Tal
London 13 mars 2007
Mats Odell, Kommun- och finansmarknadsminister

Reducing public ownership

Check against delivery.

I am happy to meet Swedish friends and friends of Sweden at this gathering.
First let me try to explain why we are doing this sale of certain state-owned companies and what we hope to achieve.

We are trying to get away from using the term privatization. We prefer to talk about divestments or reducing public ownership. Why? Well, privatization implies both more and less of what we are trying to do. In the US the word privatization will make you think of turning over prisons to private enterprise. We have not picked up on that idea. In any case privatization over there most often means handing over public services to private business. That is not common practice in Sweden.
Privatization in our territory implies that a state owned firm is sold to the public or possibly handed over to the citizens in some way or another. This was the idea or even the ideology behind the divestment which former Swedish governments, including Mr Carl Bildt´s 1991-1994 of which I was a member, performed during the 1980´s and 90´s. The idea became less attractive after the social democratic government of Göran Persson sold a large minority of Telia, the telephone company, to the public in the year 2000. That was shortly before its shares dropped by 50 per cent. That was not considered a hit with the public which to us politicians is synonymous with the voters.
A similar public offering is not as likely as it once was.

So what we are talking about is reducing public ownership when it comes to six partly or wholly owned government enterprises.

One principle behind it is this : The government - its legislative, executive branch - sets the rules of the game. The government, which in practice also is the umpire, should not also be a player in the field.

This principle is applicable to companies operating under market conditions. Companies with special societal interests is another thing. We are not going to touch companies like the King´s Dramatic Theatre, The Opera or the Systembolaget with its exclusive right to sell spirits, wine and even strong beer to the public.

The principle that I just referred to means that we will sell more companies in due course. But it is not likely that much more will be sold during the remaining 3,5 years till the next election in Sweden. Our stated aim is to collect some SEK 150 billion during our present term in office. The companies in question are worth much more than that - they are all Crown Jewels - so there is no hurry.
And let me tell you - we will not stop the bidding if the price surpasses our wildest dreams. Here I could quote Mr Bengt Dennis, head of our central bank when he had pushed interest rates to 500 per cent, : "The sky is the limit!".

Another idea behind the government´s policy is our belief that these fine companies would do even better in the hands of owners who have knowledge and resources to develop them and make them reach their true potentials. This, we think, would also be good for their employees.

The social democrats in government, and let me tell you they have been in government, reduced the public ownership of SSAB, Nordbanken and TeliaSonera and quite a few more state owned companies. But now they are die hard against it. It is a sad thing because we know that they have had other plans had they stayed in power and it would be good to unite around at least some of the sales. Some objections come from those who think that this process is unique for Sweden. I try to point out that already in the 1980´s Britain - home of the Crown Jewels - sold off a few of them. Let me remind you. There was British Gas, British Telecom, Jaguar, British Airways, Sealink, most government shares in British sugar, British Aerospace, British Petroleum and British Steel were also sold.

Did Britain sink to the bottom of the sea? No, again she proved herself to be Great Britain. I don´t think we will sink either. On the contrary.

Now let me round off with some words about how we will proceed from here. I am afraid that we are going to make many journalists unhappy because of the careful and unexciting process that awaits us and them. This is at least what we are hoping for. The process should be transparent - it has to be - but information about individual deals should be kept secret until the right moment when information will go out to each and everybody.

It is true - we politicians are known to seek publicity. That is part of our game. But in this regard I and my associates will operate in quite a different fashion. We will do everything we can to avoid journalistic scoops. Those among you who are businessmen can surely appreciate our way of handling the information process.

This does not mean that we will avoid the important principal questions. We have already had duels at the Riksdag between Mr Oestros of the opposition and myself. It would be a slight exaggeration if I told you that these debates have been characterized by understanding and good manners. The social democrats have been against everything we are doing and I am for it all. I have reminded them of their past and scorned them as best I can. That` s politics. Politics as usual. I only wish we could do it differently.

At an occasion like this, however, I think we should allow some nuances.

There are, after all, arguments on both sides.

But let me remind you of a some facts. The state is the largest of Sweden`s company owners. The government administers 55 companies/groups of which 41 are wholly owned and 14 partly owned by the state. Some 200 000 people are employed by these companies. What is that stuff worth? A lot more than a year ago when the estimation was around SEK 675 billion.

Nobody has argued that all these stakes should be sold. As prime minister Fredrik Reinfeldt put it in the article in Financial Times that I quoted from some minutes ago:
"The state should not own companies if the ownership doesn`t have an obvious strategic role and if we can find the right investor willing to pay the right price".

The Riksdag must empower the Government to phase out ownership of state-owned company. That was done in part 1996, during the former government, when the Riksdag passed the State Budget Act. It stipulated that the government may sell the state`s shares in companies where the state has less than half of the votes unless the Riksdag has decided otherwise. For three of the companies this is already done. I am talking about Nordea, the bank, TeliaSonera the telecom operator and the Nordic stock exchange OMX.
We are now asked the Riksdag for permission to sell the real estate company Vasakronan, the Vin o Sprit - producer of Absolut Vodka and many more brands - and SBAB operating in the residential mortgage market.

Almost all of these six companies have presented or will present record profits for the year of 2006. TeliaSonera will hand over more than SEK 12 billion in dividends to the government which owns about 45 per cent of its shares.

The argument against selling is obvious. You may sell Crown Jewels but for God` s sake, don` t sell the milking cow!

This, I believe, will be the main argument against us. We ` ll hear time and again, you are selling something valuable to pay of some of the government dept and so you will lose money hand over fist. The buyers will want a high rate of return, much higher that the four per cent that you will save when you pay off the government debt. You will get a higher rate of return if you keep your assets. Besides the government dept, a little more than 40 per cent of GDP, is no longer alarming. Why bother?

This is true today. But difficult to prove if you look at the long range figures.
The companies are for sale but we are not putting any of them on sale. We believe they are all attractive and should command a premium. Under the leadership of Mrs Karin Forseke, former president of the investment bank Carnegie and my adviser, I am sure we are going to get good value for what we have to offer. And that includes, let me stress that point, a good prospect for the company in question and in some cases a better structure of the industry and maybe an enhanced competition.

The former government had an overall objective - to create value for the owners i e for us the taxpayers.
That is ok as far as it goes. And as of late some state-owned enterprises have been very successful. That is true about Vattenfall and LKAB and a few more. But there has also been great failures. In the beginning of the 90 s the government had to put in tens of billions of Swedish crowns to save Nordbanken, the embryo of today`s Nordea. There have been great losses in the government operated steel industry in the 1970` s. Steelmill 80 and I could line up quite a few more . And let me repeat - I think that the government generally speaking is less suited to operate industries on market condition than private entrepreneurs. If governments were better suited shouldn´t socialist economies be better off then they are today or were yesterday?
With some exceptions, I have mentioned a few, we think that government companies should not be among the players. There is always a temptation for a government to favor state-owned enterprises even though you are not supposed to according to EU doctrine.

But let us be open minded about it. Even we who think as does the prime minister that government should not own companies operating in a competitive market will not propose radical sell offs.
Let me assure you, We are not going to discriminate foreign capital. You are all welcome to bid. But if we sell too much too soon almost only persons or companies from abroad can afford to buy. I would not like to put the Swedes in a disadvantaged position.

That is one reason why I would like to see the Swedish wealth tax not only cut in half, which we are doing, but abolished. If that is done much Swedish capital, now hidden in faraway places, could find its way back to our shores. We are an open economy. And I think we should be open also to our own people`s money.

Thank you!