Equality, Participation, Transition: Essays in Honour of Branko Horvat

Saul Estrin 149
share has grown very rapidly and covers more than a quarter of gross
domestic product. Thus the desire by governments to undertake very
speedy privatization has in most of the region been realized.
Interestingly, the countries of former Yugoslavia, with the exception of
Slovenia, have lagged in this privatization process – in part because
their ownership form, social ownership, has made the process of privatization
much more complicated.
In Table 9.1, we present the main methods of privatization employed
in the region for medium size and large firms. It immediately becomes
clear from the figure that in seven of the leading transition countries,
sales to outside owners (the predominant privatization form in the
West and in other emerging economies) were relatively insignificant.
As noted above, the only exceptions are Estonia and Hungary. Voucher
privatization and management-employee buy-outs have been the main
mechanism for privatization in the countries covered and have been
more general. Table 9.2 goes on to discuss in greater detail the operation
of mass privatization schemes. It can be seen that almost every
country in the region, except Hungary and the former Yugoslavia, has
used mass privatization as part of their privatization program. In countries
like the Czech Republic, Russia, Slovakia and Romania, mass privatization
has been the predominant privatization form. In other
countries, such as Poland and Ukraine, it has been one form amongst
several. Nonetheless, mass privatization has been the great invention
of the transition process and it is because of mass privatization that
such widely defused ownership holdings have emerged in so many
transition economies. It is when we turn to the outcomes of these mass
privatization program, and the broader privatization efforts, that the
prospects for a significant employee ownership sector become clear. We
find the widespread emergence of employee ownership almost everywhere
in the region. This is true not only in Russia, Ukraine and
Romania, but also even in Hungary and Poland where it was not a
planned or desired policy outcome. This is because almost everywhere
insiders have been given ownership rights, and the insider group comprises
the coalition of workers and managers. In some countries, managers
have managed both to retain control over firms and to get for
themselves a predominant ownership stake. However, in practice, this is
usually very hard to accomplish because, though firms were being sold
for a fraction of what they were worth, managers still could not generate
sufficient funds among themselves and therefore needed also to rely
on the savings of their much larger labour forces. Table 9.3 gives some
very rough estimates of the ownership outcome in some key countries.