Setting the privatization model for the Montenegrin Sport System

Numerous studies have shown the fundamental importance of the higher degree of involvement of the central government in the implementation of the privatization process.[1] Privatization once public (governmental) organizations is a complex socio-economic challenge.[2] This process involves long-term planning and a thorough implementation of the set of activities, not just bearing in mind a commercial aspect when developing the operational privatization plan.

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Carefully prepared model of privatization in sports involves the following potential benefits:

  • Alignment with the EU system and the overall perception of sport
  • Adapting existing system of sport financing
  • Capital inflow
  • Responsibility
  • Entrepreneurship and Competitiveness
  • Responsible tax policy

Potential shortcomings of privatization (experience):

  • Ignoring the values that sports represent
  • The influx of illegally acquired money
  • The manipulation of sports results
  • Changes in land use (location of the sport organization facilities)
  • Politicization

The experience shows that in Balkan region (Eastern European region as well) dominated “give away” model (voucher privatization) which didn’t provide new funds to enter; and a model where the organization after privatization remained in the hands of the management structure of the organization.[3] These models have proved to be ineffective, especially in the area of leadership and enabling for the new investment possibilities.

Sports organizations are established as associations of citizens (which is constitutionally guaranteed right), but it is unclear position on the rights and obligations of both the founders and other members, especially in the part of the membership fee and that the rights thus acquired. Often sporting organizations have blocked business accounts, and regularly receive financial support from both the central government and local authorities and companies with majority state ownership. This current constellation in the sport system, is the main obstacle for clearer positioning but also open investment opportunities through sport.

Toward turning to a market economy, with the aim of raising the level of productivity (often just commercial one), bearing in mind macroeconomic benefits, the privatization as a product was developed under the strong influence of the socio-political system of liberal-democratic orientation due to the high level of the globalization. The privatization of the sport system among EU region, has intensified in the 80s of the last century.[4] Recognized the commercial interest, with a view to achieving a higher level of efficiency, the process assumed a wider transformation of society, from social to private property. The most common model of privatization of sports organizations in the EU is based on the functioning of the organization as a joint stock company. When it comes to professional sports, there are three models dominated within EU countries:

  • The right sport of organization to be established as an association of citizens, or as a company
  • Sports organization organized as a corporation
  • A combined model (a corporation or association, where the team that competes in the professional league have status as a corporation)

It is necessary to begin with conduct an analysis of the work and functioning of sports organizations, members of the NSFs participating into professional national and international competition system. The analysis should include the following information’s from the sport organizations:

  • Strategic Plan
  • Register of the athletes and their contracts,
  • Annual Financial Report,
  • Audit Report.

In the process of privatization, of particular importance is the audit report, which should include:

  • List of assets (movable and immovable)
  • Valuation of assets
  • Business Overview sports organization in the last ten years

Next step involves analyzing the ownership structure of the sports facilities within the territory of Montenegro, which is used by the abovementioned sports organizations.

The final step includes a review of the system of local community financing of sport organizations.

Future amendments to the Law on the Sport, for the process of privatization in the sport system should be based on the following recommendations:

  • Model privatization should be a joint stock character
  • Full transparency in the process of purchasing stocks,
  • The right of preemption:
  1. Majority package (former players, current players and fans)
  2. Minority pack (managers, creditors and current sponsors of the sport organization).

[1] Chang, S.J. & Hong, J. 2000. Economic performance of group-affiliated companies in Korea: Intragroup resource sharing and internal business transactions. Academy of Management Journal, 43: 429-448.

[2] Megginson, W. L. & Netter, J. M. 2001. From state to market: A survey of empirical studies on privatization. Journal of Economic Literature, forthcoming.

[3]EBRD (European Bank for Reconstruction & Development). 1998. Transition Report, 1998: Enterprise performance and growth. London: EBRD.

[4]Perker, D (1998). Privatization in the European Union: theory and policy perspectives. London: Routledge.

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