First of all, what were the main reasons for creating the National Property Fund after the destitution of Ministry of Privatisation, was it because the process of so called voucher privatisationwas not what it should have been?
To talk about creation of the National Property fund, we have to go back to the beginning of 1990's. The actual foundation of the NPF was a compromise between than political forces in the Czech Republic, because one part of the parliament wanted to have the NPF as an administrator of the national property, but the other part wanted voucher privatisation and so on... and here comes the point of the compromise, which was to have both, the voucher privatisation as well as the NPF. But because the side on which Mr. Klaus stood was the stronger one, the NPF had a very limited power and it's sole purpose was to fulfil the privatisation projects approved by the Ministry of Privatisation or by the government. On the other hand, and that's another part of the story, during the process of privatisation, the NPF became the biggest share holder of many Czech companies, that were there to be privatised. But this is by no means the reason why the NPF was established. And this is a problem that has been following us all the way long, because as a body we don't have enough power nor organisation capacity.
But in which ones of your activities do you feel completely independent?
We can only make independent decisions in matters involving the economics of the NPF, for example putting deposits into the bank, we also have a limited autonomy in solving some of the environmental problems. The NPF is closely connected with other state institutions in almost all of it's activities, mainly with different ministries. I have mentioned the reparations of environmental damages, so in this we co-operate with the Ministry of Environment and the Czech Inspection of Environmental Problems. We work with other ministries as well and it's usually them that have the power to execute the individual rights. On the other hand, we do have some information, we observe the situation, we point out the problems and sometimes try to solve them.
In some of the companies you hold 100% of shares, in some 50%....
Maybe I should talk a little about the structure of our ownership of the individual enterprises. We now have about 30 or 40 so called strategiccompanies, these are mostly power plants or distribution companies of different kinds etc. In other companies we might hold a very minor part, 4-5%, and that's our inheritance from voucher privatization. There is a problem of potential restitution claims. If these were made, we might have to sell those. The stakes are small though and basically worthless, so it's almost impossible to sell them. You see, the idea of voucher privatisation was to use the means of capital market for companies that couldn't possibly survive on the capital market, because they are too small. Well, then there is the problem of what to do with the rest, but it's practically costless for us , because the shares we hold are only recorded in the State Securities Centre. Nonetheless, we're still trying to sell them, but this looks like a never-ending story. Our privatisation program is based on the strategic companies. The government has just decided upon privatising some of the key companies.....
I think we should talk a little more in detail about privatisation of banks, public utilities and telecom, so, the Czech economy needs the banking sector to be privatised, it is a priority now, so what will the NPF do to help to speed up this process?
Tomorrow we're planning to sign a contract with Erstebank, that will take over Ceska Sporitelna. I think that the present government has been very successful in banks privatisation. It is necessary to mention CSOB, which was a great success story, because as a compensation, we received over 1 BIL. USD and that we didn't expect. Of course, talking about other banks, some work has to be done there, restructure their portfolio, enlarge their equity capital. Coming back to Ceska Sporitelna, it is very important that we have a good co-operation with EBRB, who helped us a lot in the process of restructuring Ceska Sporitena's portfolio. So now, the plan is to privatise the last one of the four biggest Czech banks, which is Komercni Banka. I can say that first steps have already been done, the equity capital has been doubled at the end of last year. Also the government has now resolved to restructure their portfolio and I think that within four month the Komercni Banka will be ready to be fully privatised. So we expect that by the end of June the information will have been distributed and that by the end of this year, we'll have signed a contract...
Are you already negotiating with any potential partner?
Of course, we have got a list of potential partners for KB, but I am afraid I cannot tell you the names.
Are they mostly Austrian and German...?
I can tell, that there are some of the biggest players in the world. Not only from Germany, but also from the USA. This is all I can say, because we promised to some parties present, that we will not disclose their names for the reason of potential damage it could cause them. What I have to stress out is that this list is not closed and any other potential partners are welcomed.
So you think that KB will be privatised by the end of this year?
I think the contract could be signed by then. But of course if it happened in March 2001 instead of in December 2000, it would not make such a huge difference. The problem is the actual closing date of the whole operation, and we expect it to be set for the middle of 2001. Hopefully, the KB's privatisation will be successful. We know that in order to survive and eliminate the risks, small banks have to team up with world giants.
It is also an opportunity for those foreign investors..
I think that yes, it is an opportunity. Not only
the banks privatisation though. Let me give you
an example. When KB gets a partner, it will stabilise
their position on the market. All newcomers with
small banking offices do their picking. So many
of our companies are financed from abroad. It is
not bad, because , of course, it increases the competition,
but on the other hand it's necessary for Czech banks
to find a partner if they want to keep up with the
competition. Last but not least, there is a problem
that it is only through privatisation that the last
cut into economic situation can be made. In the
early 1990's, some of the decisions were based upon
politics and there was also the pressure of public
opinion that banks are like a barrier for transformation.
We are in a different phase of economical transformation
now. It is necessary to form independent subjects,
that will have a power to make autonomous decisions.
Without this, the market mechanism cannot work. |
Another section of economy where you have a lot of shares is telecommunication sector, which is booming now, how far in the process of privatising Cesky Telecom and Ceske Radiokomunikace are you?
I think the timing is the same as for KB, which I mentioned before.
Maybe I am wrong, but in my opinion, privatising Cesky Telecom seems to be easier than privatising Komercni Banka?
Of course, we expect a serious income for the NPF from privatising Cesky Telecom. It will not be all easy though, because the number of companies with potential interest is very limited. The price will be enormously high. Any day now the government should choose a particular privatisation advisor, because in such a complicated case the NPF is not qualified to do all the necessary business itself. So in these complicated cases we are using the best investment bankers. For example Ceska Sporitelna had Meryl Lynch as an advisor, Komercni Banka has Goldman and Sachs and so on. In ten days we should know who wan the competition to be an advisor for Cesky Telecom . It started with about 40 companies that all have an interest in this.
And you expect the deal to be signed before the end of the year?
I think we will succeed in this. We'll sign at the end of the year, maximally the beginning of next. But we have to do it transparently and in a fair way, because if we didn't we wouldn't only risk the income, but also the reputation of Czech Republic as a country. So this is the priority, not whether it will happen two months sooner or later. That's Cesky Telecom. As regards Ceske Radiokomunikace, the decision that the structure of its shares within the market should be changed, was changed again. This happened because some companies indicated that they want to buy all of it - which is at least 51% of shares.
You have seen that we've met some of the Energetika and Plynarenska companies. We also know that the government has decided to speed up the process of privatising these public utilities, but asking the question about the timetable, I didn't get any concrete answer. So now I'm asking you this question.
I am the last man that could give you an answer to this. The privatisation of this sector is in the hands of the Ministry of the Industry. Some of the responsibility also falls onto the Ministry of Finance and as soon they decide on something, we can do it.
Is there any concrete resolution about how to speed up the process?
You will have to contact the Ministry of Finance and ask them. As far as I know, the full document considering this should be ready by the end of March. Other discussions will follow, I am sure. On the whole I think that the investment environment is good and that Czech Republic has an advantage in this. On the other hand, the Ministry of the Industry and Trade has some comments to this and those have to be listened to. You cannot privatise without proper regulations system. This, of course, caused the delay. Also it is being discussed, which of the distribution companies should be privatised, for example CES - the biggest energy producer. In my opinion, it would be good for CES to buy two or three distribution companies, because it's good to have a vertical structure. Basically, there are lot of possibilities that can be found.
You are the chairman of the NPF, do you have lots of relations with foreign businessmen?
We have some contacts. There is a number of people that are interested in Czech privatisation. The other contacts we have are with partners that some companies already have. So we are in contact; sometimes it's successful; sometimes there are problems, because we cannot always unify our ideas. On one hand, Mr. Lauder has a law suit against the Czech Republic and on the other hand, many more investors are coming to Czech Republic, because they believe it's possible to do business here.
It is also because of the seriousness of institutions like the NPF, so even if some things are criticised....
But often it is the former Czech institutions that are criticised, but they are not the same as they were three years ago, because they improve a little every year. For example I was at a conference about the bankruptcy procedures, which is good for Czech Republic; now we'll have the tenth amendment of the bankruptcy and composition act......It will get better.
As a more personal issue, you are the new Chairman of the Fund, what do you think you will derive the biggest satisfaction from?
I am not a chairman but only the vice chairman, I only act as a chairman.
But nonetheless, what will be your biggest satisfaction in the coming year?
It's complicated. Every day I get up and plan my day.......but of course I will be satisfied when the privatisation of KB and Cesky Telecom is finished. But it is not only that, it is also helping companies in helpless situation to survive and that is something invisible, because after the restructuring of the company is finished, half of the people loose their jobs. And these people than accuse you that they lost their work because of you. But you are in a situation of saving something, or saving nothing. Basically, you can derive satisfaction just from reading in the newspaper that something is going well.
As a final issue, Mr. Havel, what would be your message to our readers?
Come to the Czech Republic and invest. We have many qualified people with strong motivation, stronger than people in other parts of the world, because they want to show to their competitors that they are not the best, but that they are very good. |
