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Privatization: Successes and Failures resources

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INTRODUCTION 5 privatization has taken place outside of fi ve countries: South Africa, Ghana, Nigeria, Zambia, and Côte d’Ivoire. Infrastructure is the sector where one fi nds the largest SOEs in Africa, but privatization in that sector has lagged behind. When privatization does take place, the government usually keeps a signifi ership share. In Africa there is much less cant own evidence regarding the effects of privatization than in Eu rope, and the ev- idence, scarce as it is, is at best mixed. Privatization in Côte d’Ivoire seems to have had positive effects on fi rm per for mance. A similar picture emerges from Ghana. However there are many caveats. Positive effects seem to be observed only when privatization is associated with enhanced competi- tion and a better quality of regulation. There is also evidence of rent seek- ing, regulatory capture, reduction in affordability of public ser vices, and a loss of jobs—all of which further feed resentment within the country and increase the reluctance of African governments to go farther along the route of privatization. Nellis argues that even when negative effects are observed, it is not obvious that the counterfactual—namely, the absence of privatization—would have delivered better results. This is due in part to the general deterioration of public ser vices and of the economy in gen- eral in many countries. The poor per for mance of privatization has in the Eastern Eu ro pe an context often been attributed to weakness in institu- tions. This is likely to be even truer in Africa. However, it is not realistic to expect large institutional changes in Africa in the medium run. Nellis explores possible solutions to this problem, such as the outsourcing of in- stitutional provision and the use of offshore commercial arbitration mech- anisms or of NGOs to vet transactions. However, few of these solutions are likely to fi nd much po liti cal support. It appears that the return of Africa to a path of growth and development cannot, in the near future at least, rely too much on privatization. Chile was one of the fi rst countries to start a large- scale privatization program. Chile began privatizing in 1974 after the Pinochet coup—many years before Thatcher started privatizing in the United Kingdom. In the late 1980s and early 1990s, many other Latin American countries also en- gaged in extensive privatization. Bolivia, Peru, Brazil, Argentina, and El Salvador, for example, all launched quite ambitious privatization pro- grams. In chapter 5, Antonio Estache and Lourdes Trujillo detail Latin America’s diverse experience with privatization and give a country- by- country account of its privatization policies. Privatization of infrastructure plays a special role in Latin America, pointing to po liti cally delicate dis- tributive issues such as access to water, electricity, and public transportation.

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