Privatisation in Slovakia was legislated by the 1991 Act on the Conditions of Transfer of State Property to Other Persons and its amendment approved by the National Council of the Slovak Republic (NR SR) on 17 February 1994.
The National Property Fund (FNM) was established on 28 June 1991 for privatisation purposes. Registration of citizens for the first wave of coupon privatisation began on 1 November 1991 and ended in March 1992. Coupon privatisation itself began on 14 May 1992 and ran until Christmas 1992.
The idea of coupon privatisation was to transform state enterprises into joint-stock companies as quickly as possible. Their shares were to be distributed to the population in the form of investment coupons. Every citizen over the age of 18 was entitled to a coupon book containing cheques for one thousand points. It was enough to pay a thousand crowns to participate in the privatisation process.
5 942 851 citizens in the Czech Republic and 2 579 327 citizens in Slovakia registered for the first wave of coupon privatisation. Coupon books became a lucrative target for organised crime and privatisers who, by buying the books from individuals, gained the opportunity to control entire competing enterprises.
The Slovak branch of the privatisation entered the so-called second wave on 5 September 1994 and lasted until 30 November 1994, with a share of 20-30 thousand Slovak crowns per owner of investment coupons. Unlike the first wave, the second wave was carried out by the bond method. For each registered coupon book, an amount of CZK 10 000 plus interest was allocated. 3,428,419 citizens registered for the second wave of coupon privatisation in Slovakia.
The Czech coupon privatisation was terminated by the Ministry of Finance on 25 November 1994. In Slovakia it lasted longer, until 11 July 1995.
The beginnings of the split privatisation strategy can be traced back to the end of 1992. While the Czech part continued with the previously approved federal strategies, the Slovak part revised them. The government there approved a new privatisation concept that strengthened the standard methods, while coupon privatisation was considered only complementary. The powers of ministries and departments in the privatisation process were significantly increased. This led to a slowdown in privatisation and greater influence of politicians on specific competitions. This is also why privatisation in Slovakia took longer and generated more controversy than in the Czech Republic.
Another Slovak phenomenon was the large-scale Dutch auctions. The auctioneer gives the opportunity to get the auction item on a forum looking like an open competition. However, the problem with the fairness of the competition was that if an unfair bidder wanted to win, it was enough to intimidate potential competitors. Scenes of Dutch auctions not infrequently brought bizarre situations where a hand flying up with a bid was pulled down by the ‘roughneck’ gentleman next door, or the unsuccessful bidder was beaten in the corner of the auction room.
The era of the “suitcase makers”, who promised as the new private co-owners of former state-owned enterprises to turn them around, also brought with it a major banking crisis, when banks providing private capital had more than CZK 100 billion in non-performing loans not covered. The new Commercial Code was supposed to intervene against the practices described above, but it was not approved for a long time under pressure from the business community.
A separate chapter of Slovak privatisation is the period of the so-called big privatisation. This was the period when Mečiar and his cronies changed the laws so that large enterprises were sold on the basis of the decisions of a three-member commission he had set up, sometimes including himself.
It was important for privatisation in both the Czech Republic and Slovakia to ensure sufficient available capital, which is why the Investment and Development Bank was established under the Tatras on 20 February 1992 with its headquarters in Bratislava.
In April 1992 the National Property Fund established the joint-stock company NAFTA Gbely. It was created from a state enterprise that was included in the first wave of coupon privatisation as part of the transformation process. The enterprise caused a number of corruption cases in the following years. At the beginning of 1993, the joint stock company Transpetrol was created with a similar fate.
On 17 February 1994, the National Council of the Slovak Republic approved an amendment to the Act on the Conditions of Transfer of Property, which opened the possibility to compete also for large enterprises. However, the sale of selected enterprises continued in the following years. Decision-making was even more concentrated in the hands of politicians, and at the highest levels.
From the point of view of corruption, the establishment of DMD Holding in Slovakia was also interesting, whose officially presented purpose was to address the situation of companies affected by conversion and loss of markets, especially in the countries of the former USSR. Here, there were many crooked deals in the context of the debasement of Russian debts. In reality, these debts were never fully repaid; on the contrary, they created a large window of opportunity for corrupt politicians.
Vladimír Mečiar appointed himself finance minister after failing to rein in his previous minister, Ľubomír Dolgos. Although he pressed him to speed up the privatisation of state companies, Dolgoš refused. He did not want to encourage the giving away of assets and met resistance from the heads of state-owned enterprises, who realised that without proper competitions for the companies they would be left out of the game.
Instead of Dolgos, Mečiar nominated Ivan Lexa for the post of privatisation minister. Due to the controversy surrounding this figure, President Michal Kováč refused to appoint Lexa.
Mečiar solved it by taking over the ministry, which was giving away state property, himself. His very first move as minister was to ensure that the enterprises could be given away according to pre-written instructions.
Together with Lexa, whom he put in the ministry at least as deputy, they began attacking the banks because they believed they had too much power. They accused them of taking bribes for granting loans. Mečiar entrusted the selection of new private shareholders to the three-member committees described above during his brief period of autocracy. He was represented on them either by himself or through Ivan Lexy.
Among the most bizarre sales of state companies during this dark period were, for example, the expropriation and attempted misuse of the Slovak Matrix to privatise the Neografie publishing house and printing house, the privatisation of Novofruct Nové Zámky by the wife of MP Vlastimil Vicen, the privatisation of several companies by the wife of another leading SNS politician, Víťazoslav Móric, and the privatisation of Železniční remontaen.
Other special privatizations were the sales of Skloobal Nemšová, VAP Prešov, Kovohuty Krompachy or Polygraphic Plants in Trnava. The companies ended up in the hands of government MPs or leading people from Mečiar’s entourage. It was common for new owners to submit privatisation documents to the authorities several days after their projects had been approved by Mečiar’s commission.
The record was set when the government approved 45 privatisation projects in one month. This period created today’s oligarchs; it brought Mečiar and his associates enormous profits. The darkest period of Mečiar’s ministry lasted from 22 June 1993 to 15 March 1994.
The privatisation of Východoslovenské železárny was a record sale of assets worth CZK 110 billion. It was approved on the day of the famous President’s report on the state of the republic on 11 March 1994. The ironworks were acquired by a newly established limited liability company, which was backed by Alexander Rezes. The company was acquired without a plan or capital. In the following years, he and his cronies embezzled billions of crowns from the company and brought it to bankruptcy.
The time has brought several new millionaires and billionaires who have not been heard of much in the Czech Republic. In reality, however, they were and are behind many other projects, and some of them are still alive today from the mining of state assets during the Mečiarism period.
