Why do most Czechs regard early 90s voucher privatisation as unfair?

27-05-2005

The Czech president Vaclav Klaus has just signed a new law making it easier for majority owners of companies to acquire the shares of small shareholders. Ironically Mr Klaus himself is the reason why the Czech Republic has such a large number of small shareholders in the first place.

In the early 1990s, when still finance minister, it was Mr Klaus who introduced an unprecedented voucher privatization scheme. Thousands of companies were privatised after four decades of communism, by virtually giving away shares to citizens. At the time the scheme seemed to many like a dream come true, but today many Czechs feel cheated and say the process was grossly misused.

Jan Schiesser: "The idea was relatively simple - give people vouchers and basically through the vouchers buy shares. It was a decision to employ a very quick and relatively simple way to sell the state property."

Analyst Jan Schiesser explains the essence of the voucher privatisation system, which was launched in 1992. At the time it was a novel idea born out of the necessity to return to a market economy. But not many people made any real money, with sometimes dubious investment funds taking advantage of people's inexperience and making a killing. Polls suggest three quarters of Czechs now believe the system was unfair.

"The problem is I think what happened after the coupon privatisation, with a couple of investment funds being tunnelled, or assets being siphoned out of these investment funds, with minority shareholders being squeezed out in a very non-transparent way and very unfair way from companies."

But perhaps it was not just small shareholders who learnt about capitalism the hard way. Jaroslava Moserova is a former presidential candidate.

"There were many mistakes made of course, all of us were inexperienced new members of parliament. We were not used to power; we didn't know what power we had. And many steps were taken too quickly, too many laws were introduced without proper rules of fair play. And of course when suddenly there is freedom it's the less honest who know how to use it or misuse it. That's what caused so many mistakes, such great losses for the country."

And "national character" may also have played a role in the perceived failures of voucher privatisation.

"We didn't foresee, and I don't think a member of parliament was born who could foresee the inventiveness of the dishonest Czech. Because the inventiveness of our people is admirable, is great."

And finally was the system really such a failure? Economist Jan Schiesser doesn't think so.

"From the human point of view I understand that some people might view it as a failure, because they didn't receive so much money from coupon privatisation. Or in bad cases they were basically stripped of their assets, especially in some of the investment funds. But I think ten years from now or maybe even five years from now the perception will change, people will put more emphasis on the speed, rather than the problems that arose after coupon privatisation."

27-05-2005