A Study on Private Enterprises and Entrepreneurs in Transition Economies: Focusing on Russia and Vietnam

Russia's privatization took place from small enterprises, apartments, family farms to mid- and large-sized firms. Although national assets and state-owned enterprises were sold to the private sector, the government's fiscal condition did not improve. Rather, the government revenue to GDP ratio decreased in general. Furthermore, the corporate income to GDP ratio shrank more drastically. One of the reasons behind this could be that the tax system was just formed. In addition, as privatization went on, a number of companies failed and the government provided tax off-sets or tax amnesty to businesses. In terms of productivity, privatization had a positive effect. According to J. David Brown, John. S. Earle, and Scott Gehlbah (2013), privatization by both foreigners and Russians increased productivity to different extents by period. However, privatization weakened the government's power, destroyed social order and exacerbated corruption. The opaque and monopolistic manner of privatization in Russia benefited only those who were in power. As a result, Russia became a phony capitalist economy and private companies and businessmen came to have a negative public image. The word "piratization" was also coined based on this. Vietnam's equitization, which began in the early 1990s, is still underway. Even though the government has announced privatization plans on several occasions, the process has been very slow with mediocre achievements. State-owned companies in Vietnam are struggling with debt issues and diseconomies of scale, which can be connected with the country's falling industrial competitiveness. The default of Vinashin Group (largest Vietnamese shipbuilder) in December 2010 was a representative instance that highlighted the need to reform state-run companies. The World Bank also recommended that in order for the Vietnamese economy to develop into a middle-income country by 2035, privatization of state-owned enterprises will have to be accelerated. (the rest omitted)