Why is Privatisation of Residual State-Owned Stakes Delayed?

Abstract

There is a considerable variation across transition economies with respect to the implementation of privatisation programs. In Russia privatisation is comparatively far advanced. At the end of 1995, about 80% of the industrial enterprises (measured by employment) had been ‘privatised’. However, the label ‘privatised’ does not mean that the state has transferred all shares in these companies to private agents. On the contrary, a World Bank Survey carried out in the summer of 1994, found that only in 35% of ‘privatised’ Russian firms the state held no shares. In 17% of firms the state ownership was between 0% and 10%, and in 19% of firms between 10% and 20%. In Hungary, the state still held shares in 34% of large firms, in 23% of which the state holding was below 50% (Pistor and Turkewitz, 1994). However, this was partly a result of the fact that the privatisation in Russia happened in two stages. In the first stage, shares were allocated to insiders and sold in voucher auctions to the population. This phase ended in 1994. The residual share-ownership reported by Pistor and Turkewitz are the ones at the end of the first stage of privatisation. During the second stage of privatisation, which was introduced by a presidential decree in July 1994, shares were sold off for cash in auctions or investment tenders to blockholders.