PRIVATIZATION OF THE COAL INDUSTRY IN EASTERN EUROPE LEADS TO DEEP JOB CUTS
21 November 1996
Nearly half a million mining jobs already lost and
another 400,000 miners facing the sack
A Round Table on "Should the Coal Industry in Countries in Transition be Privatized?" took
place at the Palais des Nations, Geneva, on 5 November 1996, within the context of the annual
session of the United Nations Economic Commission for Europe (UN/ECE) Working Party on
Coal.
Several coal industry specialists participated:
Richard BUDGE, President of the Confederation of United Kingdom Coal Producers;
Christian CLEUTINX, Head of Solid Fuels, DG XVII, European Union; Yuri MALYSHEV, President,
ROSUGOL, Russian Federation; Jerzy MARKOWSKI, Secretary of State, Ministry of Industry and
Trade, Poland; Serguey POLYAKOV, Head of Regional State Administration, Donetsk, Ukraine;
Yuri RUSSANTSOV, Minister of Coal Industry, Ukraine; Dieter SCHMITT (Chairman), Professor
of Energy Economics, University of Essen, Germany; and Yves BERTHELOT, Executive
Secretary, United Nations Economic Commission for Europe.
Only healthy businesses attract private investors, and the European coal industry as a whole
is far from healthy. The speakers at the Round Table cautiously concluded that, in spite of the
severe social problems that would follow, privatization was the best way to make the coal
industry viable and efficient. Since private enterprises do not normally receive subsidies from
the State or other sources, they have to generate profit to survive. Since the countries in
transition are anxious to phase out government subsidies to their coal industry, restructuring
and privatization are the obvious means of achieving this.
The major problems are the severe social and political consequences of privatization: drastic
job losses, social hardship. The figures speak for themselves:
Between 1990 and 1996:
Bulgaria: 4 mines closed, 2,000 jobs lost
Czech Republic: 15 mines closed, 60,000 jobs lost
Hungary: 20 mines closed, 20,000 jobs lost
Poland: 9 mines closed, 13 under liquidation, a total of 150,000 jobs lost
Romania: 12 mines closed, 60,000 jobs lost
Russian Federation: 37 mines closed, 147,000 jobs lost
Slovenia: 3 mines closed, 2,000 jobs lost
By 2000 it is expected that 376,000 to 400,000 additional jobs will have been cut in
central and eastern Europe.
With unemployment already high and alternative work opportunities scarce in the coal-mining regions, privatization would have to be introduced selectively and, more importantly,
gradually in order to be acceptable and not cause too much hardship. Eastern European
governments cannot afford the necessary social security and regional development programmes
that are available for these purposes in western Europe.
The eastern Europeans admitted that, despite the importance of the coal industry for
supplying their energy and electricity, unprofitable coal mines would have to be closed down
and that coal production would have to be reduced for both economic and ecological reasons.
Restructuring was already under way in the coal industry in their countries, though in
each case tailored to suit the specific needs of the individual country.
They felt that there may be a need for mixed state and private ownership to sustain the
required level of coal production. A certain degree of government intervention and support may
be necessary, however, to maintain the desired level of coal production in western as well as
eastern Europe.
The only privatized coal industry in Europe, that of the United Kingdom, had achieved
high productivity and was now the lowest-cost coal producer in western Europe. However, it
still had to stand the test of time.
In most eastern European countries the state-owned coal industry has been transformed
into shareholding companies, in which central government still holds the major stake, together
with local government and regional authorities, as well as mine workers and other private
owners. One hundred per cent private coal-mining companies also exist, for example in the
Russian Federation, but these are still few and far between.
The western European panellists pointed out that the restructuring of the western
European coal industry, too, was a painful process which cannot be carried out without
hardship in spite of the generous financial aid from national governments and the European
Union to mitigate the social consequences.
Each country needed to carry out coal industry privatization according to its own
specific circumstances and aims. Governments may not be able to entirely escape from the
responsibility to support the coal industry. The speed, timing and forms of privatization would
have to be attuned to the particular situation of each country. The process must be carried out
by consensus among all partners, i.e. the policy-makers, the coal industry and the miners.
There were no "models" of privatization but the experiences gained in several countries could
none the less be useful for the countries of central and eastern Europe in designing their coal
industry restructuring and privatization strategies. One proposed means of preparing the coal
industry for privatization was to create groups of coal mines according to their prospects of
profitability.