INTOSAI Working Group on the Audit of Privatisation

Taking into consideration the paper I presented in Warsaw I have tried in general, to explain the difficulties encountered during the process of the privatisation with vouchers.

It is worthwhile also, to point out some other peculiarities of this phenomenon.

1. The ex-political prosecuted people profited privatisations leks as compensation for the suffering they had during the communist regime.

2. All the albanian citizen over 18 years old would profit vouchers with they'd take part in mass privatisation, converting them with stock of state associations that would privatize. Money and vouchers were declared transferable and freely tradable. This is something that increases the possibility of their usage and abuse.

3. The ex -owners of the site (land) make-up a part of mass privatisation program. The sites value can, if the owner desires, be compensated through stocks.

On the main failures during this process, we can emphasize:

• The privatisation procedures followed so far have been wrong and lack clear concepts.
• One of the weakest main issues was that nominal value of enterprises stocks were smaller or much smaller then the value of vouchers. This caused deflation of vouchers and created distrust among the populace of privatisation process by means of vouchers. The responsible officials pretended that it was impossible to compare the value the properties offered with the demand for the property to be privatised. Perhaps it is true that there is no precise mathematical equation available. But only theoretically it can be said that an advantage of mass privatisation is that accurate evaluation of the property that is to be privatised is not necessary, (because the trading value will define everyone's real investment).
• In this respect, another factor against was that a lot of enterprises were not efficient and needed to be liquidated, the value of stocks to be given to the citizens was very low.
• We should even mention here the high level of the corruption State officials, which has influenced the low value of vouchers.
• The low level of demand for vouchers, I think was based also on the fact that the objects in the market ready to be privatised either are delayed or are not interesting from the business point of view.
• Here we have to mention, even those that had vouchers were not saved from the epidemic of money-lending with interest (which reached "madness" at the figure 30% per month). As long as the number of those who put money in the pyramid schemes was large and of those that sold the vouchers was big, a considerable increase in the supply of vouchers occurred at a time when demand for them was at low levels.
• Another important fact that has attracted attention has been the immediate selling of the purchased objects with vouchers, to money-lending companies. Calculating here that the purchase price included devalued vouchers, this ratio varies from 5 to 10 times. So this was "a very successful business", with profits from a single operation that would be envied by even the most successful businessmen of the world.
• Another shortcoming which adversely affected privatisation were incomplete and poorly prepared privatisation projects with the consequence that whole process was slowed down considerably.

Attempting to find the most effective way to achieve privatisation and to soften social problems Government, through the Ministry of Public Economy and privatisation establishes the privatisation formula after determining the part of shares for ex-owners of land and company employees.

The so-called Privatisation formula is based on the law "on privatisation of commercial companies that operate in non-strategic sectors" and several government decisions.

Privatisation formula, is the division of company shares into:

Stake of shares, is the stake of shares offered to buyers. This stake will be sold in cash.

Stake of shares to ex-owner of land, is the part of shares by which ex-owner of land enters into commercial companies without participation into auction.

Ex-owners of land as demander subjects have the right to get shares in proportion with the value of recognised land, based on decision of Compensation and Restitution Commission. The value of 'land is determinate according to legal acts in force. The compensation determined in proportion with the other part of company equity, will remain unchanged apart from auction results.

Stake of shares to public, is the art of shares that is offered to public and company employees in exchange of privatisation vouchers and money. Company employees have the right to exchange their vouchers and those their families at nominal value with company shares.

State owned shares, is the part of shares held by state.

Company employees, means existing employees and employees receiving social assistance according to law "on social support to persons without work as result of economic reform", one year before the announcement for the privatisation of state commercial enterprises.

In the conditions of the high rate of unemployment derived from the "economic reform" applied in the country, it is only a cosmetic measure. It is profitable only for a very small part of the people and is used by the government as political objective. It is a fact that the process of privatisation actually is going slower. In order to make the whole mechanism function, a necessary instrument is the existence and the efficient use of very powerful financial intermediation, via the stock exchange.

Anyhow the purpose of this work is to give some thoughts on privatisation and especially on vouchers and their use in Albania. At least I would like to give a modest contribution by helping -even so little - the treatment of the problem in this meeting.

Also, I would like also to give my special thank to Mr. James Marshall who encouraged me to improve our country paper.