Bourse Privatizations Lost Between Government Delays And Opposition's Neglect

05.30.2011 ZF English

The Social Liberal Union (USL), the leading opposition political force in Romania, on Friday presented its economic plan, which, however, does not include any reference to the stock exchange privatization of state-owned companies.

The PDL (Democratic Liberal Party)-led government has been promising for over a year to sell stakes held by the state on the stock exchange. At the beginning of the year the Government expected to collect around EUR700 million from privatizations in 2011, but, although the first half of the year will soon be over, not one cent has gone to the state budget, not even from the sale of a minority stake.

From 2005 until the now, the state has listed only two companies on the Stock Exchange, Transgaz (TGN.

RO) and Transelectrica (TEL.RO), from which it collected around EUR100 million. The state insists to remain a 100% shareholder in the biggest energy and transport companies, despite many of them being inefficient and bringing no benefits to the majority shareholder.

The listing of minority stakes in companies that the state controls would solve several problems in one go: it would make their operations more transparent and more efficient, as well as bring additional revenue to the budget in a transparent manner.

It is difficult to understand why politicians continue to refuse stock exchange privatizations, opting instead for non-transparent direct privatizations, much criticized in the past twenty years, analysts say.

"Stock exchange transactions are more efficient and more transparent. It is easier to sell on the stock exchange, you can find more investors and raise money even by selling minority stakes, which means the state doesn't have to give up control of strategic companies," explains Razvan Pasol, chairman of Intercapital Invest brokerage firm.

Poland remains the best example as far as stock exchange privatizations are concerned, and for the manner in which the state can use the mechanisms of the capital market to its advantage. All big privatizations conducted in Poland in the last 15 years have been done through the Stock Exchange, and the Polish state has managed to retain control of its strategic companies, such as the biggest bank (PKO), the biggest oil companies (PKN Orlen and PGNIG) and the biggest energy companies (PGE and Tauron), but has at the same time managed to raise billions of euros.

It is important for the state to retain control of the companies, Polish officials themselves say, partly because it can prevent a prospective delisting of the companies. On the other hand, by selling stakes on the stock exchange, the state can influence decisions even when holding less than 50%.