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Privatizations: Golden Opportunities Presented |
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Archives -
2007 Archive
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Written by B. Tyril
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Saturday, 19 May 2007 |
A growing influx of foreign businesses has made the Faroes a highly competitive environment — with upcoming privatizations of government owned companies set to attract new attention from international investors.
While plans to include Faroese Telecom in the Faroese government’s forthcoming wave of privatizations have been preliminary frozen for lack of political consensus, the bulk of the scheme remains on track. It comprises commercial bank Föroya Banki, pension fund and life insurance company Lív, and air carrier Atlantic Airways, all of them well consolidated companies with a history of success.
Symbolically, for many Faroese who remember the financial turmoil that occurred a decade-and-a-half ago, the upcoming privatizations are seen to mark a final farewell to the unpopular crisis measures of the early 1990s.
“You could say we have a luxury problem on our hands,” says Prime Minister Jóannes Eidesgaard. “As a government, we generally do not think we should own or operate commercial corporations. We consider it necessary to sell these companies, preferably both to strategic investors and to the Faroese people, partly through flotation on the stock market. These companies represent taxpayer assets and we will seek to secure a fair price. Time has come for the government to move away from non-core business; instead, we should free up our resources for optimum use. Privatizing these companies will hopefully generate revenues that can be spent on core priorities and payment on government debt.”
Mr Eidesgaard adds: “Insurance companies, commercial banks and airlines are best operated as free enterprises under normal competitive conditions. The government’s job, on the other hand, is to provide for political stability and a strong social services infrastructure. We are not going to privatize merely for the sake of it — there is a clear limit — and health care and social security are generally speaking beyond that limit.”
Given the reality of the Faroese home market — a mere 48,000 people inhabit the islands — foreigners are amazed when made aware of the general level of wealth. Some find it hard to believe that so few people would be capable of creating such an advanced community, chiefly funded and facilitated by their own exports and communication systems.
According to Áki Johansen, Director for the Department of Strategy and Economic Development at the Prime Minister’s Office, the strong Faroese economy works to propel the country to become “a more proactive participant” in the global marketplace.
“Things move very quickly in the Faroes,” he says. “One or two years ago, talk of global perspectives in business or government would often be dismissed as pure fantasy. Today, globalization is part of everyone’s thinking. The comparison between a super tanker and a speed boat may apply here: the Faroes as the fast moving, extremely maneuverable speed boat, and larger societies as the big, heavily loaded supertanker.”
Some may, to a degree, attribute recent developments in the Faroese business community to the ‘Iceland effect’ as initiated with the entry of Icelandic financial services companies less than a decade ago and now institutionalized in a comprehensive trade agreement between the governments of the two countries.
“What is hardly disputed today is that many Faroese companies have evolved to a high degree of internationalization in a very short time frame,” Mr Johansen maintains. “Not that we didn’t have strong companies, active in foreign markets since many decades; but those were very few. What we’re seeing now is a whole culture of internationalism in the business community with success stories ranging from security software and telecom to maritime services to art and entertainment — all of which seems to indicate that we’re building a more diverse export industry to complement the all-dominant seafood.”
As chairman of the government’s special Privatization Task Force and a member of several subcommittees that deal with specific privatization objects, Mr Johansen is one of the key persons involved in the current privatization schemes. However the case of Föroya Banki is somewhat different inasmuch as the bank, technically, is owned by the 1992 Finance Fund, which works independently of the government’s system of departments and agencies.
“All of these companies that are being offered for sale now are potentially very attractive for investors. Their age ranges from just over 30 to just over 100 years; all of them are highly respected and financially strong, and all of them have excellent market positions and are poised for international growth. We have highly favorable events taking place in their respective business environments, such as the deregulation of the insurance and pensions market, the ongoing mergers and acquisitions, the toughening competitive environment, and the increasing level of globalization.”
Link to pdf presentation...
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