Could you please present us a short history of the State Ownership Fund (SOF), and what are the main objectives that you have accomplished since your creation?
The SOF was created in 1992 in order to administrate the privatization of commercial companies, which represents about 48% of the social capital of the Romanian economy. Its main task is to privatize the industrial, agricultural and financial state-owned companies. The balance, up to 100% of the social capital, belongs to the local municipalities. Unfortunately until the elections of 1996, in Romania there was no real political will to privatize. Out of the companies that were privatized, about 90% were privatized in favor of their employees. That delayed the re-capitalization, with consequences concerning the technologies and the ecology. This is why, at the end of 1996 when the present coalition was elected, when the government tried to accelerate the privatization process they discovered that these companies were in a rather precarious economical situation, and that most of them needed to be restructured before being privatized.
The companies in SOF portfolio are large, very large and giant. Due to the specific circumstances in Romania, the Romanian capital that can be invested is very weak, which is why privatization cannot be accomplished without the participation of foreign capital. We sold 6,300 companies out of the 9,000 in our portfolio, but most of the sold companies are small and middle-sized. About 6,000 were bought by Romanians, and only 300 were bought by foreigners. For the moment we are selling about 200 companies per month and we hope that by the end of next year only 500 companies will remain in our possession. Many of these companies, as I mentioned before, must be restructured before being privatized, because the Romanian state does not have the money to buy new technology. This restructuring means adapting the respective companies to the market they still have. At the same time, the number of personnel will be correlated with the output. That is the production according to the market and the personnel according to production. In order to maintain this rhythm of privatization we are very flexible in our transactions, so that we can accept the payment in installments of the share's price. We can negotiate the reduction of the debts of Romanian companies by eliminating the increases and penalties resulting from the delay of payment of these debts to the state for a period of a few years. In the case of investors who want to buy the companies clean, without any debts, we are ready to liquidate them, and then sell them as actives. As a rule, in our transactions the price is not the main component, but the investments are granted by the contract, and the quantum of the debts that will be assumed by the buyer. Technology and a managerial plan in some cases is a more important priority than the money that investors will bring.
What countries are the main investors, the main buyers?
The largest investments were made by the Frenchmen, such as LAFARGE who bought a big share of the cement industry; SOCIETE GENERALE who participated in the privatization of the ROMANIAN DEVELOPMENT BANK; RENAULT who bought the Romanian car factory DACIA, and many others. The South-Koreans bought the second Romanian car factory to produce DAEWOO cars, and they are now producing nine types of cars in Romania. They also bought a ship-yard in Galati. There are also the Italians, the Englishmen and the Americans. GENERAL ELECTRIC CAPITAL CORPORATION has recently bought the second privatized bank in Romania, BANC POST. The biggest American producer, TRINITY, bought two Romanian plants producing railway wagons.
You mentioned before that most of the companies privatized so far were small and medium size companies. Why have you kept the largest companies for the last year?
Because there were no buyers for them. Before the 1996 elections only 11 companies had been sold to foreigners. During the last three years 250 were sold, and most of them were small and medium size. The Romanians do not have enough money to administrate the enormous companies built during Ceausescu's regime. | Some of the foreign investors complain that the privatizing process in Romania is too bureaucratic. Why is this so?
During the last year the procedures were simplified, and all the small or medium size companies were sold either by outcry auction or on the capital markets. These are most transparent methods and the most rapid, and the large companies are being negotiated to the extent that it is not the price that counts, but the investments, the technology and the assumption of the debts. These negotiations are carried on by the SOF. Before this we restructure the companies to be privatized, but without investing in them, because we do not have money. We reduce their production according to the market they have and we also reduce the personnel according to the production.
According to our information, 63 companies in your portfolio are to be privatized. What is the situation?
We are now about to announce the World Investment News Ltdrs, that is the banks that will undergo their respective privatizations. We hope that the professionals in such a type of transactions - the investment banks - will manage to attract buyers for the largest companies of the Romanian economy.
Will you please tell us what you have left? Which are these large companies?
The first one is SIDEX. There are also two big companies in the aluminum industry and all the steel industry .
What do you consider to be some of your success stories?
Most of the privatizations done so far are success stories. 80% of the privatized companies are doing better now than before. Only 1.7% the are in same situation. The rest of them are doing worse. From this last category, the majority of companies were bought by the unions. I think that the most successful privatizations are those made in the banking sector. The privatization of banks has eliminated a big menace of the Romanian economy, because the banks complied to the state demands, and now that the state is no longer their owner they can act correctly with their customers.
I know that lately there have been many protests organized by the trade unions.
There are two categories of protests. Some of the trade unions are against the privatization, and others are in favor of it. Those that are against the privatization are fortunately fewer and fewer. The explanation is that in the process of privatization many people are fired. But the social protection of these people who lose their jobs are assured by the Romanian state, not by the buyer.
You still have companies which you want to privatize. In which way do you want to lure the investors, having in view that you compete with Bulgaria, with the Czech Republic, with all the ex-communist east-European countries?
It is very difficult to lure the foreign investors in the circumstances that Romania had this year, when everybody thought that it will not be able to pay its debts. But it wasn't so, because Romania paid them. Meanwhile, the country rating decreased successively, even though reforms were taking place faster than ever before. We were also obliged to suspend the facilities offered to the investors in order to reduce the deficit of the budget, according to the agreement concluded with the IMF. We explained to our potential investors that the years 1999 and 2000 were the best to buy here, because the price is no longer important.
Which way do you intend to change this negative image created by the very low rating?
We have our offer on the INTERNET, we attend international meetings, we publish our ads in specialized magazines such as Financial Times, Frankfurter Algemeine Zeitung, and we are sending by e-mail our offer to big foreign companies.
What is your message to our readers?
My message is: "Come here and buy! You won't be sorry. |
