In Hungary the government consulted the trade unions before and during the privatisation of the energy sector. As a result, clear protections for employees were built into the contracts from the outset.

Political and economic background

The Hungarian government embarked on a programme of privatisation of parts of their energy industry in 1994. The programme proved politically controversial, and was delayed for a number of reasons. Two ministers of privatisation resigned during this period. At the end of 1995 shares in electricity and gas distribution companies, and some electricity generating companies were sold to western industrial companies. At the end of 1996 further problems arose over both price and pay increases.

The political and economic issues debated included:

• how far the industry should be broken up before privatisation.
• how rapidly energy prices would be allowed to rise following privatisation.
• what rate of return on capital should be used as a benchmark

The Hungarian energy trade unions raised a number of concerns about the impact of privatisation on employees. These included concerns over:

• loss of jobs
• retraining and redeployment for displaced workers
• a collective labour contract for the electricity industry
• the future administration of social and welfare facilities in the industry
• opportunities for employees to buy shares

During the preparations for privatisation the trade unions felt that they were not always being properly consulted and involved. Strike action was threatened on at least one occasion. International organisations became involved in asking the Hungarian government to negotaiate. In July 1995 the government reached agreement with the trade unions on all the issues that had been raised.

Three specific points in the agreement included:

• a percentage (5%) of the money received for the shares would be used to create a fund for retraining and redeployment of any displaced workers
• the observation of the industry collective labour contract would be a contractually binding condition of the share sales
• employment levels in the privatised companies would be protected

The government also stated that the companies would be allowed a rate of return of 8%. The status of this has since been disputed, with the companies arguing that it was a guaranteed minimum.

The first stage of privatisation was introduced at the end of 1995. The privatisation agency sold shares in regional electricity distribution companies, gas distribution companies, and some electricity generating companies. In each case, the shares sold represented less than 50% of the companies share capital.

The shares were sold to a number of foreign energy companies, including Tractebel, Electricite de France, and RWE. The new owners said they were pleased with their purchases, and many of them declared their intention of investing more money in the Hungarian companies. At least in the case of RWE, German managers and trade unionists advised Hungarian colleagues on how to set up works councils and bargaining arrangements that reflected those operating in Germany.

Nearly all the purchasers were continental European companies. Both the UK and the USA energy companies were concerned that the likely rate of return was neither high enough nor guaranteed enough.

The following year the Hungarian government decided that it could not, after all, allow energy prices to rise as much as had been anticipated at the time of sale. The reason was simple political concern over the impact on people’s cost-of-living. The foreign companies protested very strongly over this, and in some cases threatened to withdraw their investments. In the end a compromise was reached.

At the same time, the Hungarian trade unions accused some of the companies of not observing the collective agreement on pay and conditions. The companies had not implemented the increase in pay which was due under those agreements. First RWE, and then Tractebel, said that they wanted to withdraw from the national agreement. The Hungarian energy union appealed for support from international trade unions, especially in the home country of multinational energy companies with whom they were in dispute. This resulted in extra pressure being brought to bear on these companies to observe the national agreement in Hungary.

Following this domestic and international pressure, the companies did eventually implement the pay rises.