New FNM President Ľudovít Kaník seeks to reduce FNM's obligations.
The privatisation bonds were issued to citizens on January 1, 1996, with a face value of 10,000 Sk each and a maturity of five years. They replaced the voucher system of privatisation, in which each citizen who registered to participate in the privatisation of state property received a book of vouchers for 1,000 Sk with which company shares could be bought.
The voucher scheme was cancelled by the third government of Vladimír Mečiar in December 1994, as pressure from the industrial management lobby grew to keep property out of the hands of citizens and concentrate it in the hands of groups close to the government. The change to the bond system was heavily criticised by domestic and foreign economic experts, who considered the cabinet to be reneging on a business arrangement (vouchers) in mid-stream.
Kaník, who used to be a partner in Bratislava real estate firm 1. Narodná Aukčná, told The Slovak Spectator in an interview on December 11 that the move to exchange bonds for shares rather than pay them off had been made because the FNM was desperately short of funds.
The Slovak Spectator(TSS): You have taken a big step from the post of owner of a real estate agency straight to the seat of the FNM president. How did you get the job?
Ľudovít Kaník (ĽK): I have had very close ties with privatisation in the past. In 1994, when Ivan Mikloš [the current Deputy Premier for Economy] was Minister of Privatisation, I was director of the 'small privatisation' department. Besides that, I have always said that the FNM is one big acquisitions house that should look for investors. I'm not saying that it's a real estate agency, but there are several points of similarity. So I don't think it was a big professional step from that point of view.
TSS: In the first half of 1999, the FNM wants to offer shares in some 'strategic' state-run companies in exchange for privatisation bonds payable by 2001. Why did the fund decide to do that, and what effect should it have?
ĽK: From the moral point of view, it's because we would like to redress the unfortunate [Slovak] method of privatisation. So far, the fund's methods haven't brought anything positive and almost no money compared to the promised yields. Instead, it has filled the pockets of people that privatised companies by buying these bonds from people for low prices.
However, the main reason for the share exchange, connected with maintaining balance in the economy, is the fact that paying more than 30 billion Sk in cash at one time would seriously harm the Slovak economy at various levels. The state wouldn't be able to release the money from its own reserves and would be forced to borrow it at high interest rates, which would create further expenses to lie on the shoulders of our children or even grandchildren. That would tie up our economy for years and years to come.
We realise that the total costs [of repaying the money] are much higher than 30 billion Sk. That's why we are offering people an alternative, which is exchanging the privatisation bonds for state shares. By this, we will lower the financial impact to the lowest possible level. It will also revive the capital market: people will start trading in privatisation bonds, which will then appreciate in real value, and so it'll become more interesting for citizens.
TSS: The FNM is offering shares in 'strategic' companies [large, state-owned firms considered to be of strategic importance to the Slovak economy], which according to the law can't be privatised until the end of 1999. Isn't the exchange of bonds for up to 20% of shares in strategic companies just the first step towards their actual privatisation?
ĽK: The strategic companies need foreign investment. No one doubts that, not even the opposition. And such investment de facto means the entry of private capital. What form it should take - that's a matter of debate, but everybody says it's needed. But we admit that our scheme might involve the partial privatisation of some strategic companies.
TSS: But isn't that in conflict with the amendment to the law on strategic companies [passed by parliament on November 20]?
ĽK: I don't think it's against the law. The law sets a date [before which the companies cannot be privatised], but the state can take some company off the list if a good partner comes along with enough capital. It is obviously better for the state to have a majority stake in a profitable company with plenty of investment, and which is connected with some strong foreign group, than to own a 100% stake in a company with basic existential problems.
TSS: During the previous government the work of the fund was not transparent at all, and people close to the fund privatised state companies for next to nothing. How will you prevent the same thing from happening to the FNM under your leadership?
ĽK: The first thing is to obey the law. The law doesn't allow us to make final decisions on privatisation. The government must decide. Another fact is that representatives of many different political parties sit on the fund's controlling boards, so it's impossible to keep secrets among such a group.
TSS: Before elections, the political parties that currently form the government were discussing re-privatisation. What is the attitude of the new FNM management?
ĽK: I don't like the term re-privatisation. That means a kind of nationalisation, which is not part of our plans. If something happens [if the state takes back privatised property], it will only be in the case of contracts which go against the law, or in which the conditions of contracts have not been fulfilled. In such cases, the fund can start legal proceedings and ask the court to cancel the contract. And if the court agrees, the FNM can try to sell the property again. But that's not re-privatisation.
TSS: Economic analysts say that so far, in terms of political appointments to state companies and bodies like the FNM, only the faces have changed, not the system or the way of thinking. Are you a political nominee as well?
ĽK: We are all political nominees, and the change in the way of thinking is individual from person to person. The FNM has been and will always be politically influenced, since it is engaged in carrying out the policies of the government.