A panel session entitled “Effective Privatisation - the Role of Sovereign Funds” has been held at the 9th annual meeting of the International Forum of Sovereign Wealth Funds (IFSWF) in Astana.
The discussion participants shared their views on a range of topics, including: how to use capital raised from the privatisation of companies; the conditions under which an IPO should be conducted; the ideal timeframe for privatisation; and the lessons learnt by different countries during the privatisation process.
Dauren Tasmagambetov, Director of Asset Privatization and Restructuring Department of Samruk-Kazyna JSC, commented: “Our approach to identifying the ideal conditions for privatisation always depends on the company in question. In addition to market factors, we also assess the internal readiness of the company using a number of criteria, including strategy, asset structure, capital structure, regulatory compliance and other factors. In our opinion, the optimal moment for privatisation is during a period of positive financial market performance."
Mr Tasmagambetov added that Samruk-Kazyna’s role as the owner of assets is to ensure the successful privatisation of its portfolio companies.
Dauren Tasmagambetov noted: “When we speak about efficiency, we do not just mean ensuring the capital is raised and the company is valued accurately, but also the creation of long-term structural changes in the national economy, such as the development of competition and raising the standards of corporate governance. To facilitate a successful privatisation, certain assets, primarily those of social importance, require improvements in the regulatory framework and careful preparation of investment agreement terms."
In turn, Dato Mohd Isani Ghani, Executive Director for Investments of Khazanah Nasional Berhad, described how the privatisation process took place in Malaysia. He said that when the government transferred state assets to the Fund in 2004, the companies were not in the best shape. A 10-year programme was developed to transform these problematic companies.
Dato Mohd Isani Ghani observed: “It was a very difficult task, because the transformation process faced opposition. As a result, we had to seek support from the government. Thereafter, we increased the value of companies, we gradually paid off their debts and began to attract new investors, who brought new experience and new options for creating additional value, enabling the companies to begin to earn money.”
Janet Heckman, Managing Director, Southern and Eastern Mediterranean (SEMED), European Bank for Reconstruction and Development (EBRD), outlined the key factors for successful privatisation. These include determination and transparency, as well as state reforms. Successful privatisation is the result of economic reforms, which always help to create economically viable enterprises.
Janet Heckman highlighted: “The reforms currently being implemented in Kazakhstan are very interesting. Prices are falling, the government has adopted a new strategy, and the financial crisis has almost passed. The country has increased its potential by implementing the privatisation programme. However, for a successful privatisation process it is imperative to have a stable currency, subsidies for certain areas, effective management of the process and the transformation of large state-owned companies.”
Hung Tran, Managing Director of the Institute of International Finance presented his advice to address the fear of losing the country’s strategic assets during the privatisation process. He noted that holding an asset is not the only way to control companies. For example, in the case of an airline, it is possible to create a transport organisation that will monitor the respective airports and infrastructure.
Hung Tran stated: “You do not need to control and own a company in order to redirect the issue of production and efficiency towards the appropriate objective. The state has regulatory levers to serve this purpose. Small, medium or large companies - they all must comply with law and regulations, so you can conduct your business in the appropriate and proper way.”
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