The Economic Transformation of Eastern Europe: Views from Within

By Bernard S. Katz; Libby Rittenberg | Go to book overview

closed, spontaneous privatizations. As a result of those transformations, a small group of people received unfairly generous material advantages without any payments to the state. On the other hand, by the time of the establishment of SPA, the majority of the large and mid-sized enterprises has already gone through some kind of transition, in a completely legal way. Therefore, any retroactive action would be but renationalization. Renationalization in order to obtain privatization? What a contradiction! Reconsidering legally closed cases would cause more damage to the general transition of the economy to a market-driven form than some questionable advantage from it.


ESTIMATIONS ON THE MAGNITUDE OF THE PRIVATIZATION

The extent of the public sector to be privatized is about 2,200 enterprises, with a combined value of 1,800 billion forints. Up to the end of 1989, about 500 state firms (with a value of about 10 billion forints, according to a non-official estimation) had gone through some transitions in a "spontaneous" form. For comparison, the foreign debt of Hungary is about 1,470 billion forints (U.S. $21 billion).

The first package of the SPA privatization program was announced in September 1990 and covered 20 companies with a combined asset-value of 33 billion forints. The average annual revenues of these firms had been 93 billion forints in 1989. The project is to be accomplished within two years. The situation is similar in the case of small-scale retail shops and restaurants, the privatization of which had been announced earlier as a project of "pre"-privatization.

The government has more recently announced a second package of centrally initiated privatization, which includes 23 additional state enterprises. The government's declared goal is to decrease the proportion of state ownership from 90 percent to 50 percent within three years.


CONCLUSION

The World Bank is deeply concerned about the acceleration of transformation in the former socialist countries, including Hungary. As a result, the office of the prime minister has elaborated a framework in which all state firms should be transformed into share-holding companies and the shares should be distributed immediately among the self-governing boards and the employees. This questionable concept involves that office, indicating the contradictory development of the privatization process. 18

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