Social Democratic Party (SDP) parliamentarian Slavko Linic, who was a Deputy Prime Minister from 2000 to 2003, said on Monday before a parliamentary commission of inquiry into INA's privatisation that the first stage of the privatisation of this oil and gas group had been launched due to a difficult situation in the state finances and the economy which the government led by SDP chief Ivica Racan inherited from the Croatian Democratic Union (HDZ)-led government in the 1990s.
"INA was not the reason for the privatisation," Linic said in response to a question from Boris Kunst of the HDZ who asked why the Racan cabinet had opted for the privatisation of INA which Kunst described as a strong regional oil company at the time.
Linic said that the difficult situation in the country, including a HRK 10 billion loss in agriculture, an 8 billion loss in the shipbuilding industry, and a HRK 9 billion budget deficit, which he said all needed to be covered.
Linic said that the Racan cabinet had decided to use money to be collected from the sale of 25 percent plus one share of INA for reviving the ailing agriculture and shipbuilding.
"Reforms had to be carried out and reforms cost," the SDP official said.
In response to Kunst's criticism about allowing Hungary's MOL to acquire bigger managing rights than it was entitled to with the purchase of the said stock, Linic said that special rights, such as the right to veto some decisions, had been awarded more as a guarantee that "Croatians, being a majority owner, would not misuse their rights."
According to Linic, MOL could use its veto rights regarding possible investments in INA's nonbasic business activities, such as tourism or real estate.
Josip Salapic of the HDZ asked Linic about the basis for the appraisal of INA's value before the Racan cabinet embarked on its privatisation.
Linic said that INA's book value was about HRK 9 billion, with experts warning that its market value would be much lower.
However, MOL offered USD 500 million for 25 percent plus one share, Linic said, adding that this positively surprised the government.
"The USD 505 million was only for the payment of 25 percent plus one share and nothing more," Linic said in response to HDZ MP Ana Lovrin's comment that the Privatisation Act banned the transfer to third persons of any voting rights stemming from INA shares owned by Croatia.
Linic said that the good price was achieved thanks to good negotiating skills of Ljubo Jurcic, Economy Minister in the Racan cabinet.
Linic also testified that the HDZ had no objections to the first stage of INA's privatisation at that time as the sale had been conducted fully transparently.
Linic said that objections appeared when the HDZ government led by the then Prime Minster Ivo Sanader embarked on the modification of the agreement with MOL and further privatisation of INA.
Jurcic continued testifying before the commission on Monday.
As regards the testimony of Ivo Sanader, who is expected to appear before the commission on Tuesday, the commission's chairwoman Dragica Zgrebec said that the postal service had informed the commission that Sanader had not been served with the summons from that parliamentary body.
Witnesses -- current and former Croatian officials -- are expected to explain certain decisions regarding the privatisation of INA or taking over from the company its gas business. Their testimonies are expected to cover the entire privatisation process, until the moment when the Hungarian oil company MOL acquired a 47 percent stake in INA.
