Janusz J. Tomidajewicz
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Privatization issues in Central Europe
Countries
(the case of Poland)
Introduction
 Particular
features of privatization in countries
transforming their economy from central managed into
free market have resulted mainly from:
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Privatization and liberalization have been the instrument of transition into
free market economy, therefore privatization became the goal itself.
The issue and the scope of privatization was very wide, it included
privatization of: the whole production sector, financial services and large
part of institutions of culture, social services, infrastructure, etc.
The process of privatization has reached serious barriers of capital and
social character.
Privatization has become the instrument of employment rationalization.
National enterprises have had many social roles before their privatization.
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Such situation brought specific social and economic
problems connected with processes of privatization. It had
impact on the process, as well as economic and social
consequences of privatization.
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Present paper tend to analyze repercussions of privatization
process connected with:
Institutional and organization aspects of process of privatization.
 Economic effects of privatization.
 Social effects of privatization.
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1. Factors of privatization in
Central European Countries
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Political
and
macroeconomic
character of privatization aims.
Scope, directions, rate and sequence
of privatization.
Capital barriers of privatization.
Social barriers of privatization.
Privatization as instrument of
rationalization of employment
Social functions of state enterprises.
1.1 Political and macroeconomic
character of privatization aims.
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The economic policy stood up in the face of the problem whether forming the
market economy is possible without simultaneous (or even earlier) of replacing
dominating state enterprises, by private enterprises as dominating organizations in
the market.
Under the influence of the small and average enterprises and different
international institutions in the practice of the economic policy they assumed that
increasing the scope of the private sector in the economy was a basic condition
and at the same time expression of going to the market economy.
In view of the fact that chances of the coming into existence of the strong private
sector on the founding road are very little they recognized that a privatization of
current state enterprises must become essential means of transforming the
economy.
In the process the privatization alone in itself became the purpose of the economic
policy and the amount of privatized enterprises and the growing participation of
the private sector in producing the GDP became basic indicators efficiency of the
transformation politics
1.2. Scope, directions, rate and
sequence of privatization
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An assumption was made that, privatization to a considerable degree
independently of what sectors, enterprises or fields it concerns and with the
help of what tools is a process accomplishing purposes of the economic
policy realized.
Issue of the selection of directions and methods of the privatization
examined was above all from a point of view of their effectiveness measured
with the amount and the pace of privatization. However to a little extent here
an economic and social effectiveness of processes of the privatization was
being taken into consideration.
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Essential problems of choice about methods of the
privatization concern :
 what
rate of the privatization should be i.e. whether to carry it out
possibly quickly or to spread this process in the time?
 whether to privatize good enterprises at first, whether than those
having problems?
 whether to privatize enterprises for which it is possible to get the
fair price on the capital market or all enterprises too every (even
clearly lowered) price provided that to cause the privatization?
In the practice of the economic policy they were deciding for solutions
allowing quickly to carry the privatization out, independently of whether
privatized enterprises demonstrated the high or low ability to be active in
conditions of the market economy and independently of the price with
which it was possible to get at their privatization.
1.3 Capital barriers of privatization
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According to estimation made before beginning the transformation, in
Poland all money supply of the population and individuals of the
unnationalized economy constituted c 10.7 % value of the production
wealth of the nationalized economy. However donating even an entire onemonth workers' pay to the repurchase of shares in privatized enterprises
annually, would require in order to 60 – 70 of years for buying out the
wealth of state enterprises by their workers, at simultaneous backing up the
entire operation with credit tools.
 Z. Fedorowicz, Obiektywne uwarunkowania czy chciejstwo (Objective conditioning or the
wishful thinking) , „Życie Gospodarcze”, nr 10/1988
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In the first years of the transformation, the invited foreign capital came across the
barrier into forms of the high-risk assigned in this period to investments carried out
in countries of Central Europe.
1.4 Social barriers of privatization
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1- anxiety of employees of privatized public
enterprises concerning employment, level of
remuneration and social benefits.
2- existence of claims for managing enterprises by
workers (in companies where some selfmanagement experience appeared).
3- anxiety of the society concerning foreign
capital.
1.5 Privatization as instrument of
rationalization of employment
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Dr W.Dymarski will elaborate present subject more widely in its paper.
Here we will mark only, that a phenomenon of the exaggerated and ineffective
employment became the particular sympthom of the irrationality of the socialist
economy causing the hidden unemployment.
In such situation the privatization was treated as the tool of restructuring of both
individual enterprises and the economy as the whole, including particularly the
tool being supposed to lead for eliminating the overemployment.
1.6 Social functions of state
enterprises.
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State enterprises, served social, enabling the access for one's workers on
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preferential conditions to: cheap meals in the place of the work, the health
care, the care of the child, holiday rest, the involvement in the culture, etc.
From social activity a coming into existence of the following problems
caused the back-pedalling of enterprises requiring to answer:
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deciding or cutting businesslike welfare security benefits on the part
of enterprises will be (and if necessary in what stage) compensated by
appropriate raising monetary workers' profits,
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whether and how to privatize current activity social keeping
enterprises object of this activity, in which whereas step simply
entirely to close this activity down.
2. Course and consequences of
privatization in conditions of transition
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2.1 Institutional and organization aspects
of process of privatization
2.2 Economic effects of privatization.
2.3 social consequences of privatization.
2.1 Institutional and
organization aspects of process
of privatization
Significance
of dispensing public enterprises and nonequivalent methods of privatization,
Importance of public administration in process of
privatization and its character causing corruption as a
consequence of such state,
Significant dependency of capital market from the
process of privatization.
2.2 Economic effects of
privatization.
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Ownership structure: national and foreign capital
Capital as instrument of realizing development aims and of
ownership transition
Restructuring of sectors and enterprises
Microeconomic efficiency of companies activity
Percentage share of foreign capital in
industry and banks in 1999
Country
Industry
Banks
1.
Czech Republik
35
45
2.
Estonia
60
80
3.
Poland
35-40
70
4.
Slovakia
25
40
5.
Slovenia
15
10
6.
Hungary
75
70
7.
France
25
12
8.
Spain
25
13
9.
Germany
13
6
10.
Ireland
60
55
Source: K.Z. Poznański, Wielki przkręt (Great scam), Towarzystwo Wydawnicze i Literackie, Warszawa, p.
Use of capital
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Directing the considerable part of free funds to take over meant
ownerships of current state enterprises, around these means
weren't left directed for developmental investments and
restructuring. The process of privatization was connected with a
specific crowding-out effect of investment. the privatization
through the crowding-out effect became the factor influencing
for lowering the pace of the restructuring and the development
of privatized economies.
2.3 Social consequences of
privatization
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Distribution of benefits resulting from privatization in the
society
Impact of privatization on situation on labor market
Impact of privatization on range and accessibility of social
benefits
Conclusions:
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Privatization has brought such economic consequences,
like:
 Foreign
capital inflow;
 Reduction of investment capacity in economy – at least in
its preliminary stage;
 Structural changes expressed by development of low
capital capacity and services sectors;
 Increase of microeconomic efficiency of enterprises with
simultaneous liquidation of significant number of nonefficient companies.
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From the social part privatization has brought :
 Significant
benefits for foreign capital, part of
management of formerly national enterprises, part
of former and new private sector
 Reduction of position of employees and trade
unions in enterprises and aggravation of labor
relations
 Reduction of social benefits accessibility,
particularly for employees with low remuneration.