PRIVATIZATION IN TRANSITION ECONOMIES

Abstract

I examine the motives for and goals of privatization pursued in transition economies. Following this, I sketch the various techniques of divestment in some sense used up to now. Privatization has been used in a broad sense of fostering the market economy based on private property. Deep divestment cannot be accomplished overnight. And no economy wants to divest all assets. The frequent identification off privatization policy with asset sale is misreading. The effect of privatization depends very much on the degree to which the new shareholders can motivate management to maximize net asset values. A simple exchange of title does not necessarily this effect. The dividing line between small and large privatization is not set hard and fast. Big privatization refers to sale or the free distribution of shares to part of the state de facto property rights to the vast bulk of SOEs that tend to be large, organized in conglomerates, and highly monopolistic. Although privatization has been at the center of the discussions around transformation, the progress made to date remains uneven. Except for a few spectacular sales, mostly to foreigners, and putting in place more or less rounded privatization laws most action has been in the form of petty privatization and mass distribution of shares in one form or another.