The general framework for liberalization and regulation of public utilities in countries of ex-Yugoslavia

This edition of Network Industries Quarterly aims to provide insights into the general legal framework for liberalization and regulation of public utilities, notably communal services, in countries of ex-Yugoslavia. Among ex-Yugoslav countries, two are European Union (EU) Member States (Slovenia and Croatia), two are in the process of accession negotiations (Montenegro, Serbia), one is a candidate country (Macedonia) and one represents a potential candidate country (Bosnia and Herzegovina). After World War II, ex-Yugoslavia was a unique example of self-management, and a specific system of governance and societal ownership of companies, including public utilities. In the early 1990s, Yugoslav disintegration and democratization coincided with economic transformation from a socialist market economy to a market economy. However, legacies of the past economic system are still present in some aspects, albeit in some countries more than others, and influence the process of liberalization of public utilities. This process was urged by joining the EU or is still urged by EU accession requirements. Most of the impetus for liberalization comes as a response to low investments in infrastructure, as most of these countries have reached high debt levels and therefore a private finance infrastructure seems to be a solution. The market liberalization agenda began to come to the front, and regulatory reform urged creation of independent regulatory agencies for state-wide public utilities such as electricity and gas markets. On the other side, municipal (communal) services are mainly provided by local authorities and public operators. Liberalization agenda in many of these countries presupposes privatization of public undertakings, contracting out or alternatives to privatization such as Public-Private Partnerships (PPPs) and concessions, with special attention given to the general legal framework for PPPs and concessions in these countries. The following are some of the issues the country contributions have strived to address: • The scope and characteristics of public undertakings providing utilities and the character of public utilities owned or regulated by local self-government units; • PPPs and concessions as an “alternative” to full privatization: basic overview of active projects and reference to the legal and institutional framework for PPPs and concessions; • Liberalization agenda and the main issues in regulating local public utilities (communal services); • The character of regulatory powers and challenges posed to municipalities in regulating communal services. Although all country contributions have a similar structure, the level of detail may differ, notably due to the existing level of development of the normative and institutional framework in a respective country and different experiences in private sector involvement. After presenting the institutional and normative setting, in the concluding remarks authors have identified the main pitfalls and prospects for change. Although differences exist, it seems that the volatile political situation in many countries of ex-Yugoslavia and the fragile political will to perform necessary reforms of public (including local) administration and public sector of the economy are the most important deficiencies. Therefore, it is necessary to adjust legal and regulatory frameworks and create a stable economic environment. Local administration and business communities have to understand the concept of PPPs and private finance initiatives, while policymakers and local authorities must develop adequate plans and facilitatory structures for potential PPP projects, including capacities to initiate projects and perform cost-benefit analysis for the potential projects.