The Privatization Payoff

By Jordan, Don D. | Chief Executive (U.S.), November-December 1993 | Go to article overview

The Privatization Payoff

Jordan, Don D., Chief Executive (U.S.)

A phenomenon is sweeping across the world stage that is unique in the annals of business. Its financial and geopolitical impact will be worldwide. Through it, technology will im,rove the economies of nations and the lives of ordinary citizens. And participating investors and politicians might alter the course of history.

This process is the large-scale privatization of government-owned industries. Virtually overnight, countries and their governments in every region of the world have repudiated socialistic, "managed" economies and have embraced private investment and free enterprise. As a result, the business and investment communities now are confronted with an unprecedented opportunity and challenge.

Among major industries being privatized are electric services, telecommunications, petroleum exploration and development, railways, steel production, and mining--each a critical part of the infrastructure needed to build or sustain economic success. I will focus on electric power production and distribution, one of Houston Industries' key businesses. But my comments, particularly those on risk analysis, are pertinent to any industrial privatiZation.


Through pfivatization, poor countries are finding it possible to leapfrog decades ahead in building infrastructure required for development. Newly industrializing nations are using privatization as a means to speed the spread of prosperity among their citizens, bolstering lagging economies or adding momentum to those that are taking off. Even highly industrialized countries are getting into the act to enhance their positions in an increasingly competitive and ever-more-open world marketplace.

In many countries, state-owned enterprises such as elecuic utilities have been big money losers, requiring massive subsidies. Being exuemely capital-intensive, they often have burdened govemments with crushing debt. And, in many cases, the inability of governments to finance needed expansion has hampered industrialization. In India, for example, an official with the U.S. Agency for International Development estimateS that inadequate and unreliable electric supply costs industry 1.5 percent of GNP; in Pakistan the figure could be 1.8 percent. In other cases, frequent blackouts or brownouts have undermined political support and the credibility of the govemment.

For some nations, the sale of utiliry and other assetS also offers a way out of an international debt problem. By privatizing, th, govemment not only attracts investment and operating expertise, it raises hard currency that is used to reduce international debt. In turn, this may reduce pressures from the Intemational Monetary Fund, the World Bank, and private lenders, and facilitate loans needed for other purposes.

Finally, in an incresing number of nations, the decision is being made to let business handle what it does best, while the government focuses on areas such as defense, public health, and education, where it is the logical large-scale provider.


The scope of the investment needed is I staggering. There are at least 50 major nations in the process of privatizing, ranging from Argentina to Australia, Bangladesh to Brazil, Italy to India, Peru to pakistan, Turkey to Thailand, Mexico to Malaysia, and China to Colombia (see Exhibit I).(Exhibit I, omitted)

In the electric supply sector, the U.S. Agency for International Development estimates that power is increasing at an annual rate of 6.5 percent. In the U.S., the Edison Electric Institute forecasts a more modest annual rise of only 1.9 percent over the next decade.

According to AID, the electricity requirements of developing and indusuializing nations over the decade will amount to a whopping $100 billion a year, "...sums which are not now and are unlikely tobe ity available in the future from developing Asi nations' treasuries."

These figures only address known, new additions to the existing power supply. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Cite this article

Cited article

Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25,

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

The Privatization Payoff


Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25,

    New feature

    It is estimated that 1 in 10 people have dyslexia, and in an effort to make Questia easier to use for those people, we have added a new choice of font to the Reader. That font is called OpenDyslexic, and has been designed to help with some of the symptoms of dyslexia. For more information on this font, please visit

    To use OpenDyslexic, choose it from the Typeface list in Font settings.

    OK, got it!

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search


    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.