Damir Miljević for NAP: We must not allow Agrokor companies to take money out of BiH

The most important topic that the media have been dealing with in recent days in BiH, and for a longer period in neighboring Croatia, is certainly the crisis in the Agrokor company.

One of the leading economic analysts in Bosnia and Herzegovina, Damir Miljević, speaks about the problems in the Croatian company Agrokor in an interview with the Patria News Agency.

Damir Miljević was born in Banja Luka in 1958, graduated from the Faculty of Economics in Banja Luka, and obtained his master's degree from the Faculty of Economics in Zagreb. He specialized in agricultural product marketing at the prestigious American Colorado State University.

How do you see the crisis in Agrokor, how did it come about?

Well, it is obvious that the problems in Agrokor are not new and that the current situation has been brewing for at least a few previous years. The fact that Western banks did not want to support Agrokor in its plans and that Todorić had to turn to Russian capital was the first indication that something was fundamentally wrong. When you also know that during the time of cheap capital in Europe, Agrokor, for example, borrowed on the Berlin Stock Exchange at interest rates above 9%, it is clear that the entire system was on shaky legs and that the appetite for growth and expansion was far greater than the company's real capabilities.

Who is most responsible for the crisis and could it have been avoided?

In my opinion, the crisis in Agrokor is primarily a consequence of poor management by the company's owner and management, and a poor business model based primarily and exclusively on expansion, i.e., physical growth without much regard for development and the need for the company to stabilize from time to time, both financially and operationally. The race for growth at all costs always required additional money to finance that growth, so Agrokor essentially went bankrupt due to its inability to meet its obligations to both financiers and suppliers.

How and in what form can the crisis affect BiH?

Regardless of what the authorities in BiH say and how much they try to calm the situation, the crisis with Agrokor is very serious and will shake the entire region. The fact that the Croatian government had to essentially take over the management of the company to save what could be saved speaks to this. This has also alerted the authorities in Slovenia and Serbia, and as far as I can see, the Slovenians will also pass a law by which they will try to minimize the damage caused by the crisis in Agrokor, primarily related to Mercator. In BiH, Agrokor owns about ten companies, and it is impossible for everything to pass without consequences for the BiH economy, especially since the debts to Konzum's suppliers in BiH are large, and there are quite a few BiH companies that supplied their goods directly to Agrokor companies outside of BiH. The situation is more than serious, and it would not be good if, due to the authorities' indolence, the situation with Tuš or the situation with construction companies from Slovenia in BiH were repeated, after which domestic companies were definitively left without their claims.

How should the authorities in BiH approach the crisis in that company?

Well, the authorities in BiH should sound the alarm and start working day and night on a rescue model, both for domestic companies within Agrokor, in cooperation with the new management of Agrokor and the Government of Croatia, and on finding a way out for domestic companies that are suppliers to the Agrokor concern, both within the country and abroad. What must absolutely not be allowed is for Agrokor's companies in BiH to serve as a bargaining chip in saving Agrokor in Croatia, which is the real priority of Agrokor's new management. In addition, it is important to prevent Agrokor's companies in BiH from taking money out of the country while the crisis lasts. In this context, it is necessary to adopt appropriate legal regulations, which are currently lacking, and to make it clear to the management of the concern's companies in BiH that they are BiH companies, regardless of their foreign ownership, and that they must start cooperating seriously with the domestic authorities.

What future awaits those most affected by the crisis (suppliers) if the crisis prolongs?

The future of suppliers is not bright and is absolutely uncertain, and therefore suppliers must self-organize and take an active role in resolving the crisis, as they will be the most affected by it. BiH authorities should think carefully about amending the VAT collection law to ease the position of suppliers and their subcontractors, because otherwise, a chain reaction of illiquidity and inability to pay will occur, which could be devastating for a good part of the country's economy.

How do you see the solution to the crisis and is it even possible to resolve the crisis?

Every crisis can be resolved, including this one. What is important to know in this regard is that the Agrokor crisis will last at least the next two years, and it is still not clear today in which direction it will go. Whether some of the companies within Agrokor will have to be sold to settle debts, whether the system will undergo financial consolidation, or whether, most likely, some combination of models will be pursued. Be that as it may, BiH authorities and domestic suppliers must play an active role in this entire process so as not to be left empty-handed. Whether everyone understands how serious the situation is and what the potential short-term and long-term damages are to the BiH economy, I am not entirely sure. What I am one hundred percent sure of is that in such major crisis situations, everyone first looks after themselves and their own interests, so we should not expect Croatia to save the business of Agrokor's companies in BiH at the expense of companies from Croatia, no matter how much the official policy of our neighbors tries to convince us of that.