The Challenges of Privatization: An International Analysis

The Challenges of Privatization: An International Analysis

The Challenges of Privatization: An International Analysis

The Challenges of Privatization: An International Analysis

Synopsis

From 1997 to 2001, more than 4,000 privatization operations have been carried out in more than 100 countries, bringing in government revenues of over 1,362 billion dollars. The phenomenon, which grew exponentially at the end of the 1990s and then abruptly slowed down, had dramatic consequenceson the performance of state-owned enterprises and a significant impact on industrialized countries, as well as emerging and less developed economies. Yet there have been surprisingly few attempts to provide a systematic empirical account of the privatization process at the worldwide level. Why do governments privatize? Why do some countries accomplish large-scale privatization programmes, and others never privatize at all? Is privatization a trend or a cycle? Furthermore, how do governments privatize? Do governments really transfer ownership and control of state-owned enterprises ordoes private ownership tend to coexist with public control?This book provides some answers to these important questions trying to test research hypotheses set forth by the recent economic theory of privatization. Comprehensive cross-country empirical analyses carried out over a period of more than twenty years are used in the book to show that privatization has taken place all over the world, sometimes spontaneously, more often under the pressure of economic and budgetary constraints. Several of the goals ofthe privatization have been met, but despite proclamations and programmes, only a small minority of countries has carried out a genuine privatization process, completely transferring ownership of state-owned enterprises to the private sector. A lack of political will is to some extent at the root ofthis reluctance. However this reluctance can be traced back partly to structural factors that would make an orderly privatization difficult, such as the absence of developed capital markets, appropriate regulation, and suitable institutions.

Excerpt

Between 1977 and 2001 more than 3,535 privatization operations were carried out in the world, bringing government revenues of over $1,127 billion. The phenomenon involved over 100 countries, and all sectors in which state-owned enterprises usually operate: agriculture and industry, finance, telecommunications, energy, and public utilities. Beyond aggregate figures, the process took different forms and yielded different outcomes in various countries.

This book presents a thorough empirical analysis that makes it possible to identify the main trends and patterns of privatization worldwide. However, it is not simply a collection of stylized facts. Rather, it aims at explaining why and how privatization takes place, trying to simplify the wider complexity of the process.

Our work has an underlying thesis. We try to prove that privatization has been a very varied process in different parts of the world, seldom decided upon autonomously, more often forced by external factors and carried out reluctantly in the absence of suitable legal, political, and economic institutions. As a result, in most cases, privatization has been incomplete and fraught with error. However, privatization is partly an irreversible process that may lead to institutional innovation and market development.

We argue that privatization outcomes can be explained by a unified framework suitable for understanding whether privatization is a trend or a cycle, for identifying the factors shaping the evolution of the process over time, and for considering why private ownership is likely to coexist with public control, at least in the near future.

B.B.

D.S.

Torino

23 April 2003 . . .

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