Who and why did it take to revive the privatization checks?

There is a further point to be made is that the majority of the population had no idea what to do with the vouchers. Every citizen received "a piece" of his country's property; however, not all availed of this opportunity. Nowadays, there are proposals to resume the effect of privatization shares that citizens failed to avail of in due time. It is no laughing matter: 20% of the privatization checks distributed among citizens have not been used! However, the experts we have interviewed disagree with setting the matter in this way. A question arises: who owns an unrecorded percentage of privatization vouchers? Why has the topic of resuscitation of these papers become relevant right now?

In turn, lawyer and financier Akram Hasanov told the Agency that owners of the resonant, unused share of vouchers have almost no relation to ordinary citizens:

"Ten years after these privatization checks lost their effect; it’d be a legal nihilism to reanimate them. Admittedly, we love such legal uncertainty whereas the law is made of clear rules and their implementation. Even if in the end someone suffers from this, there’ll be a sense of certainty for the future. Yes, some holders did not use privatization vouchers in due time hoping to get more benefits later. I agree with a view that these papers remained in the hands of speculators, not ordinary citizens. Apparently, today they are minded to use them somehow.

Proceeding from the standpoint of protecting interests of a very small minority -conscientious people who failed to realize their rights, we are generating "a bomb" for the future. It transpires that the law means nothing for. It is wrong. In general, the check privatization that we borrowed from the Russian practice was wrong in principle. As a consequence, ordinary people did not become business owners – mostly these proved to be "red directors", officials, law enforcement officers who simply took away their shares from ordinary people or bought them out. If some of ordinary holders of these securities bought a share in a company, this is such a tiny part that it means nothing. I am against replaying this all over again today."

There is no getting away from the fact that  the authors of the economic policy of the years in question insist that the privatization was a forced measure to create a class of private owners and guarantee the country's non-return to communism. The nominal value of the voucher in the state privatization share was the material equivalent of 1/32000000 (one thirty-two million) part of the state property of Azerbaijan which was subject to check privatization. Note that the privatization part of the state property under the program was supposed to be 70-80 percent even despite the fact that as of July 1, 1994, all the fixed assets of Azerbaijan were estimated at 4.5 trillion. In June 1996, the Cabinet of Ministers decided to create a special government commission to specify a coefficient required for the revaluation of fixed assets.

According to preliminary estimates of experts of the State Property Committee, in the mid-1996, the cost of fixed assets amounted to about $ 25 billion. Following the official revaluation, the public authorities announced that the cost of state property is 76.8 trillion manats or at the exchange rate of the corresponding period – $ 18.7 billion. Based on these clearly relative indicators, the management of the State Property Committee made the same mistake in its forecasts about the price of vouchers as on the eve of privatization in Russia.

It is useful to highlight in this regard that in February 1997, on the eve of the distribution of privatization shares to the population, officials began to announce their forecasts that the price of vouchers would be $ 800-1000, and even $ 2000. However, contrary to these forecasts, the prices of vouchers on the black markets cost $ 10-100 at different times.

It is worth reminding that “vouchers were sold for nearly nothing," said Elkhan Jafarov, PhD in Economics at UNEC:

"Checks in the process of privatization performed the role of securities. In theory, they were designed to enable broader circles of the population to participate in the privatization of the state property. People were given the right to sell these vouchers. However, the snag was that those owning a controlling stake, i. e. main shareholders of the privatization objects did not inform the minority owners about details of redistribution of financial resources while in accordance with the legislation of the Republic they had every right to receive comprehensive information as set forth in the financial statements of these enterprises.

In other words, the owners of the controlling stake did not allow small shareholders to obtain information about company's profit after deducting all taxes. At that time, privatization was carried out at an uncontrolled level and this was used by people who had serious resources at their disposal. It is for this reason that in Azerbaijan, as on the entire post-Soviet space, the privatization proceeded not without certain frauds6. Note that the owners of the main package - the majority shareholders of the privatized objects – managed to deprive the minority shareholders-owners of small units of dividends.

They argued that the company was unprofitable and that the main part of the financial resources is directed toward paying unforeseen expenses,  involving  highly paid foreign specialists and acquiring highly efficient technologies. Thus, under various pretexts, the dividends did not reach small shareholders and the size of their shares did not allow them to get directly involved in the management of the privatized company. People who invested money into privatized enterprises were mostly deceived by the main shareholders.

It is worth noting that another part of the population lost faith in privatization and began selling privatization vouchers with due regard for limited time of their legal appeal to the process of privatization. The prices of vouchers fell following the decline in confidence in the privatization process. Besides, the securities became cheaper as their expiration date drew nearer. In total, a part of people unwilling to use the" privatization vouchers" sold them for a song. And then the "black market" came on the scene where speculators bought up these shares and resold them to the main shareholders of the privatized objects who thus increased their share in the privatized objects.

In fact, the situation was handled in personal interests of those having the controlling stakes in the privatized enterprises. These were new trends when people did not fully understand their rights, so big shareholders who bought them benefited from this.

Having taken the ownership of state objects-factories and enterprises, they began dividing, reselling and repurposing them. As a result, we have lost many large and serious manufacturing enterprises. To restore justice today, we have to delve into the root of privatization, raise documents from 30 years ago, unless they were destroyed.

After all, this is a very sensitive issue, for scores of people have made their capital on it. In this regard, the resumption of the legal effect of these privatization checks is not a panacea for the current issue of fair participation of the population in the privatization process. It is necessary to clarify those having these 20 percent concentrated. Otherwise, if they are concentrated in the hands of certain manipulators, we will have a new scam already of the 21st century.

It’d be appropriate to note that if today there is a question of fairness, hence, it is required, first of all, to investigate the legality of the distribution of these dividends. In this case, the appropriate executive authorities should check how these enterprises had actually been privatized and how the dividends been redistributed, which facilities were built on the site of the privatized ones that had a powerful production potential and, as a result, significantly predetermined the economic development of Azerbaijan 30 years ago. It is essential to speak about justice not in words but based on concrete facts."

As viewed by the scientist, in terms of the restoration of the conquered part of the country, it is advisable to develop a targeted comprehensive program for the "Privatization of Socio-Economic Objects in Karabakh" with the involvement of all categories of the population of our country in keeping with the property qualification.

From all has been said it follows that the results of check privatization are perceived negatively by the majority of the country's population and experts. The interlocutors note that the redistribution of property was unfair and inefficient, but what are they trying to achieve right now? What are the motives of the persons in whose hands 20% of unused privatization securities are concentrated? There is no answer to this question yet. At the same time, according to the economist-analyst Natigajafarli, in the 90s. privatization measures were carried out throughout the post-Soviet space to create conditions for a market economy. In our country, they also decided to distribute vouchers for free to the population, he told Turan.

"A very similar decision was made in neighboring Russia. In Azerbaijan, it was announced that every citizen has the right to have a privatization check in order to become a shareholder of joint-stock companies at the dawn of their origin in our country in the mid-90s. However, all the nuances of check privatization were not fully worked out. To be honest, this initiative was practically a failure. A market economy has not been formed in Azerbaijan; there is no full-fledged securities market. Consequently, the goals of privatization were not achieved.

It ought to be noted that there were scandalous situations as well. At the beginning of the privatization there was an interest of foreign investors in the voucher privatization of strategic objects. For example, Minaret Group that worked here in the mid-90s, bought privatization checks in the hope of privatizing the oil and gas sector. But this did not happen, i.e. the very idea of privatization of state property that was preached in all the countries of the former USSR in the 90s, was not fully put into life in Azerbaijan.

It should be emphasized that we have not been able to form a market economy institutionally. In Russia, it turned out. And although the Russian experience is harshly criticized, it should be understood that this is a painful process and, despite all the shortcomings, the securities market has formed in Russia, and privatization has taken place. Although there is a lot of criticism that officials have become owners of large enterprises. In Azerbaijan, enterprises with large land plots, especially in the city center, were privatized for almost pennies. According to the law, the new owners had no right to change the profile of the privatized organization for three years. However, after waiting for the expiration of this period, everything was demolished and new buildings were erected, since the land at such enterprises was more valuable than the objects being privatized.

It should be borne in mind that the process was extremely unsuccessful in Azerbaijan. I do not think that today the reanimation of privatization checks will be crowned with success. However, we have to adopt a new privatization plan and make a fresh start. The point is that the state still dominates the economy with a huge number of business areas that need to be privatized. Starting with such incomprehensible state-owned enterprises as, for example, JSC "Azerkhalcha," it remains unknown why the state should be engaged in the production of carpets and ending with structures in the municipal economy. Distribution companies “Azersu”, "Azerigaz" and "Azerishig", etc. should be privatized. To my thinking, the production enterprises should be left in the hands of the state for safety reasons while distribution enterprises should be transferred to private ownership. The point is that this will allow us to establish normal relations between consumers and distribution companies.

It is in this direction that we need to adopt a new privatization program designed for at least 3 to 5 years. Then it will be possible to conduct a normal privatization campaign and, finally, achieve an institutional market economy. Today, it is not institutional, official capitalism prevails, and to move away from this, a new privatization program is required. Should such a program be adopted, it would be possible to think about how to use the old privatization checks. A mere renewing voucher does not matter. We have lived through all that and the validity period of these papers was extended at least twice but it did not lead to anything good."

Tamila KHALILOVA