The Privatization Process in East-Central Europe

It is beyond any doubt that East-Central European countries such as Czech Republic, Hungary, Poland and Slovakia has dramatically changed its shape through its radical transition from centrally planned to the market economies in last 7 years. Many economists divide the process of economic transformation into areas of Stabilization, Liberalization, and Privatization/Restructuring. The traditional view is that stabilization and liberalization can be achieved rather quickly-by balancing budgets, balance of payments, tightening money supply, freeing prices and liberalizing trade-but that the area of privatization is one that could be moved to the future and will require much more time. Until 1991, none of the post-communist nations except former East Germany (which had a large decree of support from West Germany) had succeeded in privatizing large numbers of enterprises, even though more than two years had passed since the changes in government in these nations. The privatization has been, however, seen as an extremely important part of reform package together with stabilization and liberalization especially in the Czech Republic from the very beginning. The Czechs originally as a part of the Czechoslovak Federal Republic embarked on an unprecedented path that should have lead not only to stabilization and liberalization, but also to very rapid, mass privatization of its sector of large enterprises that have dominated its economy to an extreme extent.

1. The Initial Economic Environment for Privatization.- 1.1. Introduction.- 1.2. Initial Conditions for Change of Ownership Relations.- 1.4. Reform Pitfall.- 1.5. Necessary Conditions for Avoiding the Reform Pitfall.- 1.6. Making It Easier to Develop the Private Sector.- 1.7. Foreign Investments and Outside Shocks.- 1.8. Conclusion.- Appendix: Selected Official Indicators for the Czech Republic, 1995..- 2. The Restructuring of Property Rights Through the Institutional Economist's Eyes.- 2.1. Introduction.- 2.2. The Institution of Property In "Real Socialism".- 2.3. Restructuring Property Rights: The Alternatives to Institutional Evolution.- 2.4. The Formation of Property Rights Institutions.- 2.5. Some Theoretical Comments on Practical Ways of Reestablishing Property Rights.- 2.6. Instrumental Rationality and Spontaneous Evolution of Institutions: The Moral Dimension of Property.- 3. Initialization of Privatization Through Restitution and Small Privatization.- 3.1. Introduction.- 3.2. Restitution.- 3.3. The Small Privatization Program.- 3.4. Conclusion.- Notes.- 4. Large Privatization: Theory and Practice.- 4.1. Case By Case or Mass Privatization.- 4.2. Voucher Privatization, Ownership Structures, and Emerging Capital Market in the Czech Republic.- 4.3. A Technical Analysis of The Prague Stock Exchange.- 4.4. A Multicriteria Evaluation of Alternative Privatization Methods.- Appendix 4.1. The Criteria Tree Used to Evaluate Privatization Methods by the Expert Choice System.- Appendix 4.2. The Dependence of the Final Ranking of Alternatives on the Global Weight of Social Criteria C1 and C5, All Firms.- Acknowledgment.- 5. Fiscal Impact of Privatization and Fiscal Policy.- 5.1. Introduction.- 5.2. The Macroeconomic Situation.- 5.3. Budget and Tax System Reform.- 5.4.Review of Fiscal Policy For 1990 Through 1995.- 5.5. Privatization.- 5.6. The National Property Fund and Its Ties to the Budget.- 5.7. Development of Budget Revenues and Expenditures.- 5.8. Conclusions.- Notes.- 6. The Emergence of Institutional Owners: The Role of Banks and Nonbanking Financial Institutions in the Privatization of the Economy and the Banks.- 6.1. Introduction.- 6.2. The Czech Financial Institutions after 1989.- 6.3. Compensation for Inherited Debt by the Proceeds of Privatization.- 6.4. Development of the Czech Banking Sector.- 6.5. The Evolutionary Development of the Nonbanking Financial Sector.- 6.6. The Privatization of Major Banking Groups.- 6.7. Further Evolution of Privatized Major Financial Groups.- 6.8. Conclusion.- 7. Privatization, Postprivatization, and Structural Problems.- 7.1. Structural Changes and the Privatization Process.- 7.2. Enterprises Restructuring During and After Privatization.- 7.3. The New Private Sector in the Czech Republic.- 7.4. Monopoly in The Context of the Privatization Process.- 7.5. Monitoring of Borrowers under Asymmetric Information: The Czech Experience in the Early 1990s.- 7.6. The Impact of Privatization and Capital Market Development on Posttransitional Exchange-Rate Policies.- 7.7. The Phillips Curve and Market Structures.- Acknowledgments.- Notes.- References.