Privatization in Central and Eastern Europe 2013-05-13 ... · Slide8 Slowdown -recent privatization trends in selected CEECs Significant slowdown of privatization process over the

Privatization in Central and Eastern Europewe

Warsaw – May 13th, 2013

Łukasz Zalicki, Partner at Ernst & Young

„Privatization - what’s next”

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Central and Eastern European Countries - CEECs

Czech Rep., Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, Slovenia

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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

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Privatization revenues as % of GDP, left axis Real GDP growth (%), right axis

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European privatization during the economic slowdown

Cumulative privatization revenues in 2009-2011 as % of GDP


► 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

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Privatization revenues in the CEECs


► 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)

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CEECs participation in EU25 privatisation revenues (%), left axis Privatization revenues in CEECs (US$ bn), right axis

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Privatization in the CEECs – average pace (2/2)

Privatization revenues in selected countries as % of GDP


► 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

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2004-2008 2009-2011

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Suspension - recent privatization trends in selected CEECs

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Hungary

Privatization revenues as % of GDP (LA)

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Slovakia


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.

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Slowdown - recent privatization trendsin selected CEECs

Significant slowdown of privatization process over the last few years in case of Czech Rep. and Lithuania

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Czech Rep.



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Lithuania




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Continuation - recent privatization trendsin selected CEECs

In case of Latvia and Slovenia privatization process has been continuedover the last few years

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Latvia



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Slovenia




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Acceleration - recent privatization trends in selected CEECs

Estonia and Poland have accelerated privatization process over the last few years

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Poland



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Slide 11

Privatization’s 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.

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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

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Privatization



Foreign capital inflowFinancial market development

Increase in productivity of enterprises

Improvement of public finance

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Privatization



Faster economic growth

Foreign capital inflowFinancial market development

Increase in productivity of enterprises

Improvement of public finance

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► 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.

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2006 2007 2008 2009 2010 2011 2012

Austria Czech Rep. Hungary Poland

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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.

4.45.3

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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 shareholdingof the Treasury – PLN 11.1 bn

(3) shares in public companies – PLN 21.8 bn(market value of those shares as of 31st December 2011 was amounted to PLN 92.4 bn)

TotalPLN 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!

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Privatization in Central and Eastern Europe 2013-05-13 ... · Slide8 Slowdown -recent privatization trends in selected CEECs Significant slowdown of privatization process over the