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...

Advantages and Disadvantages of Using SIPs to Privatize State Assets

Not surprisingly, the advantages and disadvantages of using SIPs are the mirror images of those spelled out above for trade sales. On the plus side, SIPs can raise truly astonishing amounts of revenue. For example, the Japanese government has raised over 111 billion from six rounds of share sales of a single company, NTT, yet the government still owns 46 percent of NTT. For the very largest privatizations, there is simply no realistic alternative to a multi-tranche share offering strategy....

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...

Early Attempts at Denationalization

Most people associate modern privatization programs with Margaret Thatcher's Conservative government, which came to power in Great Britain in 1979. However, the government of Konrad Adenauer, in the Federal Republic of Germany, launched the first large-scale, ideologically motivated denationalization program of the postwar era. In 1961, the German government sold a majority stake in Volkswagen in a public share offering heavily weighted in favor of small investors.4 Four years later, the...

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...