5 November 1999 • The Privatisation Experiment in Austria • Karl Aiginger

Austria has successfully privatised the majority of its large manufacturing firms. We label the experience a success, since the revenues were high, the headquarters remained in Austria, the privatised firms now enjoy rising sales and employment, and they are noted on the stock market – performing for a long time above average. The success of the privatisation was based on the explicitly stated goal to privatise and the following delegation of the process to a privatisation agency with clear incentives to privatise. The privatisation schedule and mode was flexible; specific supplementary criteria demanded that offers with higher value added in Austria should be preferred, if economically feasible. The nationality of the owner did not play a role.

In contrast to this successful privatisation, the attempt to privatise one of Austria's largest banks gained world-wide attention as a never ending story. The difference between privatisation in the manufacturing sector and privatisation in the banking sector was that the first followed explicit rules (guidelines for the objective, the schedule, and the form of the privatisation) and was delegated to a privatisation agent with the power to restructure firms. In contrast the latter remained under direct ministerial control up to the very last stage of the privatisation process, the rules were changed during the process, and never made explicit up to a very late stage. The principal was weak and his choices were limited by political considerations. The firm was reluctant to be privatised and sought to codetermine the buyer as well as the method of privatisation. Furthermore, no special agent was employed to promote privatisation and supervise the project.

Liberalisation of the large infrastructural firms follows the rules of the European Union, without using the potential of earlier schedules. Restructuring the public sector according to the principles of new public sector management is only in the beginning. Many examples of off-budget companies exist, but specifying the objectives of these agencies, defining universal services, and monitoring them after cutting the direct links is done insufficiently. Contracting-out, tendering of services, and competition within the government are less common than in other countries.