The Effects of Privatization on Enterprise Production and Trade Strategy

Abstract

Privatization of state-owned enterprises is a major component of economic transformation in the countries of Eastern and Central Europe and the former Soviet Union. Finding private owners for state-owned firms, which in the late 1980s still accounted for more than 80 percent of the gross national product in the region, is not an easy task. If we take into account the lack of market links and institutions, the small number of professional managers, and the shortage of real capital resources needed to take over the privatized assets, we can assess the scope and difficulty of this venture more realistically. Privatizing a major part of state-owned assets in a relatively short time, however, seems to be the necessary prerequisite for upgrading the economies of the region from their levels of efficiency and production quality. It is also a prerequisite for overcoming the atrophy of economic motivation and establishing firms that are viable to respond to the challenge of competition in the world market.

This study uses results of monitoring research on privatization processes that has been carried out by the Gdansk Institute for Market Economics (Dabrowski et al., 1992a, 1992c; Kaminski, 1992). It covers the operation of more than 60 enterprises in various stages of privatization and subject to various transformation formulas. The firms analyzed differ from one another in terms of size, location, and branch affiliation (Tables 11.1 and 11.2 present the structure of the sample). The occurring changes are monitored comprehensively (the research involves the operations of privatized firms in all fields of their activity, the progress of the privatization process and its effects, and the barriers to privatization) and dynamically (the research is repeated every six months). The analyses provide, first of all, the comparison of the four major privatization paths in Poland. The justification for this approach stems from the fact that the four individual paths distinguish themselves both in scope and in the set of measures they are supported with.