Voucher Privatization with Investment Funds
Voucher Privatization with Investment Funds

Author: David P. Ellerman

Publisher: World Bank Publications

Published: 1998

Total Pages: 18

ISBN-13:

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May 1998 The most likely outcome of the strategy of voucher privatization with investment funds may be a two-sided grab fest by fund managers and enterprise managers-along with drift, stagnation, and decapitalization of the privatized industrial sector. Common wisdom among post-socialist reformers has been to use voucher investment funds to provide the corporate governance needed to restructure newly privatized enterprises after mass privatization efforts. The idea has been that mass privatization would spread the ownership too wide and make corporate governance difficult. Ellerman examines the likely institutional behavior of voucher funds and the possible effects of their development on a transition economy. Since most policy advice has been in favor of voucher privatization with investment finds, Ellerman can be seen as playing the devil's advocate, but his argument is institutional, not statistical. Policymaking requires insight and foresight into how institutions will tend to function. He concludes that voucher funds will introduce a bias in the economy away from the real industrial sector toward an ersatz financial sector that will have little if any positive financial role but will be well-protected by friendly regulators. One long-term consequence of voucher privatization with investment funds, according to this view, is a de facto industrial policy of real sector decapitalization in favor of short-term rent-seeking by fund managers through board sinecures and lucrative side deals with portfolio companies and through financial market manipulation and paper entrepreneurship in the financial sector. Without strong corporate governance from the funds and without stable ownership of their own, many enterprise managers will exploit the post-socialist version of the separation of ownership and control to grab what they can in the form of salaries, bonuses, perquisites, and side deals. The most likely results of the strategy of voucher privatization with investment funds may be a two-sided grab fest by fund managers and enterprise managers-together with the accompanying drift, stagnation, and decapitalization of the privatized industrial sector. This paper-a product of the Office of the Senior Vice President, Development Economics-is part of a larger effort in the Bank to define policymaking using institutional analysis. The author may be contacted at [email protected].

Making a Market
Making a Market

Author: Nemat Shafik

Publisher: World Bank Publications

Published: 1993

Total Pages: 62

ISBN-13:

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The mass privatization scheme put information about enterprise values in the public domain by allowing increasingly informed bidders to interact. This quickly differentiated enterprises with favorable prospects from those with unfavorable prospects. The design of the program served the objectives of speed and equity more than those of corporate governance.

Privatization in Eastern Europe
Privatization in Eastern Europe

Author: Roman Frydman

Publisher: Central European University Press

Published: 1994-01-01

Total Pages: 239

ISBN-13: 9633864917

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In Eastern Europe privatization is now a mass phenomenon. The authors propose a model of it by means of an illustration from the example of Poland, which envisages the free provision of shares in formerly public undertakings to employees and consumers, and the provision of corporate finance from foreign intermediaries. One danger that emerges is that of bureaucratization. On the broader canvas, mass privatization implies the reform of the whole system, the creation of a suitable economic infrastructure for a market economy and the institutions of corporate governance. The authors point out the need for a delicate balance between evolution - which may be too slow - and design - which brings the risk of more government involvement than it is able to manage. A chapter originating as a European Bank working paper explores the banking implications of setting up a totally new financial sector with interlocking classes of assets. The economic effects merge into politics as the role of the state is investigated. Teachers and graduate students of public/private sector economies, East European affairs; advisers to bankers or commercial companies with Eastern European interests.

Time to Rethink Privatization in Transition Economies?
Time to Rethink Privatization in Transition Economies?

Author: John R. Nellis

Publisher: World Bank Publications

Published: 1999-01-01

Total Pages: 44

ISBN-13: 9780821345030

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IFC Discussion Paper No. 38.QUOTEIt is now universally acknowledged that ownership matters; that private ownership in and of itself is a major determinant of good performance in firms... Decent economic policy and well-functioning legal and administrative institutions... matter greatly as well.QUOTEThis paper looks at what happens when the shift to private ownership gets far out in front of the effort to build the institutional underpinnings of a capitalist economy. The emphasis is on what went wrong and why and what, if anything, can be done to be correct it. Proposals include renationalization and/or postponement of further privatization, both to be accompanied by measures to strengthen the managerial capacities of the state. Neither approach seems likely to produce short-term improvements. The regrettable fact is that governments that botch privatization are equally likely to botch the management of state-owned firms. In a number of Central European transition countries, privatization is living up to expectations; and there is no need for such measures. For institutionally-weak countries, the less dramatic but reasonable short-term course of action is to push ahead more slowly with case- by-case and tender privatization in cooperation with the international assistance community in hopes of producing some success stories that will lead by example.

Privatizing Russia
Privatizing Russia

Author: Maxim Boycko

Publisher: MIT Press

Published: 1997-01-22

Total Pages: 180

ISBN-13: 9780262522281

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Privatizing Russia offers an inside look at one of the most remarkable reforms in recent history. Having started on the back burner of Russian politics in the fall of 1991, mass privatization was completed on July 1, 1994, with two thirds of the Russian industry privately owned, a rapidly rising stock market, and 40 million Russians owning company shares. The authors, all key participants in the reform effort, describe the events and the ideas driving privatization. They argue that successful reformers must recognize privatization as a process of depoliticizing firms in the face of massive opposition: making the firm responsive to market rather than political influences. The authors first review the economic theory of property rights, identifying the political influence on firms as the fundamental failure of property rights under socialism. They detail the process of coalition building and compromise that ultmately shaped privatization. The main elements of the Russian program -- corporatization, voucher use, and voucher auctions -- are described, as is the responsiveness of privatized firms to outside investors. Finally, the market values of privatized assets are assessed for indications of how much progress the country has made toward reforming its economy. In many respects, privatization has been a great success. Market concepts of property ownership and corporate management are shaking up Russian firms at a breathtaking pace, creating powerful economic and political stimuli for continuation of market reforms. At the same time, the authors caution, the political landscape remains treacherous as old-line politicians reluctantly cede their property rights and authority over firms.

Proposals for Privatization in Eastern Europe
Proposals for Privatization in Eastern Europe

Author: Mr.Eduardo Borensztein

Publisher: International Monetary Fund

Published: 1991-04-01

Total Pages: 28

ISBN-13: 1451977905

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This paper discusses several proposals for a wholesale privatization of public enterprises in Eastern Europe. These proposals include the distribution of ”vouchers” to private citizens as well as the use of mutual funds, privatization companies and other forms of financial intermediaries. The paper analyzes the implications for economic efficiency of the different forms of ownership and control that would emerge from the proposals as well as their main macroeconomic consequences.

Privatization and Corporate Control in the Czech Republic
Privatization and Corporate Control in the Czech Republic

Author: Clemens Schütte

Publisher: Edward Elgar Publishing

Published: 2000

Total Pages: 360

ISBN-13:

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The book discusses the role of the most important players in corporate control including the big bank-centred financial groups, capital markets, the board model of Czech corporations and the institutional base of debt control and minority shareholder protection. It also reveals the conflict of political intentions and real-time developments.

Privatization at the End of the Century
Privatization at the End of the Century

Author: Herbert Giersch

Publisher: Springer

Published: 2011-09-26

Total Pages: 367

ISBN-13: 9783642645747

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At the end of the century, privatization has become a worldwide phenomenon. It is taking place in what was once called the first, the second, and the third world. The volume mirrors this expansion of privatization. In Part I on the economics of privatization, historical, theoretical, and politico-economic issues are covered. In Part II country studies are presented for China, the Czech Republic, Eastern Germany, Estonia, Hungary, Poland, Russia and the United Kingdom. In Part III a broader view on privatization is taken by including deregulation and the private provision of public goods and services.The book contains contributions by D.Bos, T.Eggertsson, R.P.Heinrich, P. Jasinski, H.Klodt, B.Krug, D.Lal, S.C.Littlechild, M. Mejstrik, P.Mihalyi, P.Plane, J.-J.Rosa, K.M.Schmidt and M.Schnitzer, and U.Siegmund."

Reforming Infrastructure
Reforming Infrastructure

Author: Ioannis Nicolaos Kessides

Publisher: World Bank Publications

Published: 2004

Total Pages: 328

ISBN-13:

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Electricity, natural gas, telecommunications, railways, and water supply, are often vertically and horizontally integrated state monopolies. This results in weak services, especially in developing and transition economies, and for poor people. Common problems include low productivity, high costs, bad quality, insufficient revenue, and investment shortfalls. Many countries over the past two decades have restructured, privatized and regulated their infrastructure. This report identifies the challenges involved in this massive policy redirection. It also assesses the outcomes of these changes, as well as their distributional consequences for poor households and other disadvantaged groups. It recommends directions for future reforms and research to improve infrastructure performance, identifying pricing policies that strike a balance between economic efficiency and social equity, suggesting rules governing access to bottleneck infrastructure facilities, and proposing ways to increase poor people's access to these crucial services.