Guest writer Ronnie Smith covers the recent privatization, not yet finalized, of the state-owned chemical producer Oltchim, which caused plenty of scandal and quarrel in the Romanian media and on the political scene.
My fascination with the Romanian government’s sale of the state-owned Oltchim chemical manufacturer continues. Having lived through Margaret Thatcher’s complex sale of state assets in the United Kingdom in the 1980s, where even parts of the armed forces’ operations were outsourced, I am amazed to witness the simple incompetence of both seller and buyer in the Oltchim fiasco.
Oltchim is broke and has had financial difficulties over a number of years, only state subsidy has kept it afloat. It is currently non-operational and the workforce is on strike, having become members of a large group of debtors because they are owed substantial wage payments. The company is what is generally termed non-viable and should be in administration.
It seems that the government simply issued a straightforward sales notice for the company, at the vague insistence of the IMF. There was no detailed prospectus issued and no proposals, offers, ideas or guarantees made concerning the payment of debt and restructuring of the business going forward. The government went hopefully to the market saying, ‘This run-down, very troubled, company is for sale and the highest bidder wins, quickly as possible please and no need for adequate time for proper due diligence to be carried out’.
Who, in their right mind, would consider buying a chemical company that is heavily in debt, is failing as a business and requires untold amounts of investment to make it a modern competitive and profitable business? Enter Mr Diaconescu, a businessman active in the media who also owns/leads a political party. Mr Diaconescu won the auction to buy Oltchim after more serious interests in the chemical industry refused even to enter the sale.
Mr Diaconescu’s motives are unclear. Does he really hope and have a business plan to turn Otlchim around? Does he actually have the funds necessary to buy the company from the government, make debt payments to current creditors, including workers’ wages, and invest profitably in the future of the business? Is his stated intention to raise investment by issuing shares in the company for all Romanian citizens to buy anything but laughable? Many people have doubts and I will give one example to show why I am one of them.
Only when he came to sign the sales contract with the government did Mr Diaconescu start asking questions and seeking guarantees about debt payments. A serious investor would not have entered the sale process without first knowing that the price to be paid for the business and its assets would be offset against the debt held by the company. Any serious buyer would understand that he is doing the government a favor by taking Oltchim off their hands and would not expect to pay for the privilege up front and also cover the company’s debt.
Mr Diaconescu has either made a big mistake, is in the process of being let down by foreign investment partners or is engaged in a piece of political theater in the hope that he can find some benefit at the December elections. Either way, if the sale is not completed Oltchim will be put back on the market, according to Mr Ponta, and the government will have a second chance to learn how to sell a state asset without creating yet another national scandal by reason of its monumental lack of brains.
Looking forward we can probably expect a similar story when the same people try to sell parts of the railway system and various bits of oil companies. The same questions will arise – why would anyone want to buy debt-ridden, unprofitable and poorly functioning business entities that depend on other shambolic, state-owned, parts of the company to be successful?
There are not many Mr Diaconescus out there and frankly, Pricewaterhouse Coopers might want to review their role in the whole privatization process as Mr Ponta is already starting to use their name rather too often. Soon it will all be their fault…
By Ronnie Smith, Guest Writer
Ronnie Smith is Scottish and now lives in Romania, working as a professional training business consultant and communication coach. He is also a teacher of political science, a political and social commentator and a writer of fiction. The views expressed are his own and do not necessarily reflect those of Romania Insider.com.
(photo source: gov.ro; in photo: left to right- PM Victor Ponta and Economy Minister Daniel Chitoiu)