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RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHVJ #0398/01 0901126
ZNR UUUUU ZZH
R 311126Z MAR 09
FM AMEMBASSY SARAJEVO
TO RUEHC/SECSTATE WASHDC 9975
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBW/AMEMBASSY BELGRADE 0071
RUEHPS/AMEMBASSY PRISTINA 0174
RUEHSQ/AMEMBASSY SKOPJE 0289
RUEHTI/AMEMBASSY TIRANA 0160
RUEHVB/AMEMBASSY ZAGREB 0595
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 SARAJEVO 000398 
 
SIPDIS 
 
STATE FOR EUR/SCE AND EUR/ACE 
 
E.O. 12958: N/A 
TAGS: BK ECON
SUBJECT: BOSNIA:  WORLD ECONOMIC CRISIS HITS VULNERABLE 
SREBRENICA COMMUNITY HARD 
 
¶1. (U) Summary: Emboffs visited the Srebrenica municipality 
to assess the impact of the world economic crisis on area 
businesses and municipal government. Automobile parts 
manufacturer, CIMOS Srebrenica, warns that a 50% decline in 
customer orders since September 2008 will force the plant to 
layoff between 50 and 60 of its 100 employees within the next 
month or two. The SASE lead and zinc mine recently laid off 
240 of its 420 employees following a complete drop off in 
customer orders during the last two months. These layoffs 
also have an impact on local businesses dependent on 
ancillary sales and on the municipal revenue stream, which 
has already declined 40% compared to last year. Two 
additional factors compromise the municipality,s ability to 
respond to the crisis: the Republika Srpska,s delay in 
transferring to the municipality 470,000 KM in concession 
revenues it has already collected from area businesses and a 
disagreement with Tuzla Canton over the disbursement of 
427,000 KM in emergency funds designated for area businesses 
which make up 10% of the municipal budget. 
 
Customer Orders Cease, SASE Mine Layoffs Follow 
--------------------------------------------- -- 
 
¶2. (U) SASE Mine typically produces 220,000 tons of lead and 
zinc ore concentrate annually which is marketed and sold by 
its parent company, MineCo (UK). General Manager Aleksandr 
Petric reported that a decline in lead and zinc prices 
worldwide resulted in a drop off in demand for the mine,s 
product beginning in September 2008. With customer orders 
ceasing completely in December 2008, the mine stopped all 
excavation and production and began to lay off employees 
gradually.  Of 420 employees, only 180 are currently working 
on mine maintenance and preparation for new excavation. If 
MineCo cannot secure orders from existing or new customers by 
April, obtain assistance in the form of utility or other 
government subsidies, or restructure their existing debt, the 
mine will be forced to further reduce its workforce. Having 
already cut its operating costs to a minimum, the mine will 
be able to survive only until the end of this year if 
circumstances do not change. 
 
CIMOS Employee Furloughs Will Not Prevent Layoffs Much Longer 
--------------------------------------------- ---------- 
 
¶3. (U) Slovenian auto parts manufacturer CIMOS has operated a 
manufacturing plant, CIMOS SREBRENICA d.o.o., in 
Srebrenica/Potocari since June 2005. The 1 million Euro 
investment CIMOS made in the plant represents the largest and 
most successful foreign investment in the Srebrenica 
municipality.  While in the long run CIMOS is well positioned 
to expand its operations (e.g., by pursuing supply contracts 
with the Fiat automobile plant in southern Serbia), the plant 
is facing a short-term crisis. With hands shaking out of 
worry, the General Manager Mr. Azem Huremovic explained that, 
in the next month or two, he will be forced to fire 50 to 60 
of his 100 employees. 
 
¶4. (U) CIMOS began to experience the global automobile 
industry slump in September 2008 when orders for its products 
declined by more than 50 percent. In the last month, orders 
have declined 75% and management was forced to begin rolling 
furloughs at reduced salary levels, which will affect at 
least 25% of employees each month. Mr. Huremovic predicts 
that 2009 revenues will drop by 40% or more, and that only a 
cash injection or new business opportunities will save the 
plant. In the meantime, CIMOS is positioning itself to 
produce parts for manufacturers outside of the automobile 
industry and is currently filling one such order for a 
Belgian customer. While Mr. Huremovic acknowledged receiving 
46,000 KM in Tuzla Canton support, he said that further 
support from the RS government in any form would be welcome, 
and cited suspension of electricity payments as an example. 
 
Small Businesses and Municipality Impacted by SASE, CIMOS 
Crisis 
--------------------------------------------- --------------- 
 
¶5. (U) Local service and supplier companies, dependent on 
SASE Mine and CIMOS for business, are suffering as well. For 
example, SASE has decreased its local transactions by 70%, 
which amounts to a loss of 175,000 KM to local businesses. By 
eliminating food and transportation allowances for furloughed 
employees, CIMOS,s difficulties also impact the local 
 
SARAJEVO 00000398  002 OF 002 
 
 
economy. 
 
¶6. (U) New Srebrenica Mayor Osman Suljic reported to Emboffs 
that the crisis facing SASE, CIMOS and other businesses has 
contributed to a 40% decline in municipal tax revenues when 
compared with the same period last year.  The mayor predicts 
that that municipality will be required to lay off employees 
as early as next month and will no longer be able to meet the 
increasing requests for assistance to families. The mayor 
noted that CIMOS, one of the most profitable companies in the 
municipality, had been one of the largest contributors to the 
municipal coffers via its tax obligations. 
 
Municipality Waiting for its Money 
---------------------------------- 
 
¶7. (SBU) Adding to the municipality,s budget crisis, the 
Republika Srpska,s Ministry of Energy owes the Municipality 
almost 470,000 KM in concession revenue that the RS has 
already collected from local businesses. Mayor Suljic 
requested Embassy assistance to access these funds. This is 
likely to be a future problem as SASE Mine has admitted to 
Emboffs that the mine now owes 200,000 KM in concession fees 
to the RS, and identified this debt as one of those it would 
like RS government to cancel. 
 
¶8. (SBU) The municipality also has more than 427,000 KM in 
emergency funds sitting in its bank account, which the Tuzla 
Canton has earmarked for ten companies identified by the 
previous mayor.  Mayor Suljic has appealed to the Canton for 
permission to apply municipal procurement practices in 
determining the beneficiary companies, but so far has not 
received it. He maintains that some companies on the list of 
companies specified by the Canton and previous mayor should 
not receive funding unless they can demonstrate their plans 
for expending the resources and how it will impact long-term 
employment. (Note: Emboffs suspect that this conflict may be 
driven as much by politics as a desire for increased 
accountability. In earlier conversations, Suljic mentioned 
that certain companies selected were friends of Malkic. End 
note) In any event, available funds are not going to CIMOS 
and other businesses that are clearly in need. 
 
It Could not Happen in a More Sensitive Place 
--------------------------------------------- 
 
¶9. Comment:  The loss of at least several hundred mining and 
manufacturing jobs as well as secondary impacts on this 
economy would be a serious matter anywhere in Bosnia.  Each 
lost job will likely hurt at least one family.  In this 
sensitive political situation in Srebrenica, it is 
particularly unfortunate as evidenced by the mayor's 
acknowledgement that the city cannot meet all of the requests 
for food assistance. Post will work with the Republika Srpska 
CRS Development Bank, other RS officials, the European Bank 
for Reconstruction and Development and others in the 
international community to try and alleviate the situation, 
but there is no easy alternative to export markets that have 
disappeared.  End comment. 
 
ENGLISH