Privatization and Public Enterprises

Occasional Papers, September 15, 1998

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This paper examines the role that privatization can play within a wider strategy designed to overcome the problems associated with public enterprises.
Privatization is defined as a transfer of ownership and control from the public to the private sector, with particular reference to asset sales. It is therefore equated with total or partial denationalization.
Economic efficiency is not only the key to improving the performance of the public enterprise sector, but is also the source of other gains often attributed to privatization, in particular, its favorable budgetary impact.
To public enterprises that are subject to national or international competition, privatization offers the possibility of increased productive efficiency as government financial backing is withdrawn and bankruptcy and takeover become possibilities.
The admissibility and desirability of privatization, as well as what types of enterprise should be privatized, ought to be determined by similar considerations in both industrial and developing countries.

Privatization is equated with total or partial denationalization, focusing on asset sales.
Economic efficiency is identified as central to improving public enterprise performance and generating budgetary gains attributed to privatization.
Competition (national or international) is a catalyst for increased productive efficiency when government financial backing is withdrawn and bankruptcy and takeover become possibilities.
Criteria for admissibility and desirability of privatization, and for selecting types of enterprises for privatization, should be applied similarly in industrial and developing countries.

Subjects: Asset and liability management, Asset management, Competition, Economic sectors, Financial markets, Privatization, Public enterprises, Public sector
Keywords: Africa, Asia and Pacific, Asset management, asset sale, Competition, enterprise, Europe, Global, government, OP, Privatization, privatization policy, privatization program, privatization strategy, public enterprise, public enterprise sector, Public enterprises, Public sector, sale