Finance Minister Harris Georgiades said on Thursday the government’s approach on privatisations was not absolute, as the National Economy Council (NEC) said it favoured full privatisation of public companies and unions reiterated their opposition.
“On the other hand, the obligation we assumed is clear,” Georgiades said.
Cyprus needs to raise at least €1.4 billion trough privatisations by 2018. The island must have a privatisation roadmap ready in December, a condition for the release of the next tranche of bailout cash.
The minister said the programme should afford the government some flexibility.
“We recognise the bailout obligation – it clearly refers to procedure of privatisation – but we want a procedure that will leave open options at least as regards the extent,” Georgiades told state broadcaster CyBC. “This plan must be prepared and agreed with the troika (of international lenders) before next tranche is released.”
In a policy paper published on Thursday, the NEC said full privatisation must be pursued wherever possible.
“Privatisations will yield significant proceeds and will show Cyprus’ determination to proceed with reforms that would satisfy the relevant provisions of the (bailout) Memorandum of Understanding,” the NEC said.
According to the paper, full privatization would attract bigger investment, as opposed to partial privatization which would not raise the €1.4 billion.
Going fully private would also get rid of “the problem of political interventions and limit the scope of actions associated with party interests.”
The NEC suggested that the telecommunications authority, CyTA, should be the first to go, as it already operates in a competitive environment.
It considers the case of the EAC, the island’s power supplier, as “rather more complex.”
The EAC itself is in a difficult position, the paper said, in that a sizeable part of its production capacity is inactive given the reduced demand due to the financial crisis.
It remained trapped in costly diesel to generate electricity compared to the production costs by solar panels that are below the EAC production costs.
“A transition to a new ownership regime would be more difficult and traumatic for the EAC than for CyTA,” the NEC said, adding that privatization of the EAC should be accompanied by a strong regulatory authority that would supervise the private firm.
As far the Cyprus Ports Authority was concerned, the NEC recommended it assumed a regulatory role over ports, whereas the administration of the ports should be transferred to the private sector.