Privatization and development project : midterm evaluation

Mid-term evaluation covers 5/91-12/93. The project has contributed significantly to restructuring efforts in many countries; its level of activity far exceeds that of its predecessor (Center for Privatization project) as well as that foreseen for this project. USAID and the prime contractor, the Price Waterhouse International Privatization Group (PW/IPG), have shown great flexibility in adapting to changing needs; this has been of particular value in the face of the post-1989 opportunities for privatization arising in Eastern Europe, which led PW/IPG to shift from research and information dissemination towards the development of instruments and methods and from pre-privatization activities towards transactions. PW/IPG's highly qualified staff have delivered TA effectively and helped to bring about important innovations. In Poland, for example, PW/IPG was a leader in testing sectoral approaches to privatization; in Russia, it was at the forefront in implementing voucher auctions; in Nicaragua, it was the principal source of TA for a successful privatization program; in Morocco, it provided sustained analytic services that kept the privatization program alive when government interest flagged; in the Philippines, Bolivia, and Morocco, it initiated new thinking on private provision of public services. Although changing priorities negated the project's original emphasis on research, PW/IPG recently undertook a series of studies of experiences with mass privatization, pension fund privatization, industrial sector analysis, and hotel privatization in the Caribbean. It has also expanded its privatization databases and publications distribution to meet the objective to gather and disseminate lessons learned. Not all objectives have been achieved, however. PW/IPG has not been effective in capacity building; its consultants have tended to work by themselves, apart from local counterparts. In addition, relations between PW/IPG and subcontractors have been uneven; subcontractors have complained of insufficient work assignments, lack of information flow, and a lack of team-building by PW/IPG. Also, while PW/IPG's relationship to USAID/W and Missions has generally been cooperative (buy-ins have abounded), several Missions have registered dissatisfaction and even specific complaints, such as being ignored by the consultants. Lessons learned are as follows. (1) Due to the length and difficulty of privatization transactions (only 25-30 have been effected with project help) and the numerous problems that arise after divestiture, more emphasis should be put on pre- and post-privatization activities. (2) More policy research is needed to bolster intellectual commitment to privatization. (3) Since alternative sources of information about privatization have expanded, some information dissemination activities should be dropped. (4) Capacity building tends to be neglected unless it is given explicit priority. (5) Upfront costs of preparing public enterprises for sale often seem excessive; more cost-effective approaches should be explored. (6) Financial considerations sometimes seem to dominate pre-sale analyses; more attention should be given to economic analysis. (7) There is unexploited scope for nondivestiture initiatives, among them private provision of public services. (8) The sectoral approach has not proven cost-effective in transitional economies; its use should be reviewed. (9) More attention -- and budget support -- should be given to USAID/W monitoring. The report includes country studies of project efforts in Bolivia, Burundi, Ecuador, The Gambia, Indonesia, Morocco, Nicaragua, Philippines, Poland, and Zambia.