Enterprise-State Relations after Mass Privatization: Their Character in Mongolia

Abstract

Mass privatization is the centerpiece of policies aiming to sever the old links between state and enterprise and to channel interactions into modern legal and regulatory forms. Thus, enterprise-state relations are an important indicator of the effect of mass privatization. We present a detailed picture of those relations for Mongolia, which has implemented a comprehensive voucher-privatization scheme. The state interacts with enterprises in multifarious ways, many inconsistent with the role of the removed regulator that is the objective of reforms. We find that intensity of interaction is strongly related to the size of state ownership. Indeed, our results suggest the incipient creation of two different privatized sectors, one in which there is partial state ownership, which accounts for a large proportion of enterprise-state interactions, and one in which there has been complete privatization, with enterprises far removed from the state.

JEL Classification: P11, P21, H11