Political Economy of Privatization in Hungary: A Progress Report

This paper focuses on the political economy of privatization in its second phase in Hungary, the country which, overall, has gone furthest in privatizing public utilities, introducing elements of competition and setting up regulatory mechanisms and institutions to monitor them. The background to Hungary's reform path, the antecedents to privatization, the debate on the issues, the institutional framework and the progress of privatization in Hungary up to late 1993/early 1994 are well-documented elsewhere, including by the present authors. Therefore, the paper presents a brief review of the evolutionary path of Hungary's privatization "vision", policy and strategy under the government of József Antall (1990-1994), and attempts to identify the factors influencing this evolution. Developments regarding privatization under the reform- socialist/liberal coalition government led by Gyula Horn, which came to power in 1994, and a detailed examination of the privatization of the major utilities and the regulatory environment currently in place, forms the core of this study. Finally, the paper sets the above in the context of the overall development of the private sector in Hungary.