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Cabinet: Privatisation on track

The ruling coalition defied critics and allayed investor fears on May 9 when government deputies who had seemed divided on the speed of privatisation rallied to push through important legislation in parliament.
Weeks of apparent fudging over a new telecoms law, which until passed would hold off the already delayed privatisation of state fixed-line monopoly Slovenské telekommunikácie (ST), were left behind when the bill passed its first of three readings in accelerated proceedings May 9.
The move was one of the strongest recent signs that the coalition cabinet is united in forging ahead with its privatisation plans, something investors had been growing increasingly concerned about after the leader of the coalition Democratic Left Party (SDĽ), Parliamentary Speaker Jozef Migaš, in April came out in support of a proposal to take privatisation powers away from the government and turn them over to parliament. Critics of the plan said it would only further delay important sales of major state assets, such as utilities and banks.


Prime Minister Mikuláš Dzurinda (right) and independent MP Róbert Fico pointed the way for future privatisation during a May 9 meeting.
photo: TASR

The ruling coalition defied critics and allayed investor fears on May 9 when government deputies who had seemed divided on the speed of privatisation rallied to push through important legislation in parliament.

Weeks of apparent fudging over a new telecoms law, which until passed would hold off the already delayed privatisation of state fixed-line monopoly Slovenské telekommunikácie (ST), were left behind when the bill passed its first of three readings in accelerated proceedings May 9.

The move was one of the strongest recent signs that the coalition cabinet is united in forging ahead with its privatisation plans, something investors had been growing increasingly concerned about after the leader of the coalition Democratic Left Party (SDĽ), Parliamentary Speaker Jozef Migaš, in April came out in support of a proposal to take privatisation powers away from the government and turn them over to parliament. Critics of the plan said it would only further delay important sales of major state assets, such as utilities and banks.

"There shouldn't be any concern," Finance Minister Brigita Schmögnerová told The Slovak Spectator just after the parliament session. "You can see that even today parliament discussed the Telecom Law and approved it in the first reading in accelerated proceedings, which shows that there is a strong commitment not to delay0 the privatisation of Slovak Telecom."

The minister added that the recent political discord within the coalition, which had included Migaš, the head of Schmögnerová's own SDĽ party, voting against Prime Minister Mikuláš Dzurinda in a no-confidence vote, was in no way jeopardising the government's planned programme of privatisation.

"I simply deny this suggestion," she said. "We are at a time when the banks are about to be privatised, and there is no reason for any concern. I am sure the same can be said for the future privatisations of strategic companies. Politicians always have to make a fuss about something, but the media and investors should distinguish [between real problems and political squabbles]."

Transport, Post and Telecommunications Minister Jozef Macejko backed Schmögnerová's stance. The minister said that privatisation was very much still on track, and that the recent moving of proposals including the telecoms bill and the Bankruptcy and Compensation Act to accelerated legislative proceedings was a positive sign of the government's commitment to privatisation.

"I think we should speak rather of an acceleration than a slowing down of the process," he said outside the parliamentary chamber.

Nervous markets

The political infighting that has been an ever-present feature of the coalition's 18 months in power came to a head with the Migaš vote on April 11. Combined with concern over the direction of the government's economic policies and particularly the SDĽ's on-going battle with right-wing Deputy Prime Minister for the Economy Ivan Mikloš, the cabinet conflict began to affect confidence in the economy last week when the crown fell dramatically to a record 48.3 to the US dollar.

The political uncertainty and news May 3 that there would be a further delay in talks on the privatisation of oil pipeline Transpetrol and the state gas utility Slovenský plynárenský priemysel (SPP) were also, some analysts believed, behind last week's intervention by the central bank to prop up the crown when it dropped to as low as 42.68 to the euro.

To cloud matters, the agenda of this month's parliamentary session, which began May 9, contained a bill submitted by the leader of the non-parliamentary Smer party Róbert Fico, whose electoral support in recent polls has been running from 23 to 25%.

Fico's bill threatens to derail privatisation by calling for decision-making on sales of strategic companies to be stricter, by demanding the state keep a 51% stake in those companies, and by transferring power to decide on privatisation from the cabinet to parliament. Fico's proposal stipulates that at least two-thirds of parliamentary deputies (90) would have to support a privatisation. Although cabinet members such as Telecom Minister Jozef Macejko have protested against the bill, saying that it would slow down the sale of Slovenské telekommunikácie and cost the state 40 billion crowns, some MP's from Migaš' SDĽ party have said they support Fico's proposal.

But following a meeting with Prime Minister Dzurinda May 9, Fico said that he was not seeking to delay privatisation, merely to ensure transparency in any sale of state stakes. Dzurinda agreed that openness in privatisation was crucial and that this in itself did not entail any hold-ups in the pace of privatisation.

Other cabinet members were also at pains to calm the waters, stressing that tension within the government had dropped and that there was no cause for concern over the stability of the coalition despite Migaš' erratic behaviour.

"Yes, I do agree that this could raise many questions, but on the other side it is important to note that it [the non-confidence vote in Dzurinda] was more or less his [Migaš'] own initiative. The second point is that he always claimed, even though he was in favour of the non-confidence vote, that there is no other choice than this coalition. His vote was a sign of some criticism of the cabinet and the prime minister, and while it was not appropriate, I have explained what was behind it," said Schmögnerová.

She added what was most important was that parliament could still pass legislation smoothly and that the coalition was still functioning.

Dzurinda's recent proposal to fuse the centre and right parties within the ruling SDK party (see story pg 1), will also, according to Former Telecom Minister Gabriel Palacka, assure that privatisation remains on track.

"This [political fusion] will be a guarantee that there will be one political party that will promote privatisation, will promote free-market ideals and philosophy," Palacka said. "Some statements [regarding privatisation] from the coalition, and particularly from the SDĽ, have been rather confused and ominous, but I hope that time will show that these were individual [and not party] pronouncements. Today's events in parliament have shown that there is no will in the government to support the ideas of deputy Fico and that the process of privatisation will continue as it has so far."

Somewhat mollified

The united front within the cabinet has partially allayed fears from investors that disunity would lead to privatisation further delays. However, concerns are still being voiced over the pace of structural reform, particularly in the banking sector.

"Political uncertainty is a factor, it is an issue [for investors]," said Matthew Vogel, emerging markets senior economist at Merrill Lynch. "The privatisation of ST is important because it will pretty much ensure that Slovakia can get into the OECD [Organisation for Economic Cooperation and Development] and will push along with Slovakia's EU entry. But the need is for structural reform. Investors need to have a reason for holding in Slovakia. Macroeconomic stability was the issue last year, but now it's really the structural reforms," he added.

Vogel pointed out that unless these reforms are pushed through promptly, ratings agencies such as Moody's or Standard & Poor's will be unable to upgrade Slovakia to investment level.

Domestic analysts, meanwhile, have said that while ST's privatisation is important the government should be looking to privatise banks as quickly as possible.

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