Privatization and economic restructuring in Poland: An assessment of transition policies

American Journal of Economics and Sociology

Volumn 55, Issue 2, 1996, Pages 145-160

  Rondinelli, Dennis A ^a   Yurkiewicz, Jay ^a,b  

^a UNIVERSITY OF NORTH CAROLINA   (United States)

^b UNIVERSITY OF NORTH CAROLINA   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 17444413429     PISSN: 00029246     EISSN: None     Source Type: Journal    
DOI: 10.1111/j.1536-7150.1996.tb03193.x     Document Type: Article

References (49)

1. Organization for Economic Cooperation and Development, Reforming the Economies of Central and Eastern Europe (Paris: OECD, 1992).
2. The most concise statement of the case is found in International Finance Corporation, Small Scale Privatization in Russia: The Nizhny Novgorod Model - Guiding Principles (Washington, DC: IFC, 1992).
3. Center for International Private Enterprise and the Futures Group, "Poland Case Study," Economic Reform Today, Vol. 1, No. 1 (1991): 9-15.
4. See G. Helleiner, "Stabilization, Adjustment and the Poor," World Development, Vol. 15, No. 12 (1987): 1499-1513; Branco Milanovic, "The Cost of Transition," Transition, Vol. 5, No. 8 (1994): 1-4.
5. See G. Helleiner, "Stabilization, Adjustment and the Poor," World Development, Vol. 15, No. 12 (1987): 1499-1513; Branco Milanovic, "The Cost of Transition," Transition, Vol. 5, No. 8 (1994): 1-4.
6. See International Monetary Fund, World Economic Outlook, Washington: IMF, 1993; and Slovoj Czesany, "Stabilizing Aspects of the Economic Reforms and the Macroeconomic Developments in Hungary, Poland, the USSR and Czechoslovakia," in S. P. Prasad and R. B. Peterson (eds.) Advances in International Comparative Management, Vol. 7, (Greenwich, CT: JAI Press Inc., 1992), 157-168.
7. See International Monetary Fund, World Economic Outlook, Washington: IMF, 1993; and Slovoj Czesany, "Stabilizing Aspects of the Economic Reforms and the Macroeconomic Developments in Hungary, Poland, the USSR and Czechoslovakia," in S. P. Prasad and R. B. Peterson (eds.) Advances in International Comparative Management, Vol. 7, (Greenwich, CT: JAI Press Inc., 1992), 157-168.
8. Jedzejczak and Sterniczuk, "Privatization in Poland - 1991," 45-60.
9. Anna Sabbat-Swidlicka, "The Legacy of Poland's Solidarity Governments," RFE/RL Research Report, Vol. 2, No. 44 (5 Nov. 1993): 19-22.
10. For a more detailed description of these methods in Poland and in other Central European countries, see Dennis A. Rondinelli (ed.) Privatization and Economic Reform in Central Europe: The Changing Business Climate, Westport, CT: Quorum Books, 1994.
11. For a summary of restitution laws see Michael S. Fischer, "New Laws in Eastern Europe Set Terms for Restitution," Business International 38, no. 31 (Aug. 5, 1991): 261-262, 268.
12. See Unsigned article, "Bids to Reclaim Property Increasing; Total Bill Could Reach $23 Billion," BNA's Eastern Europe Reporter, Vol. 1, No. 3 (Nov. 25, 1991): 113; and Ben Slay, "Poland: An Overview," RFE/RL Research Report, Vol. 1, No. 17 (Apr. 24, 1992): 15-21.
13. See Unsigned article, "Bids to Reclaim Property Increasing; Total Bill Could Reach $23 Billion," BNA's Eastern Europe Reporter, Vol. 1, No. 3 (Nov. 25, 1991): 113; and Ben Slay, "Poland: An Overview," RFE/RL Research Report, Vol. 1, No. 17 (Apr. 24, 1992): 15-21.
14. Ben Slay, "Poland: An Overview," RFE/RL Research Report Vol. 1, No. 17 (Apr. 24, 1992): 15-23.
15. Zbigniew M. Fallenbuchl, "Polish Privatization Policy," Comparative Economic Studies, Vol. 33, No. 2 (1991): 53-69.
16. Ben Slay, "The Mass Privatization Program Unravels," Report on Eastern Europe, No. 44 (Nov. 1, 1991): 13-18.
17. Economist Intelligence Unit, Poland: Country Report, No 3 (London: EIU, 1991): 1-21.
18. The first step in the mass privatization process was to "commercialize" the enterprises by transforming them into joint-stock companies fully owned by the state treasury. Next, about 20 National Investment Funds would be created. These NIFs would then receive 60 percent of the stock in the commercialized enterprises while the state treasury retained 30 percent. Managers and employees would receive 10 percent of the shares free of charge. Shares in the NIFs were to be sold at a nominal price to Poland's 28 million adults, but securities trading would not begin until one or two years later. To secure the commitment of these funds to the success of enterprises in their portfolio, 33 percent of each company's shares would be assigned to only one NIF. The remaining 27 percent was to be distributed among the others. Thus, each enterprise would have one of the NIFs as a major stockholder. Such an arrangement would aid in maintaining the stability of the securities market and prevent excessive dispersion of share ownership. Postponing the marketing of shares would prevent the shareholders from dumping securities and would give privatized companies time to reorganize.
19. Fallenbuchl, "Polish Privatization Policy," 53-69.
20. Mario Nuti, "Privatization of Socialist Economies: General Issues and the Polish Case," in Hans Blommestein and Michael Marrese (eds.) Transformation of Planned Economies: Property Rights Reform and Macroeconomic Stability, (Paris: OECD, 1991), 51-63.
21. Even when employee or management buyouts were not the principal instrument for privatization, the government made provisions for employee shareholding in their negotiations with many private investors in SOEs. It encouraged foreign investors to give employees and managers preferential treatment or protection. The Polish government negotiated special treatment for employees and suppliers, such as in the American Gerber Products Company's bid to purchase the Polish Alima Baby Food and Juice Company. The approval of Gerber's bid hinged on guarantees to maintain existing employment levels in the company for at least 18 months after the acquisition was completed. The 1,000 employees and 4,500 agricultural suppliers of Alima were also allowed to buy up to 40 percent of the shares in the company at a 50 percent discount on their issue price.
22. Martin Wolf, "The Giant Leap to a Capitalist System," Financial Times (May 3, 1991).
23. Christopher Bobinski, "Poland: Much Lost Time Has to be Made Up," Financial Times, Special Supplement (July 3, 1992): 4; and Unsigned article, "Government Reports Accelerated Privatization Process in 1992," BNAs Eastern Europe Reporter, Vol. 2, No. 7 (Mar. 30, 1992): 243.
24. Christopher Bobinski, "Poland: Much Lost Time Has to be Made Up," Financial Times, Special Supplement (July 3, 1992): 4; and Unsigned article, "Government Reports Accelerated Privatization Process in 1992," BNAs Eastern Europe Reporter, Vol. 2, No. 7 (Mar. 30, 1992): 243.
25. Unsigned article, "Poland Tallies its Sell-Offs," The Wall Street Journal (Oct. 21, 1993): A15.
26. Louisa Vinton, "Privatization in Poland: A Statistical Picture," RFE/RL Research Report, Vol. 2, No. 32 (13 Aug. 1993): 58-62.
27. Economist Intelligence Unit, Country Report: Poland, 1st Quarter, (London: EIU, 1994): 12-13.
28. 24. Penn and Shoen Associates Inc., Democracy, Economic Reform and Western Assistance in Czechoslovakia, Hungary and Poland: A Comparative Public Opinion Survey New York: Freedom House and the American Jewish Committee, 1991.
29. In the same surveys, only 12 percent said that their personal economic situations were better one year after the collapse of the Communist regime, and most believed that their situations would not improve in the immediate future. More than two-thirds of those surveyed believed that their families' standard of living would drop markedly in the future, and more than a majority feared that the economic reforms would fail. Only about 30 percent of those surveyed in Poland stated that they would prefer to work for a state-owned company, but one-quarter of the respondents said that only small businesses should be privatized.
30. Louisa Vinton, "Poland's New Government: Continuity or Reversal?" RFERL Research Report, Vol. 2, No. 46 (Nov. 19, 1993): 1-7.
31. Slay, "The Mass Privatization Program Unravels," 13-18.
32. Judy Dempsey, "OECD Raps Poland's Knuckles," Financial Times (July 3, 1992): 2.
33. Louisa Vinton,"Polish Government Proposes Pact on State Firms," RFE/RL Research Report Vol. 1, No. 42 (Oct. 2, 1992): 10-18.
34. Jeffrey D. Sachs, "Accelerating Privatization in Eastern Europe: The Case of Poland," in World Bank, Proceedings of the World Bank Annual Conference on Development Economics (Washington: World Bank, 1991): 15-30.
35. See Byron Brown, "Transforming Postcommunist Labor Markets: The Polish Case," RFE/ RL Research Report Vol. 1, No. 32 (14 Aug. 1992): 50-56.
36. Nuti, "Privatization of Socialist Economies," 51-68.
37. Christopher Bobinsky and Anthony Robinson, "Poland's Hero Strikers Fall from Grace," Financial Times (Sept. 22, 1992): 7.
38. Leslie Colitt and Anthony Robinson, "Heavy Going Slows the Pace of Race to Reform Czechoslovakia's Economy," Financial Times (Mar. 26, 1991): 2.
39. Unsigned article, "Government Trying to Save Troubled Ursus Tractor Plant," BNA's Eastern Europe Reporter Vol.1, No. 1 (October 28, 1991): 13-14.
40. Some argued that the best way to appraise an enterprise was by determining its market value, but this method was not very useful when there was only one buyer. Despite a considerable book value, an enterprise could have a zero or even negative market value after the dismantling or restructuring costs were included. Even as late as 1994, critics of the Polish government contended that its concern with selling SOEs rapidly led state agencies to undervalue them. They pointed to the sale of stock in Bank Slaski in 1994 for an initial offering price of $23 - only to see the buying price of the stock increase to $313 a share the following day - as one of many examples of the deliberate undervaluing of SOEs that deprived Poland's Treasury of needed revenues. See unsigned article, "Poland Faulted on Sell-Off," The Wall Street Journal (Jan. 27, 1994): A10.
41. Unsigned article, "Poland's Investment Climate," The Wall Street Journal (Oct. 27, 1992): A12.
42. For example, in "mass privatization" foreign investors would be allowed to purchase companies' shares only if the National Investment Funds decided to sell the shares privately or on the open market. Obtaining a majority stake in one company would be nearly impossible. Domestic savings were inadequate to absorb more than a small fraction of the companies that would be available for privatization, and many of those who did have savings either retained them as a hedge against an uncertain economic future or used them to start small businesses.
43. See Jan Vanous, "Polish Economic Monitor," PlanEcon Report, Vol. IX, Nos. 28-29 (1993): 1-34.
44. Anthony Robinson, "Expectations Continue to Soar," Financial Times, Poland Survey (Mar. 19, 1994): 2.
45. See Leila Webster, "Private Sector Manufacturing in Poland: A Survey of Firms," Industry Series Paper No. 66 (Washington: World Bank, 1992): 1-11.
46. See International Finance Corporation, Small Scale Privatization in Russia, 5-6.
47. Economist Intelligence Unit, Poland: Country Report: 1-21.
48. Louisa Vinton, "Privatization in Poland: A Statistical Picture," RFERL Research Report, Vol. 2, No. 32 (Aug. 13, 1993): 58-62.
49. See Webster, "Private Sector Manufacturing in Poland," pp. 1-5.