Starting in the first week of August, Slovak entrepreneurs and entities that acquired property during Prime Minister Vladimír Mečiar's term with as little as a 10 percent down payment will be able to pay back the Fund for National Property (FNM) with bonds distributed during the government's switch from coupon to bond privatization last summer.
But while many companies are interested in the scheme, only a handful have been given a license to engage in it. In July, the FNM announced that fourteen physical persons or entities had obtained a license to buy the approximately 3.5 million bonds that citizens got in exchange for their coupon booklets. Rastislav Zbořil, director of the FNM's section for organizing the bond market, said there were 600 companies with debts to the agency.
Out of that number, 142 have requested the license, he added. However, only 14 filed the request properly so far, Zbořil added, though the FNM hopes to give indebted firms as many licenses as possible. "We want to develop the bond market as much as possible," Zbořil said. "Therefore we want all the brokers, licensed by the Finance Ministry, to be active there."
Zbořil estimated that companies owing the FNM will be able to pay back 60 percent of their debts due in 1996 with the newly-purchased bonds. If true, that would translate into an active bond market. şşI suppose some 20 percent of the entire bond issue will be traded through licensed entities in 1996, worth approximately 7 billion Sk,'' Zbořil said.
Ask father FNM
However, trading FNM bonds requires special FNM permission. According to Rudolf Lahkovič, president of the Association of the Investment Funds and Companies, some 70 brokers requested the license to trade FNM bonds, all without success. Asked why, Zbořil attributed it to "a lack of demand."
Bond privatization was ushered in by the Mečiar Administration in June 1995 and replaced voucher privatization that had existed under previous governments.
While the Premier said his government made the switch to be more equitable in creating a class of domestic entrepreneurs, critics said it was designed to help businesses owing the FNM, most of which they claim are cronies of the ruling coalition, pay back their debts towards the agency.
In March, the government set the minimum price for which a bond can be purchased from a citizen at 7,500 Sk. However, the FNM buys the bonds from the debtors for 10,000 Sk, the value at which the government said the bonds would be worth if left to mature to 2000. Critics said this reinforced their view that Mečiar is using bond privatization to reward certain individuals and companies.
"The privatizers first cheaply obtained the property, then had various abatements, and now they are enabled to pay their debts cheaply back,'' said Brigita Schmögnerová, economist from the opposition Party of the Democratic Left and deputy prime minister of the economy in the interim government led by Jozef Moravčík in 1994.
Author: Robert Žitňanský
