- Email: [email protected]
Energy in Eastern Europe — introduction The case of Poland, Hungary and Czechoslovakia
Energy in Eastern Europe introduction The case of Poland, Hungary and Czechoslovakia Coopers & Lybrand, European Energy Group The two companion articles which follow have been prepared by Coopers & Lybrand (International) and discuss the energy sector in Eastern Europe by reference to the experience of Poland, Hungary and Czechoslovakia. These three countries have been chosen because of their relatively advanced programme of reform towards a market economy. The nature of the articles is not that of an academic, economic or political treatise. Rather, the perspective adopted is a very practical one - focusing on the key changes which have taken place in the energy sector and the institutional framework within which it operates, their impact on energy enterprise management, the economic functioning of the sector, the changing role of government and the prospects for further restructuring, commercialization and ownership change. The observations made are based on recent Coopers & Lybrand (International) experience, both as interested observers and as advisers to governments and energy companies in the region. The first article focuses particularly on institutional aspects of energy sector change in Eastern Europe - including industry and organizational restructuring, the role of the state, commercialization of energy management and future prospects for further institutional reform towards Keywords: Eastern Europe; Reform; greater market orientation. The second article deals with more explicitly commercial issues such Market economy as pricing, the changing nature of energy trading relationships, moves Coopers & Lybrand (International) is towards ownership change and the introduction of private foreign a worldwide federation of business investment. advisers. It has recently opened offices As the first article makes clear, the energy sector exemplified until throughout East Europe. These arti- recently many of the key features of the old centrally planned economic cles have been prepared by its Euro- systems: Monolithic integrated enterprises, internal and external tradpean Energy Group. For further ining monopolies, extensive state 'command and control', serious distorformation please contact Chris Wiltions of the pricing structure, a lack of managerial autonomy and liams, Coopers & Lybrand, Plumtree widespread disregard for the environment were typical. In turn, this had Court, London EC4A 4HT, UK. a profound impact on the way that energy enterprise managers and government officials interpreted their roles. Against this background, the magnitude of the tasks involved in reforming the energy sector is forbidding in terms of the restructuring, capital expenditure and attitudinal changes which are required. In this sense, even the progress made to date is remarkable and the restructuring proposals now being developed are still more radical. This points to
Enormous changes are taking place in Eastern Europe as it restructures politically and economically. The energy sector is not immune from these changes - indeed given its relative size in, and the energy intensity of, their economies, success in the energy sector is vital. This is reinforced by traditional dependence on Soviet imports which are now priced at world levels. Change is occurring at many levels within the energy sector - the break up o f monolithic monopolies, a new relationship between government and industry, more commercially oriented trading relationships, moves towards economic price levels, the rationalization o f capacity and in some cases privatization. These articles survey developments by focusing on Czechoslovakia, Hungary and Poland.
81 6
0301-4215/91/090816-02 ~) 1991 Butterworth-Heinemann Ltd
Energy in Eastern Europe - introduction
a willingness to change which, for the present, is strong enough to outweigh m a n y of the risks and uncertainties associated with a process of such radical reform. Successful energy sector reform in Eastern E u r o p e wild undoubtedly require industry and organizational restructuring, commercialization of trading relationships, the judicious introduction of new ownership forms and a reduction in the degree of state intervention. Perhaps just as importantly, it will depend on developing both the willingness and the ability to operate the new structures in a new way. This will require training, skills transfer and attitudinal changes as well as the break up of integrated monopolies and an influx of Western capital if the hoped-for benefits are to be fully realized. We have been priviledged to have been extensively involved in the changes and discussions that have taken place in Eastern Europe. It is hoped that these articles will lead to a wider awareness and appreciation of developments within the energy sector of Eastern Europe. A further article in a future issue of Energy Policy will focus on environmental issues. Postscript: These articles were written in July 1991. Since then there have been further developments as well as momentous events in the former USSR. These can be expected both to add further impetus to change in Eastern Europe as well as the creation of a vast new province in which commercialization and market-orientated reform can now begin.
ENERGY POLICY November 1991
817
Enormous changes are taking place in Eastern Europe as it restructures politically and economically. The energy sector is not immune from these changes - indeed given its relative size in, and the energy intensity of, their economies, success in the energy sector is vital. This is reinforced by traditional dependence on Soviet imports which are now priced at world levels. Change is occurring at many levels within the energy sector - the break up o f monolithic monopolies, a new relationship between government and industry, more commercially oriented trading relationships, moves towards economic price levels, the rationalization o f capacity and in some cases privatization. These articles survey developments by focusing on Czechoslovakia, Hungary and Poland.
81 6
0301-4215/91/090816-02 ~) 1991 Butterworth-Heinemann Ltd
Energy in Eastern Europe - introduction
a willingness to change which, for the present, is strong enough to outweigh m a n y of the risks and uncertainties associated with a process of such radical reform. Successful energy sector reform in Eastern E u r o p e wild undoubtedly require industry and organizational restructuring, commercialization of trading relationships, the judicious introduction of new ownership forms and a reduction in the degree of state intervention. Perhaps just as importantly, it will depend on developing both the willingness and the ability to operate the new structures in a new way. This will require training, skills transfer and attitudinal changes as well as the break up of integrated monopolies and an influx of Western capital if the hoped-for benefits are to be fully realized. We have been priviledged to have been extensively involved in the changes and discussions that have taken place in Eastern Europe. It is hoped that these articles will lead to a wider awareness and appreciation of developments within the energy sector of Eastern Europe. A further article in a future issue of Energy Policy will focus on environmental issues. Postscript: These articles were written in July 1991. Since then there have been further developments as well as momentous events in the former USSR. These can be expected both to add further impetus to change in Eastern Europe as well as the creation of a vast new province in which commercialization and market-orientated reform can now begin.
ENERGY POLICY November 1991
817