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(East/West Letter, March/April 1995, vol. 4, no. 2)
Armenia aims to sell 64% of shares in ten of its largest enterprises for privatization vouchers and cash in its privatization campaign launched in March. Among the ten companies to be sold are Armenia's only automobile plant, an electrical equipment plant, and a pastry factory. The enterprises will be transformed into joint stock companies. Armenian citizens and foreign investors will have the same rights to acquire shares. Shares will be on sale in local auction centers for two months; non-residents will be able to buy Armenian drams at a special rate in order to participate in the auction.
On 27 March, the president of Belarus, Aleksandr Lukashenka, suspended the activity of the specialized investment funds. The accounts of the funds were frozen on 31 March. The 31 investment funds serve as conduits for investment by Belarusian citizens who give them their privatization vouchers to invest in a portfolio of stocks. The funds' activities were suspended because of supposed violations of the law, although no evidence of these violations was provided. Heads of the funds have appealed to the Supreme Soviet for relief. It is unclear whether the funds will be given permission to resume operations or if new funds will be formed to replace them.
Ironically, Mr. Lukashenka renewed Belarus' privatization program on 14 March; the program had been suspended in 1994 because of abuses and irregularities. The program calls for all retail shops, restaurants, and other services to be privatized by the end of the year. In addition, 365 medium- and large-sized enterprises will be sold through auctions in 1995.
In early April, the director of Bulgaria's privatization agency announced that Bulgaria plans to sell off almost all state-owned companies - about 3,500 enterprises - over the next few years. The government hopes to privatize 600 enterprises, or 20% of all state-owned enterprises, by the end of 1995. There will be no restrictions on foreigners as to which sectors they can invest in or the size of stakes they could acquire in individual companies. Some stakes will be set aside for the mass privatization program which is set to begin in November. Around 100-150 large companies will be sold under this program for which every Bulgarian adult will receive privatization vouchers worth a total of 50,000 leva ($750).
The government also hopes to lift the moratorium on the sale of arms factories, the sale of which had been prohibited until the end of 1995, so that 130 factories can be sold under the privatization program.
So far, only 265 state-owned and 531 municipal companies have been sold.
Privatization vouchers are being distributed throughout Georgia in April, May, and June; they are to be distributed to all of Georgia's 5.5 million residents including children except for those in the breakaway regions of Abkhazia and South Ossetia. In early April, the vouchers, which have a face value of $30, were already trading at between $8 and $18. Georgians can use the vouchers to bid for shares in companies being privatized or invest them in one of Georgia's 20 new investment funds. The privatization of state-owned property is set to begin in July. The voucher program was approved in early 1994 but has been delayed due to ethnic conflicts and political turmoil.
Latvia has begun privatizing companies by selling a majority stake, usually 51%, to a foreign strategic investor. Up to 20% is sold to employees and 25-30% to local investors for privatization vouchers. Latvia's Privatization Agency plans to sell off 50 companies in 1995. Latvia plans to launch the Riga Stock Exchange in June.
On 16 March, the Moldovan parliament adopted a mass privatization program for 1995-96. The program will allow 1,500 state-owned firms to be sold for cash or vouchers; about 70% of all property in Moldova should be in private hands by the end of 1996. Over 700 companies have already been privatized for vouchers, which were distributed free to Moldovan citizens in 1994. In the second phase, 800 of the firms will be privatized exclusively for vouchers. Between 40 and 70% of the shares of a further 400 firms will be sold for vouchers, with the remaining shares either remaining under state control or sold off to private investors. Vouchers expire on 15 September at which time voucher privatization must be completed.
Companies being sold for cash include 185 service-related firms and 100 unfinished construction sites. Large firms in the oil and gas sectors, and the wine-making, tobacco, and cosmetics industries will be sold off individually.
Poland's mass privatization program (MPP) may finally be on track. A change of government in March helped resolve the on-going wranglings over the fate of the MPP (see E/W Letter, no. 1, 1995, pp. 10-11). The 444 firms which have been earmarked for the MPP scheme will be put under the supervision of the fifteen National Investment Funds in late May. Sixty percent of equity in the privatized companies will be transferred to the funds. Firm's employees will receive 15% of shares and the state treasury will retain the remaining 25%. Each adult Pole will be able to buy a "participation certificate" for a modest fee. The distribution of the certificates will begin in August; the certificates can later be traded for shares in funds and traded on the Warsaw Stock Exchange. (See E/W Letter, no. 1, 1994, pp. 7-8 and no. 6, 1994, p. 10 for more on the Polish MPP.)
The Romanian parliament passed a mass privatization program (MPP) on 21 March. Under the program, about 3,000 state-owned companies will be privatized within the next year - half of those earmarked for privatization under a 1991 law. Romanians will be able to swap vouchers which were distributed in 1992 for new privatization coupons representing a 60% stake in the 3,000 companies. The remaining 40% of shares will be sold for cash. The entire scheme will be slowed down by the process of reissuing coupons to Romanian citizens and creating the structures necessary to implement the MPP. Romania has sold off about 900 mainly small companies so far - most were bought out by management and employee groups. The passage of the MPP should clear the way for a $250 million World Bank loan; the program is also a main component of a $700 million package of IMF loans.
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