The World Bank, Privatization and Enterprise Reform in Transition Economies
A Retrospective Analysis
The Operations Evaluation Department (OED) of the World Bank commissioned this analysis. Unlike the typical OED study, it does not analyze the specific details of any particular Bank project or set of projects. Rather, it offers a conceptual account of the approach to privatization and enterprise reform of three major countries in the transition region. It discusses for each the states of mind concerning enterprise reform and privatization that prevailed in the country and the World Bank at various places and moments prior to and in the transition process, the initial conditions faced by reformers and those who assisted them, and the policy frameworks that evolved.
In each of the three chosen cases restructuring and privatization were seen as critical by reformers, their Western academic and financial advisors, and Bank and other international financial institution's (IFI) staff. In each case the debates on the privatization issue raised questions of importance beyond the single country. The intent is to complement the more traditional and detailed OED review of projects, by illustrating the major problems and issues faced, the solutions proposed, their evolution over time, and the policy paths rejected or missed by Bank staff, and reformers in the transition governments, concerning the contentious topic of privatization.
The paper is organized as follows: Section II summarizes Bank thinking on public enterprise reform and privatization prior to the large-scale involvement in transition. Section III briefly sketches the original moments of contact. Sections IV, V and VI discuss the three country cases. Section VII then offers a general discussion of what has been learned concerning what works and what does not; this is followed by conclusions in Section VIII.
In the order they are discussed the countries are: Poland, Czechoslovakia (now the Czech Republic and Slovakia), and Russia (at the very first, the Soviet Union). The privatization approaches of a number of other countries will be mentioned, though not analyzed, in passing.
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Center for Global Development