Goals and policies of the privatisation process

Peter Bisák
Minister of Privatisation & Administration of National Property, Slovak Republic


Overview

The privatisation process in the Slovak Republic is a key part of economic reform. In 1991-93, the first wave of privatisation took place. This covered 678 state enterprises grossing SK169 billion in industry, public services and other areas. This wave included enterprises under the Ministries of Industry, Agriculture, Post and Telecommunications, Trade and Tourism, Construction and Civil Engineering, Finance, Health, Forest and Water Economy, Transport and Culture, together with the Slovak Bureau of Statistics, the Slovak Geological Institute and the Slovak Institute of Geodesy and Cartography.

The first wave of privatisation also involved smaller enterprises in the retail, restaurant and catering and accommodation services. This small-scale privatisation also included the sell-off of property through public auctions; in all, it grossed SK12 billion from some 10,000 smaller operational and retail units.

The second wave of privatisation began in September 1993 and ended in June 1996. Initially it included the sale of 540 state enterprises in industry, public services, tourism, construction and civil engineering, agriculture, water supply, transport, post and telecommunications, healthcare, culture and finance. This earned SK258 billion.

The privatisation process is governed by Act No 92/1991 on the Terms and Conditions of Transferring the Title of National Property to Other Entities. This Act was subsequently amended in the light of the experience and knowledge gained as the privatisation process unfolded.

Privatisation methods

Part of the first wave of privatisation was in voucher form. In the second wave of privatisation, the voucher method was replaced with the state bond method. This gives bond-holders several ways to use these bonds as a payment for house purchases, additional pension or medical insurance policies and the purchase of securities. Legislation governing state bonds was elaborated in the amended Decree No. 134/1994 on The Issuing and Use of Investment Vouchers in April 1996.

Privatisation aims

In January 1995, the Government outlined the main objectives of the privatisation programme. These are:
  • to establish the conditions which allow the formation of a powerful domestic entrepreneurial community;
  • to achieve the highest level of employee participation;
  • to support the use of external capital in the privatisation process, in particular in areas where external know-how, financial investment and technical modernisation are required.
In essence, the Government does not see the privatisation process as a means of securing the greatest possible income. Rather, it aims to ensure the development of these assets through their transfer to the private sector. The Ministry of Privatisation and Administration of National Property is authorised to resolve restitution claims under Act No. 403/1996 on the Mitigation of Some Cases of Property Injustice and later provisions, and under Act No. 87/1991 on Non-Court Rehabilitation. About 17,000 restitution applications were submitted under the law; 1,000 remain to be dealt with.

The privatisation process has entailed resolute action in the case of enterprises which are either insolvent or in debt. Liquidation is a positive move: it allows the property of liquidated enterprises to be turned over to new business programmes, shifts employees into productive areas, halts non-effective production, abolishes unprofitable, indebted, morally and physically obsolete or even non-functioning enterprises and settles debts and commitments to creditors, thereby eliminating secondary insolvency.

Strategic sectors

As a result of the Government's programme declaration, and based on Ministry of Economy proposals, Act No. 192/1995 on Protection of the Interests of the State in the Privatisation of Important Strategic State Enterprises and Joint Stock Companies was approved. The following list describes strategic organisations which are crucial to ensuring the stability of the Slovak economy:
  • enterprises which have a crucial impact on power tariffs which would significantly influence inflation factors within several sectors and in the wider society;
  • enterprises which provide services related to the operation and development of all areas of the economy and life of individual regions;
  • organisations of vital importance to all other sectors;
  • security and defence enterprises;
  • enterprises which play a role in stabilising the economy in order to eliminate fluctuations related to the imports of strategic inputs;
  • enterprises which constitute the basis for a series of other industries;
  • enterprises which deal with unique deposits;
  • enterprises with business on such a large scale that it is in the interests of the state to keep them going without affecting its level of efficiency.
The open assessment of the strategic interests of the state via selected enterprises and joint-stock companies is essential. In accordance with further economic development, some changes are expected.

Foreign capital role

Foreign capital enters the Slovak economy in two ways: by direct foreign involvement based on acquisition of and capital participation in Slovak firms; and mutual arrangements with the management on the allocation of shares and selection of areas of activity.

Foreign investors are bringing their expertise, technological innovations and financial capital to Slovakia. According to the latest Finance Ministry data, the volume of foreign investment in the privatisation process through so-called standard methods, via direct sales and public tenders for sale of property or shares, amounts to SK1,835 billion.

Conclusion

In spite of the fact that the second wave of privatisation was completed in the first part of 1996, it would be premature to draw any explicit conclusions. However, macro-economic statistics on the Slovak Republic provide evidence of the success of the privatisation methods which the Slovak Republic has adopted.


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