**Table 3.3 Privatization revenues during 1990-98** (HUF bn at current prices)

||**1990**|**1991**|**1992**|**1993**|**1994**|**1995**|**1996**|1997|1998|
|---|---|---|---|---|---|---|---|---|---|
|Cash|0.7|31.4|77.2|169.9|139.8|481.0|176.1|301.7|99.2|
|Liquidation|17.7|39.8|31.7|32.1|29.0|12.6|_5.0_|_15.5_|0.0|
|Asset Transfers/Other|154.0|0.0|17.5|41.1|19.6|91.2|20.0|26.8|0.0|
|Divestiture Total|172.4|71.1|126.4|243.5|188.5|584.9|201.1|344.0|99.2|
|**Divestiture Total,**|**8.3**|**3.1**|**4.3**|**6.9**|**4.3**|**10.4**|2.9|**4.1**|1.0|
|**% of GDP**|<br>_|**I_**<br>_|**I_**<br>_|**I_**<br>_|_<br>_|<br>_<br>_|**I_**<br>_<br>_|_<br>_|_<br>_|

Source: The APV Rt. and MOF.

Note: The cash amounts are not adjusted for devaluations which occurred during this period.

**_1990-94: Slow Privatization._** Privatization began largely as a "spontaneous" process, with thousands of companies started by spinning off viable parts of state enterprises into new entities. Spontaneous privatization was swift, but it was not transparent, nor did it always safeguard the state's interest. There were widespread charges of abuse and favoritism, and whether warranted or not, they led to a slowdown in the transfer of state assets to private owners. Although many enterprises were liquidated (often by being transferred to new owners) during this period, most were small or medium-size firms; the biggest enterprises (in energy, communications, and transport) which accounted for the bulk of state assets, still were publicly owned. By the end of 1994, the state property agencies had divested only about 35 percent of their initial state equity holdings.

In divesting enterprises, the government took several strategic decisions which may have slowed the process but enhanced adjustment to a market economy. Privatization was to be case by case, not wholesale, as in other transitional countries. Moreover, the government opted for cash sales, rather than vouchers and other non-cash transactions. Each enterprise had to be evaluated and managed, and a tender prepared for each. To stabilize state enterprise and enhance their sales value, the property agencies spent time and money restructuring viable entities. In the preparation for privatization, the property agencies contributed capital, or offered guarantees. Even when assets were privatized, the state often continued to be implicated in the enterprises. In some cases, the government policy required the state to retain an ownership share; in others, the state held or guaranteed enterprise debt; in a few cases, the property agency took back the company when the new owners were unable to make it a going concern.

**_1995-96: Accelerated Privatization._** As Table 3.4 indicates, 1995 was the turnaround year in Hungary's privatization strategy. The government decided to move ahead with divestiture of some of its largest holdings. To spur the process, it enacted a new law that consolidated responsibility for divesting and managing state assets in a single agency"<sup>3</sup> , made the process more transparent, required the agency to provide written explanations of its decisions, and generally reduced the state's residual share in privatized firms.

> '3 Privatization was entrusted in 1990 to a new state property agency; subsequently, a second agency, holding many of the largest companies, was established.

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