Iceland's privatisation programme 1991-2000

10/30/01

Also see:

• Rules procedures regarding the implementation of privatization

The coalition government of the Independence Party and the Progressive Party was formed on 28. May 1999. As the two previous government (the coalition, it has on its agenda a comprehensive approach to privatization.

The objective is to modernize the Icelandic economy and free it from the political shackles of political intervention. In particular, the aim is to ensure responsible management of the nation}s contributions to common funds.

In the beginning of a new term in June 1999, the Cabinet reappointed a Task Force on Privatization to make specific recommendations on privatization policy and to oversee the execution of the privatization programme. The Task Force was composed of Mr Hreinn Loftsson, Attorney at Law, Chairman, Mr Jón Sveinsson, Attorney at Law, Mr Sævar Þór Sigurgeirsson, Certified Public Accountant and Mr Steingrímur Ari Arason, General manager of the Student loan fund. The Ministry of Finance provides the Subcommittee and the Task Force with technical assistance and staff support.

The Task Force on Privatization receives advice from a number of different sectors of the economy. Specialists from the Icelandic securities industry are the key advisers in the programme. Independent business consultants and lawyers have also been consulted on various issues.


The Icelandic Government has four main privatization objectives. They are:

1. To increase private savings. In selling government shares private saving will be considered as one of the main objectives. This can be accomplished by selling the shares in public offerings and by continuing to offer individuals tax reduction if they invest in company shares.

2. To increase economic efficiency by eliminating the distortions inherent in state-ownership. The state owns two of the three major commercial banks, various other financial institutions and funds as well as several manufacturing and service industries. The energy companies, and the Post and Telecommunication companies are also public property.

3. To widen share ownership and continue to encourage development of the Icelandic stock market. The Icelandic stock market was established in the mid 1980's and has since developed with abundant speed only this decade. The turnover of the Icelandic stock market has over the period from 1994 to 1998, increased from less than 19 million dollars to more than 172 million dollars. Privatization of publicly owned companies over this period has influenced this development. The goal of the privatization programme in Iceland is to widen share ownership and to educate the public on issues such as the stock market, privatization, etc.

4. To raise capital in order to decrease Treasury debt. One of the main goals of the privatization programme is to use the income from privatization to reduce Treasury debt. Earnings from privatization will also be used to finance specific transportation projects and to support the growth of information technology.

The Icelandic government has published its plans to fully privatize the two currently state owned commercial banks, the Búnaðarbanki Íslands hf. and the Landsbanki Íslands hf. and to prepare the selling of government shares in the Icelandic telephone company, Landssími Íslands hf. The time framework for these companies is set to be within the next four years or in the current term of the new government.

The Task force on privatization is currently working with a mandate from the Minister of Transport and Communication, on preparing the privatization of Landssími Íslands hf.(Iceland telecom). In this assignment which will probably be the largest privatization so far in Iceland, many aspects have to be considered such as competition, regulation and the actual sale methods.


Iceland's privatisation programme 1991-2000