Privatization in Central

and Eastern Europewe

Warsaw May 13th, 2013
ukasz Zalicki, Partner at Ernst & Young
Privatization - whats next
Slide 2
Central and Eastern European Countries - CEECs
Czech Rep., Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, Slovenia
Slide 3
Worldwide privatization trend in recent years
Worldwide revenues from privatization and GDP growth
Sources: Privatization Barometer, IMF World Economic Outlook.
Slower privatization pace after Dot-com Bubble Era (1997-2000)
Unusual 2009 with high privatization revenues, but in two-thirds arising from
bank share repurchases
High true privatization in 2010
Postponing privatization in 2011
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
0.0
0.1
0.2
0.3
0.4
0.5
0.6
Privatization revenues as % of GDP, left axis Real GDP growth (%), right axis
Slide 4
European privatization during the economic slowdown
Cumulative privatization revenues in 2009-2011 as % of GDP
Sources: Privatization Barometer, IMF World Economic Outlook.
Two CEECs Estonia and Poland the EU leaders in terms of privatization
revenues during the economic slowdown
0 0.5 1 1.5 2 2.5 3 3.5
France
Greece
Portugal
Netherlands
Ireland
Poland
Estonia
Slide 5
Privatization revenues in the CEECs
Sources: Privatization Barometer, IMF World Economic Outlook.
The historical highest nominal CEECs privatization revenues in 2010
Greater CEECs participation in the total EU25 privatization revenues during
the economic slowdown compared to the period of high economic
growth 2004-2008
Privatization in the CEECs average pace (1/2)
0
1
2
3
4
5
6
7
8
9
10
0
5
10
15
20
25
30
35
40
CEECs participation in EU25 privatisation revenues (%), left axis Privatization revenues in CEECs (US$ bn), right axis
Slide 6
Privatization in the CEECs average pace (2/2)
Privatization revenues in selected countries as % of GDP
Sources: Privatization Barometer, IMF World Economic Outlook.
Similar average privatization pace in the CEECs before and during current
economic slowdown but different recent direction in selected countries:
suspension Hungary, Slovakia
slowdown Czech Rep., Lithuania
continuation Latvia, Slovenia
acceleration Estonia, Poland
0.0
0.2
0.4
0.6
0.8
1.0
1.2
2004-2008 2009-2011
Slide 7
Suspension - recent privatization trends
in selected CEECs
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Hungary
Privatization revenues as % of GDP (LA)
0
2
4
6
8
10
12
0
2
4
6
8
10
12
14
16
Slovakia
Privatization revenues as % of GDP (LA)
The share of employment in state-owned enterprises in total
employment in % (RA)
Suspension of privatization process in Slovakia and Hungary
from 2007 and 2010, respectively
Sources: Privatization Barometer, IMF World Economic Outlook, International Labour Organization.
Slide 8
Slowdown - recent privatization trends
in selected CEECs
Significant slowdown of privatization process over the last few years
in case of Czech Rep. and Lithuania
0
2
4
6
8
10
0
1
2
3
4
5
Czech Rep.
Privatization revenues as % of GDP (LA)
The share of employment in state-owned enterprises in total
employment in % (RA)
0
2
4
6
8
10
12
14
0
1
2
3
4
5
6
Lithuania
Privatization revenues as % of GDP (LA)
The share of employment in state-owned enterprises in total
employment in % (RA)
Sources: Privatization Barometer, IMF World Economic Outlook, International Labour Organization.
Slide 9
Continuation - recent privatization trends
in selected CEECs
In case of Latvia and Slovenia privatization process has been continued
over the last few years
0
2
4
6
8
10
12
14
0
2
4
6
8
10
12
Latvia
Privatization revenues as % of GDP (LA)
The share of employment in state-owned enterprises in total
employment in % (RA)
0
2
4
6
8
10
12
14
16
18
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Slovenia
Privatization revenues as % of GDP (LA)
The share of employment in state-owned enterprises in total
employment in % (RA)
Sources: Privatization Barometer, IMF World Economic Outlook, International Labour Organization.
Slide 10
Acceleration - recent privatization trends
in selected CEECs
Estonia and Poland have accelerated privatization process
over the last few years
0
5
10
15
20
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Poland
Privatization revenues as % of GDP (LA)
The share of employment in state-owned enterprises in total
employment in % (RA)
0
2
4
6
8
10
0
1
1
2
2
3
3
4
4
5
Estonia
Privatization revenues as % of GDP (LA)
The share of employment in state-owned enterprises in total
employment in % (RA)
Sources: Privatization Barometer, IMF World Economic Outlook, International Labour Organization.
Slide 11
Privatizations reasons in transition countries
The variety of the privatization models results from different goals set for privatization
process in each group of countries. However, the main types of privatization models
can still be distinguished.
Type of the model Characteristic features of the model
Western European
Privatization plays a supportive role for economic policy and is aimed
at enterprises restructuring and fiscal benefits.
CEECs
(Poland, Czech Rep., Slovakia,
Hungary, Slovenia, Estonia,
Lithuania and Latvia)
At the beginning of transformation, privatization was a pillar of structural
reforms, introducing the market economy. It also changed the ownership
structure, improved business efficiency, provided a source of financing for
necessary public expenditures, and therefore accelerated the economic growth
in the long term.
Southern European
(Albania, Bulgaria, Romania and
countries of the former Republic
of Yugoslavia)
The initially slow pace of privatization has accelerated in the subsequent years
of transformation and privatization process becomes similar to the CEECs
model.
Post-soviet
(some CIS countries)
Privatization has served realization of selected stakeholders interests and
goals.
Non-reform(outsiders
model)
(Belarus and Turkmenistan)
Slow privatization with a number of subjective and objective exemptions.
Such privatization has not played a crucial role in economic policy.
Source: Own elaboration.
Slide 12
Privatization effects in the CEECs (1/2)
Privatization as well as the accompanying structural reforms contribute to faster
economic growth in the long term. Thereby privatization contributes to increased
prosperity of all CEECs.
Privatization
Reforms of economic
environment
Creation of efficient
institutions
Slide 13
Privatization effects in the CEECs (1/2)
Privatization
Reforms of economic
environment
Creation of efficient
institutions
Foreign capital inflow
Financial market
development
Increase in productivity
of enterprises
Improvement
of public finance
Slide 12
Privatization as well as the accompanying structural reforms contribute to faster
economic growth in the long term. Thereby privatization contributes to increased
prosperity of all CEECs.
Slide 14
Privatization effects in the CEECs (1/2)
Privatization
Reforms of economic
environment
Creation of efficient
institutions
Faster economic growth
Foreign capital inflow
Financial market
development
Increase in productivity
of enterprises
Improvement
of public finance
Slide 12
Privatization as well as the accompanying structural reforms contribute to faster
economic growth in the long term. Thereby privatization contributes to increased
prosperity of all CEECs.
Slide 15
Privatization effects in the CEECs (2/2)
Accelerated privatization in Poland during the economic slowdown was an important
factor strengthening the WSE in comparison to other stock exchanges in the region.
Acceleration of privatization helped to reduce the negative effects of the global financial
crisis.
Market capitalization (bn EUR) on the largest stock exchanges in Central Europe*
* Capitalization and value trading apply to domestic companies.
Sources: Stock exchanges from selected countries.
0
20
40
60
80
100
120
140
160
2006 2007 2008 2009 2010 2011 2012
Austria Czech Rep. Hungary Poland
Slide 13
Slide 16
Opportunities for further privatization in the CEECs
The share of employment in state-owned enterprises in total employment in 2010 (%)
Source: International Labour Organization. * Own calculation based on ILO data.
Despite the recent developments, there are still opportunities for further
privatization in all CEECs.
4.4
5.3
6.1
6.8
7.0
7.9
11.7
3.5
Slide 14
Slide 17
Opportunities for further privatization in Poland
Despite over twenty years of privatization in Poland, the value of the property
of the Treasury at the end of 2011 amounted to PLN 48.2 bn
Stocks/shares in companies
with Treasury shareholding participation
PLN 46.0 bn
(1) shares in sole shareholder companies
of the Treasury PLN 13.1 bn
(2) shares in companies with partial shareholding
of the Treasury PLN 11.1 bn
(3) shares in public companies PLN 21.8 bn
(market value of those shares as of 31
st
December
2011 was amounted to PLN 92.4 bn)
Total
PLN 48.2 bn
Equity capital value
of the state-owned companies
PLN 2.2 bn
Source: Polish Ministry of Treasury.
300 state-owned companies
in Privatization Plan
for 2012-2013
Slide 15
I. Thank you for your attention!