DISTRIBUTION OF VOUCHERS TO COMMON PUBLİC AS A METHOD OF PRIVATIZATION AND ITS APPLOCATION IN AZERBAIJAN

DISTRIBUTION OF VOUCHERS TO COMMON PUBLİC AS A METHOD OF PRIVATIZATION AND ITS APPLOCATION IN AZERBAIJAN

 

Dr. Muhammet AKDİŞ

 

I-INTRODUCTION

Privatization is a reality of our era. Almost all nations ranging from those countries which have adopted liberal economy with its various applications to former USSR nations have used privatization technique more or less. The nationalization movement of the 1940s gave way to privatization from 1970 onwards.

There are extremely different techniques of privatization being effected. In particular, this matter is of a special importance in the economies which adopted in the past a socialist economy system and which brought entire economic units under state property. That is because this means not only privatization of state property but a transition to a new economic system.

 

II – PRIVATIZATION TECHNIQUES THE VOUCHER METHOD

There is an extremely wide range of privatization techniques which found field of application for themselves throughout the world. However, in eastern block countries in particular the matter takes up a different shape and there may be certain differences in practice observed. One such different practices is the Voucher method.

 

A-                      THE VOUCHER METHOD CONCEPT ANN THE GOAL OF THE COUVHER METHOD

Meaning instruments, receipts or voucher and having different names in every country, the concepts refers to privatization shares certificates of documenting shares at institutions to privatized.

The system of privatization through voucher in principle is based on the logic that all people living in a given country should have equal claims of ownership over entire property to be privatized. The basic goals of practice distribution of capital to the base and accomplishment of privatization in a swift manner1  and provision of vertain amount of the profits derived from such privatization for the public.

 

B-MODE OF APPLİCATION OF THE VOUCHER SYSTEM

To apply the voucher system, it is necessary first to determine the values of the institutions to be privatized; having vouchers printed which correspond to such values; offering common public of such printed vouchers, creation of a market where the vouchers dealings can be made; later, it is necessary to go though steps involving transformation of the institutions to be privatized into joint stock companies and sale of certain lots of their shares at auctions in exchange for voucher cum; and purchasing of given  company shares by buyers upon payment of such sums with voucher.

 

III- THE COUNTRİES WİTH THE VOUCHER SYSTEM APPLICATIONS AND THE RESULTS

Recommended by World Bank, the voucher system found itself a field of application particularly in Czechoslovakia, Lithuania and Mongolia and practiced in each country in a different manner.2

In Czechoslovakia where the voucher system was first practiced, investment funds were created in parallel with offering the common public vouchers. The funds were made available to Czech and Slovak investors simultaneously without any requirement authorization or depending any limitation and thus over six hundred funds were created. Certain of these funds however failed to fulfill their respective obligation so they had be written off. State also brought regulatory principles over the funds. Czech people had the option of transforming their vouchers to directly privatization allotments(shares) through auctions, or they, if they liked, were able to maintain as them investment fund share in order to transform them to share for those institutions to be privatized in future.

In Poland, on the other hand, there were limitations brought over transformations of such vouchers to investment funds, while in Hungary, a contrary action was assumed where it was imposed restrictions over meeting of demands for repayments of the vouchers and that practice was broadened that way.

In Czechoslovakia, approximately 8.5 million people paid an amount in cash to obtain vouchers; whereas in Lithuania the voucher records were allowed to be used for purchasing all State property; as for Mongolia, voucher owners  used such vouchers for swift and successful privatization of small enterprises.

It was in Russia where privatization with voucher was practiced in the most broad from. There, vouchers were distributed to people, sold on free markets and used in privatization of public property.

In short, together with certain problems privatization with voucher was practiced in Russia, Georgia, Azerbaijan, Czechoslovakia, Poland, Hungary, Latvia and Lithuania3 and was highly successful.

 

IV- APPLICATION OF THE VOUCHER SYSTEM IN AZERBAIJAN AND THE RESULTS

Azerbaijan adopted independent means for the small, medium and big business enterprises to be privatized, using the voucher technique in privatization of medium and big enterprises. The enterprises covered by this practice were split into five groups, by sectors, and under the headings of industry, transportation, construction, trade and service enterprises. These enterprises were further divided into three categories big, medium and small enterprises, according to the number or the employees.

 

A- GROUPING THE ENTERPRISES IN AZERBAIJAN AND PRIVATIZATION TECHNIQUES

Table 1 illustrates the sizing criteria used for grouping the enterprises in Azerbaijan.

Table 1

The Grouping Size of Enterprises

Active in Azerbaijan

Lines of Field of

Grouping the enterprises by number

Enterprises

of emloyees

 

 

 

Small

Medium

Big

1. Industry

50

51-300

Above 300

2. Transportation

15

16-75

Above 75

3. Construction

25

26-150

Above 150

4. Trade

10

11-50

Above 50

5. Service

10

11-50

Above 50

 

Source: State Program for Privatization of State Property between 1995 and 1998 in Republic of Azerbaijan. 29.9.1995. Add.2, Art.9

 

According Table 1, present number of small enterprises is approximately 13621 in Azerbaijan.4 Privatization in these sectors on the other hand was accomplished, based on different principles separately for small enterprises and again different principles for medium and big enterprises. In addition to mass privatization where the voucher privatization was practiced, a brief mention should be made to privatization of small enterprises in the following lines.

1.                        Privatization of Small Enterprises

Privatization of the establishments regarded as a small enterprises by their number of employees was deemed as compulsory according to State privatization program.

 

Table 2

Small Enterprises Privatized In Azerbaijan

Item

Bussiness

Number

Initial

Starting

Price of Selling

No

Category

 

Value(100$%)

Price(85%)

Thousand

ABD

 

 

 

Thousand

Thousand

Manat

$

 

 

 

Manat

Manat

 

 

1

Service

7380

28434404

24232310

24169243

616720

2

Trade

614

47652075

40504264

40504264

1033536

3

Social Needs

146

6940469

5899399

5899399

150533

4

Fuel Oil Fill Stations

316

50796544

43177062

43177062

1101737

5

Bread Selling Stores

360

10933018

9293065

9293065

237128

6

Bread Barkery

140

6809788

5788320

5788320

147699

7

Industrial Enterprises

242

16792294

14273450

14273450

364212

8

Construction Enterprises

27

3416761

2904247

2904247

74107

9

Enterprises with

 

 

 

 

 

 

Uncompleted Construction

22

1926724

1637715

1637715

41789

10

Transportation Enterprises

371

142281

120939

120939

3086

11

Enterprises offered to let

54

2631788

2237020

2237020

57081

12

Enterprises offered to let but

 

 

 

 

 

 

not domiciles themselves

51

3520869

2992739

2992739

76365

13

Other Enterprises

8

55059

46800

46800

1194

 

Total

9731

180052074

153107330

153044263

3905187

1$=3919 Manat (Official currency)

Source: State Property Committee

  

In privatization of these establishments, it was aimed transferring 15% of enterprises to employees on privileged prices, and selling the remaining part though public actions5. Privatization of fuel supply stations and bread selling kiosks which are spread nation wide and considered as small business corporation category in continuing. Table 2 illustrates information on the enterprises privatized in Azerbaijan until 15th October 1997.

As it is apparent by Table 2, total of 9731 small business enterprises were privatized and a profit of about US$ 4 millions was derived thanks to the efforts made up to date. Number of the privatized establishments constitutes about 70% of total enterprises. The number is increasing every day. As of January 1998, the number exceeded 130006, reaching 90% of the total number.

2- Privatization of Big and Medium Size Enterprises (Mass Privatization)

Privatization of big and medium scale enterprises (mass privatization) in Azerbaijan is being carried out in different manner. These enterprises were transformed to joint stock companies prior to privatization and their capital were divided into shares. It is envisaged on these shares that subsequently.

-15% being used in form of privileged sale of the enterprises to their employees.

- 50% voucher public auctions,

- 10-20% pecuniary public auctions,

- while the remaining, in pecuniary public auctions or creation of investment funds7; thus, completion of the privatization process. Law orders that all privatization transactions shall be materialized using Manat which is the national currency unit8.

However, there is also another application called Gold Share Clause(Kızıl Semih) in privatization of medium and big size enterprises in Azerbaijan. During privatization process of the enterprises deemed as strategic and the enterprises in field  of public health and security. State can make such privatization conditional on gold share clause. The golden share requirement makes State to be entitled to the right of vetoing the resolutions adopted by a three quarter majority by Boards of Directions of enterprises.9

 

A-                      PRIVATIZATION OF GIB ENTERPRISES AND THE VOUCHER METHOD IN AZERBAIJAN

In Azerbaijan, some 65 percent of the medium and big size enterprises was planned to be privatized though the voucher method. To be in compliance with the plan, provision were made for the years of 1997 and 1998 and these were put into practical action as well. Carrying out this practice within the framework envisaged was deemed as necessary also by IMF, in term of harmonization programs and loans support.10

Practised in Azerbaijan, in addition to Russia and certain former eastern block countries, the voucher system is finding itself different application modes in various countries. The following lines describe  the application of the system Azerbaijan.

   1- Relevant Institutions With Regard To Privatization in Azerbaijan

The institution called State Property Committee(SPC) is the responsible body for privatization efforts in Azerbaijan. This institution and establishment to be privatized, and determines privatization modes of them and practices such privatization.11

SPC was entrusted with the task of carrying out the voucher system in its entirety. That is to say, field of activity of the Committee covers issuing vouchers, offering to common public, determining values of the institutions to be sold through the voucher public auctions, and sale of such institutions though auctions.12

SPC was also entrusted with missions pertaining to the taking necessary measures to make sure that the voucher system runs trouble free, and the bodies to be established. In this respect, both establishment and operation of institutions and establishments such as National Stock System (NDS), Voucher Investiya (Investment) Funds(VIF), and Voucher Stock Exchange (VSE).13 NDS will be an institution where commercial papers, privatization vouchers are dealt, vouchers are recorded and their circulation is regulated. Likewise, VSE will be composed of a series of centers where voucher prices are regulated on free market, and their dealings are made. As to what constitutes the goals of VIFs, these are anticipated to be established as joint stock companies open to common public, sale of their shares in exchange for vouchers; maximize the shares held by the common public to possible extent and use of such shares in purchasing lucrative enterprises to be privatized; subsequently, distribution of net profit derived through such companies to VIF partners. What was intended by application of the voucher system with such organization was to prevent property from being lost within a big mass and to overcome probable difficulties which might occur in the administration as well14. However, as of early 1998, only NDS went into service, and work on establishment of others are currently under way.

   2- Determining the Value of State Property To Be Privatized

It was envisaged that the state property to be privatized should be appraised in terms of their value prior to privatization. Same process shall also apply to the enterprises to be privatized though voucher.

To that effect, start appraisals to be determined as the result of full inventorization of the State property to be privatized shall be determined by relevant establishment or by the commissions to be constituted and such appraised values shall be subsequently submitted to SPC15.

The full inventorization process which constitutes the basis of the start appraisal value to be determined by the relevant enterprises or appropriate commissions, on the other hand, are realized taking fully into account the assets and liabilities concerning the corporation to be privatized. However, the assets of enterprises excluding monetary and financial assets are revaluated. In revaluation, increases in certain amounts are applied to the balance sheet value.16

All such process were also carried out for those enterprises to be privatized with voucher, and these computations were kept in purview in issuing and distributions of vouchers. According to this calculation, total values of the institutions and enterprises start appraisals of which were determined and given to NDS and which were thought to be privatized with voucher were found approximately to be at 200x32.000.000 US$,  6.400.000.000.- and it was envisaged that the allotments (shares) given to each citizen should earn a profit of about US$800.

   3- Issuance and Distribution to Common Public of Privatization Vouchers

NDS carried out transactions concerning issuance of vouchers conforming to the State program which went into effect in 1995 and distribution of such vouchers to common public began in marc 1997. Distribution of vouchers continued throughout the nation and ended on 15 August 1997.

Differently from other countries, each privatization shares in Azerbaijan were comprised of four voucher made out to the bearer. A privatization share comprised merely of four voucher was given to every Azerbaijani citizen alive and born before 1 January 199717. This means each Azerbaijani citizen was given four vouchers and opportunities were created for participation of every citizen in four independent privatization. Total shares of the state property to be privatized with voucher was found to be 32million and 8 million of privatization shares were issued taking into account population as well as privatization shares to be given additionally. Thus, ever Azerbaijani citizen owned 4/32.000.000 of the state property to be privatized with voucher.18 Furthermore, additional privatization shares were given to families of martyrs, veterans and those who were  entitled to hold the title of national here; here of Soviets; of  labour hero in the Sovietic era19, and total 7.183.803 shares were distributed as of 15 August 199720.

Privatization vouchers were entitled to all claims such as being sold, endowment, retained as guarantee, succeeded as inheritance, etc., though these vouchers were meant virtually for use in purchasing state property to be privatized. All such transaction were put into practice upon completion of distribution of privatization vouchers. Privatization vouchers were envisaged to be use for privatization operations for three years21.

 

4-Privatization Voucher Dealings at Free Market

When privatization vouchers were distributed to common public, the process of deals at free market also began. SPC declared public that each privatization share was around US$600-800. However, there were major fluctuations in prices of vouchers and extremely lower prices prevailed than had ever been anticipated that was because institutions such as NDS, VIFs and VSE envisaged to be constituted for better operation of the voucher system could turn to be only semi-operational and there was a vagueness on privatization.

Vouchers were dealt by voucher brokers accumulated at certain locations. During the first months, (March 1997) prices of these vouchers for buyers were US$200 and a share of US%800 just as determined by NSC. Yet these  prices were extremely short-lived and were valid for only certain dealers. Later, following a sharp decline, price of one share (four vouchers) dropped to US$100, and much later as of early July 1997 to even US$10.

When it was definite that certain State property would soon be sold in turn for privatization vouchers and as the dates for public auction were more visible, share prices rose towards late July 1997 to US$40 $50 . As of January, value of a share is around US$60.

5-Sale of Vouchers to Foreigners

As was mentioned in earlier chapters, owners of the vouchers are citizens as Azerbaijan. Yet it is desirable the participation of foreigners in the state property to be privatized, and coming of foreign capital to the century. To that effect, foreigners were allowed under certain conditions to obtain vouchers from market and use such vouchers for privatization purposes.

According to such conditions, in order for the foreign real or corporate persons, and the stateless persons and the enterprises of which 25% of grand capital belong to foreigners, to participate in privatization, they must obtain a “Privatization Option”23. Issued by SPC, the Privatization Option is a commercial paper made out to the bearer, and it grants its holders to be entitled to a right to purchase one vouchers that were obtained based on such rights should be used in privatization for a term of three years24. As for the number of Options, it was anticipated these to be about 15% of the privatization vouchers25. However, as of January 1998, that amount was surpassed. The Option is priced and distributed by SPC which issues it as well. The prices quoted were US$0,5 to 1 for each option in September and October 1997. As of November 1997 on the other hand the price of one option on US$ was found to be around US$26. Further, a limitation was introduced for purchases of option, and the amount of the options which a foreigner could possibly buy were  limited to 400.000 in figure. Currently, over 100 foreign companies27 bought total 16.589.000 options, 12 million options being on Manat 2.000, while 4 million options being on Manat 4.000.28 Number of options sold as of January 1998 exceeded 18 millions29.

 

6-Use of Privatization Vouchers In Privatization Operations

In Azerbaijan, it is being planned that 65% of the State property shall be privatized through privatization vouchers30. This phase to be privatized, transformation of such enterprise to joint stock companies and getting to the information on their total shares, and offering for sale by auction of the part to privatized and sale of such part to those who shall give the most high vouchers.

 

a-   Identification of the State Enterprises to be Privatized With voucher

As one may have noticed in previous sections, number of those state property and enterprises are identification those state property and enterprises which are considered as medium or big scale enterprises are the subject of privatization with voucher. However, there may be the ones whose privatizations are not appropriate and such enterprises are determined by Azerbaijan  Cabinet of Minister upon joint suggestions of SPC and the State Committee For Prevention Of Monopoly And Assistance To Free Enterprises.

b-   Transforming Enterprises To Be Privatized with Voucher Into Joint Stock Companies

With a decree that was issued in the fires when Azerbaijan was still a part of the former Soviet Union, the means and principles governing the transformation of numerous State- owned property and enterprises into “Share Groups” that are joint stock companies, have been established32. Operations concerning transforming state property and enterprises which are deemed as appropriate for privatization to joint stock companies are carried out according to provisions of the regulation based on his Law. According to the provisions, privatization committees are constructed in every enterprise to be privatized. Privatization plans devised by such committees and the criteria and coefficients to be taken into account in appraisal of the value of a given enterprise in full are submitted to SPC. According to the model plan accepted by SPC, the capital of a given enterprises are divided into shares and thus it becomes possible for that enterprise to be a joint stock company32.

Those institutions and establishments which turn into joint stock companies have two kinds of shares. First kind of share are common stocks which enable their holders to cast a vote at general assembly, while the second kind of shares are privileged shares which earn their holders only to be entitled to a right to get a share from the profit. In the privatization process, the privatization of from the profit. In the privatization process, the privatization of only the common stocks and the distribution of privatized company net profit net profits starting from privileged shores, have been envisaged33.

c-  Putting Company Shares On Sale At Public Auctions

Management of the shareholders group which are constituted through identification of institutions and establishment to be privatized and division of their shares into shares shall be vested with the NDS. As a result, at least 50 percent of the common stocks of the shareholders group shall be distributed for sale at auctions and sold in turn for privatization voucher34.

The auctions involving enterprises to be privatized determined by NSC, are being carried out at a center in Baku. As of January 1998 the process went though and many enterprises have been privatized though public auctions with vouchers.

 

d-  Transfer of Companies to Their Respective Buyers

All operations involving privatization vouchers are being carried out at a center which shall replace NDS within SPC since NDS is not established as a separate structure. Registers of shareholder citizens after public auctions are taken at the center and they are awarded official documents representing their shares.

Upon awarding of the official documents, all vouchers used in such operation are invalidated35.

 

7- Privatization with Voucher in Azerbaijan and Results

Privatization with voucher operations in Azerbaijan began on 18 May 1997. Until 15 January 1998, 14 voucher  auctions and 13 monetary auctions were held36; subsequently, dates for the voucher public auction were set.

Table 3 illustrates in detail the results concerning voucher public auction held.

 

Table 3

Enterprises Privatization With Voucher In Azerbaijan

Voucher

First

Total

Capital of the

Capital of Total

Ones which Were

Sold

Auciton

Issued

Issued

First Issued

Total Issued

Offered for

(Thousand)

 

 

 

(Manat*)

(Manat*)

Public Auction

(Manas*)

 

 

 

 

 

(Thousand)

 

 

 

 

 

 

(Manas*)

 

1

21

21

54.195.546.920

54.195.546.920

8.080.130

7.844.655

2

41

50

114.279.493.971

128.192.504.231

21.486.900

20.485.025

3

15

50

44.318.886.500

152.636.097.660

55.633.490

52.638.384

4

22

50

185.981.263.000

242.729.343.800

118.689.750

116.470.282

5

27

50

81.874.133.000

139.247.772.120

38.108.370

37.805.450

6

13

50

7.184.291.092

249.215.271.092

44.037.070

43.748.368

7

19

50

11.643.195.488

98.531.869.479

17.135.900

16.949.035

8

36

50

47.164.596.800

58.683.174.200

21.336.490

20.997.970

9

32

50

26.651.936.300

89.261.284.200

27.512.540

28.692.329

10

30

50

76.559.342.700

132.790.031.180

49.109.170

47.024.843

11

41

70

131.954.315.000

151.211.196.700

75.246.790

74.516.130

12

41

65

121.818.134.200

143.405.167.200

66.242.270

65.080.875

13

23

50

84.110.267.470

159.355.493.470

49.464.880

41.669.320

14

48

70

58.887.877.870

106.679.192.236

31.370.940

27.446.520

Total

409

726

1.046.623.280.311

1.906.133.944.488

623.454.690

601.369.185

 

As it is apparent by the Table 3, around 762 enterprises were offered for sale at public auctions and a revenue of about US$160 millions were collected.

 

8- Difficulties Encountered in Privatization With Voucher and Criticism for The Voucher System

As in eastern block nations where economic system and all property beign under state control, privatization in Azerbaijan is also a hostile practice for all sectors of the society. Therefore, there is a criticism for both the logic behind the practice and the difficulties caused bye the practice itself. These can be listed as follows :

 

a-Negative Impact of Countries Conditions On Privatization

One of the most important reasons for the fact that privatization may not be going as it is earlier stated on the Governmental programs lies with the conditions prevalent in a country. Among them, chiefly the institutional deficiencies caused by transition to a new system are; lack of trained manpower on privatization and free market economy; change in the system; and financial deficiencies caused by the state of warfare and invasion of Nagorno Karabagh.

 

b-Errors of SPC Concerning Privatization

There are statements that SPC has been in error with regard to its respective operations for privatization. First, it is said that necessary infra- structure has not been laid prior to distribution of the privatization vouches to common public38. Free circulation of the vouchers on free market is shown as one of the strongest indications of the fact that SPC was unprepared for the second phase of privatization. The fact that there was not an established system for circulation of the vouchers when they were first distributed to common public and that the government was late to undertake necessary legislative arrangements created opportunities for certain circles to collect the vouchers from common public39. The poorest among the segments of the society were the first ones who most eagerly sold their vouchers and disposed their vouchers immediately for rather low prices40.

Second criticism on the other hand advocates the claim that citizens were misinformed on privatization vouchers. SPC declared value of one privatization voucher to be around US$200. However it is claimed that this was done deliberately and the citizens were urged to sell their vouchers41. Furthermore, real value of the vouchers were declared much more differently by the official organs of the state42.

Third criticism is that common public were not informed enough by SPC. There are criticisms saying that the public were not sufficiently informed particularly by television instead SPC tried reaching out to the common public rather through printed media and this criticism is also accepted by then SPC itself43.  Same point was also criticized by World Bank as well. Although there are two state run TV stations in Azerbaijan, it is accepted as a fact that it was a deficiency that introductory programs on privatization were not shown is a deficiency in terms of having common public be familiar with the privatization program. Inefficient privatization propaganda may keep large public masses away from privatization process. It is stated that in this situation, former rulers will participate in privatization and stand higher changes of taking control of State propert44.

 

c- Delayed Distribution of Privation Vouchers

Another criticism against privatization practices is that mass privatization was begun in 1996 although the Law On Privatization was passed in 1993. As it was mentioned in the chapters above, distribution of the privatization vouchers which constitutes mass privatization came true but 1,5 years later than the period stated on State Program45. During the era when privatization was delayed, making of the necessary reforms for transition to privatization failed45.

 

d-  Delayed Establishment of NDS, CIF and VSE

Privatization vouchers are dealt in free market since SPC has not established a Stock Exchange for unimpeded deals of privatization vouchers and as there are no already established regulations. On Black market, price of the privatization shares are seeing deals at approximately 10 to 20 times lower than of the one declared previously by the government and it is further said that voucher brokers have major impact on declination of voucher prices artificially47.

 

e-  Voucher Auctions Which Began Prior to Completion of Distribution of Vouchers

First voucher auction was conducted within 15 days after distribution of privatization vouchers to common public. At the date of that auction only %20 of the common public managed to be in possession of their privatization shares. Another issue generally criticized is the fact that SPC started voucher auctions in line with the recommendations of IMF prior to the completion of voucher distribution48.

 

f- Insufficient Information of Common Public

People were not furnished with necessary information on privatization vouchers. Many believe that vouchers were given as assistance to themselves to improve their social level49.

Ignorance causes common public to sell their vouchers on extremely low rates on free market, something which is most liked by voucher brokers or high level bureaucrats50. The fact that those holders of privatization vouchers did not actually know what to do with them caused 20%-25% of the common public sell their vouchers on very low rates on free market51.

 

g-    Lock of Sufficient Competition at Public Auctions and Privatization of State Enterprises on Extremely Low Rates

It is stated the privatized State enterprises were privatized on low rates and that was caused by low level of competition due to the privileges granted to employees of such enterprises. Even in privatization of cotton cleaning plants which were highly suitable for making investments for shareholders in Azerbaijan, the competition remained too low. For instance, 172 privatization share participated in the auction where 15% of the Yevlak Cotton Cleaning Joint Stock Companies shares, and some 12,88 million Manat* shares fell on one privatization share. At another auction where %55 og the shares of the same company were put on sale, 4643 privatization share participated and a 2,2 million Manat shares fell on one privatization share. The fact is reflected on the resultant figures. During 1996, State budget earned a revenue of only 4,5 billion Manats as a result of privatization of enterprises standing the value of 44,8 billion Manats53.

 

h-    Involvement of Foreign Capital in Privatization

There are two kinds of criticism against involvement of foreign capital with privatization. The firs criticism features that participation of foreign capital in privatization which is also contained in Article 4 of the Privatization Program, there was not a suitable environment created for this purpose and that with privatization choices provided by the foreign capital for the country was also limited54. Another criticism advocates that the fact that about 18 millions of options were sold corresponded to more than half of the privatization vouchers and this may be interpreted as that more than half of the State property were going to be sold over to foreigners.

 

V. CONCLUSION

 

In addition to former eastern block nations, Azerbaijan is managing its respective efforts for transition from a fully state controlled market to free economy as well. Transition from a system where entire economic assets are in possession of the State, to a liberal economy system surely brings certain difficulties.

However, the privatization efforts constituting the most important step pf the efforts to make a transition to a liberal economy is continuing at utmost speed. The voucher system recommended to former eastern block nations by the World Bank is being carried out with care and resoluteness though criticisms of all sort. Taking lessons from negative experiences of the countries which already practiced similar privatization system. Azerbaijan has made outstanding achievements on the issue. When the institutions envisaged to be established for common public to make greater use from privatization materialized with this system are established in the immediate term, both privatization shall gain momentum, and major steps shall be taken towards setting up and operation of stock and bond exchanges which are an integral part of liberal economies.

It is hoped that the voucher system in Azerbaijan has gone though a positive application process and that with completion of the process the biggest roadblock standing on the way to transition to liberal economy shall be thrown out of the way.

  

FOOTNOTES

 

1                    Azerbaijan, From Crisis to Sustained Growth, A World Bank Country Study, The World Bank, Washington, 1993 p.52

2.                   Ilib

3.           Paul Knight and Elizabeth Danes, “Privatization in the Former Soviet Union” In, Investment Opportunities in the former Soviet Union, 1994, p.34

4.             Zafer Hüseyinov, Refet Askerov, Asef Ağayev, Privatization in Azerbaijan, Unpublished work, p.4.

5.             Pep. Azer. State Program for Privatization of State  Property between the years pf 1995 and 1998 a.g.p. Art7(4)

6.                        SPC, Press Release dated 14 January 1998

7.                        Azer. Rep. State Program For Privatization of State Property between the years of 1995 and 1998 a.g.p. Art.8/3

8.                        Privatization Law, Art.7/1

9.                        Field Properties of Privatization of State Property, 29 September 1995, Addition No.11, Art. 3.

10.                    CSIS Weekly Magazine, March 14, 1997 p.12

11.                    Written Basis on State Property Committee of Republic of Azerbaijan no.438 dated 12 February 1996.

12.                    Privatization Law (No445), Art.3

13.                    Azer. Rep. State Program For Privatization of State Property between the years of 1995 and 1998 a.g.p. Art 5, Art 10 and Add. No.7

14.                    Paul Knight and Elizabeth Danes “Privatization in the Former Soviet Union”, a.g.m. p.34

15.                    Methodological Views on Appraisal of the Privatized State Property dated 25 March 1996, Art. 1-3

16.                    Ö. Faruk İnal, Privatization of Meyve-Terevez Corporaitons in Republic of Azerbaijan and Regulation of Their Activity, Azerbeijan Institute of Scientific Investigations Economy and Constitution of Urban Disposal, Unpublished Dissertion, 1996, p.124

17.                    The Decree of Head of State on Privatization Shares, 25 March 1996, Art. III/1

18.                    A.B.Azizov, N.L. Ahmedov, E.H. İsmayilov, How to Benefit From Privatization Shares, Bak. 1996. , pp. 6-7

19.                    Written Basis On State Privatization shares dated 25 March 1996 Art. III/I

20.                    Verbally Told From SPC Information Center.

21.                    A.B. Azizov, N.L. Ahmedov, E.H. İsmayilov, a.g.e. p.8

22.                    The “Mülkiyet” Newspaper, Baku-SPC Publications, 14-25 Jaunary 1998, p.2

23.                    Rep. Azer. State Program For Privatization of State Property between the years of 1995 and 1998 a.g.p. Art. 4/3

24.                    A.B. Azizov, N.L. Ahmedov, E.H. İsmayilov, a.g.e.p8

25.                    Ibid

26.                    The SPC Decree No. 889 dated 27 October 1997

27.                    B. Nuriyev, Speech Delivered by Him On The Meeting A Gülistan Palace.

28.                    The Newspaper “Mülkiyet”, 4-11 November 1997.

29.                    Verbally Told From SPC Information Center.

30.                    A.B. Azizov, N.L. Ahmedov, E. H. Ismayilov, a.g.e.p.7

31.                    Res. 313 and dated 9.7.1990 of the Azerbaijan SSR Cabinet of Ministers

32.                    Rules Governing Transformation of State Enterprises to Share Groups in The Privatization Process, App. 2.29 September 1995,Art. 4-7

33.                    A.B. Azizov, N.L. Ahmdov, E. H. İsmayilov, a.g.e. p.16

34.                    Rep. Azer State Program For Privatization Of State Property between the years 0f 1995 and 1998 a.g.p. Art 8/2-3

35.                    Rep. Azer. State Program For Privatization of State Property between the years of 1995 and 1998 a.g.p. Art. 12/2

36.                    Te “Mülkiyet” Newspaper, Baku-SPC publications, 14-25 January 1998

37.                    Economic Review, September 1994, IMF Publications, Washington, pp 27-28

38.                    Ali Meisimov, The Mirror Newspaper, Baku, 17 May 1997, p.14

39.                    CSIS Weekly Magazine, December 27 1996, p.16

40.                    CSIS Weekly Magazine, March 14, 1997 p.12

41.                    CSIS Weekly Magazine, December 27, 1996 1997 pp12-13

42.                    Gurban İbadoğlu, The Meeting Held at the Musavat Party Center, The Musavat, 27.02.1997

43.                    Verbally Told From SPC, Tag yev, 9.October, 1997

44.                    Tevfik Yaprak, ı,rat Xussein, “Azerbaijan Poka  Ni lider, No Mojet Im Stat” Translation by Zaur ireliyev, The “Mülkiyet” Newspaper, SPC Publications, 23-30 September 1997, p.4.

45.                    Ali Mesimov, The Newspaper “Musavat”, Baku, 7 Oztober 1997, p.1

46.                    CSIS Weekly Magazine, 27 December, 1996 p.13

47.                    The Newspaper “Azatlq”, Baku, 5 March 1997, p5

48.                    The “Mülkiyet” Newspaper, SPC Publications, Baku, 22-29 June 1997, p.3

49.                    The Newspaper “Azatl”q”, Baku, 5 March 1997, p.1

50.                    Nazmi İmamov, The Eurasia Newspaper, Baku, 11 May 197, p.1

51.                    CSIS Weekly Magazine, 27 December 1997, p.14 1US$=appox.360 Manats

52.                    İsmayil Zohrab, “Iri Müesseseler Su Q’ymentine Özelleştirilir” , The Newspaper Azaltq, 11 September 1997

53.                    İsmayil Zohrab, Ibid.

54.                    Gurban Ibadoğlu, a.g.m.

 

 

Sources

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