Through the coming together of some of the key policy strategists on privatisation in Eastern Europe and the CIS, this publication provides both a comparative, historical record of processes of mass privatisation since 1991 as well as a resource for decisionmakers of countries contemplating such reforms. It shows that the experience of mass privatisation in former socialist nations, as brief as it is, has much to tell the world about the institutions of capitalism, the establishment and enforcement of property rights, reforming the public sector, and the state’s role in these affairs.
Fifteen country studies highlight the different experiments with mass privatisation that demonstrate the widest range of possible outcomes. These studies address the nuts and bolts of mass privatisation, focusing on issues such as supply, demand, sale of enterprises, unique characteristics of the programme, and the results.
Five questions were asked for each of the country studies:
- Was mass privatisation effective as a means to transfer ownership from the public to the private sector? Essentially, yes
- Did it achieve distributive equity? Essentially, no
- Who are the stakeholders, and winners and losers? The general public is a major stakeholder and yet from a financial perspective emerge as a substantial loser. However, much was learned during the process and they have been educated in ownership, which is an important element of an emerging market economy
- What were the programme’s strengths and weaknesses? By its very nature, the process could not allow for fine tuning. It has left a weak legal framework and governance is an issue little understood. Governments still retain large chunks of property and this inhibits market forces from functioning properly
- What are the next steps for those countries that have implemented a mass privatisation programme?. Governments must make the transition from market player to market regulator and facilitator. Additionally, most countries need to move quickly to case-by-case privatisations of large strategic companies to deepen private sector orientation of the economy and convey to the public the benefits which such privatisation offers.
An adapted form of mass privatisation could be applicable to transition economies in Asia (including China and Vietnam) or to African countries where limited savings and conditions comparable to those in Central and Eastern Europe and the NIS make privatisation desirable. Lessons learnt from the processes of mass privatisation so far, are that:
- A comparative analysis suggests that the removal of enterprises from state control and the establishment of private cash flows are shaped by countries’ institutional endowments and by the state’s capacity to balance competing interests, manage social conflicts and distribute the costs and benefits of reform
- The actual implementation of voucher-based privatisation schemes requires equal attention to be paid to the problem of commercialising enterprises as to the problem of ensuring adequate public participation
- There is no necessary end point to the process, after which a private sector will be clearly separated from the state
- In many cases, governments have remained the largest property owners, holding significant shares of privatised companies. Thus government intervention is not so much eliminated but rather, transformed.
