10 privatization method (Box 1). But the latter part of the decade and the years thereafter saw a shift in activity to infrastructure sectors: telecoms and electricity transactions now constitute two-thirds of regional proceeds compared to less than 50 percent in the 1990s. Privatization of banks is also on the rise, accounting for 10 percent of regional revenues since 2000, with recent activity taking place in Albania, Bulgaria, Czech Republic, Latvia, Russia, and Slovakia. The region’s recent rise is attributable to activity in these newer sectors, concentrated largely in three countries—Poland, the Czech Republic, and Slovakia—which together accounted for nearly 70 percent of regional proceeds since 2000.

## **Box 1:  Privatization in Russia**

Privatization in Russia unfolded rapidly following the collapse in 1991 of the Soviet Union and its centrally planned economy. In late 1992, about 150 million privatization certificates (vouchers) were distributed which gave the bearer the right to buy small-scale business or shares at auctions, as well as to pay for housing. To get the plan through parliament, the reformers agreed to allow managers and workers to buy 51 percent of shares in businesses, rather than the maximum 40 percent originally proposed. This often kept enterprises in the hands of "insiders,” Soviet-era bosses with little idea of how to run private business, creating a delay in the influx of new management and the shake-out of inefficient companies. The voucher-based scheme ended in mid-1994, marking the beginning of the second stage of the privatization process, the loans-for-share scheme. By then, 75 percent of smallscale enterprises had been privatized, along with over 80 percent of the industrial workforce. Overall, 15,000 companies were privatized using vouchers, which accounted for 60 percent of industrial assets. Cash privatizations or the loans for shares scheme resulted in a compromise where businessmen would bail out the government with loans and in return would receive shares in big enterprises as collateral. This was attractive as many crown jewels of Russian industry - oil companies, metal smelters and mines - had been kept back from voucher privatization. In 1997 the privatization process entered a third stage, case-by-case privatization. In this phase, financial, insurance, aluminum and coal companies were sold. By the end of 2001, 129,811 enterprises had been sold, representing about 66 percent of the entire inventory of enterprises at the beginning of privatization. About 700 enterprises and packets of share were sold in 2001.

More recently international attention has been drawn to the partial re-nationalization of Yukos (the oil and gas giant) which had been privatized as part of the 1990s program when majority stakes in lucrative mining and energy enterprises were sold. This occurred when Yukos' main subsidiary, Yuganskneftegaz, was auctioned off to a little known company which was quickly taken over by a state-owned firm, Rosneft. The future of Yukos itself is uncertain because of the large tax liability Russian authorities have imposed on it in the form of back taxes. The president of Russia recently promised an end to legal challenges to the results of the privatization program, suggesting there would be no repeat of the Yukos case, which has damaged both investment and economic growth.

_Source_ : _Privatization Link.com and Financial Times.com (May 6 2005)_

# _East Asia and the Pacific_

16. East Asia and the Pacific—with $66 billion or 16 percent of total proceeds from 420 transactions—also increased its share over time, almost doubling revenues between 1990-99 and 2000-03. One country alone—China—accounted for nearly 90 percent of regional proceeds in the past four years, compared to 50 percent in the 1990s when Indonesia and Malaysia were other major contributors (with transactions in transport, electricity, energy and telecoms).