Czech privatisation 25 years later

Privatisation is still a hot political topic today and divides economists as well as politicians and the general public. The paper aims to capture the Czech privatisation in its historical, economic and political contexts. The first part explains the difference between transitional privatisation and standard privatisation. The second part examines the interests in the privatisation process. The third part discusses the privatisation methods used in the Czech Republic. The fourth part offers an international comparison.     

Privatisation: politics,institutions, and financial markets

This paper presents evidence on privatisation processes in 49 countries for the period 1977–1996. The empirical analysis shows that the decision to privatise and the choice of privatisation method appear to be influenced by the governing political majority and public-sector budget constraints, while the success of privatisation in terms of revenues and stakes sold requires suitable legal institutions and developed capital markets.     

Western privatisation assistance in the Russian Federation

The provision of assistance in the privatisation process is a key element of Western technical aid for Russia. The first part of this article describes the influence the largest Western donors have in Russia and the activities they have performed in connection with the provision of privatisation assistance. It then outlines the stage reached in the privatisation process by the middle of 1997. Finally, it discusses a number of ways in which privatisation consultancy by Western donors may develop in future. The article is a revised version of a speech delivered in Eschborn on 9th July 1997; at the GTZ Workshop on “The Provision of Privatisation Assistance in Central and Eastern Europe”.     

The politics of necessity: electricity and water in Great Britain

This paper examines the politics and the policy developments regarding access to electricity and water supply in Britain after the privatisation of these industries in 1990. It does this primarily through discussing two issues: paying for water and fuel poverty. It concludes that, somewhat surprisingly, the introduction of privatisation and greater reliance on market mechanisms has not made the material position of disadvantaged consumers worse as regards these industries. This seems to be attributable partly to changes in the regulatory structure consequent on privatisation and partly due to changes in national politics.     

Book Reviews

Rail privatisation was a controversial, widely unpopular policy whose implementation was not inevitable. This article employs counterfactual history methodology to examine whether the move to rail privatisation in Britain might have failed. It places the privatisation proposals in context by examining opposition within the Conservative Party and British Rail. The paper then focuses on three key counterfactual questions, including the significance of New Labour's reversal of its commitment to renationalise rail under its ‘third way’ policy and the possible consequences had the move to privatise rail failed. Based on the historical evidence available, it concludes that the move to rail privatisation could have failed, and that performance would have been better had rail remained an integrated, nationalised industry.     

Rhetoric versus Reality: the Privatisation of Telekom Malaysia

Telekonl Malaysia (TM) was floated as a private enterprise in 1990 as part of the country's overall privatisation programme. The programme included the usual privatisation goals of competition, reduced state involvement, growth and efficiency, but also a redistributional goal to enhance the Bumiputra community. This paper discusses whether the Malaysian government has been able to reconcile all its stated objectives, and suggests that the Bumiputra redistributional goal has been favoured at the expense of the other objectives. It is concluded that the privatisation of TM was cosmetic and that the government has used TM to implement its strategy, mainly through internal control of its corporate affairs, which runs contrary to the most widely accepted views of privatisation.     

Privatization and Strategic Fit: Evidence from Rumania

This article is a contribution to the growing body of research on the privatisation process in Central and Eastern Europe (CEE). It reports on a study of enterprises in Rumania which sought to establish whether privatisation there improves performance and, if so, whether ownership by managers and employees is beneficial and whether smaller enterprises perform better than larger ones. Broadly, the authors conclude that the answer to all three of these questions is "yes". The article then outlines the implications for CEE policy-makers, in particular that they should speed up the process of privatisation, (even if foreign investors are not available) and split up large enterprises, whether state-owned or privatised.     

Privatisation and corruption in historical perspective: The case of secularisation in Bavaria and Prussia in the early nineteenth century

Abstract

The article deals with privatisation and the valuation of such processes in Germany around 1800. Therefore, it focuses on a topic that has rarely been studied by historians for any time period, although the phenomenon was widespread in the past. The author argues that secularisation in 1803–1810 can be seen as an important privatisation process, because it included large transfers of former church property into private hands. Furthermore, he shows that a new generation of officials benefited from this process, although they had denounced comparable practices as corruption in the previous decades. They could easily justify such advantageous transfers publicly with their self-perception as an administrative and entrepreneurial elite. However, contemporaries publicly accused their actions and the secularisation itself of being corrupt. The author shows that privatisation was already a publicly discussed issue in the nineteenth century and needed to be justified. A history of privatisation, as the author finally states, allows insights into contemporaneous concepts of markets, state and welfare, and their effect in the respective time period.     

‘A highly successful model’? The rail franchising business in Britain

A crucial feature of rail privatisation in Britain was franchising. Passenger services were franchised in competitive bidding processes to train operators which were meant to function with declining subsidy. The article adopts the framework of social cost-benefit analysis to examine rail privatisation’s impact on three key groups; consumers, producers and the government. It establishes that privatisation did not achieve all the supposed benefits. Further, franchising only appears to be profitable through the use of calculative accounting practices, whereby franchised train operators are portrayed as discrete business entities, whereas they are supported by very substantial, ongoing direct and indirect government subsidies.     

Economic Prospects in Hungary: The Rise of The Private Sector

After introducing many market-oriented reforms during the 1980s, Hungary was in a good position to move rapidly towards a market-type economy after 1989. Because of trade shocks and restraint on domestic demand, Hungary suffered similar falls in output to other countries in eastern Europe. But it encouraged start-ups of new firms, welcomed foreign investment and undertook an active programme of privatisation. After some initial experience with uncontrolled privatisation, the State Property Agency was set up to supervise the process. At first it operated in a very centralised way, but more recently it has seen the need to operate in a decentralised manner. To manage those firms which will remain in state hands for some years, the State Assets Management Company was recently established. Overall, the combination of new start-ups and privatisation of state-owned firms is rapidly creating a more dynamic economy, which should soon start to grow out of the present recession.     

Privatisation policy in Russia

Since Russia’s process of privatisation got under way in 1992 a large proportion of the country’s state-owned enterprises have been turned into private legal entities and have been transferred into private property. However, the desired economic success has so far largely remained elusive. What deficiencies in the privatisation policy have caused this? What can be done to solve the problems?     

New rules – old games? Social capital and privatisation in France, 1986–1998

This article focuses on social capital among the French business elite, the period under study coinciding with the implementation of privatisation programmes in France from 1986 to 1998. The Chirac government (1986–1988) sought to change the rules of the economic game, the political aspirations invested in privatisation centring on the free play of market forces and competition, to which the programme purported to reconcile the public at large. The article reveals how privatisation, far from breaking with the past by widening participation in economic life, strengthened the ties that bind the French establishment elite through the concentration of power in ‘hard cores’ of stable investors in newly privatised firms. High levels of social capital within the French national business system ensured that members of the ruling elite, united by multiple ties and similar backgrounds, connived, as before, to manipulate institutions and situations in their perceived collective interest.     

“Do frogs jump as a result of privatisation?” Impact of privatisation on buyer–supplier relationships

As the cornerstone of the Conservative Government between 1979 and 1996, privatisation has undoubtedly had an enormous impact on the UK economy. On the whole, privatised companies have improved their performance in an ever increasing competitive environment by focusing on, among other things, a drive to reduce costs through bought-out goods and services. Research into Japanese companies, meanwhile, has highlighted the key role that supplier relationships play in their success. It has stressed the advantages of co-operative over adversarial relationships with suppliers, and evidence shows that an increasing number of Western companies are adopting this practice. This has raised the profile of purchasing in these companies with a change towards `better practice’ and improved management of the supplier base. From this new research a model of Feature and Construct Evaluation and Aggregation (FCEA) has been developed, in the search for a link to support the proposition that privatisation has an influence on purchasing strategies concerning supplier relationships. The research has shown that only a very limited link exists. Whilst Purchasing as an activity has increased in its importance and control, it has not become strategic. Purchasing strategies have not evolved or supported the business strategy as a result of privatisation, nor does privatisation encourage the development of purchasing strategies towards closer relationships with suppliers. This is compounded by the EC Directives that reflect an `open tender’ model of procurement, particularly evident in the emphasis on formal competitive tendering procedures and maintaining an `arms-length’ relationship with suppliers.     

Politicking and Privatisation

This article charts the privatisation process in a Hungarian firm. It was a long, complicated and high profile journey, typifying what the author calls a "struggling through" scenario, as distinct from "going through" and "muddling through". The case underlines the fact that privatisation in Central and Eastern Europe (and elsewhere) needs to be considered in the context of a political view of organisations, as a complement to the dominant economic model based on agency theory.     

Business Perspectives on German and British Regulation: Telecoms, Energy and Rail

Regulation of network industries is very different in Germany and the UK, not least because privatisation started earlier in the UK and has gone much further. This paper uses research among regulatory officials and senior executives in both incumbent and new entrant firms to compare and contrast the changing strategic relationships between regulators and firms in the two countries. It also discusses interaction between national regulatory processes and EU regulatory processes. The authors conclude that whilst the passage of time after privatisation/liberalisation is likely to reduce the amount of conflict and recourse to law, national and cultural differences will continue to dominate.     

Privatisation and the unusual case of Belarusian accession to the WTO

The accession negotiations of Belarus to the WTO are unusual since, due to its obligations in the Eurasian Economic Union, WTO accession is not expected to impact its tariffs or formerly substantial trade‐distorting agricultural subsidies. Nonetheless, we estimate that WTO accession will increase welfare by 9.9% of consumption in Belarus. We show that inclusion of: (i) foreign direct investment; (ii) reduction in non‐discriminatory barriers against services providers; and (iii) our model with imperfect competition and endogenous productivity effects together produce estimated gains eleven times larger than a model of perfect competition with only cross‐border trade in services. Our analysis is enabled by our production of a data set on both discriminatory and non‐discriminatory barriers in services and their ad valorem equivalents. Based on a new data set on labour productivity by sector and type of ownership, in our central model, we estimate that privatisation will increase welfare by 35.8% of consumption. We find substantial variance in the estimated gains from privatisation depending on model assumptions, but all the estimates of the impacts of privatisation indicate substantial welfare gains.     

European market integration and the political economy of corporate adjustment: OTE and Telecom Italia, 1949–2009

Despite the common challenges posed by European market integration and liberalisation, the behaviour of telecommunications operators across Europe suggests a variety of modes of adjustment and paths to privatisation. The article examines the puzzle of divergent responses to liberalisation by OTE and Telecom Italia (TI), casting light on their distinct paths to privatisation and internationalisation. The cases are considered in the context of the Varieties of Capitalism frame, which challenges the perspective that global market integration will lead to convergence in strategies and structures. Thus, the article suggests that the observed differences are largely explained by the domestic actors' preferences, and to a much lesser extent attributed to the globalising forces of technological change and competition.     

The impact of privatisation on procurement management: evidence from seven privatised companies in the UK

A major argument in favour of privatisation is that it prompts the companies involved to increase efficiency in order to survive in their new environment. This implies, inter alia, a reconsideration of external resource management with a view to maximising its contribution to the bottom line. This study provides evidence on procurement changes in seven UK privatised companies based on a questionnaire completed by procurement managers of these companies and semi-structured follow-up interviews. The results suggest that, in general, there have been some substantial changes in procurement since privatisation. However, in the main these were driven initially by cost-cutting pressures. More recently, the companies have begun to adopt what may be viewed as a more “strategic” approach to external resource management.     

The ethical challenge of management buy-outs as a form of privatisation in Central and Eastern Europe

There has been a growing debate about the ethics of management buy-outs (MBOs). One possible criticism of the MBO is that it serves the interests of incumbent management at the expense of shareholders. In this paper we develop the general arguments concerning the ethical aspects of the MBO to include other forms of buy-out beyond “going privates” and apply the analysis to MBOs as a mode of privatisation in Central and Eastern Europe (CEE). MBOs are justified in this context postperestroika as a means of incentivising economic activity by giving managers an ownership stake in former state enterprises. The actual mode of privatisation, though, raises issues of social justice and the criticism that MBOs are at the expense of the broader social good. The ethical problem for the CEE is to balance the economic gains of a move to markets with the ethical risks to the agents of these markets.     

Where Are the Utilities Going Next?

This provocative article suggests that the utilities in countries where restructuring has been succesfully completed are poised to steal a march on many companies in more glamorous industries. Partly for historical reasons, utilities are exceptionally strong in particular competencies. With successful competitive strategy increasingly based on competencies, and because privatisation and liberalisation were such a baptism of fire,the author argues that utilities are "way ahead of their time".