It is not a region specific phenomenon. It was pioneered in Asia & Latin America before the recent wide spread adoption in transition economies.
Enterprises in the developing countries following trends of firms in the developed countries in involving employee in stock ownership, decision making and gain sharing.
In developing economies, privatization has an important role to play but cannot succeed by simply banishing government from the economic scene
Facts about Chile
Pioneered the privatization movement.
A strong market based economy in which government competently plays an active but targeted role in the areas in which it is most needed.
In the early 1970s it was an economy with the pervasive government intervention and later became one of the most open and most market oriented economies of Latin-America.
Every market (except the labor market) was freed from the government control.
Under Pinochet also there were some hidden subsidies and inducements including a massive government rescue of financial sector, amounting to 4.6% of GDP from 1982 to 1986.
In Privatization itself, subsidies were offered to the private sector through the sale of assets at little more than half their real value.
Facts about Chile contd..
In 1974 & 1975, some 360 firms that had been nationalized in the early 1970s were returned to their previous owners; most of the rest of these were reprivatized by 1978.
From 1978 to 1981, privatization of social services took place; the government officially continued to provide social services only for the poorest groups and focused on subsidizing demand rather than supply.
1982 – stocks crashed, there was a huge wave of bankruptcies, including one-fifth of all manufacturing companies employing 50 workers or more: & unemployment reached 24%
1983-1986 – many enterprises “rescued” (nationalized) by Pinochet.
Since 1986 – 30 large industrial enterprises that had been in state hands for a longer term were privatized. 2 recent e.g.s – electricity-generating company and a railway company.
To become eligible for generous discounts, participants had to be taxpayers with no back taxes owed.
First in Latin America to be able to tame inflation.
Facts about Poland
Early 1990 – the Polish government launched a five-part radical stabilization plan composed of price deregulation, introduction of a convertible currency, wage controls, increased interest rates and budget-balancing measures.
GDP in Poland fell drastically in the early transition to a market economy, 11.6% in 1990; and unemployment reached high levels.
Polish privatization plan was adopted in the summer of 1990.
For smaller firms, “privatization through liquidation” was adopted.
Out of 250 companies about 10% were fully privatized and only about 175 firms had self privatized by mid 1992.