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Privatization: Countries
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Privatization--properly structured --yields substantial and enduring benefits. A detailed and rigorous Bank examination of 12 privatizations in four countries found that divestiture was good for the economy as a whole--and led to higher productivity and faster growth in all but one case (see chart and the box on the back page). The Chilean telephone company doubled its capacity in the four years after sale. The privatized telephone company in Mexico reduced its per-unit labor costs sharply.
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On gaining its independence from the Soviet Union in 1991, Armenia made swift progress in starting the processes of land reform and small-scale privatization. In 1991, Armenia took the dramatic and radical step of privatizing 90% of rural agricultural land - setting the tone for a far reaching program. The first privatization program for the industrial estate was adopted in January 1994 along with the establishment of a voucher scheme in October, 1994. In the same year, land became tradable. Large-scale privatization began in April 1995 and advanced at a rapid pace until the end of 1998 when voucher privatization ended. During 1999, there was some slowdown in sales as the focus has shifted from certificate to cash privatization, but it is hoped that this slowdown - which is typical for many countries which have completed voucher privatization - will soon be overcome.
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From the beginning, the most publicly persistent and organized opposition to privatization in Africa has come from the labour movement. Most recently, in 1999, there were strikes or threatened strikes against privatization in several countries including Benin, Cape Verde, Gabon and Niger. Sometimes workers succeeded in blocking or slowing down the privatization of specific enterprises or influencing negotiations for a privatization agreement. At other times, responding to external pressures, governments have simply brushed labour opposition aside, leaving a legacy of anger and political tension.
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[One] factor in the privatization process is the concept of financial intermediaries. This has been cited to be a unique characteristic of the Bulgarian process. In an article by Gabor Hunya, Large privatization, restructuring and foreign direct investment, this aspect is discussed. We read, "Citizens can paricipate in the voucher scheme either personally, or through an agent, or through a privatization fund, . . . Foreigners can take part through investment funds provided they are registered as a financial institution and have been engaged in similar activities in their home country for at least five years. Privatization funds and foreign capital may ensure better results for the Bulgarian privatization than for the Romanian progarmme, which excludes finanacial intermediaries" (Hunya, 284). There were 120 privatization funds set up to act as such financial intermediaries, in which "small shareholders can invest their shares" (Michailova, 80).
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Nigerian President Olusegun Obasanjo announced a new privatization programme in July 1999 shortly after becoming that country's first elected head of state in 15 years. He was scathing in his criticisms of Nigeria's large public sector, where some of the more than 1,000 state-owned enterprises have been losing millions of dollars annually. "State enterprises," he declared, "suffer from fundamental problems of defective capital structure, excessive bureaucratic control or intervention, inappropriate technology, gross incompetence and mismanagement, blatant corruption and crippling complacency."
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[One] type of privatization became more popular in 1996--mass privatization. Mass privatization is considered to be less expensive, because it does not "require legal analysis and evaluation based on current market prices" (82). But a noted criticism of mass privatization is its potential to not give the workers enough control in their companies. Therefore, it has been less popular in countries where unions have greater influence. In this type, vouchers are the main sources of shareholding. Ten percent of the assets are designated for the employees and are given freely.
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