[abe-forum] privatization

[Edi Bice]

              *** Albanian Business and Economics Forum ***



On Fri, 5 Feb 1999 ecala at american.edu wrote:

> University in Washington DC. Before that I have worked for two years in one
> of the GTZ-Projects in Albania that assists the Albanian Government in the
> privatization and legislation fields.

I am personally very happy that you have joined our forum (it doesn't seem
like a forum so far does it? ;-) )

We could all use your working experience in Albania, as most of us have
either never worked in Albania or have been away for so long that whatever
experience we have is not relevant anymore.

> Instead what happened was that the small businesses were sold to the owners
> (usually no more than 10) who either sold their part to each other or sold
> the total business to third parts that change the destination of these
> businesses.

>From what I have been reading these were concerns of the Polish government
a few years before the reform started in Albania. Not that I thought about
it at that time but it is now clear that the vouchers would depreciate
rapidly given the bad need for cash most of the Albanians experienced. 

> The second part were medium enterprises (here are included some potential
> good companies like small mines or chemical plants or mechanical plants).
> Unfortunately all these companies have old technology and no clue about how
> to compete in the market economy. Add the same old staff and no protection
> from the government for Albanian products they are almost bankcrupted. 

I believe it was more a slow death caused by the 'gradual transition'
approach. There was no competition at all in the Albanian market. The
stores were empty and there was a severe lack of raw materials. This is
what caused the boom in imports. Had our medium enterprises been
privatised quicker they would have had a decent chance given: cheap labor,
home market, inexpensive transportation. Even today most of the foreign
products compete indirectly; Albanian trading firms being the link. Local
companies have control over their products (cost, pricing, features etc.)
and can be more flexible.

> of these companies were bought from people with money that destroyed
> everything and used the land to build apartment complexes. (Please note
> that according to the law all the selling is done by vouchers and due to
> their ridiculously low value it is very easy for people with money to
> become owners of these enterprises)

There were hardly any other alternatives. Leaving the ineffectiveness of
the government in attracting investors aside, not many foreign investors
were willing to invest in enterprises of that sort (legal, social,
political issues). On the other side everybody wanted to get his share of
the privatisation benefits. Even economic propaganda wouldn't have worked
convincing people they better hold the vouchers. I guess they will just
have to deal with it, if sb. proceeded otherwise and is more successful
today.

> The third phase called "the strategic" one that is going on now is the
> privatization of Telekom, CASH and mines (copper, oil etc) Because of the
> strategic nature of these businesses there is a big corruption in actual
> Ministry Staff (mostly regarding the procedures that will favor certain
> groups or individuals). I don't know what will happen.

I know corruption would be enough to shut my mouth in this topic. It
simply botches every privatisation scheme one designs. 

BTW, is there a parliamentary commission supervising the privatisation
process at all? Or is it left to whoever jumps the chair of the Ministry
of Privatisation? If they had a position+oposition team supervising things
would be a bit slower but then again it's 'strategic' stuff, right?

> As for the general policy of privatization people who work in that Ministry
> will say "Albania is a case study for IMF" but I will say it is more a case
> study because everybody who is in power changes the policy of privatization
> in favor of groups beneficial to him. As for everything else right now in
> Albania it will take a long time even for the potential businesses to give
> results due to three main factors:
> 1- Old mentality in running a business

I don't know but somehow Albanians manage to run their private businesses
decently. Maybe it's still a matter of incentives.

> 2-Old technology
> 3-Nonexistent financial ability to invest for improving the two first
> factors.

I have read different opinions about this. The Bank of Albania says that
it's the businesses that can't absorb the amount of credit it assigns to
each bank. I heard the private banks (foreign and local) have been
offering loans but only to certain businesses (quick return ones such
as trade). On the other side the Savings Bank has locked in 150 billions
of lek. 

> To be realistic we should add the political instability in Albania and the
> total absence of laws in the respective fields.

What happens to all those laws that are passed everyday? (apart from not
being used ;-) ) I agree that as long as the State Dept. issues travel
advisories for Albania, Moody's need not bother issuing grades for
investment risks in Albania. But then again we're not talking about the
average risk-averse investor.

> presume that there is a bad chemistry of power and money. But a beginning
> would have been a clear law on privatization and protection of the Albanian
> products (for the enterprises that are still running).

Protectionism! That's a topic. I have been arguing this with my professor
for some time now. The concept definitely introduces inefficiencies, and
it shouldn't be played much with. There's definitely enough lobbying for
that. Look at Germany's Deutsche Telekom, and the rest of Europe for that
matter, and compare the market there with that in the US. Liberalisation
and Deregulation seems to be the key.

Maybe we Albanians should deal with the fact that we don't have the money
or the market experience to run our 'strategic' sector, so instead of
slowing down the rest of the industry that depends on this sectors, we
should let others run it. Concessions seem to be getting popular again
(now we understand better why King Zog did that earlier this century ...
this word had such a bad sounding in my mind for such a long time :-) )

> I hope this was not too general, etta

No, thank you for your spur. Hope others join soon.

edi