Janusz J. Tomidajewicz

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Janusz J. Tomidajewicz

• Privatization issues in Central Europe Countries
  (the case of Poland)

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Introduction

• Particular features of privatization in countries
  transforming their economy from central managed
  into free market have resulted mainly from
• Privatization and liberalization have been the
  instrument of transition into free market
  economy, therefore privatization became the goal
  itself.
• The issue and the scope of privatization was very
  wide, it included privatization of the whole
  production sector, financial services and large
  part of institutions of culture, social services,
  infrastructure, etc.
• The process of privatization has reached serious
  barriers of capital and social character.
• Privatization has become the instrument of
  employment rationalization.
• National enterprises have had many social roles
  before their privatization.

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• Such situation brought specific social and
  economic problems connected with processes of
  privatization. It had impact on the process, as
  well as economic and social consequences of
  privatization.
• Present paper tend to analyze repercussions of
  privatization process connected with
• Institutional and organization aspects of process
  of privatization.
• Economic effects of privatization.
• Social effects of privatization.

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1. Factors of privatization in Central European
Countries

• Political and macroeconomic character of
  privatization aims.
• Scope, directions, rate and sequence of
  privatization.
• Capital barriers of privatization.
• Social barriers of privatization.
• Privatization as instrument of rationalization of
  employment
• Social functions of state enterprises.

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1.1 Political and macroeconomic character of
privatization aims.

• The economic policy stood up in the face of the
  problem whether forming the market economy is
  possible without simultaneous (or even earlier)
  of replacing dominating state enterprises, by
  private enterprises as dominating organizations
  in the market.
• Under the influence of the small and average
  enterprises and different international
  institutions in the practice of the economic
  policy they assumed that increasing the scope of
  the private sector in the economy was a basic
  condition and at the same time expression of
  going to the market economy.
• In view of the fact that chances of the coming
  into existence of the strong private sector on
  the founding road are very little they recognized
  that a privatization of current state enterprises
  must become essential means of transforming the
  economy.
• In the process the privatization alone in itself
  became the purpose of the economic policy and the
  amount of privatized enterprises and the growing
  participation of the private sector in producing
  the GDP became basic indicators efficiency of the
  transformation politics

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1.2. Scope, directions, rate and sequence of
privatization

• An assumption was made that, privatization to a
  considerable degree independently of what
  sectors, enterprises or fields it concerns and
  with the help of what tools is a process
  accomplishing purposes of the economic policy
  realized.
• Issue of the selection of directions and methods
  of the privatization examined was above all from
  a point of view of their effectiveness measured
  with the amount and the pace of privatization.
  However to a little extent here an economic and
  social effectiveness of processes of the
  privatization was being taken into consideration.
  

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• Essential problems of choice about methods of the
  privatization concern
• what rate of the privatization should be i.e.
  whether to carry it out possibly quickly or to
  spread this process in the time?
• whether to privatize good enterprises at first,
  whether than those having problems?
• whether to privatize enterprises for which it is
  possible to get the fair price on the capital
  market or all enterprises too every (even clearly
  lowered) price provided that to cause the
  privatization?
• In the practice of the economic policy they were
  deciding for solutions allowing quickly to carry
  the privatization out, independently of whether
  privatized enterprises demonstrated the high or
  low ability to be active in conditions of the
  market economy and independently of the price
  with which it was possible to get at their
  privatization.

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1.3 Capital barriers of privatization

• According to estimation made before beginning the
  transformation, in Poland all money supply of the
  population and individuals of the unnationalized
  economy constituted c 10.7 value of the
  production wealth of the nationalized economy.
  However donating even an entire one-month
  workers' pay to the repurchase of shares in
  privatized enterprises annually, would require in
  order to 60 70 of years for buying out the
  wealth of state enterprises by their workers, at
  simultaneous backing up the entire operation with
  credit tools.
• Z. Fedorowicz, Obiektywne uwarunkowania czy
  chciejstwo (Objective conditioning or the wishful
  thinking) , Zycie Gospodarcze, nr 10/1988
• In the first years of the transformation, the
  invited foreign capital came across the barrier
  into forms of the high-risk assigned in this
  period to investments carried out in countries of
  Central Europe.

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1.4 Social barriers of privatization

• 1- anxiety of employees of privatized public
  enterprises concerning employment, level of
  remuneration and social benefits.
• 2- existence of claims for managing enterprises
  by workers (in companies where some
  self-management experience appeared).
• 3- anxiety of the society concerning foreign
  capital.

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1.5 Privatization as instrument of
rationalization of employment

• Dr W.Dymarski will elaborate present subject more
  widely in its paper.
• Here we will mark only, that a phenomenon of the
  exaggerated and ineffective employment became the
  particular sympthom of the irrationality of the
  socialist economy causing the hidden
  unemployment.
• In such situation the privatization was treated
  as the tool of restructuring of both individual
  enterprises and the economy as the whole,
  including particularly the tool being supposed to
  lead for eliminating the overemployment.

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1.6 Social functions of state enterprises.

• State enterprises, served social, enabling the
  access for one's workers on preferential
  conditions to cheap meals in the place of the
  work, the health care, the care of the child,
  holiday rest, the involvement in the culture,
  etc.
• From social activity a coming into existence of
  the following problems caused the back-pedalling
  of enterprises requiring to answer
• deciding or cutting businesslike welfare security
  benefits on the part of enterprises will be (and
  if necessary in what stage) compensated by
  appropriate raising monetary workers' profits,
• whether and how to privatize current activity
  social keeping enterprises object of this
  activity, in which whereas step simply entirely
  to close this activity down.

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2. Course and consequences of privatization in
conditions of transition

• 2.1 Institutional and organization aspects of
  process of privatization
• 2.2 Economic effects of privatization.
• 2.3 social consequences of privatization.

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2.1 Institutional and organization aspects of
process of privatization

• Significance of dispensing public enterprises and
  non-equivalent methods of privatization,
• Importance of public administration in process of
  privatization and its character causing
  corruption as a consequence of such state,
• Significant dependency of capital market from the
  process of privatization.

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2.2 Economic effects of privatization.

• Ownership structure national and foreign capital
• Capital as instrument of realizing development
  aims and of ownership transition
• Restructuring of sectors and enterprises
• Microeconomic efficiency of companies activity

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Percentage share of foreign capital in industry
and banks in 1999
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Use of capital

• Directing the considerable part of free funds to
  take over meant ownerships of current state
  enterprises, around these means weren't left
  directed for developmental investments and
  restructuring. The process of privatization was
  connected with a specific crowding-out effect of
  investment. the privatization through the
  crowding-out effect became the factor influencing
  for lowering the pace of the restructuring and
  the development of privatized economies.

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2.3 Social consequences of privatization

• Distribution of benefits resulting from
  privatization in the society
• Impact of privatization on situation on labor
  market
• Impact of privatization on range and
  accessibility of social benefits

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Conclusions

• Privatization has brought such economic
  consequences, like
• Foreign capital inflow
• Reduction of investment capacity in economy at
  least in its preliminary stage
• Structural changes expressed by development of
  low capital capacity and services sectors
• Increase of microeconomic efficiency of
  enterprises with simultaneous liquidation of
  significant number of non-efficient companies.

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• From the social part privatization has brought
• Significant benefits for foreign capital, part of
  management of formerly national enterprises, part
  of former and new private sector
• Reduction of position of employees and trade
  unions in enterprises and aggravation of labor
  relations
• Reduction of social benefits accessibility,
  particularly for employees with low remuneration.