Privatisation in Eastern Europe

Résumé du document

In the late 1980s, mostly with the tumultuous events of the winter of 1989, the world has witnessed a tremendous ideological change with the collapse of communism, which led the Former Communists Countries (FCC) to a long period of transition. Privatization has always been considered as being a major part of this transition process to a market economy, which is logical: it seems impossible to imagine any market economy with state-owned property accounted for about 85-90 per cent of the national assets, as it was the case in most of the FCC . However, while many Western and Eastern economists (O. Blanchard, M. Friedman, D. Lipton, J. Sachs, V. Klaus, D. Trisk) had estimated that the privatization of these economies would be rapidly achieved (less than five years according to many of them), this challenge has appeared to be far greater and far longer than they had thought. But the aim of this paper is not to study the factors which led to the underestimation of the length of this process. In fact, we are going to study the different options available for the privatization of state property and as well as the advantages and drawbacks of the various schemes.

Extraits

[...] According to some authors, privatisation is limited to the full transfer of property rights to private owners, and to majority share-owning and voting rights for those private owners (for example, Hodjera, 1991), while for some others, privatisation is mostly about the development of a private sector inside a command economy, to such an extent that the private sector becomes more important than the latter. So I think that the definition given by Marie Lavigne is more accurate, because she makes a mix of these two approaches. "Privatisation is a process influenced by economical and political factors which means creating and developing a private sector and converting state- owned enterprises into privately owned ones. [...]

[...] According to Jeffrey Sachs, "the need to accelerate privatisation in Eastern Europe is the paramount economic policy issue facing the region. If there is no breakthrough in privatisation in large enterprises in the near future the entire process could be stalled for political and social reasons for years to come, with dire consequences for the reforming economies of the region."[5] And The Economist agreed, calling "the growing acceptance of gradualism the greatest peril now facing the countries of Eastern Europe." 2 Eight structural constraints Throughout different lectures and the analysis of different authors, we have noticed at least eight structural constraints common to each Eastern country that are more than liable to complicate both privatisation and the construction of effective institutions in Eastern Europe Shortage of entrepreneurial experience. [...]

[...] Private sales introduce discretionality and lack of transparency into the process, but are generally considered a feasible alternative in underdeveloped equity markets. In a tender offer, bids are normally invited at or above a stated minimum price. It has the advantage of not requiring a precise estimate of the value of the firm, although it is often a complex procedure which might discourage the participation of small investors Auctions Some authors regard auctions as an optimal solution to the problems posed by privatisation. [...]

[...] 1 The gradualist school. Security is the major point of the gradualists: they have contended that the short run costs of rapid privatisation would overwhelm any conceivable long term benefit. Long accustomed to the protection of the state, the newly privatised companies would not be able to survive in a competitive market environment. In fact, the structures of both supply and demand for these large firms had been shattered, mainly because of the collapse of the CMEA. So corporate failings resulting from sudden privatisation would result in extensive layoffs, massive bankruptcies and ultimately social unrest. [...]

[...] First, they can be implemented relatively quickly and therefore allow a rapid eradication of state property. They also offers advantages in terms of transparency of the procedure and avoidance of corruption (very important in these countries). At the end of the process, the distribution of wealth accumulated under the previous regime may turn out to be more equitable, therefore helping to gain public support for the entire privatisation process. Strategies of privatisation in the transition economies and their results We have to say first that it would have been dangerous from the beginning of the transition process, to generalise about this region and apply a single set of institutions and a single strategy across the different countries. [...]