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Privatization: Successes and Failures resources

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4 INTRODUCTION The most spectacular privatization experience is undoubtedly the one that took place in the transition process from socialism to capitalism in Central and Eastern Eu rope. In chapter 3, Jan Hanousek, Evz ˇenda,ˇen Koc and Jan Svejnar review this historical phenomenon. They insist that priva- tization policies must be seen within the general context of the transition strategy adopted in each country, including the relative role given to privatization of large state- owned fi rms and to the development of a new private sector. Economists were deeply divided between those who, on one hand, advocated very rapid privatization relying on giveaway schemes— the so- called mass privatization programs—and those who, on the other hand, advocated a more cautious approach based on the gradual sale of state assets. The literature abounds with various schemes on how to im- plement one of these two approaches. Countries like Poland, Slovenia, Es- tonia, and Hungary adopted the gradualist approach. Rus sia, Ukraine, the Czech Republic, Lithuania, and, to a certain extent, Slovakia adopted forms of mass privatization programs. Within that general classifi cation, the details of the programs varied from country to country. The few stud- ies on the determinants of privatization suggest that the more profi table fi rst, which is consistent with po liti cal economic rms were privatized fi theories of privatization where the sequencing of privatization is used to gather support for further privatization. But there is astonishing diversity in the results of the studies on the effects of privatization on fi rm per for- mance. Many studies were made very shortly after privatization fi rst occurred. Other studies relied on rather rough mea sures of own ership, noting only a public- private distinction, and could not mea sure differ- ences in own ership structure and corporate governance. Many studies suffer from a selection bias alluded to previously. If the more profi rms table fi were privatized fi rms cannot be caus- rst, superior per for mance in those fi ally attributed to privatization. The studies that correct for this bias gen- erally fi nd more modest effects of privatization. The strongest effects seem to be reached in cases where state assets were sold to foreign own- ers. Employee and manager own ership rarely has a signifi cant positive effect on fi rm performance—be it total- factor productivity, labor produc- tivity, or profi ˇenda, and Svejnar is tability. The survey by Hanousek, Koc quite thorough in terms of the per for mance variables analyzed. In chapter 4, John Nellis gives a careful overview of privatization poli- cies and their effects in Africa. African governments have as a rule not wholeheartedly embraced privatization of SOEs. Only a minority of SOEs have been subject to privatization in most African countries. Very little

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