Privatisation in Eastern Germany—Experience with the treuhand

Abstract

WHENEVER ONE DISCUSSES THE PROCESS OF PRIVATISATION in Eastern Germany after 1989 one must refer to the Treuhandanstalt (Treuhand). The reason is simple: the Treuhand took over all state property as the German Democratic Republic (GDR) collapsed. In June 1990, just one month before German Currency Union (GCU), the Treuhand assumed the task of selling East German state holdings to private owners as quickly as possible. The Treuhand's task went beyond the act of just selling off state property, however; it had the additional responsibility of reorganising firms so as to make them profitable as a precondition for sale. In those former socialist enterprises where reorganisation for profitability was not viable, liquidation was the expected solution. The lack of clarity between these functions-privatising through selling and reorganisation for profit-has provided the basis for serious disputes. Within a few months, the Treuhand was created and then made into the largest holding company in the world. After a slow pace of privatisation during its first half year of existence, sales speeded up beginning with 1991.1 In July 1993, three years after the decision to set up the Treuhand became law, the Treuhand had sold 95% of the former GDR state-owned enterprises. From 1992 numerous newspapers included lists of (small and medium sized) enterprises offered by the Treuhand for potential buyers. The largest 1 000 enterprises were not listed publicly, but were sold by discrete bargaining, the prevailing method of selling in 1990/91, the first year. What remained in late summer 1993 were only 523 enterprises, 20 of which were larger enterprises with a total of 90 subsidiaries.2 It is not surprising, therefore, that since July 1992 the Treuhand had announced the closure of half a dozen of its 15 regional subsidiaries in Eastern Germany, because the selling operation in some regions was over. Not only regional assets but entire industrial branches, like the chemical industry, were soon to be privatised.3 At the end of 1993, according to Birgit Breuel, President of the Treuhand since spring 1991, the privatisation of industrial plants, or the so called 'big privatisation', would be completed. By spring 1994 one third of the Treuhand staff of 4 200 is expected to be dismissed. The remainder will then concentrate on the privatisation of land and buildings and monitor the fulfilment of the privatisation contracts concluded between 1990 and 1993.4 Compared with the slow pace and the many obstacles hindering progress with 'big privatisation' in the countries of Central and Eastern Europe, the speed of privatisation in East Germany can be regarded as remarkable. Understandably, the Treuhand views it this way. Breuel called on the Central and East European nations to make use