The Privatisation Experience in Eastern Europe

In considering the privatization experience in Eastern Europe, it is necessary to consider 3 important characteristics of that experience: 1. the scope of the privatization problem facing governments in this region, 2. the fact that privatization is occurring at the same time as other fundamental structural reforms, and 3. the inherent difficulty in establishing the value of state-owned enterprises. It is not surprising that the countries of Eastern Europe have developed a number of different approaches to privatization policy. Spontaneous privatization (the decentralized and largely unregulated process by which the managers and workers of a state owned enterprise (SOE) transform that enterprise or a portion thereof, into a privately owned business) has been prominent in Hungary and Poland. Under legislation that took effect along with the unification treaty in July 1990, all East German SOEs were commercialized and transferred to the Treuhandanstalt, a public corporation. The long-term welfare of this region may be best served by following the advice of Kornai (1992) who has suggested nurturing and promoting the development of an entrepreneurial class.