Two years after the adoption of the Privatization Law(1992), even if slowly, privatization in Bulgaria has made considerable progress. It is the only transition country wich implements only market (capital) privatisation. Bulgaria is a middle-income country, which poses a serious barrier to capital privatization. Of course, experience (Chile, for instance) has shown that a successful capital privatization is possible in such countries as well. The privatization method itself puts a number of limitations with respect to the speed and effect of privatization. Capital privatization is generally slower than the free-of-charge distribution of bonds because it involves time-consuming procedures for valuation, legal analysis, negotiations and lawsuits.

The choice of capital privatization under the conditions of emerging market economy and markets was a serious challenge insofar as the absence of such conditions and their creation, together with privatization itself, involve substantial risks, both as regards obtaining an adequate price for the privatization objects, and with respect to a sufficiently high privatization demand, to administrative and bureaucratic difficulties, and political support. However, not only has the experiment demonstrated that privatization is possible, but a number of quite successful transactions have actually been concluded, at rather advantageous conditions for both sides; there has been relatively high stability of the concluded transactions and they are acceptable from a social point of view.

Table 1

PRIVATIZATION TRANSACTIONS

(End of December 1994)

Source: Privatization Agency

The data about initiated privatization procedures (see Table 1) indicate that despite its late start, Bulgarian privatization is gaining momentum. More than 25% of the Bulgarian state-owned enterprises and more than 7% of the municipal ones are in the process of privatization. About 230 state owned enterprises and 431 municipaly owned were sold by the end of 1994. Privatization procedures have been instituted for about 1 500 state enterprises and about 1 800 municipal.

One of the chief goals of privatisation, along with the withdrawal of the state from the management of the economy on a microeconomic level, is for the enterprises to be restructured and, once they have acquired real owners, for their activity to be based on the principles of competition and the market.

The different privatization methods provide different ways of achieving those objectives. The capital (market) privatization favored by Bulgarian legislation is still the dominating privatization method. One of the unquestionable advantages of the capital privatisation is the speedy restructuring and adjustment of the privatized yet enterprises owing to the presence of a real owner-entrepreneur and the ensuing more efficient management system. As it is seen from the table, (see Table 2) the state owned enterprises are privatised and transfered mostly to an individual owner.

Table 2.

Note: * refers only to state-owned enterprises

Source: Privatisation Agency

The effect of privatization is to be sought in the activity of the enterprises and their economic state following denationalization. Any general appraisal of the course of privatization would be incomplete without an analysis of the impact of privatization on the enterprise level - insofar as the transfer of property from the state to private persons brings about immediate changes in the market behavior of the privatized enterprise and enhances profitability, efficiency, and the financial stability.

Does privatization lead to the creation of more efficient enterprises?

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