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Help begins at home

Hungarian privatization has helped place the economy among the best emerging-market performers of the 1990s. However, questions about the transparency of deals reappeared this year.

THE BUDAPEST STOCK Exchange had a very good year in 2002. Having fallen in the late 1990s under pressure from the Russian financial crisis and a Hungarian government that delayed pro-market reforms, it recovered strongly to become the world's fourth-best performer in 2002.

The capitalization of the exchange could be bigger - it has traditionally been dominated by a few big corporates such as energy corporation MOL, telecom company Matav and OTP, a bank. Many of the country's smaller-capitalization companies were wiped out in the Russia crisis, and some of the biggest privatizations of the 1990s were not flotations but sales to strategic investors. However, as Gyorgy Jaksity, chairman of the Budapest Stock Exchange, said in a presentation to foreign investors in London last month, the exchange is about to receive a new boost of supply.

The Hungarian government, needing to reduce a large budget deficit, is looking to raise revenues by reactivating privatization to sell off the last 20% of state assets.

Istvan Salgo, deputy state secretary of finance, told investors at the same presentation that the government plans as many as 25 transactions in 2003 alone, including the sale of: Postabank, the second-largest retail bank; mortgage bank FHB; a smaller bank called Konzumbank; a steel company; and an agricultural company.

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