Articles on the Bosnia Conflict



Bosnia-Herzegovina 2019, report #3: Aluminij conglomerate; Corruption at Gikil.

2019 Report index

Report 1 Why Bosnia; Exodus; protests; Scandal.
Report 2 Impunity, manipulation, activism
Report 3:
Aluminij conglomerate; Corruption at Gikil.
Report 4
Political charades; militarization of police..
Report 5Pride in Sarajevo
Report 6Migrants stuck in BiH on the way to Europe 

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On July 10, the day I left Bosnia for home, Aluminij, the once-powerful economic motor of western Herzegovina, shut down. This bauxite-to-aluminum smelting plant, founded in the 1970s, once employed 5,000 workers and was part of a thriving economic triangle between the port of Ploče in Dalmatia, the aluminum processing factory in Šibenik (also in Dalmatia), and Mostar. Unlike some other powerful Herzegovinan concerns, Aluminij came back from near-death after the 1990s war, but its future is seriously in question and it will never be what it was.

The story of Aluminij illustrates the wreckage and corruption involved in all larger publicly-owned companies in Bosnia-Herzegovina. It is a special kind of corruption pertaining to the operation of the powerful political parties and their functionaries. The following description of embezzlement and carelessness could apply to dozens of other companies in the country, regardless of geography or ethnicity.

Aluminij was part of the happy story of western Herzegovina during the best days of Tito's socialism, from the 1970s going into the 1980s. Then, the company employed thousands of workers and its economic ripple spread out to support farms, daycare centers for the children of the workers, hotels, restaurants, and vacation spots. Aluminij received tons of bauxite ore via the nearby Dalmatian port at Plo
če. Mostar was peaceful and people had jobs.

All that changed in the early 1990s. As the war broke out in spring of 1992, first Serbs attacked Mostar, and then Bosnian Croats (backed by Croatia) fought pro-government and Muslim forces. The city was divided between east and west, and Aluminij was shut down and plundered. However, soon after the end of the war the local Croat nationalist infrastructure, governing west Mostar under the auspices of the Croat nationalist/separatist HDZ party, arranged to revive the plant. This took place, as did many economic and political developments in that part of the country, with the guidance of the Croatian government. Croatia's President Tudjman arranged for Mostar's wartime mayor, Mijo Brajković, to become general director of the plant.

In 1997 the Šibenik-based aluminum re-processing plant TLM invested $9 million in Aluminij to create a smelting hall there. The citizens of Šibenik were glad to have this vast source of pollution leave their town—and the Croat citizens of Mostar were glad to have the jobs. I write "Croat citizens," because the company—controlled by Bosnian Croats since the war—discriminated against its former Bosniak employees and very few were rehired.

I should note that Mijo Brajković
is a rabid Croat nationalist and separatist who once asserted that Bosnia-Herzegovina was a historical aberration that had no sense in existing. This put him directly in line, ideologically, with the retrograde World War II Ustasha enthusiasts who advocated for the annexation to Croatia of as much of Bosnia as possible.

The $9 million investment from Croatia made that country a 12% owner of Aluminij, with another 44% owned by the Federation of Bosnia-Herzegovina, and the rest, another 44%, owned by small holders, many of them workers at the plant. Aluminij produced raw aluminum out of bauxite and sent it to TLM for "re-processing," or "rolling," into aluminum sheet and other manufactured materials. So at the end of the last century a well-functioning economic triangle had been set up, as mentioned above, between Mostar and Dalmatia. Aluminij constituted a majority customer of the port at Ploče.

But economics, corruption, and carelessness conspired to wreck the plant. The first big problem was the cost of electricity—and until this summer, Aluminij was consuming as much as 20% of Bosnia-Herzegovina's electrical usage! Before the war, Aluminij had been a subsidiary of Bosnia's energy conglomerate, Energoinvest, which was well-employed domestically and abroad, and in a comfortable position to subsidize the plant. But after the war, not so.

Thus over recent years Aluminij ran up debts that it could not repay, or that its managers did not bother to resolve. This, while the company was paying its ethnically homogenized workers  more than 3,000 KM in monthly wages (roughly $2,000), easily three times the national average. The high pay kept Aluminij's 900-odd workers quiet as other large regional companies, such as the Soko aircraft manufacturer, were biting the dust.

The government of the Federation provided generous subsidies from its budget—that is, from the entity's taxpayers—to keep Aluminij functioning. Subsidies in recent years reached as high as 285 million KM (roughly $190 million). Meanwhile, economic practices of the plant's managers were anything but practical. One recent analysis read thus: "The entire story of Mostar's Aluminij after the war is a story of murky actions of the highest ranking officials and members of the administration of the company, a series of political personages, on one hand, and the attempts to ensure cheaper electricity for the 'thirsty' process of electrolysis, on the other."

With the HDZ running Aluminij via its functionary Mr. Brajković
, and with great subsidies coming in from the Federation—and to some extent from the government of Croatia as well, for political reasons—Aluminij came to be sarcastically known as "HDZ's bankomat (ATM)." Company directors received enormous bonuses and salaries, and enjoyed an opulent lifestyle. This, and the high wages of the workers, was perhaps supportable in the 1980s, but not in the past generation, when the price of aluminum has fallen significantly.

Along with poor economic practices, this led to the downfall of the firm. For years Aluminij agreed to damaging contracts of various types, contributing to the company's mounting deficit. One such deal involved the recycling of steel from a defunct factory, valued at 46 million KM. Aluminij's manager, however, let the material go for 6 million KM.

By this year, Aluminij owed nearly 400 million KM and local electricity-producing companies were refusing to sell the plant electricity at any price because of the debts. And while economic policies worked to ruin the company, managers were happily embezzling what they could. As long ago as 2014, financial police addressed several reports on these practices to the Canton prosecutor, who ignored the reports. The financial police had named 48 company officials suspected of illegal actions and "abuse of position" (corruption).

Not the least of these was Mr. Brajkovi
ć himself. He bought an apartment in Mostar for 13,000 KM, and then, with 420,000 Deutschmarks (about $280,000) of Aluminij's funds, traded it for a fine three-room flat in Zagreb. After this, by the time of his retirement he collected some 700,000 KM in "manager's awards," severance pay, and luxury items such as jewelry, Swiss watches, and perfume.

Thus with mounting debts, higher-priced electricity, and reduced demand for aluminum, Aluminij closed this July. This put 900 employees out of work. Around the closure, recriminations have been fired back and forth between Croat nationalist leaders and Federation officials, among others. Most upset, naturally, were the workers who faced an uncertain future. There was talk about reviving the plant one way or another, but in no case would that include re-starting the smelting operation. Only processes depending on gas will be able to be employed.

Amidst the uncertainty about the future of the now-dormant company, workers began to stage protests around Mostar. These are primarily local Croats who, for many years, had been bribed by their political leaders via the unrealistically high wages mentioned above. The workers and their families and now ethnically homogenized Croat communities constituted a crucial loyal voting body that kept the HDZ in power. And the HDZ, for many years, has been led by Dragan Čović
. Čović was a manager at Soko before the war, and general director of that company for a time afterwards.

The story of Soko and Čović is a more involved and sordid one, which I won't go into in depth here. But suffice it to say that not only did Soko fail and Čović thrive, but the newly minted tycoon (complete with controversial villa) ultimately gained the position of foremost leader of the Bosnian Croats—especially those concentrated in western Herzegovina. He has operated at the pinnacle of a nationalist, separatist, plundering apparatus and has, for more than one non-consecutive term, occupied the state-level Bosnian presidency as its Croat member.

Čović has been all but untouchable in the eyes of his flock of Croat supporters—until the fall of Aluminij. It's not that ordinary people did not know how he got rich over the years, participating in raking off funds donated by the Croatian government and in various other schemes. They knew, but they were preserving their own privilege by keeping quiet. Now all of a sudden, abandoned Aluminij workers have been blocking the highways and chasing after the tycoon, yelling, "Čović, thief!", because they consider him to be ultimately responsible for the downfall of their company.

Analysts have said various things about this interaction. Commentator Gojko Berić
was hard put to refrain from sarcasm, observing the opprobrium of those same employees who had nothing to say when their Muslim co-workers were abandoned after the war. Dragan Markovina noted the failure of class consciousness on the part of the Croat workers, which led to the absence of solidarity from other workers around the region when this could have been helpful. And others have questioned the future of the HDZ itself as an effective player in national politics. But Bosnia's Croats—like the Serbs and Bosniaks, rounded up in political ghettoes—for the most part do not see the way out of the trap of ethnic homogenization.

In recent days, as it happened, the news came out that for now, Aluminij will retain nearly 400 workers, and will provide severance pay to another 500. It may turn out that the retained workers will have to work a couple of months without pay to subsidize that severance pay.

There are a couple of overriding political/economic dynamics at play that have led Aluminij to its present disgrace and, by extension, that have kept Bosnia-Herzegovina one of the poorest countries in Europe since the end of the war. The most obvious of these is the strankokratija, the "party-ocracy." It is the political parties that run the country, and all but one or two of the smaller ones operate on the impulse of profiteering. Yes, ordinary people vote for the same corrupt parties over and over again, but they have little choice. As long as the Dayton constitution remains in place, enabling the ethnic-based parties to rule, honest actors cannot gain a political foothold.

And the mode of rule is such that the parties name their faithful operators as directors of the state-owned companies, and with the results such as those described above, it's all downhill from there. The managers look to line their own pockets; the party leaders take a cut; and the country goes to bankruptcy.

An insightful article recently said that one can't blame "wild capitalism" (divlji kapitalizam) for what's going on in Bosnia, because the transition from a controlled economy to a "free market" one has not been undertaken. The article noted that there are still some 550-odd state-owned companies with so much debt that privatization is hardly an option. Yet, on the other hand, as the article points out, in a sense the state-owned companies have been definitively privatized—into the hands of the ruling political parties. And they are the worst kind of privateers.

The article quoted a Sarajevo-based economics professor as saying that Aluminij is the embodiment of a completely deformed system in a society where the public companies have long ago become just a source of plunder for the political parties: "The public companies are essentially in the private ownership of the political parties and whoever is in power manages them. That is, in all aspects of business from employment to investment to borrowing, the parties decide."

This criticism supports the idea that real privatization would be the right step—as long as the state companies were put into the hands of responsible managers whose priorities were the health of the company and the economy. The only other possibility would be for the state, that is, the parties that run the government, to shape up and behave honestly. No one can assert that that is going to happen. A couple hundred thousand recent emigrants have vividly illustrated what they think about that. And as for the idea of honest privatization, well, that looks like a bit of a long shot as well.


A year ago I wrote about the Lukavac-based company GIKIL under the heading "Toxic Capitalism in Bosnia." There, I discussed the criminal irresponsibility of one of many foreign-owned and administered factories in Bosnia, particularly in the realm of environmental irresponbility. As I described, last year GIKIL, a coke-producing plant near Tuzla, committed at least two horrendous environmental crimes, once spilling tar into the nearby river, and once letting loose hundreds of cubic meters of ammonia.

The 2018 story illustrated a scenario of careless, sometimes complicit local administrators and greedy international operators. There's more to the story. With regard to GIKIL, that greed came into high relief this summer with the Lukavac arrest of billionaire Pramod Mittal, until recently chairman of GIKIL. Mittal was arrested in late July with two fellow Indians nationals and two Bosnian directors in the company. They are suspected of "organized crime and abuse of power" for having embezzled millions of KM from GIKIL.

Pramod is the brother of the London-based steel magnate Lakshmi Mittal, chief executive of ArcelorMittal, which owns a controlling interest in the Omarska mine near Prijedor, and in the steel plant in Zenica. Worldwide, that company employs some 300,000 workers and brings in $30 billion annually. And brother Pramod, owner of
Global Steel Holdings (GSHL), is not so bad off either. He was able to blow $82 million on the Barcelona wedding of his daughter in 2013—the second most-expensive wedding in history.

The Canton prosecutor in Tuzla has accused Pramod Mittal of raking off some 21 million KM (roughly $14 million) to private accounts, through shady deals between 2003 and 2015. Prosecutors suspect that the money was funneled to
GSHL without any documentation or justification of the expense.

GIKIL is an important company in Lukavac, where it employs a thousand workers. That has not stopped the avaricious Pramod from poisoning those workers and the local environment. And his record in other parts of the world where he has holdings, including Nigeria, Bulgaria, and Liberia is just about as dismal. One article describes Mittal and his company as having a "record of social destruction...Its actions in Nigeria, Libya and Bulgaria over the last five years illustrate a total institutional disregard for the company’s employees and their communities, as well as for the law and the national economies in which they operate. The record includes lengthy pay arrears of up to seven months, leading to numerous worker suicides. The company is also known for cannibalising equipment and exporting it.”

And for that matter, Pramod Mittal has not been so conscientious in his home country, either. There, he got into trouble for borrowing money to buy materials for a new factory in Bosnia, and depositing that money in off-shore accounts. In trouble to the tune of $300 million, Pramod was bailed out when big brother Lakshmi paid off the bill. Not a big deal for someone valued by Forbes at over $17 billion.

The billionaire Pramod and his two Indian cronies were set to be held in jail for the standard month-long investigative period, but they ended up cooling their heels for only about a week. By the end of July he was free, having paid bail of a million euros—and as guarantee, another 21 million KM to cover the amount he was suspected of having embezzled. But Zuhdija Hasanhodžić, former director of a local partner company of GIKIL, now in bankruptcy, was not satisfied. He said that there's a variety of other things that Mittal did to hurt GIKIL, separate from the 21 million KM embezzlement.

Hasanhodžić points out that he had tried to call attention to Mittal's criminal ways as early as 2011, and that GIKIL was operating in the red for most of Mittal's term, excluding two or three years. He also asserts that this kind of laxity could not have been possible without the tacit approval of local authorities who were on Mittal's payroll.

It begins to sound a bit like Aluminij. Hasanhodžić accuses Mittal of stealing more than 100 million KM overall—and he is not optimistic that even the 21 million KM just fronted by Mittal will do GIKIL any good. First, the court process against Mittal has to run its course, and that can take ten years—if Mittal even bothers to return to Bosnia.

GIKIL is not in as bad a state as Aluminij, but it will take some serious good management for it to recover and stay in business.


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