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CABINET SWITCHES INTO HIGH GEAR TO FINALIZE POWER UTILITY SLOVENSKÉ ELEKTRÁRNE SALE

Opposition says stop privatization

THE SLOVAK government recently announced plans to speed up the sale of power utility Slovenské elektrárne to Italian investor Enel. Meanwhile, opposition parties want to bring all government privatizations to a halt. Experts warn that stopping such deals would put Slovakia at financial risk.
The opposition is using the departure of the New Citizens' Alliance (ANO) from the ruling coalition to argue that cabinet members lack the appropriate mandate to make important financial decisions regarding the country's future.
"The government is in such a desolate condition that it does not have the political legitimacy to continue [deciding on] privatization matters," Smer leader Robert Fico said.

THE SLOVAK government recently announced plans to speed up the sale of power utility Slovenské elektrárne to Italian investor Enel. Meanwhile, opposition parties want to bring all government privatizations to a halt. Experts warn that stopping such deals would put Slovakia at financial risk.

The opposition is using the departure of the New Citizens' Alliance (ANO) from the ruling coalition to argue that cabinet members lack the appropriate mandate to make important financial decisions regarding the country's future.

"The government is in such a desolate condition that it does not have the political legitimacy to continue [deciding on] privatization matters," Smer leader Robert Fico said.

The opposition party Smer is determined to push a bill through parliament insisting that the Slovak government give up on all privatization projects until fall 2006. If passed, the bill would impact the sale of national railway cargo transportation company, Cargo Slovakia, the former national air carrier Slovak Airlines, the Bratislava and Košice airports and the power utility Slovenské elektrárne.

The government's intentions are quite the contrary. Finance Minister Ivan Mikloš, acting as the temporary economy minister after ANO Chairman Pavol Rusko was recalled, said he plans to speed up the privatization process of the power utility. Furthermore, the government recently accepted official tenders for the state's airports.

Movement for a Democratic Slovakia (HZDS) boss, Vladimír Mečiar, is aligning himself with Smer boss Robert Fico despite continuing disagreements on other issues. The HZDS has pledged to support Smer's initiative to stop all privatization projects until the end of the current election term (the fall of 2006).

Critics say the opposition's parliamentary initiative would transmit a negative signal to foreign investors. Not only would it devalue the companies' worth but it would also greatly harm their economic performance.

In the case of the privatization of Slovenské elektrárne, the Slovak government would face serious fines.

"The transaction documents have already been signed. Withdrawing from the privatization process would mean violating the contract conditions," Tatjana Lesajová, the spokeswoman for the country's privatization agency, the National Property Fund (FNM), told The Slovak Spectator.

The opposition's initiative would damage the privatization agency itself and in doing so, also hurt the government.

"[Halting privatization] would result in the FNM not being able to meet its budget or the budget demands of other departments too, such as the Finance Ministry and its obligations to the state debt and state-guaranteed loans for companies," Tatjana Lesajová told The Slovak Spectator.

The FNM expects to earn revenues from additional sales of shares of power distributor Západoslovenská energetika. The privatization agency assumes that it will finalize tenders for the sale of heating companies and generate more income from additional sales of shares of power distributors Stredoslovenská energetika (SSE) and Východoslovenská energetika.

Miroslav Šmál, an analyst with Poštová banka, says that stopping all privatization would significantly harm the state's coffers. At the very least, he says it sends the wrong signal to the international community.

Budget and privatization pressures, says the analyst, present the greatest risks to the stability of the government, not whether some parties stay or leave the ruling coalition.

"Parties regularly leave coalitions, and not just in Slovakia. But calls for halting privatization and easing the budget discipline sends out signals of political instability and most importantly, indicates non-standard elements that have nothing to do with market economies and the rules that we have to keep in order to meet the Maastricht criteria," Šmál told The Slovak Spectator.

However, Viliam Pätoprstý, an analyst with UniBanka, does not think that the proceeding of the Slovak opposition is something unusual in the region.

"Privatization is generally perceived as a political process. All around the globe the business community takes this into consideration. Therefore the efforts of the opposition should not be considered as a local exception," Pätoprstý told The Slovak Spectator.

Smer has ardently opposed privatizing Cargo Slovakia since the idea's inception. Fico claims that selling strategic state-owned companies is a great mistake. He warns that the process could result in massive layoffs within the company, which currently employs more than 12,000 people.

The Transportation Ministry insists that the sale would not be disadvantageous; it maintains the right time to sell Cargo is now, before its neighbours sell theirs.

"If we don't manage to sell the company now, then we will never be able to do it," Transport Minister Pavol Prokopovič told the press.

"The truth is that there are globalization trends in the world, and whoever privatizes freight transportation in Central Europe first will have the greatest chance to get the most money for it. It is a very interesting package for a future investor," Tomáš Šarluška told The Slovak Spectator in an earlier interview.

Šarluška even suggested that privatizing Cargo is on Smer's political agenda. Other critics claim that the Smer boss only wants to make sure that something remains up for grabs in case he makes it to power. Cargo Slovakia is considered one of the very last remaining lucrative privatization deals.

According to the Transportation Ministry, even if the opposition succeeds in pushing its proposal through parliament, it would simply disregard parliament's decision to stop privatization projects. The ministry claims that the constitution leaves privatization decisions in the hands of the cabinet.

Interior Minister and member of the Christian Democratic Movement (KDH), Vladimír Palko, said that parliament could express the loss of confidence in the cabinet, but it could not remove decisions that are in the cabinet's power and are considered an executive responsibility, such as privatization decisions.

The ministry claims that there is strong pressure throughout Europe to liberalize the railway market.

Selling Cargo could bring Sk15 to 20 billion (€390 million to €520 million) to the state's pockets, which the ministry would like to use on its passenger and railway network operations.

Companies interested in buying Cargo include Rail Cargo Austria AG; freight operator Austrian State Railways (ÖBB); the Czech railway company, České dráhy; and the Slovak financial group Penta.

The media has speculated since late May that the Hungarian railway company MÁV, Deutsche Bahn and US investment group Rail World are also potential bidders. Definitive offers are due in October.

Cargo Slovakia originated in January 2005 by splitting Železničná spoločnosť into two separate companies. It reported a profit of Sk423 million (€11 million) in the first quarter of 2005.

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