary funds of the Rep. of Serbia, intended for transfer to the Employee Pension and Disability Insurance Fund of the Republic, from the section of the Ministry of Finance, the payment of obligation that has become due, referring to contributions for pension and disability insurance of employees, should be recorded for the following categories of economic entities:




the privatization entities being in the final phase of the privatization process, with the consent of the Ministry, competent for economic affairs, which will, in each individual case, evaluate the adverse effect of possible labor and legal disputes and debtor-creditor relations with employees and former employees on successful privatization;

companies engaged in the training of disabled persons for work, with the consent of the Ministry competent for labor and employment.




Based on the consent of the Departments with portfolio, the Employee Pension and Disability Insurance Fund of the Republic shall record the discharge of liabilities that have become due, relating to payment of contributions for pension and disability insurance of employees in the amount determined by the Minutes of the state of arrears referring to contributions for pension and disability insurance of employees. The Minutes shall be drawn up by the Ministry of Finance – Tax Administration, for the commitments incurred as from the date of payment of the stated contributions in compliance with item 3. of the Government's Resolution 05, no. 113-2002/2006-1 of April 20, 2006 by the date the Minutes were drawn up, and from January 1, 2005 at the earliest, with the consent of the Departments with portfolio and in cooperation with the Employee Pension and Disability Insurance Fund of the Republic and stated entity categories, in accordance with the directions to be prepared by the Ministry for Economic Affairs in cooperation with the Ministry of Finance.




Prior to recording payment of debt that has become due, the Employee Pension and Disability Insurance Fund of the Republic shall make a Contract with the privatization entities, namely, with companies engaged in the training of disabled persons for work, on regulating the rights and obligations. The amount of financial commitment, the payment of which is recorded, term for refunding (up to 360 days at the latest as of the date of capital sale), and similarly, are stipulated under the Contract. The Contract on regulating the rights and obligations shall be an integral part of the documentation for privatization, in order that potential partners get familiar with undertaken obligations.




In compliance with the signed Contract, the recorded funds are returned to the Employee Pension and Disability Insurance Fund of the Republic within a 360-day term at the latest, as of the date of completion of the transaction defined by the Contract on sale of the privatization entity through tender, namely, as from the date of payment of the purchase and sales price of capital or the first instalment of the purchase and sales price for entities privatized through public auction.




It has been noted that years of service would be linked for approx. 50 000 employees, mostly since July 2006 and primarily for the biggest companies such as FAP – Priboj, Prva petoletka – Trstenik, Industrija kablova (Cable Industry) – Jagodina, Zastava-Kragujevac, IMT, IMR, DMB, Viskoza, as well as for 50 entities at the most to be privatized through public auction. Also, it has been mentioned that all of these companies implemented social programs and that employees with less than 2 years till the fulfillment of one of the conditions for retirement on pension, have already left their companies.

 
     
 
 
 
 
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