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Privatization Policy Franjo Misak Assistant to Vice President CROATIAN PRIVATIZATION FUND

Privatization Policy Franjo Misak Assistant to Vice President CROATIAN PRIVATIZATION FUND. September 2001. Croatian Privatization Fund. The Croatian Privatization Fund was established in 1993 when the Agency for Restructuring and the Croatian Development Fund merged.

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Privatization Policy Franjo Misak Assistant to Vice President CROATIAN PRIVATIZATION FUND

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  1. Privatization Policy Franjo Misak Assistant to Vice President CROATIAN PRIVATIZATION FUND September 2001

  2. Croatian Privatization Fund • The Croatian Privatization Fund was established in 1993 when the Agency for Restructuring and the Croatian Development Fund merged. • The CPF is managed by a Board appointed by the Government. The Board is responsible for designing and implementing business policy. • The supervision of the Fund’s operation and management is carried out by the Supervisory Board, whose members are appointed by Parliament. The Supervisory Board reviews the Fund´s financial plans and annual reports. 2 September 2001 CPF

  3. Croatian Privatization Fund Portfolio • The Croatian Privatizatian Fund is responsible for the privatization of shares owned by various government institutions like Pension Funds, Health Services, the Government Agency for Bank Recovery, public enterprises, etc. • The portfolio of the Croatian Privatization Fund consists of 1203 enterprises • In the CPF’s portfolio, a special place is held by companies in the field of tourism and agriculture since these industries are traditionally considered to be strategic for Croatia. Enterprises in the industrial sector are also strategic for Croatia and are looking for investors to help them use existing capacities more effectively, seek technological innovation, and gain new market share. 3 CPF September 2001

  4. Cumulative effects of the privatization measures (for period 2000-2001) • number of companies held in the portfolio reduced from 1850 to 1203 companies by way of implementing various privatization models (public tendering, public auction, privatization through bankruptcy proceedings), • 35% decrease in the value of total equity and state portfolio available for the privatization (647 companies privatized) • total loss and resulting related losses of the companies held in the portfolio were reduced • daily portfolio loss reduced from HRK 7.5 to HRK 3.4 million • insolvency lasting more than 360 days reduced by 85 percent • increased real portfolio value reported through the net portfolio book value • the state portfolio was consolidated • Privatization Plan and Program adopted and is being implemented according to foreseen schedule. 4 CPF September 2001

  5. Privatization of Companies in the Portfolio • privatization of the largest number of companies implemented through bankruptcy and the settlement of capital outlays models 5 CPF September 2001

  6. No. of Companies in State Portfolio • a trend of decrease in number of companies held in the portfolio emphasized since June 2000 (35 percent) • 647 companies were privatized 6 CPF September 2001

  7. Privatization of 877 Share Packages • 485 share packages, i.e. 55 percent, were privatized by public auctions, settlement of capital outlays and open tendering models 7 CPF September 2001

  8. Privatization by Public Auctions • 74 percent of offered share packages were sold, making a revenue of HRK 28,782,089.54 • of HRK 18,108,889 asking price, total revenues accounted for 137percent of the asking price 8 CPF September 2001

  9. Privatization by Settlement of Capital Outlays • the shares with nominal value of HRK 1,125,911,752 were excluded from the state portfolio for the settlement of capital outlays by the sale on the Varaždin OTC market • indirect financial effect to the budget amounted to HRK 277,525,245 9 CPF September 2001

  10. Privatization by Public Tendering • the sale accounted for 55 percent of asking price, while the revenues amounted to HRK 432,127,503 with additional positive effects 10 CPF September 2001

  11. Croatian Privatization Fund Portfolio • In the years 2001 and 2002 the CPF plans to privatize its portfolio that holds 38,5% of the total equity of those companies 11 CPF September 2001

  12. Nominal Value of the Residual Portfolio by Industries • in the residual state portfolio 43 percent of the nominal value refers to industry and mining, 21percent to tourism, while 9.3 percent refers to agriculture. 12 CPF September 2001

  13. Models of Privatization A) Privatization by the settlement of capital expenditures of the Ministry for Pubic Works, Reconstruction and Construction; the Ministry of Judicature, Administration and Local Self-Administration; and the Ministry of Transport, Connections, and Croatian Waters; Per this model 448 companies or 37,2% of the companies available for privatization are being privatized; B) Privatization by the allocation of free shares according to Article 11 of the Law on the Transformation of Socially-Owned Enterprises (to invalids, families of deceased soldiers, etc.); Per this model 18 companies or 1,4% of the companies available for privatization are being privatized; C) Privatization by the allocation of free shares to entitled persons according to Article 45 of the Law on Compensation for Seized Property During the Yugoslav Communist Regime; Per this model 514 companies or 42,7% of the companies available for privatization are being privatized; D) Privatization through public tender invitation; Per this model 72 companies or 5,9% of the companies available for privatization are being privatized; 13 CPF September 2001

  14. Models of Privatization E) Privatization through public auction; Per this model 358 companies or 29,7% of the companies available for privatization are being privatized; F) Privatization with the engagement of privatization consultants; Per this model 23 companies or 1,9% of the companies available for privatization are being privatized; G) Privatization by the sale of shares at a discount to employees and former employees (small shareholding); Per this model 27 companies or 2,2% of the companies available for privatization are being privatized; H) Privatization within the ESOP program (employee’s shareholding); Per this model 32 companies or 2,6% of the companies available for privatization are being privatized; I) Privatization in bankruptcy; Per this model 16 companies or 1,3% of the companies available for privatizationare being privatized; J) Privatization by allocation of free shares to the entitled persons according to Article 8 of the Law on Rehabilitation of Certain Companies; Per this model 14 companies or 1,1% of the companies available for privatization are being privatized. 14 CPF September 2001

  15. Privatization of the Residual Portfolio by Models - 1203 companies • most of the companies, i.e. 81 percent is being privatized by denationalization, settlement of capital outlays and public auction models, primarily encompassing up to 25 percent portfolio • the most significant portfolio that makes up 6 percent of companies is being privatized by open tendering and with the help of advisors 15 CPF September 2001

  16. Industry • In Croatia, the Industry sector has 25% share in the GNP. The main industrial sectors are textile and clothing, food processing, chemicals and oil processing, metal processing and shipbuilding, wood processing tools and electricity production equipment. This sector accounts for about 49% of the state portfolio awaiting privatization. 16 CPF September 2001

  17. Privatization models of the state portfolio in Industry • the majority of the state portfolio in the field of industry is to be privatized by the techniques of public tender invitation (MODEL D) and engagement of privatization consultants (MODEL F) 17 CPF September 2001

  18. Mardesic - Sali • Mardesic JSC is one of six producers of canned fish products in Croatia, located in Sali, Dugi otok • total share capital of the company is EUR 4.249.135 and CFP is offering for sale sale 78.42% of the capital • domestically there is little price competition in this industry, and the government subsidizes the production of these products. Internationally, the major competitors are companies from Tunisia, Morocco, Spain and Thailand. Mardesic’s products satisfy the standards of the European Union. 18 September 2001 CPF

  19. Agriculture • due to the country’s rich natural resources, agriculture is considered traditionally as strategic sector in Croatia; • about 6,6% of the state portfolio being privatized is from this sector 19 CPF September 2001

  20. Privatization models of the state portfolio in Agriculture • the largest share of the state portfolio in the field of agriculture is to be privatized with engagement of privatization consultants (MODEL F) 20 CPF September 2001

  21. IPK Osijek • IPK Osijek JSC operating in the field of agriculture, food industry and trade • IPK Group composed od 45 companies wholly or partly owned by IPK • located in Osjecko-Baranjska County with facilities located ih the town of Osijek and throughout Osjecko-Baranjska County • total share capital of the company is EUR 101.888.311 and CFP is offering for sale sale 83,26% of the capital • IPK Osijek JSC is devided in four groups: Sugar company, Group IPK Industry, Group IPK Agriculture, Group IPK Services 21 CPF September 2001

  22. Tourism • Croatia has outstanding potential for the development of tourism. In addition to the Adriatic coast that includes over 1,000 islands, there are also inland tourist resorts, including seven national parks, the Plitvice Lakes, and others. In the towns along the Adriatic coast there are famous historical sites from Roman times, and Dubrovnik's beauty is widely regarded as unique in the world. 22 CPF September 2001

  23. Privatization models of the state portfolio in Tourism • the majority of the state portfolio in the field of tourism is to be privatized by the allocation of free shares to entitled persons according to Article 45 of the Law on Compensation for Seized Property During the Yugoslav Communist Regime (MODEL C), and with engagement of privatization consultants (MODEL F) 23 September 2001 CPF

  24. Suncani Hvar • In his ownership Suncani Hvar JSC holds 10 hotels, auto-camp and tennis center • total share capital of the company is EUR 44.742.851 and CFP is offering for sale sale 74.54% of the capital • located on sunniest island on Adriatic coast - 2700 sunny days per year • rich cultural inheritance - Arsenal, the monument of architecture from 1611. 24 CPF September 2001

  25. Favorable Climate for Investment • A well established institutional and legal framework, a variety of regions with different economic activities, great opportunities in tourism, a favourable location at the crossroads of transport routes from west to east and from north to south, a capable workforce with an education structure similar to other Central European countries - all these factors contribute to the favorable climate for investment. • Previously mentioned privatization models and various investment procedures from the new Privatization Law have been adjusted to meet investors needs. 25 CPF September 2001

  26. Favorable Climate for Investment • the previously dispersed portfolio of all state holdings is now united and the Croatian Privatizatian Fund is now responsible for the privatization of shares • previously owned by various government institutions like Pension Funds, Health Services, the Government Agency for Bank Recovery, public enterprises, etc. an analysis aimed at total financial consolidation is implemented for every single company; • with the implementation of the first consolidation phase the portfolio was numerically decreased (from 1850 to 1346 companies), significantly reducing its daily loss (from 7,5 to 5,3 mil kn), its level of indebtedness and its insolvency; • with the consolidation of the portfolio, prerequisites for a more successful privatization were met; • The CPF and other similar institutions are always available to provide information and assistance to anyone who wants to 26 CPF September 2001

  27. CROATIAN PRIVATIZATION FUND ZAGREB, IVANA LUČIĆA 6 Tel:++385 1 4569 111 Fax: ++385 1 4569 140 http://www.hfp.hr hfp@hfp.hr September 2001 CPF

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