Privatization as a ?Learning Process?: The Case of Hungary

Hungarian privatization is considered as a process which has been dominated by standard methods. Most of the firms were sold via public tenders, private placement or public offerings and state budget generated significant cash income from selling. A detailed analysis, however shows that the course of privatization has neither been direct nor uniform even in this country. Every conceivable approach occurred on the scene during the last decade, including free distribution to individuals and institutions or preferences to different types of buyers as well as loosely controlled movements and centralized governmental decisions.
The intention of this paper is to show some reasons behind these fluctuations. Privatization is regarded here as a learning process. Learning process not in a technical sense but rather a trial and error approach, an adjustment of all main actors (governments, enterprise management and potential new owners) led partially by constraints, partially by changing opportunities.

In: Successful Transitions, Political Factors of Progress in Post-socialist Countries, Jürgen Beyer, Jan Wielgohs, Helmut Wiesenthal eds., Nomos Verlagsgesellschaft, Baden-Baden 2001. 139-152.

Ownership structure and corporate governance in the large enterprise sector in Hungary

How typical is the organisation of a network of "managerial capitalism" and ?recombinant property? in the large enterprise sector in Hungary? Based on the ownership structures and corporate governance methods of the top one hundred companies, the article argues that both models may be justified within a narrow sphere or in a particular sense. In a formal and legal sense the management is only a shareholder in exceptional instances, and its informal influence depends on the ownership type. Its power is determinative in the case of divided ownership and for some corporations owned by the state. The concept of inter-corporate ownership elaborated by David Stark is characteristic in the sense that the majority of the large enterprises are linked to a network, though these are mainly subsidiaries of multinational companies. This, however, is not a uniquely Hungarian or post socialist solution. There is a fundamental difference between Hungarian and foreign enterprises as owners at almost all levels of corporate management. It is not advisable, therefore, to treat the two groups as a single category within the conceptual framework of the "network".

Közgazdasági Szemle (Economic Review) July-August 2000, pp. 549-564

Management of residual stat property: Implications for Corporate Governance of privatized companies the case of Hungary.

Privatisation is coming to the end in Hungary. By spring 1998 the bulk of state owned property was in private hands. According to official statistics, private enterprises account for nearly eighty per cent of GDP and almost three quarters of the capital is privately owned. More than one thousand firms were fully privatised during the period 1990-1997.
Considering the recent ownership structure of the Hungarian economy, already fairly similar to that of several West European countries, government can declare at any time the end of privatisation process. Debates on legal and institutional frameworks of controlling the residual state property have started in 1997. Despite of detailed proposals of several governmental apparatuses and consulting firms, no final decision was made before the parliamentary elections in May 1998. The future of state residual property is yet to be seen.
This analysis summarises first the main characteristics and results of Hungarian privatisation process as the precondition of managing the residual state property. The second section gives the inventory of the different controlling institutions and describes the positive and negative features of their activities. The last section presents the alternatives of state asset management considered in Hungary for the post-privatisation period, including the possibilities of further privatisation transactions.

Country paper for C.E.E.P.N. research project on management of residual state property, June 1998

Spontaneous privatisation in Hungary

The phenomenon known as "spontaneous privatisation" is one of the most passionately disputed components in the history of Hungarian privatisation. Some economists and politicians consider the essence of the process to be the disintegration of state enterprises into a group of companies, whereas others regard it as the sale of firms or company sections based on managerial decisions. Most participants in public disputes use spontaneous privatisation as a term of abuse and as a synonym for the conversion of political into economic power or for the preservation of assets, i.e. wasting state assets. In line with this, evaluations are also radically different. At one pole, spontaneous privatisation is an indication of the companies? ability to adapt, but at the other it is equivalent to unlawful acquisition of advantage or even theft.
The basic preconditions for the transition that is unique to Central Eastern Europe in many respects were created by earlier Hungarian reforms. The series of steps taken is a good indication of the continuity and breaking points of the economic and political changes as an important cross section of the disintegration of a centrally planned economy. The question is whether this method could have been an alternative path to privatisation nowhere else followed. How do we evaluate this method of transition subsequently, ten years later? Richly illustrated with contemporary disputes and actual company cases, this book seeks answers to these questions.

ÁPV Rt., (State Privatisation and State Holding Company) "Számadás a talentumról" ("Giving account of the talent") series 1998

Dinosaurs don?t want to die

Restructuring and Privatization of Big Enterprises in Hungary

?Dinosaurs were huge animals?, a chief executive explained me in the early 80s before our extensive knowledge of paleontology was developed from the books of our children. ?If a rat started to chew their tail it took several years for the information to reach the dinosaurs? brain. Our big enterprises are just like dinosaurs? - he stated with self irony. Have these primordial creatures died out of the Hungarian economy? The crucial question of our research was how the political and economic turnover affected the Hungarian large scale industry. How has the organizational and ownership structure of the socialist big enterprises changed? How have their production structures, patterns of behavior and orientations changed? What enterprise strategies have proven to be successful? What has the role of the government been like in connection with big firms? In order to answer these questions we used a combination of economic and sociological methods, based on case studies and the processing the balance sheet data of 49 enterprises, which were considered as privileged, strategic firms under Socialism. First we will outline the main characteristics of the big enterprise group concerned, than have a look at the method and degree of organizational and ownership changes. In the last section the basic lines of disintegration, the elements and the constraints of disintegration will be presented.

Published by Perfekt-Pénzügykutató Rt. 1997 (in Hungarian)


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