Privatization Policy

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 Funds operation and
  management is carried out by the Supervisory
  Board, whose members are appointed by Parliament.
  The Supervisory Board reviews the Funds
  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 CPFs 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
September 2001
CPF
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
September 2001
CPF
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
September 2001
CPF
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
September 2001
CPF
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
September 2001
CPF
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 Varadin OTC market
• indirect financial effect to the budget amounted
  to HRK 277,525,245

9
September 2001
CPF
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
September 2001
CPF
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
September 2001
CPF
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
September 2001
CPF
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
September 2001
CPF
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
  (employees 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 privatization are 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
September 2001
CPF
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
September 2001
CPF
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
September 2001
CPF
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. Mardesics products
  satisfy the standards of the European Union.

18
September 2001
CPF
19
Agriculture

• due to the countrys 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
September 2001
CPF
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
September 2001
CPF
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
September 2001
CPF
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 LUCICA
6 Tel[phone] Fax [phone]
140 http//www.hfp.hr hfp_at_hfp.hr
September 2001
CPF