Privatisation in Central and Eastern Europe

It is argued that the impact of privatisation should be seen on company performance and productivity. The effects of "levelling the playing field" between the old state sector (whether or not now privatised) and new entrants to the industry will also be considered. Privatisation, in the sense of the emergence of a de novo private sector using the fixed assets of former state owned firms purchased after bankruptcy or liquidation, can lead to industry-level supply responses to demand changes even in the absence of supply responses from current and former state owned firms. In this paper, the issues which have emerged in the early years of transition in the privatisation of state owned firms, in the awareness that any deficiencies that we might isolate in firm level supply responses may be made good by the activities of the new entrepreneurs are outlined. There are two objectives: (i) to highlight the range and variety of innovative policy towards privatisation that has emerged in the region. We seek to categorise a country by policy and by policy outcome; and (ii) to focus on the relationship between ownership, governance and enterprise performance. The paper contains five further sections: (i) the standard literature comparing state and private ownership as governance mechanisms; (ii) the particular problems posed by privatisation in the transitional context are briefly summarised; (iii) methods of privatisation; (iv) the outcome of the privatisation processes, in terms of who has actually ended up owning firms, for several of the most prominent countries, including Russia, Poland, Hungary and the Czech Republic, and (v) the impact of privatisation on enterprise performance.