IN THE CZECH REPUBLIC successful privatisation has created a new sector of the economy-the privatised sector. Occupying a middle ground between the old state sector and the new private sector, the privatised sector displays some attributes of both. Many privatised companies are still partly owned by the Czech National Property Fund, a quasi-state institution; all operate in a highly managed, highly regulated financial environment. Their special status reflects the vestiges of the old state planning system, government efforts to dismantle it in a controlled manner, and an interim industrial policy designed to deter bankruptcy during privatisation. The privatised sector is also distinguished by its special relation to the large commercial banks. In mass privatisation, the large banks, through their privatisation funds, have become the most significant owners of the privatised sector, as well as its troubled creditors. The future of the privatised sector in the Czech Republic thus depends on the progress of banks and banking reform and on the development of the capital markets. To what extent has the privatised sector escaped from state control? To what extent have the large banks, through their investment company affiliates, occupied the vacuum left by the state? What patterns of control are emerging and will emerge in the future? These are the key questions that will allow us to judge the success of privatisation in the Czech Republic. The privatised sector in the Czech Republic is, in large part, a product of mass privatisation, a controversial method of quick privatisation first successfully implemented in this country. This article is not meant to be an indictment of mass privatisation, although much of the evidence presented here could be interpreted as such. The authors rather intend to investigate the issues that have arisen in the wake of Czech mass privatisation so that governments considering such a programme can appreciate some of the inherent problems and benefits. The Czech experience provides the first example of the difficulties a mass privatised sector may have in wrenching itself free from a long legacy of state control.
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Brom et al. (1994) studied this question.