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PUSHING AHEAD WITH PRIVATIZATION IN EASTERN EUROPE

 PUSHING AHEAD WITH PRIVATIZATION IN EASTERN EUROPE
 FRANKFURT, Germany, July 28 /PRNewswire/ -- Despite progress in


some countries, privatization in much of eastern Europe is proving difficult in the absence of adequate finance capital and management know-how, writes Deutsche Bank Research in its most recent "Focus: Eastern Europe" issue. Foreign investors will continue to play a decisive role in the region's reform efforts, the institute notes, but economic and political uncertainties are dissuading many investors from becoming involved.
 Overall, Hungary, Czechoslovakia and Poland are leading the way. Hungary's private sector now accounts for about one-third of GNP, while Czechoslovakia's private sector accounts for about 15 percent of total GNP. Poland's small- and medium-sized privatized firms account for approximately 20 percent of Poland's GNP.
 In Czechoslovakia, 1,500 out of 4,000 large state-owned industries are being turned over to private ownership through a government voucher system. The 8.5 million citizens holding vouchers may use them to purchase shares in a company directly or to buy shares in one of the 437 investment funds. These funds currently account for 72 percent of all vouchers distributed.
 DB Research writes that the impending split between the Czech and Slovak republics will pose a new set of problems for the privatization process, especially for the approximately 60 large firms with locations in both parts of the country.
 In Hungary, only about 10 percent of the country's large state industries have been sold to the private sector, primarily to foreign buyers. Because the initial government-directed program was less than successful, Hungary has since decentralized the process. The change should spur new initiative for privatization among potential investors and companies alike, the institute notes.
 About 80 percent of total privatization revenue, about $500 million, has come from abroad. Hungary's privatization agency will continue to attract foreign investors by offering favorable terms for partial ownership of large state-owned firms. Partial ownership will entitle investors to full management authority, with the option to buy the remainder of the company at a later date.
 In Poland, "large" privatization has proceeded slower than planned, primarily due to political divisions within the Polish government, bureaucratic hurdles and a lack of domestic capital. The government has yet to produce a clear strategy on how to proceed. Legislation establishing legal guidelines for privatization and investment funds still awaits parliamentary approval. To date, only 12 firms of the 30 slated for privatization this year are listed on the Warsaw stock exchange.
 Many of Poland's large state conglomerates have been split up into smaller companies. So far, 1,120 such firms have been sold. Only about two dozen firms have been sold to foreign investors, accounting for revenues of barely $1 million. To date, 90 percent of small and medium sized firms in Poland are in private hands.
 The privatization processes in Romania, Bulgaria and Russia have been more problematic. Both Bulgaria and Romania are hoping to learn from other countries' experiences.
 Russia's weak legal and institutional framework for private enterprise makes achieving the goal of privatizing 20-25 percent of state owned firms in 1992 unlikely, according to DB Research. Banks, transport and defense industries will not be privatized at this time. Mass privatization is expected to begin in 1994 or 1995, after which it is hoped that 40-50 percent of the medium- to large-sized industries will be sold. Foreign investors in Russia still face a variety of restrictions on investment activity.
 For a copy of the complete text, contact Ute DeFarlo, TransAtlantic Futures, Inc., Washington, 202-462-1222; fax: 202-462-1229.
 -0- 7/28/92
 /CONTACT: Ingelies Buhl of Deutsche Bank Research, Frankfurt, 011-49-69-71007-209/ CO: Deutsche Bank Research ST: IN: FIN SU:


MH -- DC004 -- 3960 07/28/92 10:14 EDT
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Date:Jul 28, 1992
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