Sweden takes a shot at privatization

Marketplace Staff May 4, 2007

Sweden takes a shot at privatization

Marketplace Staff May 4, 2007

KAI RYSSDAL: The French beverage company Pernod-Ricard sold a boatload of booze this quarter. Sales came in at almost $2 billion. That’s everything from wine to whiskey. And, if the company has its way, more vodka. During their earnings announcement this morning executives reaffirmed their interest in buying Russia’s Stolichnaya brand and Sweden’s Absolut. Which, along with some other state-owned Swedish companies, might be coming on the market sometime soon. From Stockholm, Claes Andreasson reports.

CLAES ANDREASSON: It’s Saturday afternoon and minutes before closing time at the Swedish alcohol retail monopoly, Systembolaget. The check-out lines are long, as people stock up for the weekend.

This business will remain state-owned, but one popular product, Absolut Vodka, may soon have a new owner. Mats Odell, Christian Democrat and minister of financial markets, is in charge of the privatization:

MATS ODELL: The Swedish state is by far the biggest owner of companies in Sweden, and we don’t think that’s a good way to create new opportunities.

Last year Sweden’s state-owned companies produced record results and added $5 billion to Sweden’s bottom line. Since they are doing so well, selling them now seems like a bad idea, says Lotta Groning, an editor at the Social Democrat daily Aftonbladet.

LOTTA GRONING: For years and years and years, they have given the state and the people a lot of good income that we need.

Absolut Vodka is made entirely in the small town of Ahus, in the south of Sweden. Last year alone, 23 million gallons of vodka was made there, most of it sold to the United States.

Jan Lundin chairs the local United Food and Commercial Workers Union. He told Swedish public radio, Absolut would be a desirable acquisition for any potential purchaser.

JAN LUNDIN [interpreter]: Of all our brands, Absolut is our flagship, and most likely the product an international buyer of the company would like to purchase. That’s why I believe an international buyer may break up the company.

This is not the first time Sweden’s state-owned companies are being sold. In the 1990s, when the Social Democrats were in power, shares in the telecommunication giant Telia were offered to the public. But with a huge number of shares suddenly appearing on the market, stock prices plummeted.

GRONING: A lot of people who trust the Social Democratic Party, they took all their saved money and buy these shares. And then the shares, they went very bad and many people lost a big deal of their money, so it didn’t go so well.

With the Telia fiasco in mind, it is perhaps not surprising that only a third of the public favors the current sale. But, financial analyst Ronald Fagerfjall believes the privatization will help the Swedish economy adjust to a global market.

RONALD FAGERFJALL: We are heading in the right direction right now. We’re trying to keep the welfare state but we try to liberalize it, we try to let the entrepreneurs and the economy free, and I think that the existing Swedish entrepreneurs have done a lot of good in the last 10-15 years. I could never dream of such a fantastic development that we’ve had lately, so I feel very good about these things.

In the coming years, the Swedish government is looking at thinning its portfolio even further, Minister Mats Odell says. It’s a necessary move towards creating a dynamic New Sweden.

ODELL: I think it’s a step to make Sweden more normal, like other countries. And we believe that the state should decrease its ownership — absolutely.

Sweden’s parliament is scheduled to debate the privatization bill in early June.

From Stockholm, I’m Claes Andreasson for Marketplace.

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