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PRIVATISATION
Modalities for privatisation of public enterprises In 1995 the government of Eritrea undertook large scale organizational streamlining that enabled the public enterprises to restructure and rationalize their work.
Recently, the National Agency for the Supervision and Privatization of Public Enterprises has reinforced the initiative by allowing the public enterprises full autonomy to operate on a purely commercial basis to ensure competitiveness.
The principal reason for the establishment of the Agency is for the orderly transfer of ownership and management of the public enterprises from the Government to the private sector policy.
Principles guiding the process of privatisation in Eritrea
Public enterprises being privatized on a debt-free basis. Debts incurred by each public enterprise after May, 1991 will be paid off from proceeds of sale of the respective public enterprise . Each enterprise will issue a public notice requesting that such claims be lodged prior to the finalization of the privatization agreement. The Agency does not recognise any claims made after the expiration of the period indicated in the public notice.
Since one of the very important reasons for undertaking the divestiture of public enterprises is to promote competition and efficiency at the enterprise level, domestic and foreign buyers are not be accorded any special protection rights or privileges that is not normally accorded to other investors.
Wider participation by the Eritrean public is being promoted through the public floatation of shares of certain enterprises. In cases of joint venture agreements, the amount and type of shares the Government to retains is being decided on through bilateral negotiations.
Cash is the preferred form of payment for all transactions; but contributions in kind as well as credit arrangements may be considered on a case by case basis. Buyers of public enterprises are not liable for reacquisition environmental or other damage claims by any changes in legislation in the future. However, buyers will be required to conform to future environmental and other operational standards.
Methods of privatisation Options for the divestiture of the public enterprises include bids and auctions, trade sales, joint-ventures, public flotation of shares, labour and management buyouts management contracts, and leasing outright or partial sale of enterprises as going concerns to individuals, groups or corporate entities may be accomplished through a transparent, competitive bidding or through open auctions. Assets of liquidated enterprises may also be sold by either one of these methods.
Trade sales may be concluded through bilateral negotiations with interested parties or with parties targeted by the Agency. This could result in either the complete transfer of ownership to the private sector or in the conclusion of a joint venture agreement with the Government. Government holdings in joint-venture agreements may be gradually transferred to the public through the issuance of share certificates.
The Agency may sells whole or part of the equity of an enterprise by the public flotation of shares. Encouraging the participation of the general public in the ownership of national resources is a major consideration in deciding the denominations of shares.
Evaluation of bids and
offers
Qualification to bid Irrespective of the method of privatisation adopted, offers will be entertained from all interested parties, without restriction or prejudice due to nationality.
Incentives to buyers Capital goods, intermediates, industrial spare parts and raw materials, for instance, may. now be imported into the country by paying a nominal customs duty of 2%.Raw materials and intermediate inputs pay an additional 3% sales tax; but rebates may be obtained on the portion that is used for export production. Exports are free of export duties and sales taxes.
Foreign investors enjoy unrestricted remittances of net profits and dividends accrued from investment, debt-servicing payments, fees and royalties in payment of technology transfer agreements, proceeds received from liquidation of investment and/or expansion and, payment received from the sale or transfer of shares. Moreover, all buyers of public enterprises will have automatic entitlement to the incentives and advantages provided for in the country's Investment Code and other relevant proclamations. However, buyers of public enterprises are not entitled to special protections. privileges or monopoly rights.
Status of workers All questions related with the welfare of workers being negotiated with buyers. Rights and privileges of workers will be resolved with in the context of the provisions of the Labour Law of Eritrea.
Employees who happen to be in the payroll of the public enterprises at the time of sale by means of the public floatation/offering of shares may be entitled priority to the purchase of the enterprise shares at the initial offering prices. If this entitlement is not exercised at the time it is offered, claims for entitlement wil1 not be accepted or honoured later on.
Uses of the privatisation fund Proceeds from the divestiture of public enterprises being submitted to the National Treasury, and will be used mainly for the settlement of extraordinary Government debts.
For more Information The National Agency for the Supervision and Privatisation of Public Enterprises Government of Eritrea.
P.O. Box 4887 |
