Reprivatization

Reprivatization refers to the process of restoring to its former owners properties seized by a government, or to the process of compensating previously uncompensated former owners. This is often a component of larger privatization schemes. The term is most often used in the connection with privatization in former Soviet Bloc countries or in reference to settlements concerning the property of murdered or displaced European Jews. The difference between reprivatization and privatization is that only state (nationwide) property can become the subject of the transaction, but not municipal property. The economic content of these concepts also has differences: the privatized property is obtained due to the costs of the state, but the reprivatized property previously belonged to individuals who received income from its exploitation, they also created it.

Reprivatization is often sought by members of the old nobility or their descendants who desire the return of the traditional family home for sentimental and/or financial reasons; by Holocaust survivors, their descendants, or survivors of persons who died in Nazi death camps and whose property was confiscated by the Nazis or by later Communist states and disposed of in various ways; and by corporations or other parties whose property was nationalized. It is very difficult to work out a one-size-fits-all regime for property restitution, and it is often pursued on an ad hoc basis in the courts with varying degrees of success in different jurisdictions.

A significant barrier to reprivatization is created by larger political questions, which vary by country. In Eastern Europe, there is frequently a desire to avoid the inflammation of ethnic tensions and the ostensible reversal of Potsdam conference policies; see Federation of Expellees.

Outstanding reprivatization issues can sometimes be a barrier to foreign investment, as investors are wary of investing in a property to which the title is disputed or faulty.

Reasons for reprivatization[]

Reprivatization can be initiated due to a desire:

to reduce the number of state property
to increase the size of the private sector in the country's economy
to strengthen competition in various industries
to increase the efficiency of the use of property as a source of improving the well-being of individuals and as a consequence of the country as a whole
to eliminate the state monopoly in certain areas

Forms and types of reprivatization[]

There are two main forms of reprivatization:

Restitution. In this case, the property is returned to the former private owner.
Compensation. The value of the property is reimbursed through the provision of government securities or cash.

In their pure form, both these forms are rare. Most often they are used at the same time, compensating for part of the costs in the form of reimbursement of funds, the rest is provided in kind. In addition, reprivatization can also be accompanied by compensation for material damage (lost profits, downtime). Requirements for reimbursement can be put forward both by the former owner and by the state itself:

The owner can claim compensation for the amount of income that he could receive if his property was not nationalized.
The state can claim for reimbursement of expenses incurred, as a rule, it may be expenses for modernization, maintenance of the relevant condition,

Reprivatization by country[]

Great Britain[]

Most often, when discussing reprivatization, it turns to the example of Margaret Thatcher. After becoming prime minister in 1979, she decided to handle the economic difficulties faced by the United Kingdom at the time by engaging in a campaign against the trade unions and changing the role of the state in the British economy. One of the ways to implement the plan was to choose reprivatization.

Large-scale reprivatization touched the oil, gas, electronic, aerospace and some other industries. Many enterprises that were in a difficult economic situation (including British Airways, British Petroleum), legally transferred to state ownership and received considerable financial support from it. And all this is only to be transferred to private hands through privatization ten years later.

Germany[]

The revival of entrepreneurship in the first period after World War II went on in the eastern lands in several forms. These were the creation of new firms, reprivatization, the organization of joint ventures with the participation of Western capital and former national enterprises. A kind of transitional measure is the decentralization of management within the former combines, as a result of which the former state enterprises begin to act as free producers in the market environment. Immediately after the unification of Germany, about 6,000 applications for the redemption of enterprises by their former owners were filed. With full redemption of the household enterprises had the opportunity to obtain a loan from the German Credit Bank under the collateral value of the land plot.

Spain[]

The history of privatization and nationalization in Spain is the story of the "nationalization of losses and the privatization of profits." In a crisis, the government bought up or otherwise nationalized loss-making enterprises, actually saving them from bankruptcy. Later, when for some reason they became profitable and successful companies, the government again sold them to private hands. At the same time, traditionally unprofitable industries, such as, for example, the coal industry, radio and television, railway and shipbuilding companies, remain in the hands of the state. Analysts state that the goals of privatization - to increase budget revenues as much as possible and to increase competition in different markets - are in general contradictory to each other, so it was possible to achieve either one or the other, but not both.

France[]

In France, as in many other European countries, a vast public sector of the economy was formed after World War II. However, subsequently, the country's leadership did not adhere to a unified policy regarding the management of state property and its fate as a whole. Here, in comparison with other developed countries, the most pronounced were the so-called waves of property transformation. The processes of nationalization and privatization consistently succeeded each other, depending on who was in power. The last large-scale nationalization took place in the early 80's. Large commercial banks and many industrial enterprises were nationalized. However, during the reign of President François Mitterrand, the French economy was already experiencing difficulties due to high state participation and a large number of state companies. In connection with this, in the presidency of Jacques Chirac in the late 1990s. processes of privatization of the state enterprises have begun.

Poland[]

Unlike the industrial sector, Poland's agricultural sector remained largely in private hands during the decades of communist rule. Most of the former state farms are now leased to farmer tenants. Lack of credit is hampering efforts to sell former state farmland. Currently, Poland's 2 million private farms occupy 90% of all farmland and account for roughly the same percentage of total agricultural production. These farms are small—8 hectares (20 acres) on average—and often fragmented. Farms with an area exceeding 15 hectares (37 acres) accounted for only 9% of the total number of farms but cover 45% of the total agricultural area. Over half of all farming households in Poland produce only for their own needs with little, if any, commercial sales.

Ukraine[]

Reforms in the more politically sensitive areas of structural reform and land privatisation are still lagging. The parliament has approved a foreign investment law allowing Westerners to purchase businesses and property, to repatriate revenue and profits, and to receive compensation in the event that property is nationalized by a future government. Outside institutions—particularly the IMF—have encouraged Ukraine to quicken the pace and scope of reforms and have threatened to withdraw financial support.

Reprivatization in both political and economic terms is noted by the authors of the monograph "Privatization and Reprivatization in Ukraine after the Orange Revolution" - proved to be an ineffective way of reviewing the results of privatization in Ukraine. Reprivatization, which was carried out through the courts, proved to be a long and exhausting process. "The process of reprivatization as a way to review the results of privatization was formed under the influence of the general revolutionary moods of the population and the character of the first government team led by Yulia Tymoshenko, accustomed to an irreconcilable opposition struggle".

Kryvorizhstal is Ukraine's largest integrated steel company. In 2004, the enterprise became an open joint-stock company "Kryvorozhskiy Mining and Metallurgical Combine". In the same year, the government of Ukraine allowed a consortium created by the structures of politicians and businessmen Rinat Akhmetov and Victor Pinchuk (son-in-law of President Leonid Kuchma) to privatize the largest steel plant for $ 803 million.

After the Tymoshenko government came to power in February 2005, the procedure of judicial return of the plant to state property was launched. On April 22, 2005, the Kiev Economic Court declared illegal the sale of a 93.02% stake in Kryvorizhstal and decided to return them to the state.

On October 24, 2005, Kryvorizhstal was reprivatized. The world's largest metallurgical company Mittal Steel won the contest. It laid out a 93.02% stake in Kryvorozhstal OJSC 24.2 billion UAH ($ 4.8 billion).

External links[]

International Centre for Policy Studies paper on reprivatization issues