Large Privatization: Theory and Practice

Abstract

The CSFR’s privatization program, now divided into individual programs in the Czech and Slovak Republics, has been the most unique part of its reform strategy. In addition to more than 100,000 property-restitution claims settled, 22,345 small firms were auctioned in small privatization and over 3,500 larger firms have been transformed in the first and second waves of large privatization. In the mid-1980s Czechoslovak state-owned enterprises (SOEs) and cooperatives accounted for 96.7 percent of the national economy; only 0.7 percent of NMP came from the nonfarming private sector. Between 1991 and 1992, the Czech private sector grew from 10.6 percent of GDP to 19.5 percent. By the last quarter of 1995 fully 67 percent of the Czech GDP was created in mostly private companies. During these years of rapid privatization, foreign participation has played an important role. Total FDI amounted to $2.559 billion in 1995 alone, $5.8 billion in total for the years 1990 through 1995. In addition, the foreign portfolio investments amounted to $1.4 billion in 1995, and foreign portfolio investors owned $2.7 billion of Czech securities (two-thirds were shares).