Eastern and Central Europe and Central Asia's divestiture activity slowed in 1998, with the exception of Poland and Turkey, as a result of the 1998 Russian crisis and of a loss of momentum in economic reform in some countries. Privatization revenues in the region declined from a $16.5 billion peak in 1997 to $8.0 billion in 1998, mostly reflecting the sharp decline in Russian proceeds (see Table 3).
Russia, which raised $4 billion and accounted for one-fourth of total privatization proceeds for the region in 1997, earned only an estimated $909 million, partly because of the Russian financial system collapse in August 1998. Most of its revenues came from the sale of a 2.5 percent share in Gazprom to Ruhrgas and a 25 percent share of cellular phone services VimpelCom. However, the sales of Rosneft (oil and gas) and Svyazinvest (telecom), along with the 1998 planned sale of Rosgosstrakh (financial), were all delayed.
Since 1997, Poland’s privatization program has been gaining steam, raising $2.2 billion in 1997 and $2.4 billion in 1998. In 1998, Poland’s significant sales include a 15 percent stake in TPSA (telecom company) which raised around $925 million, a 37 percent stake in Bank Przemyslowo-Handlowy (BPH) for $600 million and the sale of a 15 percent stake in Pekao S.A. for $262 million.
Hungary’s privatization efforts are coming to an end. The country successfully privatized a large share of the economy at an early stage (relative to other countries in the region), so little is left to be sold. From 1990 to 1998, privatization proceeds reached over $12 billion with more than 60 percent sold to foreign investors. In 1998, the public offer of an 11 percent stake in MOL raised an estimated $330 million.
Despite unmet high expectations, Turkey’s privatization reached record revenues of $1 billion in 1998—the highest amount since 1990. Some noteworthy sales include the sale of Etibank (banking) for $155 million, the domestic and international public offering of IS Bank for $633 million. Other sales included the remaining 40 percent in Havas—an airport service provider—and various real estates. Romania’s sale of Romtelecom for $675 million was a record sale for the country and also one of the largest sales in the region. Bulgaria’s privatization program, which started gaining momentum in 1996, slowed in 1998, generating $139 million from the sales in the hotel, banking, and chemicals/pharmacy industries.
Privatization activity has remained strong in Poland and Turkey in 1999 and will continue garnering significant revenues in 2000-2001. Poland's privatization proceeds for 1999 are estimated to reach $4 billion. Privatization programs should accelerate in EU applicant countries that have not yet completed their reform programs. Privatization of the telecommunications and financial sectors have accounted for a significant share of revenues in 1999. Significant sales in telecom in 1999 include Hungary's Matav and in the financial sector include Ceskoslovenska Obchodni Banka (COB) in the Czech Republic and Bank Pekao in Poland. In 2000-2001, privatization of the financial, telecommunications, and power should continue at a steady pace. These will include sales of banks in the Czech and Slovak Republics, telecommunications in Poland and Lithuania, and power plants in Poland.
Source: Progress in Privatization, Appendix 4, Global Development Finance 2000 produced by Development Prospects Group