Czechs receive first privatisation shares

THE Czech Republic yesterday took a further leap towards the free market as it began to distribute shares in 1,000 previously state-owned companies to private investors.

Over the next month, nearly 2 million Czechs and Slovaks are set to receive shares in firms ranging from banks and breweries to large farms and engineering works. Millions more will participate indirectly, having entrusted their allocation of shares to 400 investment funds.

Although bids to buy and sell can now begin, trading on the Prague Stock Exchange and through a sophisticated rival computer system will not start in earnest until 18 June, when the distribution of the shares will be complete.

When what was then Czechoslovakia launched its privatisation scheme just under a year ago, it was hailed as one of the most ambitious in Central and Eastern Europe and a possible model for other countries embarking on the transformation to a free market economy.

Under the scheme, all Czechs and Slovaks were entitled to buy books of investment coupons, exchangeable for shares, for a nominal price of roughly dollars 35. After a slow start, 8.5 million people applied to join the scheme, many persauded by promises from the investment funds that they would make more than 1,000 per cent profits within a year.

Curiously, despite such promises, most Czechs and Slovaks intend to keep their shares. Much to the relief of the government, fearful that a rush to sell could be disastrous, a recent survey revealed that only 11 per cent of the new share owners planned to take instant profits, with a further 25 per cent considering selling in the first year.

The start of share trading next month will be the real test of the system: the nominal book values given to firms when the scheme got under way will be replaced by real market values determined by the laws of supply and demand. Jiri Skalicky, the Czech privatisation minister, said there would be bargains to be had. 'I expect increased demand from foreign investors who feel an opportunity to buy at relatively advantageous prices,' he said.