Privatization of public companies and assets is an excellent tool to raise state capital and improve services, but the economic crisis and a more cautious approach from investors is making it harder to conduct large privatizations of strategic assets.
In an economy like that of Albania, when just a little more than two decades ago, virtually everything was owned and centrally managed by the state, privatization is seen as a key driver to modernize and grow the economy. Since the fall of communism Albania has privatized a variety of state assets, many of which have become big contributors to economic growth and service improvements.
Yet, even the most fervent proponents of privatizations have to admit that recent months have been hard on privatizations.
This week, what could have been a huge payout for the cash-strapped government didn’t materialize: The Albanian government says it has invalidated a record bid worth Euro 850 million on the privatization of Albpetrol oil firm after the winning bidder, Albanian-led Vetro Energy consortium, failed to pay the financial guarantee leading to the finalization of the contract.
This comes on the heels of the government being forced to reverse the privatization of the power distributor CEZ Shperndarje after lengthy disagreements with its Prague-based owners, CEZ Group, over investments and management. That story is not yet over, and an arbitration court process started this week.
It’s not that all privatizations have gone bad. Those wishing to use privatization of public companies to gain state capital for investments and improve services point to success stories like the privatization of telephony monopoly Albtelecom and the formerly Savings Bank transformation in Austrian-owned RaiffeisenBank Albania.
But the privatizations that went well largely happened at a time of economic growth. The global economic crisis is making it harder for Albania to cash in on its assets at a time when the government needs its most if it wants to boost economic growth through public investments such as those in infrastructure.
As a proponent of free markets and and free enterprise, this newspaper supports the idea that privatization has its benefits. But privatization of public property in general should be the end of a very careful process, weighing not only the prize but also the long-term evaluation of the assets in question.
The economic crisis is also affecting views on privatization, with some believing a more active role of the state and publicly-owned companies can be just as successful as a private companies when managed properly.
These are uncertain economic times in this continent and the pool of buyers and investors might not be as large now as it has been in the past, but Albania should not give up on its path of privatization just because two or three cases have not been able to be successful, nor should the government be desperate to sell assets at a loss, because once the economy improves, there will be more investors knocking.
