State asset management and its
institutional framework in Hungary
OECD
Advisory Group on Privatisation
Dr. Péter Székács
Hungarian Privatization and State Holding Company
ÁPV Rt.
19th September, 2000
Slide 1
The topics of this presentation:
Slide 2

The commercial assets of the Hungarian state

Institutions of state asset management in Hungary

ÁPV Rt.’s asset management principles, objectives and tools

Possible alternatives for managing commercial state assets
The commercial assets of the Hungarian state
the Privatisation Act regulates the scope and extent of the
commercial assets of the state
assets may remain in long-term state ownership in:
•national public utility service providers
•companies of strategic significance in the national economy
•companies carrying out defence or other special duties or services
•company shares needed to guarantee state ownership or voting rights
Long-term state ownership cannot be less than 50%+1 vote.
In exceptional cases this can be reduced to a 25%+1 vote blocking minority, or a special
priority voting share
Organisations managing long-term state assets:
93 companies by ÁPV Rt.
74 companies by ministries
Slide 3
Commercial state assets in ÁPV Rt.’s portfolio
(31st December, 1999)
Total: 768 bn HUF
long-term state ownership
306 bn HUF
agricultural land
69 bn HUF
goods, real estate
26 bn HUF
cash and govt. bonds
97 bn HUF
balance of obligations
and receivables
- 138 bn HUF
assets to be privatised
409 bn HUF
Slide 4
Categories and levels of long-term state ownership
in ÁPV Rt.’s portfolio
No. of companies
general level of long-term
state ownership
_____________________________________________________________________________
state-owned forestry companies
state-owned agriculture companies
Volán group of bus companies
companies of strategic importance
companies of strategic importance
Slide 5
19
27
24
15
8
100%
75%
50%+1
25% - 100%
1 priority voting share
Institutions of state asset management in Hungary
treasury assets
Treasury Asset Management Organisation (until 1996)
Treasury Property Directorate (since 1.1.96)
Treasury
Central organisations with delegated powers (e.g. ministries)
commercial assets
State Property Agency (ÁVÜ, 1990-1995)
State Holding Company (ÁV Rt., 1992-1995)
The Hungarian Privatisation and State Holding - Company (ÁPV Rt., since 1995)
Ministries
Contracted external asset management companies
assets of separate state funds
Separate fund management organisations
assets of the Social Security Fund (wound up 1998)
Pension Fund (until 1998)
National Health Fund (until 1998)
Slide 6
Institutions of state asset management in Hungary
The Hungarian Privatization and State Holding Company (ÁPV Rt.)
•established in 1995 by Act XXXIX of 1995
•one-man, state-owned, holding-type company limited by shares
•supervised by the Government via the minister in charge of privatisation
•organisational and operational rules passed by government
•duties stipulated in the privatisation act, prevailing budget act and governmental
resolutions
•tasks are market-based management and sale of the assets in its portfolio
•headed by a 8-11 member Board of Directors and a CEO
•activities supervised by Supervisory Board, independent auditor and State Audit Office
•in 1999 asset management and privatisation activities were separated to ease the
adoption of the future asset management institutional framework
Slide 7
Organisational chart of ÁPV Rt.
State Audit Office
Minister supervising privatisation
Management
Committee
Auditors
Supervisory Board
Board of Directors
Chairman-CEO
Board Secretariat
Internal Controlling
Department
Controlling Department
International Affairs and Communications
Department
Deputy CEO
Finance
Deputy CEO
Transactions
Deputy CEO
Operations
Economics
Department
Agricultural Asset Managment
Department
Transport
Department
Human Resources
Department
Financial and Accounting
Department
Energy and Infrastructure
Department
Industrial and Trade
Department
Property Management
Department
Environment Protection
Department
Financial Institutions
Department
Individual Projects
Department
Security and Maintenance
Department
External Audit
Department
Capital Markets
Department
Privatisation Accounts
Department
Slide 8
Deputy CEO
Asset management and capital markets
Information Technology
Department
Moveable Asset
Management Group
Deputy CEO
Legal
Legal
Department
•ÁPV Rt.’s objectives for the forthcoming years:
To assert the state’s service obligations with strategic assets, implement state
policies in asset management activities.
To operate and manage the state’s commercial assets in harmony with the principles
of economic policy.
To achieve the best possible economic performance from assets and to use
resources to develop well-operating companies and pay dividends to the state.
To employ the same up-to-date management techniques used by companies in the
private sector so enable state-owned companies to compete in the market.
To exercise a governing role without being involved in every aspect of company
operations, but by setting the framework and conditions for their operation according
to tough market demands.
To privatise quickly but not just for the sake of it. Companies should be ready for it.
To sell assets competitively under the best possible conditions and with the state
undertaking the least amount of guarantees.
Increasing transparency and openness in asset management and privatisation
within legal and business limits.
Slide 9
ÁPV Rt.’s asset management duties:
issuing mandates at shareholders meetings (decisions on the articles of a company,
annual reports, business plan, use of dividends, employee shares etc.)
carrying out asset protection transactions (withdrawal, assets brought into the
business)
making owners decisions on reorganisation and crisis management
carrying out bankruptcy, liquidation procedures
raising and reducing a company’s capital
selling and buying ownership stakes in companies
providing (non-interest) loans, financial support
undertaking guarantees
founding new companies, developing existing companies
taking human resource decisions (the appointment, replacement, remuneration and
bonus payment etc. of the board of directors, supervisory board, CEO, managing
directors)
establishing controlling and supervisory systems
valuation of assets, company evaluation, record keeping
exercising ownership rights
Slide10
ÁPV Rt. can exercise its will and decisions through:
shareholders and members meetings
delegates on the board of directors
delegates on the supervisory board
analysis of regular controlling reports
owner supervision
examining targets and issues
nominated auditors
Slide11
ÁPV Rt.’s supervision of the companies in its portfolio deals
with the following:
ownership structure
capital situation, financing, liquidity
market (buyer-supplier connections)
debt level
credit (returns) repayments
competitors, examination of product structure
management of reserves
modernity of technology used
development needs, examination of developments
underway
structure of business interests
evaluating business achievements
Slide12
Points for consideration regarding the future management of the
state’s commercial assets:
the role of the state in the economy
the level and scope of long-term state ownership
the targeted objectives and outcomes
the institutional framework for managing state assets, selection of
asset managers and transferring ownership rights to them
the state’s supervision of the asset management and how it
should be integrated into the public administration system
the tools and methods of asset management
putting the required legislation into place
Slide13
Alternatives for the future management of the state’s commercial assets
option
commercial assets
treasury assets
______________________________________________________________________
1
relevant ministries
(winding up ÁPV Rt.)
Treasury Property Directorate
______________________________________________________________________
2
built on the existing
Treasury Property Directorate
professional organisation
(reworking the Privatisation Act)
______________________________________________________________________
3
new asset management holding
and new state priv. office
Treasury Property Directorate
______________________________________________________________________
4
Slide14
new asset management
and privatisation holding
(new unified asset law)
Treasury Property Directorate