No one wants to say it too loudly at the moment, but the government's recent handling of the intended sale of lucrative gas storage company Nafta Gbely is a reminder that corruption and meddling - and incompetence - have not entirely been purged from privatisation decisions in this country.
The 1995 sale of Nafta Gbely, one of the crown jewels of the Slovak economy, to Trnava-area entrepreneur Vladimír Poór, was one of the most-criticised privatisation decisions made by the 1994-1998 government of Prime Minister Vladimír Mečiar. Mečiar ally Poór was handed 45.9% of Nafta for a purchase price that was around one-seventh of its market value at the time.
In January 1999, Poór began to make noises about selling his stake in Nafta, and offered it to two buyers - Slovak financier Jozef Majský, who claimed to have purchased Nafta in March, and the government, which pulled a wry face and said it wasn't about to reward Poór for having tunnelled the firm of all its prime assets.
But others were interested, among them the Canadian firm Trans Canada Pipelines and the French Gaz de France. Trans Canada actually visited Slovakia in January and was involved in serious number-crunching preparatory to making an offer for the Nafta shares when the government came to its senses and decided to retake Poór's Nafta stake for itself.
Two plans have now been advanced for disposing of Nafta. One, supported by Finance Minister Brigita Schmögnerová and Deputy Prime Minister Ivan Mikloš, advocates the FNM national privatisation agency grabbing back a 40.9% stake from Poór and selling it p.d.q. to a foreign investor. This plan, if it were executed, would bring in some much-needed money to the state budget this year.
The problem is, however, that if a foreign investor bought a large chunk of Nafta, gas storage prices in Slovakia would be hiked. At the moment, the state-owned gas utility Slovenské Plynarenský Priemysel (SPP) pays 1.2 billion Slovak crowns annually to have Nafta store its gas, representing about 95% of Nafta's annual revenues. But Nafta is deeply in debt - it owes about 2.7 billion crowns against assets of 10.554 billion in 1Q99, and needs 8 to 10 billion crowns over the next nine years to complete construction on two new underground storage tanks. The first thing a foreign investor would do, the state fears, is hike storage rates to bolster Nafta's finances.
That fear, says Economy Minister Ľudovít Černák, was the genesis of the second option for the Nafta shares, which proposes to create a joint venture between SPP and the FNM that would then take control of Nafta and sell off a minority stake to a foreign investor. This solution would ensure that SPP had control over how much it paid for gas storage, and would also guarantee that the state got a yearly cut of any profits generated by the new storage tanks when they are finally built.
But many analysts are in private doubting Černák's motives. The new management of SPP, they say, has very close relations to the Economy Minister, and has taken great pains to ensure that their interests are considered in how the state disposes of Nafta.
Others say that the government has already decided to sell Nafta to Gaz de France in exchange for French support of Slovakia's EU ambitions. French President Jacques Chirac declared Gaz de France's keen interest in acquiring Nafta during an early May visit to France by Slovak Prime Minister Mikuláš Dzurinda, and unless Trans Canada offers a spectacular amount of money for Nafta, the sale is a done deal.
Neither of these accusations - of influence-peddling by the SPP, or of government favouritism towards a buyer who may boost Slovakia's EU aspirations - is in itself very serious. Certainly, the way the Dzurinda government has handled big issues like the rule of law and privatisation is a big improvement on the practices of its predecessors. One can also understand that the state wants to keep SPP's expenses at a minimum and keep the political profit to be squeezed from the Nafta sale at a maximum.
But the problem is that the Nafta sale is not the only investment deal the Dzurinda government has bungled so far. The April selection of a consortium led by Deutsche Bank to sell off telecom monopoly Slovenské Telekomunikácie (ST) has come under fire by critics who allege that Bratislava brokerage house Slávia Capital, named Deutsche Bank's advisor, has close ties to Economy Minister Černák.
A tender to operate the GSM 1800 mobile phone frequency, called last August and re-called in January, had to be cancelled in April when no bidders applied. The conditions, investors said, were foolishly disadvantageous (a minimum $10 million investment and 33% domestic entity participation).
Eastern Slovak steelmaker VSŽ is also still hanging in the balance since defaulting on a $35 million syndicated loan last year, and although US Steel looks to be close to buying the troubled firm, no one knows what the new ownership structure will be or what will be the fate of VSŽ's 26,000 employees.
Even the government's handling of the settlement of the debt Russia owes Slovakia blew up in its face when it was discovered that the same bunch of crooks at Devin Banka who siphoned off millions of crowns from debt repayments into their pockets during the Mečiar era had been selected to administer the debt in the Dzurinda era.
Nothing less than complete transparency, clean hands and competent privatisation policy on the part of the state will attract to Slovakia the foreign investment the country desperately needs. Presidential elections, the nearby Kosovo war and a non-commital investment support programme are keeping investors at a distance, and only honest dealing can win them back. This government must find away to appear more fair and competent, no matter how much it costs SPP or annoys the French.
