Project assistance completion report : divestiture and privatization

Although the initial scope of work called for the contractor (Analysis Group, Inc.) to design privatization strategies for 5 countries, by the completion of the project, A.I.D.-assisted privatization efforts had taken place in 46 countries. A report summarizing privatization strategies, efforts to date, barriers to reform, and the economic conditions facing privatized industries was written for each country. Specific TA was provided as well in most of the countries. Reference works on privatization strategies were also published for USAID Missions and the Bureau for Private Enterprise (PRE), respectively. The project succeeded in implementing the process of reducing the state-owned sector of the economy in 10 of the 46 countries, and was able in some degree to assist in the process in several others. Many times political and social barriers to privatization proved tougher than did economic ones. However, the benefits of privatization are becoming widely known to developing country governments. Project experience shows that several factors must be addressed in designing a country privatization strategy. (1) A process of divestiture and privatization must be established. This process must include: political as well as economic motives, realistic valuations of state-owned enterprises (SOE's), and the sequential privatization of SOE's. (2) Country objectives (e.g., greater economic efficiency, the raising of revenues or investment levels) should be precise. (3) Legislative reform is necessary at an early stage. (4) Strategy and implementation must be taken seriously if the proper signals are to be sent to local governments, the local private sector, and the international business, development, and political communities. A new privatization project, Privatization and Development (9400016), was initiated in FY 91, with Price Waterhouse as primary contractor.