1. Oskar Vuorinen (76130), Jonathan Suchocki (76140)
Privatization in CEE
Oskar Vuorinen (76130), Jonathan Suchocki (76140)

2. Structure: Introduction Explanation of term and basic concept
2) Main objectives
3) Methods of Privatization
Private vs. Public sector
Results

3. Explanation of term and basic concept
Process of transfering ownership or public property from the public sector to the private sector
Especially common in the CEE countries after the downfall of USSR
Privatization made an important contribution to economic growth in CEE especially after the fiscal crisis (1990/91)
Still a relevant topic today

4. Main objectives Establishing market economy
Forming competition
Increasing efficiency
Financing budget deficit
The transformation happened either gradually or as a shock

5. Methods of Privatization
Direct Sales
Directly selling the firms
Initial public offering (IPO)
Making firms public and selling the shares on stock exchange
Public tender
Popular for privatization of large firms (mostly foreign investments)
Self privatization
Merger of state and private companies
Auction
Auctioning state property (small firms)
Coupon or voucher privatization
Coupons indicating ownership distributed to citizens
Management-Employee Buyout (MEBO)
Transfer of shares to employees at low prices or for free
Restitution
Giving back property to it´s original owner
National Investment Funds
Funds to manage the profits gained from the sales

6. Private vs. Public sector
Pros
Cons
Private Sector
Higher efficiency
More competition lower pricess
Less hierarchy faster decision- making
May not lead to better quality or cost reduction
Higher unemployment rate
Externalities
Public Sector
Rationalization
Natural monopolies
Corruption
Political agendas
Short sightedness

7. Private Sector Share of GDP

8. Results Ca. 75% of GDP made of private sector in Poland
GDP in Poland has grown from 66 Billion to 470 Billion
Privatization is strongly associated with organizational restructuring
Foreign or outside ownership is associated with greater performance improvement
Progress in privatizing small firms has been rapid in several East European countries, but privatization of large firms has been slow

9. Questions ?

10. References
Dennis Mueller, Evgeni Peev, ”Corporate governance and investment in Central and Eastern Europe” Journal of Comparative Economics, 2007
World Bank Data (GDP in Poland)
OECD Data
Jean Tirole, ”Privatization in Eastern Europe: Incentives and the Economics of the Transition” NBER Macroeconomics Annual 6, 1991
Lecture 2 slides, Business in CEE
Stephen Cohen, Andrew Schwartz, ”Privatization in Eastern Europe: The tunnel at the End of the Light”, The American Prospect, 1993