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PNS privatization attacked by media

The state privatization agency, the National Property Fund (FNM), just can't stay out of the headlines. In mid February, it became the flash-point for a wave of public indignation at corrupt privatization methods after the business weekly Trend revealed that between 1995 and 1997 the FNM had sold state properties for an average of only 47 percent of their market value.
Nothing daunted, the FNM decided on February 20 to sell 97 percent of shares in the print media distribution company, Prvá novinová spoločnosť (PNS), to Danubiaprint, a media octopus which prints most nationwide dailies and whose management has close ties to Mečiar's HZDS. (See Danubiaprint profile, page 6).

The state privatization agency, the National Property Fund (FNM), just can't stay out of the headlines. In mid February, it became the flash-point for a wave of public indignation at corrupt privatization methods after the business weekly Trend revealed that between 1995 and 1997 the FNM had sold state properties for an average of only 47 percent of their market value.

Nothing daunted, the FNM decided on February 20 to sell 97 percent of shares in the print media distribution company, Prvá novinová spoločnosť (PNS), to Danubiaprint, a media octopus which prints most nationwide dailies and whose management has close ties to Mečiar's HZDS. (See Danubiaprint profile, page 6).

The purchase price was 410 million Sk ($11.7 million), but after promised future investments had been deducted, the sum came to 190 million Sk ($5.4 million). Even this discounted price was to be paid out in an unspecified series of instalments, the first of which was set at 40 million Sk, or 9.75 percent of the purchase price.

But the public outcry that followed the PNS sale was caused not so much by its lenient financial terms as by the danger that the newly-created print media behemoth might abuse its position during the six months before September national elections.

"It is no accident that the decision on the distribution of print media comes at a time when the struggle for political power is intensifying before the upcoming parliamentary elections," said the Slovak Association of Publishers of Periodicals in a public statement. "The distribution of print media may become a tool of manipulation, and may affect the freedom of the press and the rights of citizens to information."

Vladimír Holina, Vice Chairman of the Slovak Syndicate of Journalists, agreed that the PNS deal had political overtones. "Mečiar has said that the HZDS is dissatisfied with the media scene, and I think [the PNS sale] had a very specific goal," he said. "It is a very deliberate step, part of the first round of the election fight."

"The [FNM] interprets the opposition uproar over the transformation of the PNS as part of a political campaign, which is part of a certain pre-election nervousness," responded FNM press secretary Oto Balogh in a March 7 public statement. "But the facts tell the true story."

If the facts do indeed tell the truth, then it may be a difficult pill for the FNM to swallow. According to industry statistics, the PNS has a 60 percent share of the overall print media distribution market and more than 70 percent of newspaper distribution. According to the business weekly Trend, Danubiaprint has more than a 50 percent share of the periodical printing market.

Ivan Mikloš, the former Minister of Privatization and the current Vice Chairman of the FNM's Supervisory Board, said that "joining Danubiaprint and the PNS created a de facto monopoly in both the printing and distribution spheres - this is known as a vertical monopoly."

Moreover, Mikloš maintained, the sale of 97 percent of shares had been against the law. "In 1994, the Moravčík government decided that the PNS would be privatized in the following way," he said. "34 percent of shares would remain permanently and a further 17 percent temporarily with the FNM, while 46 percent would be privatized through the voucher system and 3 percent would go to the restitution fund," Mikloš claimed, adding that this decision was never revoked.

Not only did the PNS sale violate the terms of the Moravčík arrangement, Mikloš continued, but it was also in conflict with a Constitutional Court ruling on the powers of the FNM. "A Constitutional Court decision from November 1996 said that the Mečiar government's move to give the FNM the power to carry out direct sales was illegal," Mikloš explained, "and that the competency for arranging direct sales had to be returned to the government."

But the FNM claimed that clause 28 of the 1996 decision allowed it to privatize shares that could no longer be privatized according to the terms of a previous (ie. 1994) decision. "However, this provision applies to only 46 percent of shares - those that cannot now be privatized under the voucher system, which no longer exists," Mikloš argued. "Every share in excess of this figure - fully 51 percent of stock - was privatized illegally. That's not only my view, its also the opinion of lawyers."

Balogh disputed Mikloš's claims. "We claim that not only this 46 percent stak^ebut also the 51 percent stake could not be privatized according to [the terms of the 1994 decision]Étherefore we had the right to decide on the sale of the shares," he said. "e would have expected Mr. Mikloš to have put more effort into studying the legal conditions under which the transfer of state property can occur."

Done deal?

Mikloš said that it was now up to the Anti-monopoly Office (PÚ) to examine the sale and decide if it was valid.

According to Slovakia's law on economic competition, all sales of companies with more than a 300 million Sk annual turnover and/or more than 20 percent of a particular market had to be examined by the PÚ. If the purchaser could prove that "the disadvantages of such concentration would be outweighed by the economic advantages of such a sale," then the contract might be approved.

"Within 15 days of sale, the contracting parties must submit the purchase contract to the PÚ for approval," Mikloš explained. However, a PÚ official who wished to remain anonymous said that in the past, some privatization sales had occured with no contract being signed, and thus no document to be examined.

Such does not seem to be the case with the PNS sale. "[On March 19], we received a letter from the PÚ stating that they had received all documentation necessary to start an investigation," said Miloš Nemeček, the Chairman of the Slovak Association of Periodicals Publishers, which had lodged a complaint about the PNS sale with the PÚ. "During the investigation, no information will be released," Nemeček reported.

The Association also said it wanted the Attorney General to initiate a separate investigation. "We are waiting for our source at FNM to tell us that the contract has been signed, and then we are going to file immediately," Nemeček explained.

But Ivan Šimko, a legal expert and KDH Vice Chairman, said that the FNM decision could not be appealed to any Slovak court. "There is no administrative means to appeal such decisions at the moment," he said. "But after the September elections, which we will win, we will examine every [FNM] sale that was not in accordance with the law."

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