4.1 Mass privatization programmes in the countries of Central and Eastern Europe

In 1992, two years after the transformation process began , the countries of Central and Eastern Europe recognized that unconventional privatization methods were needed to accelerate the process. Capital-based privatization in these countries, which lacked capital resources, would take too long, hence the idea of mass privatization by means of vouchers, coupons or general share warrants .

The first privatization programme of this kind was proposed by two Polish economists: Jan Szomburg and Janusz Lewandowski (minister of ownership transformation in the Polish government in the early 1990s). The idea failed to gain sufficient political support in Poland, but it was enthusiastically received by Vaclav Klaus, the Czech minister of finance, and as a result the Czech Republic became the first country in Central and Eastern Europe to carry out a mass privatization programme. The latter, called ˜Kuponovk , was conducted in the years 1992 to 1993. In October 1992 privatization began in Russia, then in Lithuania, Latvia, Estonia, Belarus, Ukraine, Slovakia, Bulgaria and Slovenia. The Polish government eventually decided to implement a modified programme in December 1994 and named it the National Investment Fund (NIF) programme.

The main goal of all the national programmes was to accelerate the privatization of state-owned enterprises , which would result in a dramatic transformation of ownership structures in the CEE countries. Another significant goal was to compensate citizens who had contributed to the creation of national property during the previous decades as well as to gain their support for the difficult systemic changes and the social consequences of this. At the microeconomic level the objective was to improve the efficiency of companies through restructuring (Jezak, 1996).

The priorities, however, varied from country to country. In the Czech Republic the main aim of ˜ coupon privatization was the foundation of new ownership structures with social compensation and corporate restructuring being of lesser importance (Coffee, 1994, p. 1). In Russia the priority of ˜ voucher privatization was social compensation as this was expected to lead to social support for privatization in general and the inevitable systemic reforms (Radygin, 1996, p. 22). In Poland the main concern was to improve the operational efficiency of Polish companies, and the idea of social compensation and satisfaction was put aside.

The Polish mass privatization programme was based on the assumption that formal corporate privatization would bring about the necessary corporate restructuring, which demanded not only a new owner but also new management know-how. In taking this approach Poland differed from the other countries in the region, which concentrated only on the rapid privatization of a defined section of state-owned assets through general enfranchisement (coupons and vouchers). In the Czech Republic the exercise took one and a half years, in Russia three years.

A unique aspect of the Polish programme was the involvement of international consortia with a sound record in corporate restructuring. Their role was to help privatized companies gain access to optimal marketing, production and organizational techniques, international sources of capital and new sales markets. The overall programme was based on an indirect privatization model, meaning that the share warrants acquired by Polish citizens for a symbolic price could not be transferred into corporate shares, only into NIF shares. Consequently the NIFs were responsible for managing the shares of the companies included in the programme, which they did with the help of management consortia.