CzechInvest Information Series No. 3
Serial No. PRI/11/94-3
Date of Issue November 11, 1994
Recognised as being the most successful privatisation programme, the Czech privatisation process has provided the government with a powerful instrument to reach its objective which is to accomplish economic transformation. Launched on January 1, 1991, the three-part Czech Republic's privatisation strategy of state-owned property and enterprises included restitution, "small privatisation" and "large privatisation".
Property Approved for Privatisation and Passed on to Found of National Property
Number of Business Units Approved for Privatisation (Breakdown by Sector)
Value of Property Approved for Privatisation (Breakdown by Sector)
Restitution -- the return of property expropriated by the communist regime after February 25, 1948 to its original owners and their heirs -- has helped to clarify ownership and ease the process of property acquisition.
Property is returned to the original owners except in those cases where real estate was built on the land after its nationalisation; in such cases, owners were given financial compensation.
Property owned by foreign companies or companies with foreign participation is not eligible for restitution unless the property was purchased from a legal entity after October 1, 1990.
An estimated US$2.5-4.2 billion worth of assets were restituted by the end of 1992.
Passed in November 1990, the Law on Small-Scale Privatisation allows the privatisation of such small assets as shops, restaurants, hotels and local services. Nearly completed in 1993, small privatisation was conducted through public auctions under the conditions established by the Law for Small-Scale Privatisation. By the end of 1993, more than 22,000 businesses with a total value of over US$1 billion had been sold.
Legislation covers the privatisation of some 4,000 of the Czech Republic's largest state-owned enterprises, including financial institutions, insurance companies, state farms, industrial enterprises and foreign trade organisations.
Four methods are being used to transfer ownership to new owners:
Public tenders, similar to those of Western countries, are often applied by the Ministry of Privatisation when several bidders are competing for one unit, especially if the project indicates a direct sale.
Direct sales must be approved by the government. In order to allow for competition, each project must be listed and published by the Ministry of Privatisation for two months.
Unpaid transfers are used only to a limited extent. Assets can be transferred under this method only to municipalities, banks or savings banks.
The Voucher Privatisation Programme aims to redistribute state assets to Czech citizens by enabling them to bid for shares of state-owned enterprises through a system of voucher "points".
First wave voucher privatisation was applied at least partially in the transformation of 1,000 units representing a book value of about US7.1 billion, with 20.9 million shares sold. These shares are already traded on Prague Securities and Stock Exchange markets.
A second wave of voucher privatisation is now nearing completion. It involved 860 companies and, combined with the first wave, covered assets with a book value of around US$12.5 billion.
NOTE: This information is current as of November 1994. Although we have made every effort to ensure the reliability of our sources, CzechInvest does not assume responsibility for its accuracy..
Property Approved for Privatisation and Passed on to Fund of National Property
(As of Dec 31, 1993)
Approved Method of Number of Total Value of
Privatisation Business Units Property
(in US$million)
Public auction 514 193.7
Public tender 502 639.6
Direct sale 1,680 1,542.8
Commercialisation into
joint stock 1,777 25,142.1
company
Unpaid transfer to
municipalities, 2,318 1,000.4
pension funds, savings
banks
Restitutions 613 215.9
Restitutions with
additional 129 317.5
purchase
Total 7,533 29,052.1
Number of Business Units Approved for Privatisation (as of June 30, 1993)
Breakdown by Sector
Value of Property Approved for Privatisation (as of June 30, 1993)
Sector
Method of Industry Agricultur Trade Others National Health Total
Privatisati e Service and
on Non-Production
Industry
Public 69.3 26.6 82.8 10.5 5.0
194.2
Auction
Public 386.9 86.1 56.4 18.8 18.6
566.8
Tender
Direct 784.4 264.6 132.4 91.6 38.0
1,311.0
Sale
Joint-Stock 8,456.3 2,259.7 655.2 6,171.2 898.2
18,440.6
Company
Unpaid 151.3 108.7 141.2 29.6 9.6
440.4
Transfer
Total 9,848.2 2,745.7 1,068.0 6,321.7 969.4 20,953.0