Cyprus Mail
Business Cyprus

SGO privatisations to go ahead as planned

DISY leader Averof Neophytou has claimed that the sooner reforms are made, the more value they will add

By Angelos Anastasiou

AMIDSTS heavy criticism by political parties and resistance from trade unions, the government continues to push for the privatisation of semi-government organisations (SGOs), even as the troika conceded a two-week extension to submitting legislative bills governing the process.

A roadmap to the privatisation of several SGOs, designed to raise €1.4bn in government revenue, has already been devised by the Finance ministry and approved by the council of ministers in early December 2013.

The privatisation plan calls for the selling off of stakes in the state telecoms company CyTA and the ports authority CPA by the end of 2015, a further five SGOs by the end of 2016 and the electricity provider EAC by 2017.

The ruling DISY party considers privatisations to be the only way to restore confidence in the economy by attracting the first major foreign investments since the crisis hit the country.

“When it comes to reform, I believe we need to become bolder. The faster reforms are made, the more value they add,” DISY president Averof Neophytou said on Sunday.

“Foreign investment is the only source of funding for speedy development, and that’s why it is one of our top priorities. This is why we view privatisations as vehicles to attracting the first significant foreign investments in Cyprus.”

Coalition partners DIKO, however, acknowledge the need to privatise SGOs in order to raise funds, but emphasise the risk of not maximising returns if the sale is made during the current recession.

“We certainly do not ignore our obligations towards our European partners, but we should examine alternatives to the sale of state property from a position of extreme financial pressure,” said DIKO president Nicolas Papadopoulos.

“We feel that even the option of suspending privatisations should be on the table during periods of recession, as the risk of forfeiting significant income is very real.”

Opposition parties AKEL, EDEK and the Greens have sided with employees’ unions who fiercely oppose privatisation efforts, arguing that the government should consider alternative ways of raising the €1.4bn.

The unions promise to resist the government’s efforts as they claim to have been left out of the decision-making process, and the opposition parties threaten to vote against any privatisation bill the government should introduce.

But despite widespread dissent, the government has little wiggle room and the privatisation train is unlikely to slow down.

The first order of business during the troika’s ongoing third review of Cyprus’s adjustment programme concerned the issue of privatisations. When the government requested a two-week extension to prepare and submit legislative bills governing the process the troika readily agreed, but reportedly warned that the bailout loan’s next tranche will not be released unless real progress is made on the issue.

Socialist EDEK appears to be the wild card to passing the privatisation legislation, which requires a two-thirds majority in the House. The socialists have warned that they will not endorse any plans of ‘full’ – meaning a 100 per cent stake – privatisation, indicating they might consider privatisation schemes in which government control is partly retained.

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