The right way to privatize: Putting people first

The privatization process in Pridnestrovie started later than in other post-Soviet republics, thus allowing the country to learn from the mistakes
of its larger neighbors. Early on, the country decided to make human values the main priority of the privatization process. With every privatization, a series of "hard" conditions are attached, designed to preserve and enhance the companies value to its workers and to society as a whole. Failing to carry out these conditions, the privatization process will automatically be reversed ... a result which guarantees that all privatizations meet their goals, or else the process is repeated.

The country's market based economy mixes the best of both worlds: Free market capitalism with the guiding hand of a state which offers incentives to investors only as long as they keep developing the human aspect of their investments. It is an undeniable win-win, where everyone come out ahead — foreign investors, the privatized companies, their workers, and the country as a whole.

The PMR government started privatizations on a modest scale in the late 1990's, after the transition to a market economy and after having embarked upon a program of economic liberalization. Over the last five years the process of selective privatizations has accelerated. The privatization program for 2006 included approximately 130 state-owned companies.

Putting people first is the right way to privatize. Pridnestrovie's humanist-focused privatization puts people values before any other consideration. Pridnestrovie pursues an active and open policy of attracting investments, and, in the word of the country's president "We welcome any honest business."

The country's investment market is dynamic, with all the conditions for success already in place: The necessary institutions and conditions for successful market-based economy and effective investments have been created. The legal framework includes the following laws: Owner's Activity Law, Law on Small Privatizations, Small Company Development Law, Law on Free Economic Zones, and the regulatory On Leasing legislation.

When privatizing a company, the government of Pridnestrovie doesn't just strip it and sell off the assets of the firm; the mistake of some of the more notorious privatizers in other countries. Instead, every single privatization deal comes with compulory "strings attached" which include:

• Company Preservation: Continued existence of the company and its long term goals;
• Investment Injection: target numbers for investments in updating, technical refitting and repairs and improvements;
• Job Security: retaining and increasing the number of employees;
• Market Maintenance: ensuring markets of raw materials and outlets;
• Debt Liquidation: Payment of any old debts, loans, which the company has with employees and creditors.

Putting people first, a set of deadlines are attached for each condition and a market review board regularly reviews compliance over time. Failure to follow through on the conditions of the privatizations can lead to a reversal of the process, something which can and will happen. And which has actually happened in a couple of instances, a fact which is not lost on other investors.

So far, among the large companies which have been privatized, foreign direct investment primarily came from Russia, USA, Germany and Hungary, in that order. Some local investors also participated, both as companies and as local banks of Pridnestrovian origin. Finally, in a few cases, privatization investments came from individual residents of Pridnestrovskaia Moldavskaia Respublica, among them cooperatives of the workers themselves becoming the new owners.

Pridnestrovie has on its territory one of Europe's largest electricity transforming grids. It is an important link for supplying electricity to all of the Balkans. The country's Hydro Electric Plant, located in Pridnestrovie and owned by the foreign company Unified Energy Systems, sells electric energy not only in Pridnestrovie but also in Moldova and other countries in the region.
This is one of several dozen success stories in privatization with a human face.

The activity of foreign investors is regulated by the law "Foreign Investment in PMR", passed in August 1999. The law outlines the conditions of foreign investment capital, including the rights and responsibilities of investors, state guarantees on private property and the regulatory framework supporting the law.

All told, Pridnestrovie is home to more than 3,000 private companies. Most are small businesses, but some are huge firms with thousands of workers each. Unlike Moldova, where privatizations have largely resulted in failure and human tragedy, the experience in Pridnestrovie has shown that privatizations can work when they are carried out in partnership with a state that puts people first.

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