12 Reflections on the role of the World Bank in public enterprises and privatization in Africa. In 1970 he became adviser to the United Nations in New York on public enterprise and technical assistance projects.
Introduction
Survey of contributions
In chapter five, Dr. Zoltán Román, how in Hungary, with 1,043 public enterprises in 1988 (and an external debt of USD 17 billion in convertible currencies), it is no longer necessary to adhere to the central plans, but there is still 'negotiation, manipulation and maneuvering' in the administrative control of prices, subsidies, tax exemptions, preferences and special regulatory rules. Alexander describes the policy pursued - and the changes since the crisis year 1980 - in the 34 African countries where the bank is involved.
Surveys of practice and principles
Public enterprise in less developed countries: an empirical review
In South Korea, twelve of the sixteen largest enterprises were in the public sector in the early 1970s (Jones 1976); For discussion of the impact of structural adjustment policy reforms on the public enterprise sector, see World Bank (1988b) and World Bank-UNDP (1989).
Some issues of principle
From the government's point of view, some of the public sector companies were not only inefficient, but expensive. Two months later, the government asked Professor Michael Beesley of the London Business School to investigate the possibility of liberalizing the use of BT's network for resale. As a result of the liberalization strategy, BT faced emerging competition in network services, in equipment provision and in the provision of value-added services.
Whatever action management takes to improve performance, the benefits are not returned to increased profitability—the primary incentive for private ownership—but instead to the customer. In addition, the complexity of regulatory rules added to the cost of doing business in Britain. The success or failure of the policies we have described, we believe, cannot be measured by the implementation of the various reforms - the liberalization strategy, the rise of Oftel, the sale of BT.
Future changes in the telecommunications sector are therefore inevitable, but the impact of past changes - the reforms we have described in detail - is still in the process of being fully processed. Similarly, the liberalized UK VAS market represents between a third and a half of the total volume of these services in Europe as a whole.
Country experiences
State-owned enterprise reform in China
Workers and staff began to connect their own interests with the performance of the enterprise in which they worked. The lack of a participatory management system is the main cause of the state-owned industry's low efficiency. This seemed to indicate that the simple reform of the state's concession of power and interests to business had reached a dead end.
They came to realize that the inefficiency of the state-owned sector lay in the absence of property rights. But government officials have no direct interests in the efficiency of the government assets, which is extremely difficult to value. A fundamental change of state ownership must be set as the most important objective of the enterprise reform.
The proportion of state ownership must first be reduced to the realms of "natural monopoly". Du Haiyan (1987) "The outsourced system: an initial choice in the reform of the state-owned enterprise system".
Four decades of public enterprise in Hungary
This optimism seemed to be confirmed by the economic performance of the next few years, often referred to as the "golden age" (albeit brief) of the Hungarian economy. Further steps in the implementation of economic reform in 1968 were also foreseen in anticipation of a backlash. On the other hand, the latter pointed out the negative impact of stop-go.
Changes in the state-owned sector's share of the original national income since 1960 (the year before the collectivization of agriculture) have been quite small (see Table 5.1). The share of the cooperative sector was 17.0 per cent. in 1960 and invariably around 23 per cent. in the other quoted years. Cutting the hierarchical dependence of the state-owned enterprises on the sector ministries somewhat reduced (but did not eliminate) the power of the administration.
The share of the largest producer in total production was more than 50 percent in 419 of the 637 product groups. Under this program, the share of state-owned enterprises in the competitive sphere of the economy will be much lower.
Liberalization and privatization of public enterprise in India
Venugopal Reddy
This was a period of revision, both of the planning mechanism and of the role of public enterprises. Ninety percent of the workforce is in the unorganized segment - primarily agriculture and small unregistered businesses. The majority of the profits in the state enterprises come from the oil sector, which has a virtual monopoly.
To a more limited extent, there have been changes in defining the roles of the public and private sectors. Two oil refineries which were originally proposed to be established in the public sector are now being established. Of less importance is the effort to outsource some of the services that were provided within the government.
Of greater relevance to the Indian situation is the issue of hidden subsidies to the operation of public enterprises and the price mechanisms. There is nothing in the debate to suggest a positive orientation towards the private sector as a more effective, efficient or viable option for the public sector.
The public enterprise sector in Malaysia
One of the largest investment companies to be created was the National Equity Corporation (PNB). The expansion of the public enterprise sector was phenomenal during the NEP period. How successful has the public enterprise sector been in achieving the overall objectives of PEK?
In the case of the National Automobile Company (PROTON), a management team from Japan has been appointed to improve local management. This is likely to result in further expansion of mixed ownership companies. In the early years of the NEP, the focus of the policy was the establishment of productive public enterprises.
In the second half of the NEP period, the focus shifted to using public companies as an instrument for acquiring stakes in existing private companies. The direct role of public enterprises in the economy is contrary to the promotion of Malay enterprise development, one of the main objectives of the NEP.
Public enterprises in francophone Africa
Fifth, contrary to the previous conclusion, public companies are also the biggest money makers. However, six of the top ten are Algerian, representing a phenomenon more closely linked to Algeria's industrial organization than to the state of public enterprises in Africa. Overall, the French-speaking African experience shows that contract plans provide a useful counterbalance to often heavy-handed government interference in public enterprises.
French-speaking African public companies dominate neither the top of the economy nor the list of losers. The analysis of company-level financial indicators shows that public companies in French-speaking Africa apparently improved in the mid-1980s, compared to private national companies or multinationals. 15 A thorough accounting treatment of the flows of funds between government and public enterprises can be found in International Monetary Fund 1986b:274–319.
1985) “Financial impacts of public companies in sub-Saharan Africa,” unpublished research submitted to the World Bank by Temple, Barker, & Sloan, Inc. 1981). 1986) Public Enterprises in Sub-Saharan Africa, Discussion Paper 1, Washington: World Bank. 1988) ‘Contract Plans: An Assessment of Their Usefulness as Mechanisms for Performance Improvement in Public Enterprises’, unpublished report.
Public enterprise in Argentina
The first Minister of Public Works was Dr. Roque Carranza, a well-known and respected technocrat of the Radical Party. His ill-defined job description referred to the financial supervision of the public sector. At the structural level, the Interministerial Committee was dissolved and the DEP was transferred to the jurisdiction of the Ministry of Public Works.
The changes in the legislation contributed to increasing the power of the DEP and (indirectly) the Ministry of Public Works. The power to act and make real changes remained in the hands of the enterprise and its permanent management. First, transfers to public enterprises account for a large part of budget deficits, representing a significant portion of GNP.
The opposition is even stronger in the field of labor, where some of the more powerful unions are those of public enterprises. The potential buyers may be more interested in exploiting the monopoly situation than in the physical assets of the business.
Privatization in Chile
ECOM was established in 1968 as a branch of CORFO, to serve as a computer service center for large parts of the public sector. The first wave of privatization consisted mainly of the return to the private sector of 360 firms that had been expropriated by the Allende government. The result of the program was the concentration of ownership and the strengthening of oligopoly in many sectors of the economy.
Local funds to facilitate worker purchases were extremely limited due to the weakened state of the banking system in the wake of the Unidad Popular expropriations. Two additional factors made the time ripe for a privatization of the electricity generation and distribution industry. The acquisition of worker shares was part of the privatization of Colbun, Chilgener, Chilmetro, Chilquinta, EDELNOR and EDELMAG, of which the pension funds were also allowed to invest in the first four.
That said, not every aspect of the third privatization phase went as smoothly as the divestment of electric power. It kept 20 percent of the shares outstanding, and through recapitalization the share of the workers was somewhat reduced.
The effectiveness of public enterprises in Greece
These variables give an indication of the development of the internal management systems and processes. Planning, CIS and personnel evaluation systems are areas where much of the modernization effort is focused on Greek public enterprises. A cross-sectional analysis of the effects of these factors was conducted based on alternative multiple regression equations for each performance indicator.
This is aided by the government's power to appoint the majority of the board and senior management, which is largely exercised in practice. As explained earlier, controls cover all significant activities of the company: strategic, managerial and operational. However, it is obvious that all these reform directions affect the country's wider political and administrative system.
However, the overly regulated markets and the pervasive presence of the state in all sectors of the economy may reduce the reliability of this cross-sectional statistical evidence. This is also indicated in Table 11.4, which gives the averages of the return on capital and of the innovation indicators in four cells: low-high state control and low-high decentralization.
