The Privatization of Central and Eastern Europe
A powerful wave of privatizations has swept the globe since the mid-1980s. Governments on all continents are trying to sell their companies as quickly as they can. The privatization rage has overwhelmed policymakers regardless of political conviction and has affected countries in a variety of economic circumstances. Privatization nowadays seems to be dictated less by ideology and more by efficiency and budgetary concerns. The principal objectives of privatization in most countries involved are to enhance productivity and profitability of a vast range of activities carried out by the state and to raise cash that could help plug budgetary deficits occasioned or exacerbated by recent recessionary pressures.1 Privatization has raised some USD 300bn in the aggregate (not counting efficiency gains and savings from subsidy-cuts) to state coffers worldwide over the past decade. That figure, it is said, could more than double by 2000 if the privatizations in the pipeline actually reach the orifice.2 Privatization has a pivotal role to play in the transformation of the former command economies in Central and Eastern Europe. Governments in that region are in the process of transferring thousands of small, medium-sized and large state-owned enterprises (SOEs) to private owners. Others will need to be restructured or liquidated. The ambitions of the privatization programs adopted in the region extend far beyond what has been achieved to date in other parts of the world.
The purpose of this article is to provide a general overview of the Central and East European environment for privatization and to
* The author is an in-house legal counsel at the headquarters of the Asea Brown Boveri Group in Zurich, Switzerland. The views expressed in this article are his own and do not necessarily reflect those of his employer. 1 In a growing number of sectors, there are also increasing competitive pressures on companies to form cross-border alliances. The private sector is reluctant to get involved with SOEs, aptly illustrated by the recently aborted proposal to merge Volvo and Renault. In the circumstances, privatization is a condition for preserving many state enterprises as competitors in the market. See State-run groups get used to new identity, Fin. Times, Jan. 24, 1994. See also Europe’s tired national champions, The Economist, Nov. 20, 1993, at 16–17. 2 Selling the State, The Economist, Aug. 21, 1993, at 16.