BIDE

HOW TO IMPLEMENT PRIVATIZATION TRANSACTIONS;
FROM STRATEGY TO IMPLEMENTATIONS

To Be Announced

Privatization is the transfer of assets and obligations from the hands of the state to the hands of the private sector, where through competition they are expected to be managed more effectively and so produce greater returns to the country. However, policymakers around the world face a dilemma. They are often convinced of the merits of privatization, but do not know how to implement it. The enormous outpouring of literature on privatization, the dramatic success of privatization in a large number of countries, and the economic realities of the excessive burden of overstretched public sectors in their own countries, have convinced them to try privatization. Yet to most policymakers the process of implementing privatization is shrouded in mystery. This fear of the unknown often discourages them from taking the first step. The main purpose of this workshop is to demystify this process and share with participants international experience on privatization implementation. It will provide practical overview of the steps required to successfully implement a privatization policy.

A prime lesson of privatization experience is that implementation should not be divorced from policy. In country after country, top policymakers have concentrated on announcing a privatization policy, securing the agreement of important political allies, and committing funds. They have often considered the subsequent steps of actually implementing the privatization program to be technical issues that resolve themselves following successful resolution of initial policy issues. However, years of experience with privatization programs worldwide have shown that the seemingly routine implementation issues were the rocks on which many privatization programs eventually foundered. Thus, challenges of implementation should be part of the initial formulation of the privatization program. Policymakers must not consider implementation to be a process that takes place after, and independently of, the design of the privatization policy and program. That is, they should bring means and ends closer by making each depend partially on the other.

As one example, consider the question of the impact of privatization on income distribution. Many countries have initiated privatization programs only to have them die after a relatively small number of transactions.  This is typically due to failure to adequately address the distributional consequences. Internationally, there is a perception that privatization harms the poor at the expense of the rich and foreigners.   There is considerable evidence that this perception is often misguided so the a key element of implementation is an information campaign to ensure that the true consequences are known, especially the importance of access effects (for example, more poor families get clean water) over pricing effects (the relatively well-off pay more).  In other cases implementation must be modified to ensure positive distributional effects, especially through careful attention to the post-privatization regulation regime.