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.     

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.     

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.     

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.     

Impact of ownership and location factors on service multinationals' internalisation

Foreign direct investment in the service sector has been gaining importance in the past decade as more countries transform themselves into post-industrialised economies. The transition from a centrally planned economy to market-based economy has generated a surge of foreign direct investment from industrialised countries to Central and Eastern European Countries. This paper examines the impact of ownership and location factors on the extent of internalisation for service multinationals seeking to enter into the Czech Republic, Hungary, and Poland, as these countries launch their economies towards increased privatisation, deregulation, and liberalisation. Using foreign direct investment data of 76 firms during 1990–2000, we find significant support for our main hypotheses.     

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”.     

Sino-EU Relations in 2009 Will Be Warmer

In 2009, the Czech Republic officially took over the six-month EU presidency from France. Following Slovenia, the Czech Republic is the second new EU member to hold the EU presidency. The Czech Republic is currently faced with the challenge of coping with the global financial crisis and promoting EU political reform, as well as handling its own internal issues. On January 15, H.E. Mr. Vitezslav GREPL,the ambassador of the Czech Republic in China, held a press conference to address the Sino-EU relationship in 2009. H.E.Mr. Serge Abou, the EU ambassador to China and H.E. Mr. Mikael Lindstrom,the ambassador of Sweden to China also attended this conference.     

Credit Support for Export: Robust Evidence from the Czech Republic

The topic of this paper is quite a novel one – it is one of few empirical academic papers dealing with export credit. Moreover, it is the first analysis of this kind which focuses on transition economies. The paper deals with export credit promotion in the Czech Republic. The development and structure of Czech trade and export support is presented first, followed by an econometric analysis of the gravity model of Czech Republic trade. A panel of 160 countries in 1996–2008 is analysed and two gravity models of exports for the Czech Republic are estimated, the static model by fixed effects (LSDV estimator) and the dynamic model by System GMM. Due to ambiguous conclusions we assume that the behaviour of our explanatory variables is not uniform and our data set behaves as a mixture of countries with heterogeneous behaviour. This means that traditional techniques of estimation which include all observations into one model do not give significant results. Thus, we use robust techniques of estimation that solve the problem of heterogeneous patterns in data sets. Out of several possibilities we use the Least Trimmed Squares estimator (LTS) with a leverage point. We show that guarantees are a significant factor that influences positively the volume of exports in the Czech Republic. Moreover, there exist more variables that affect the size of exports in the Czech Republic. Market forces described by GDP, distance, political risk or gross fix capital formation are significant in our econometric model. We find that higher GDP, shorter distance or lower political risk have a positive impact on Czech exports.     

The new regulatory politics of electricity in India: embryonic ground for consumer action

Newly created regulatory bodies in India are the site for emergent consumer politics around electricity. Forged as a means of attracting private capital, these bodies have nonetheless become potential spaces for consumer and citizen engagement around electricity. The nature of this emergent space is examined by developing three narratives around emergent regulatory institutions—apolitical and independent regulation, regulation as captured by the state, and regulation as contested political space. Recent examples of consumer and citizen action on electricity, and particularly protests over a tariff hike following privatisation in Delhi, suggest that regulation as an institution is poised between being absorbed into politics as usual and creating a genuinely new space for consumer action and political engagement in India.     

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.     

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.     

‘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.     

Potential Market Opportunities in Hungary,Poland and Bulgaria

Central European economies are undergoing radical reforms changing from central planning to free market economies. If these changes are to be successful, there is a need for their govemments to liberalise legislation to allow privatisation to take place and to allow and encourage foreign investment in the countries. Potentially the most effective form of foreign investment is the participation of Western companies in the business of the country enabling development of the market and the local understanding of the methods of business in free market economies. Whether and to what extent this participation takes place depends on the macro-environmental climate and the specific market environments in the countries. This paper addresses both of these issues and is based on a twelve month study of marketing conditions in Hungary, Poland and Bulgaria. In the first part the macro changes taking place are explored and the overall attractiveness assessed by comparison with the published literature on the market entry strategies. The conclusion is that Hungary is the most attractive of the three countries concerned for Western company investment in terms of political stability, economic development and performance, cultural unity, and lower legal and geo-cultural similarity.     

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.     

Strukturelle Schwäche der russischen Wirtschaft

The economic situation in Russia is dramatic. GDP decreased by alarming 3.7 per cent in 2015. The imposed economic sanctions as well as the fall in oil prices have contributed to the downward spiral. However, the real weaknesses of the Russian economy are more structural in nature. The strong dependence on the oil and gas business, corruption problems, setbacks in privatisation efforts and the inefficient use of the existing human capital require greater commitment on the part of the government to commit to a return to a sustainable growth path. Individual sectors and companies in Germany suffered considerable losses of revenue in the course of the economic crisis in Russia. Overall, however, the effect on the German economy has been rather moderate.     

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.     

“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.     

Issues in privatisation

In 1990 the privatisation debate in the ex-socialist countries advanced considerably. By now, the fundamental importance of private property for a market economy and the pitfalls of employee-ownership schemes are rarely disputed. Instead, the need for rapid privatisation and suitable methods of achieving it have become the main topics of discussion and the major challenge for policy-making.     

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?     

The development of the czech sme sector

This study examines the history of small and medium enterprises (SMEs) in the Czech Republic (Czechoslovakia): the influence of SMEs in pre-war Czechoslovakia, their gradual liquidation under the communist regime, and their influence in reestablishing a market economy in the Czech Republic/Czechoslovakia after the Velvet Revolution of 1989. The core of the study analyzes the results of a survey of 100 Czech SMEs conducted within the framework of PHARE ACE P95-2047-R. The standard conclusions of such research, excessive tax burden and problems with collateral and loan prices, were made. In addition, problems specific to Czech businesses, such as the improper functioning of legal system, weak protection of property rights and deficiencies in the state of law, as well as the shortage of qualified personnel, were found to impede the growth of Czech SMEs.