Czechoslovakia's Great Sell-Off the Rapid Privatization of State-Owned Companies Is Considered Central to Eastern Europe's Economic reforms.FROM MARX TO MARKETS: EASTERN EUROPE'S DARING LEAP

By William Echikson. All the articles report are William Echikson, who covered Eastern Europe Christian Science Monitor during the 1980s. He is now a. correspondent with Monitor Radio and The Monitor Channel .. He has also worked Night: Revolution ). | The Christian Science Monitor, October 16, 1991 | Go to article overview

Czechoslovakia's Great Sell-Off the Rapid Privatization of State-Owned Companies Is Considered Central to Eastern Europe's Economic reforms.FROM MARX TO MARKETS: EASTERN EUROPE'S DARING LEAP


William Echikson. All the articles report are William Echikson, who covered Eastern Europe Christian Science Monitor during the 1980s. He is now a. correspondent with Monitor Radio and The Monitor Channel .. He has also worked Night: Revolution )., The Christian Science Monitor


SATURDAY morning in the Czechoslovak capital - auction day, and the big money's hit town. But the bidding here at the local theater isn't for fancy paintings or yachts.

This auction is on the front lines of one of the boldest economic experiments of modern times - an effort to put thousands of enterprises nationalized by the communists back into private hands in just a few short months. Everything is up for grabs, from hotels to restaurants, hairdressers to souvenir shops.

By the end of the year, the authorities hope to sell as many as 35,000 properties throughout the country.

Without recognizable owners who have a vested interest in seeing their investment pay off, East Europe's reformers argue, a market economy cannot be built. True, the West has state-run companies that make a profit. But their products can be compared with those of private firms.

"This is the crown jewel of the reform process," says Karel Dyba, Czech economics minister. "Without privatization, small-scale privatization, large-scale privatization, you cannot create a functioning market economy."

So far, the sell-off concerns small shops sold at the auctions.

Today's first happy winner is baker Zuzanna Sindelofalova, who bought a small property in the center of Prague. "Until now, I delivered my cakes" to other shops, she says. "Now I will be able to sell them in my own shop."

The privatization of large state enterprises is beginning.

A few large companies already have been sold to foreigners, most notably Skoda's automobile operations to Volkswagen for $6 billion. The bulk of the buying, however, will have to be done by locals, for both political and economic reasons. Rich foreigners are only interested in a few of the thousands of state firms. Moreover, the public opposes a fire-sale of state companies.

The Prague government has come up with an ingenious and daring solution: It plans, for all intents and purposes, to give the companies away. For a nominal fee of about $32, all Czechs will be offered the opportunity to buy vouchers which they can cash into shares.

Despite differences in technical details, Poland is preparing a similar voucher scheme. Hungary, more cautious, hopes to sell directly to company managers or to the country's emerging class of businessmen.

Whichever technique is used, the task dwarfs Britain's much-heralded privatizations of the 1980s. Under Margaret Thatcher, only two dozen companies were shifted out of government control in 12 years. In Eastern Europe, as much 80 percent or more of the economy is to be put on the auction block.

THE process is not without its problems. One typical complication is what to do with former owners. Last spring, the Czechoslovak parliament passed a law saying that individuals who had their businesses confiscated by the communists can recover them. …

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