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CommentApril 24 2016

Political determination key to successful privatisations

Serbia, Slovenia and Greece are all considering selling-off assets, but must not let public anger derail the privatisation process.
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Recent privatisation drives in south-eastern Europe show there is still a need for further private sector ownership in the region, but politics could yet bring these quests to a halt. Serbia and Slovenia, former members of Yugoslavia, have recognised the need for a less state-funded economic model and are pushing ahead with privatisation plans in 2016. Greece, having dragged its feet in the past five years despite commitments to sell $50bn of state-owned assets as part of its bail-out agreement, is now also reconsidering privatisation.

Lists have been drawn up across the three countries, detailing the assets the governments are seeking to sell and authorities are moving ahead with the privatisation processes. These are encouraging signs, but there are also signs of how inherently political, and at times poisonous, privatisation processes can be.

Asset sale commitments can quickly be derailed if political willingness is not strong enough, or if there is pressure, not to mention sheer anger, from the population about such sales. In particular, in the historically socialist state of Slovenia and in a Greece run by a coalition of the radical left, these voices could cause disruption should the governments be in doubt about the viability of their programmes. Political commitment will be key to success.

Meanwhile, the electorate could also play a protest role in Serbia. Having called an early election, the government of prime minister Aleksandar Vučić will have to hope that traditional privatisation-related fears of redundancies will not sway the population’s allegiance towards the opposition in late April’s elections.

Potential investors are aware of these political issues, generally making privatisations a more drawn-out and uncertain sales process than a private sector acquisition. This leads some to require clear political commitment and transaction certainty before further steps towards buying assets off the governments in the region are considered.

Governments would be well advised not to rush the sale of their assets to ensure a well-prepared process to convince potential investors of the economic feasibility of their projects and to achieve a good price for taxpayers – as ultimately, that remains where a government’s strongest commitment lies.

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