The activity of the privatized enterprises is characterized by
retaining the principal field of activity, with substantial changes
in the organization of labor and production. That is very often a
non-financial condition stipulated in the privatization contracts,
especially in the services sector.
The production of the privatised enterprises increases. This is
a typical phenomenon, resulting from the active role of the new
owner in making an optimal use of production reserves, improving
production organization and the use of the labor force. In some
isolated cases the output has been temporarily reduced for the
purpose of repairs, expansion, and other investments.
The new owners introduce and develop additional activities in
the enterprise. This process is particularly characteristic of
enterprises in the sectors of trade and services. It stems from the
new owners' wish to increase revenues as much as possible and
secure a good return on investment, as well as from the need to
meet the commitment to preserve or increase the number of
workplaces in the privatized enterprises, as required in most
privatization transactions.
A certain improvement and diversification of the inventory of
services and goods produced by the enterprise, both within its main
field of activity and in the newly added ones was observed. This
seems to indicate that the privatized enterprises are adjusting
their activity to the market conditions, i.e. they are flexible and
easily adaptable to market conditions.
One of the chief problems of privatized enterprises lies in the
instability and uncertain future prospects of state-owned
enterprises which strongly mark the micro-environment of the
operation of privatized ones. In this respect it is impossible to
draw analogies with other countries, insofar as the privatized
enterprises are operating in the absence of a stable market
environment.
Another major problem is the instability of production
connections. The suppliers, when these are state-owned enterprises,
frequently change the contracts (there is poor contractual
discipline), and their restructuring often changes the output
structure, prices and sales volume. All of this tends to
destabilize privatized enterprises and impedes their market
adjustment. Some privatized enterprises adjust to the situation by
building up dealer networks and work with several, rather than a
single supplier as a means of countering the instability.
Apart from the outlined, generally positive tendencies in the
activity of the privatized enterprises, there are other more
unfavorable developments concerning their financial. The high
interest rates are pointed out by the new owners as a most serious
obstacle to the growth and even the normal functioning of the
privatized enterprises, and above all those relying on their own
capital, rather than attracting investments from the outside. While
retaining their legal and financial independence, after
privatization most enterprises find themselves under considerable
financial strain related to the servicing of investment loans
received at the time of privatization. To most enterprises paying
off the loans and the interests on them is the chief characteristic
of their financial state. Nevertheless, and partly due to the
limited number of privatized objects and the short period under
consideration, almost none have been forced into insolvency.
In a number of cases, in relation to the need to secure credit
resources, fixed assets of the enterprises are mortgaged or other
assets are put up as security. There also appears a certain
reduction of the assets with a view to optimizing production
reserves and finished products in storage.
Measures are being taken to reduce certain production and other
operating costs and to make them commensurate with the respective
activity and the revenues it brings. In most privatized enterprises
which have retained their independence there lack any substantial
additional investments in liquid assets and expenditures on fixed
assets. At the same time, however, the incomes from the activity
and the additionally revealed resources prove sufficient not only
to cover the generally increased operating costs, but likewise the
investments required by the conditions of the privatization
transactions.
The study proved that the enterprises having access to fresh
capitals for the restructuring are in a favourable position. Those
are typically the enterprises which are operating on
sub-contracting bases, enterprises which are distributors or have
been licensed by a foreign company, or are part of a joint venture.
Thus, for instance, "Stil" Ltd (Case N 2) holds a licence from
Hunter Douglas, the "Yurukov" company (Case N 5) is working for a
German company supplying the materials. Those enterprises which
have been bought by the personnel or management are experiencing
more acute financial problems. As shown by the case studies, the
persons who buy enterprises at auctions usually prove to have no
connection with them and have never worked there, i.e., we are in
the presence of green-field growth - the typical model of private
sector expansion in Bulgaria.
Strangely enough, a major problem of privatized enterprises is
inadequate labor force supply. Despite the high unemployment, the
new owners of the privatized enterprises have difficulties in
finding suitable workforce on the labor market. It is clearly
necessary to link privatization policy with the labor market
policy. The means for preliminary training of the staff of
privatized enterprises could perhaps be secured from the
Professional Qualification Fund. Information should be provided and
negotiations conducted between the authorities under Art. 3 of the
TPSMEL and the buyers about the possibilities provided by the
active labor market policy - preferential term loans, cost-free
hiring of young specialists and qualified workers, the temporary
employment program and other schemes. Labor force demand on the
part of privatized enterprises has to adjust to current labor force
supply. It is possible to set up a department at the National
Employment Agency which would be dealing with these problems.
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