Definitions, Designs, and Experiments

As narrowing attention, at the moment, on what is usually in the Czech Republic considered a process of privatization, numerous issues of ambiguity are encountered. ‘Privatization’ entered Euro-Atlantic discourse extensively in the 1980s as the wave of selling state assets swept through Western Europe (Thatcher’s Great Britain, Mitterand’s France). In practical terms that meant selling state enterprises, which represented too big a burden for the state coming lean. In most instances, that meant the careful, well-considered, and quite time-consuming procedure of touching enterprises one by one. Usually, this carried with it, at first, satisfying the perspective developmental and restructuring needs of the particular enterprises, and secondly, at the same token, selling each particular enterprise at a price close to market terms. If this is understood as the definitional frame of privatization, privatization transfers and developments from the 1990s are to be considered with vigilance since the process labeled as ‘privatization’

87 Still, with respect to advanced free market democracies, agendas of the not yet standard regimes (practically still bounded to 'transformation' or even more rudimentary 'transition' agenda) and teetering on the edge of jumping back to authoritarianism/totalitarianism of the 1980s.

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in the Czech Republic differed in many instances quite decisively from the above-described frame of definition⁸⁸.

As already indicated one of the most substantial features of the process was that it started initially with quite limited legally existing investment capital; foreign investment was initially illogically restrained and even later not consistently encouraged⁸⁹ (given the scale and range of assets on offer at the time). Unprecedently extensive amounts of state property subjected to the process aggravated the lack of legally nonexistent capital and moved the process far from the regular free-market procedures along with rhetorics of privatization switch’ in the ‘shortest possible time’.

The speed of privatization surfaced as the absolute priority within the context of the neo- liberally declared approach.⁹⁰ This in practical terms meant privatizing the maximum number of enterprises in the shortest possible time. The fundamental method of privatization in accordance with these priorities was so called ‘voucher privatization’. Initially, foreign investments tended to be pushed out into the waiting room (Klaus’ and Ježek’s intention was to let in foreign investment in substantial degree only after the 'Big Bang', i.e. the first privatization wave [Husák 1997]).⁹¹ Foreign investments appeared in the picture as big

88 In contrast to the Polish and Hungarian approaches which much more satisfied the usual definition frame of privatization – one by one enterprise which may have carried with it time and effort burden.

89 Essentially, after the very initial dissidence of the Czech national government (in regard to the general privatization policy of the Federal Czechoslovak government) allowing for the privatization of some 60 firms with the participation of foreign strategic investors at the very start of the reform undertakings (1990 – 1992, e.g., till the split of Czechoslovakia), foreigner investment started to be encouraged only at the end of the 1990s as Social Democrats got to power. Though at that point, except privatization of 3 state-dominated major banks into the hands of foreign strategic investors, this encouraging effort has not concerned privatizations but FDI founding new production sites and enterprises from the scratch.

90 The other pillars of their economic reform as initially outlined were: restrictive monetary policy (since 1990), liberalization of prices and liberal trade (from January 1991), internal convertibility of Koruna (1991/1992), and tax reform (from 1993).

91 One of the very limited exceptions was the Auto-Skoda-Wokswagen deal, realized in line with Czech vice president Vlasák’s approach, characteristic in its effort to search for strategic foreign partners and investors for single Czech enterprises. It is a real paradox that this is one of few privatizations arranged initially by Pithart’s Czech administration into the hands of the strategic investor, accounts with associated domestic suppliers for the spinal cord of the current Czech economy.

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privatization advanced behind 'voucher method' associated waves only when dealing with some of the large state monopolies (i.e., Czech Telecom)⁹².

In technical terms privatization of state enterprises under the ‘big privatization’ scheme can be outlined in the following steps: 1) the management of the enterprise or other curious parties having an interest in transforming the enterprise–like the founding ministry, ministry of privatization, economic ministers, government (in the case of direct sales or disagreement about the project and privatization method) or group of outsider entrepreneurs⁹³ suggests privatization project – 2) one of the privatization projects implying a particular privatization method or a mix of methods is selected (i.e., transforming to a stock company, voucher privatization, public sale, shares being sold in public sale or at the stock market, direct sale to selected party) – 3) the enterprise becomes the property of the National Property Fund (NPF) – 4) which is realizing the privatization through ‘the standard methods.’⁹⁴ Along with that, the Ministry of Finance realizes the distribution of shares demarcated for 'voucher privatization'⁹⁵ –5) enterprise is privatized - undistributed shares remain in the hands of the National Property Fund.

92 The range of main privatization undertakings in the Czech case could be outlined more or less chronologically as follows:

1) small-scale privatization (small businesses - mostly from the area of distributive trade and services -distributed through public auctions - considered as fair by the population though money used in this privatization was in most instances of doubtful origin, this privatization practically meant also dissolving some of the state owned chains, which could be offered as a whole to foreign investors)

2) large-scale privatization (1992–1995; decisive part realized primarily through specially designed method of

‘voucher privatization’ though, theoretically, the substantial share of the economy was privatized, still many of the privatized assets were under direct state control (some enterprises stayed or their decisive shares remained in the hands of National Property Fund) as well as indirect control of the state (through state dominated banks and their investment privatization fonds)

3) restitution (smaller properties – housing properties-blocks of apartments, agricultural land and farm property, smaller trade and service workshops; the property nationalized after 25th February 1948; more substantial properties, particularly factories and other industrial enterprises were nationalized before this date).

93 Postponing the start of the first wave of voucher privatization from the end of 1991 to mid of 1992 to give time to outsider entrepreneurs to prepare their projects was the source of conflict between the federal minister of finance Václav Klaus and the minister of privatization in the Czech government Tomas Ježek as Václav Klaus considered this delay enabling outsider private entrepreneurs to take part to be a ‘sabotage’ of the whole economic reform process (Husák 1997).

94 Transforming to a stock company, public sale, shares being sold in public sale or at the stock market, direct sale to selected party

95 Newly designed methods introduced along with standard methods.

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A substantial part of assets in the Czech economy was distributed through the newly introduced method of 'voucher privatization.' The final combination of privatization methods introduced was the result of significant alterations to the original intentions and decision- making in the course of the privatization process.⁹⁶ Employing this mix of methods on an all- inclusive scale under the given circumstances (particularly in view of inadequate regulation of experimental 'voucher method'⁹⁷ among other things) led to the establishment of a very particular environment characterized by distinctive – truly peculiar –autonomous practices and codes. Those practices and codes represent the initial step in constituting particular economic practices attached to the transitory order. For governmental neo-liberally coined economists evaluating privatization in terms of speed and scale, the privatization process was a decisive success. As it has been already noted, the process and its results appeared much more doubtful, already at the time, for other economists (e.g. Kouba 1994, 1995, 1997; Kouba, Klacek 1996a, 1996b; Mertlík 1996; Mlčoch 1997b, 2000a, 2000b).

While assessing the accounts of privatization, various crucial shifts may be indicated.

Many of the notable elements of the privatization process associated with such shifts have been present in the privatization-driven discussions from the very initial stages.