Table 26 Summary of Recent Empirical Studies Examining the Fiscal and Macroeconomic Impact of Privatization Study

Jeronimo, Using country-level panel data on privatization receipts and budget Pagan, and deficits for OECD countries from 1990 to 1997, analyze whether Soydemir the concern with deficits in the 1990s in Italy, Greece, Spain, and (2000) Portugal is related to a shift from privatization as a tool of eco nomic restructuring to a tool of European monetary convergence. Macedo (2000) Examines the fiscal impact of the Brazilian privatization program, which raised over US 71 billion through the sale of...

The Changing Mix of Goods and Services Offered by Telecom Providers

Until about two decades ago, telecommunications was a very simple business, where the provider offered basic fixed-line telephone service to businesses and individuals, and these consumers paid a fixed and regulated monthly fee. Since then, as we all know, the variety of products and services offered by telecom providers has changed beyond recognition. The rapid evolution of digital systems during the 1970s and early 1980s, powered by advances in information technology, rendered the analog...

Studies of Privatization in Latin America

The earliest study in table 4.6, by Ramaurti (1996), is essentially a descriptive analysis of seven privatization programs (four telecom, two airline, and one toll road) in Latin America during the period 1987-1991. He also discusses the economic issues involved in developing these programs, and describes the methods used by privatizing governments to overcome the bureaucratic and ideological opposition to divestiture. Ramamurti concludes that privatization was very positive for the telecom...

Identifying Key Objectives and Tradeoffs in the Privatization Process

Essentially, the key trade-offs in designing a privatization program involve choosing between the following objectives (1) speed of sale versus revenue maximization and transparency, (2) revenue maximization versus favoring citizens and ensuring domestic ownership, (3) promoting economic efficiency versus preserving SOE employment levels and maximizing political benefits for the government, and (4) promoting development of the national stock market versus divesting state assets rapidly and...

Regulating Privatized Telecoms

One of the undeniable benefits of a state-owned telecom system is its simplicity. It may be inefficient, technologically backward, overstaffed, and offer consumers little choice and high costs, but at least a state-dominated telecom industry does not require any elaborate regulatory processes to be developed. Instead, the government is the monopoly provider, it owns all of the network assets, and it sets all of the rules regarding access, pricing, distribution, and allowable substitutes....

Empirical Evidence on Privatizations Effectiveness in Nontransition Economies

Since privatization has been part of government policy toolkits for almost two decades now, academic researchers have had enough time to execute many empirical studies of the effect of divestment on the operating performance of former SOEs. This chapter and the next will survey the rapidly growing body of scientific evidence on privatization's economic effectiveness, but the sheer number of well-executed studies to be examined presents us with a monumental organization challenge. These studies...

Characteristics of Share Issue Privatization Offerings

In all likelihood, you do not now consider common stock offerings to be important instruments of public policy. This section will try to convince you otherwise. In fact, we will see that governments around the world have learned to use share issue privatizations both as a mechanism for raising money and as a tool of political expression. To understand this point, ask yourself what choices the private owner of a company seeking to raise capital by selling stock to public investors for the first...

Are Privatization Proceeds Saved or Spent

In what has become by far the most influential empirical study of the fiscal and macroeconomic impact of privatization, Davis, Ossowski, Richardson, and Barnett (2000) examine the implications of privatizing SOEs in developing countries. They also define how privatization sales should be accounted for in national income accounts, and evaluate how privatization revenues were in fact used by eight transition countries and ten nontransition countries that launched sizable privatization programs...

Empirical Studies Using the Stanford University World Bank Telecom Database

All of the studies detailed above employ databases created by the researchers themselves, and thus suffer both from relatively small samples sizes and lack of comparability. Recently, however, several studies have employed the new Stanford University World Bank Telecommunications Database described in McNary (2001) and Fink, Matto, and Rathindran (2002) that couples telecommunications data provided by the ITU with economic, regulatory, and institutional data collected by Stanford and the Bank....

Brief History of State Ownership Until 1979

State ownership of a given business activity or organization can arise for any of five generic reasons. First, state ownership can emerge as a natural extension of royal power in feudal or tribal societies. Though not important today, the next section shows that this largely explains how state ownership evolved during antiquity and the Middle Ages. Second, state ownership can emerge as a means to commercialize complex, vital, and or expensive new technologies. This rationale became prominent...

Corporatization of State Ministries and Creation of Joint Stock Companies

Though state-owned enterprises come in many different forms, there are essentially two basic organizational models. First, an SOE can simply be part of a government ministry, or even be a ministry in its own right. Second, an SOE can be organized as a joint stock company that is legally and operationally separate from government ministries, but where the government owns all the stock. This often occurs when a formerly privately owned company becomes an SOE through nationalization or through a...

The Telecom Privatization Deluge 19902000 and the Big Chill after 2000

Financial history has never seen a decade remotely comparable to the 1990s in terms of security issuance volume or stock market capitalization growth, and telecom privatizations were star performers in this most extravagant of periods. Table 8.4 details 158 separate telecom privatization sales executed by either asset sale or share offering by 74 countries between November 1984 and July 2003. These sales raised a total of 441.9 billion for divesting governments, an equity issuance total...

The Empirical Evidence on Privatizations Impact in China

Table 5.9 summarizes four empirical studies of privatization in China that have either been accepted for publication in top academic journals or are far along in the journal review process. All four studies employ samples of firms that were partially privatized via public share offerings, since only these generate comparable pre- versus post-privatization performance data that are publicly available within the Chinese financial reporting system. Additionally, all four studies employ the MNR...

Studies of Privatization in Africa

John Nellis (2003) presents a survey of studies examining privatization in Africa. He notes that in many (probably most) African countries, the political elites have been opposed to privatization, and have implemented ownership changes only in response to pressure from international financial institutions, particularly the International Monetary Fund (IMF). Additionally, the bulk of the privatizations that have been implemented are concentrated in a handful of countries, with South Africa alone...

Why Have Governments Launched Bank Privatization Programs

As discussed briefly above, large segments of the global banking system have been transferred from state to private hands over the past two decades, and much more is poised to be sold in the near future particularly in the emerging powerhouses of India and China. What has caused this fundamental reassessment of state ownership of banking Two factors stand out as especially important. First, compelling evidence began to accumulate showing that state ownership was not working as planned. The...

Empirical Evidence on Privatizations Impact in Other CEE Countries

Although the Czech Republic's privatization program has garnered by far the most research attention, the programs of several other CEE countries have also been evaluated empirically. Six studies examining the experience of five countries are surveyed below and are summarized in table 5.4. table 5.4. Summary of Single-Country Empirical Studies of Privatization in Central and Eastern Europe (Besides the Czech Republic) Sample Description, Study Period, and Methodology Summary of Empirical...

SIP Offering Size

The first thing most financially literate observers notice about share issue privatizations is that many of these offerings are truly gargantuan. This is especially true in a relative sense, as compared to other share offerings from a given country or as a fraction of that country's GDP. However, as table 6.1 clearly demonstrates, SIPs are also the largest share offerings in an absolute sense. In fact, the 11 largest share offerings in financial history are all share sales by state-owned firms,...

Preferential Share Allocations and the Selection of an Underwriter

The final part of table 6.4 describes how shares are allocated in initial and seasoned SIPs. Governments clearly allocate shares in the politically inspired manner predicted by Biais and Perotti (2002). Officials achieve political goals in part by dividing the issue into tranches, with each tranche targeting a certain number of shares to different clienteles (i.e., employees, domestic, retail, institutional, and foreign). In 91.0 percent of the initial offers, some fraction of the total...

Figure 31 Privatization in OECD countries by main industrial sectors 1 includes electricity gas and water p provisional

Unfunded pension liabilities from the SOE to the government. By far the more difficult process is operational restructuring, which involves selling off or closing down unproductive divisions of an SOE, reconfiguring the company's manufacturing process, changing suppliers and customers, and most painful of all, laying off redundant workers. Since we saw in chapter 2 that one of the distinguishing features of government ownership is massive and deliberate overstaffing of state enterprises, there...

The Early Thatcher Years 19791984

Although the Thatcher government may not have been the first to launch a large privatization program, it is without question the most important historically. Privatization was not a major campaign theme for the Tories in 1979, but the new Conservative government embraced the policy. Margaret Thatcher adopted the label privatization, which was originally coined by Peter Drucker and which replaced the name denationalization Yergin and Stanislaw 1998 , page 114 .7 Early sales were strenuously...

Aggregate Privatization Proceeds

As briefly noted above, different regions have embraced privatization at varying speeds, and for different reasons. However, all governments have found the lure of revenue from sales of SOEs to be attractive, which is clearly a key reason the policy has spread so rapidly. According to Privatisation International Gibbon, 1998, 2000 , the cumulative value of proceeds raised by privatizing governments exceeded 1 trillion sometime during the second half of 1999, and by now has probably surpassed...

Privatization Goes Global 1989March 2000

After 1987, privatization programs spread rapidly around the world, particularly to the developing countries of Latin America, Africa, and South Asia. Most of these involved selling an SOE directly to a private corporation or individual in a process called an asset sale, but several were sold to individual investors through public share offerings. After 1990, the pace of privatization steadily increased, and became positively frenetic after 1995. By that time, several dozen countries were...